Innovation partnerships keep public services up to date

We all want public services such as healthcare, education, firefighting or waste management to be modern and well-adapted to the changing needs of society.

If purchasers remain conservative however, businesses will not be encouraged, or even allowed, to innovate. Therefore, since April 2016 new EU public procurement rules are opening up new options to encourage innovation without hampering competition and transparency. They include:

1. Innovation partnership allows for the combination of research and procurement

In the past, a contracting authority wishing to run a procurement procedure that combines both development and purchase elements encountered a myriad of difficulties in structuring a competition that did not infringe upon the principles of equal treatment and transparency. The new innovation partnership allows for the combination of development and purchase elements tailored to public requirements, with specific rules in place to ensure equal treatment and transparency.

The innovation partnership process takes place in three phases:

• The competitive phase takes place at the very beginning of the procedure, when the most suitable partner(s) are selected on the basis of their skills and abilities. The contracts establishing the innovation partnership are awarded using the criteria of the best price-quality ratio proposed.
• In the next phase, the partner(s) will develop the new solution in collaboration with the contracting authority. This research and development phase can be divided into several stages during which the number of partners may be gradually reduced, depending on whether they meet predetermined criteria.
• In the commercial phase, the partner(s) provide the final results.

This process should only be used in limited circumstances where:

• the goods, works and services that are sought are innovative
• there is an intention to include both the development and purchase elements in the procedure, provided they correspond to agreed performance levels and maximum costs.

2. Pre-commercial public procurement allows for the procurement of research and development 

While the rules for innovation partnerships covering both the procurement of research and development (R&D) and commercial volumes of end-products are laid down in the Procurement Directive, pre-commercial public procurement covers only the procurement of R&D services when the contracting authority shares the risks and benefits with the R&D services provider. This is an exception to the application of the European public procurement rules and the Directive normally covers procurement of other R&D services.

However, for subsequent public procurement of commercial volumes of innovative solutions, a separate public procurement procedure provided for by the Directives such as the open procedure or the competitive dialogue is used.

3. Further measures to enhance innovation via public procurement reform 

There are further new provisions to encourage companies to develop their capacity for innovation. They include:

• All procurement procedures may take into account the total life cycle cost of purchases when tenders are being evaluated and award innovative bids more points in light of their long-term financial benefits.
• Innovation in social and health services can be more easily achieved through the simplified system, which is more flexible than service contracts for other purposes (see below).
• The competitive dialogue procedure has been simplified for particularly technically and financially complex projects.
• Specific provisions for cross-border joint procurement will enable buyers from various EU countries to make joint purchases. Aggregating demand will make it easier to share the risks associated with innovative projects and should attract more risk capital.

Overall, the value of innovation lies in the improved results it achieves. An innovative solution will be more attractive because of its higher quality and/or more competitive costs. It will optimise public service operation by integrating new processes, technologies or materials.

4. Successful example of innovative procurement helps to lower pressure on health budgets

Most EU countries struggle with increasing healthcare costs. At the same time, patients are dealing with increasing contributions to health insurance systems. More efficient procurement of medical devices, medicines, medical equipment and IT solutions by public hospitals can lower the pressure on health budgets significantly while facilitating better value for money.

This was revealed at a workshop for experts in health public procurement organised by the European Commission on 19 September 2016. It looked at new opportunities for more effective procurement opened up by new EU public procurement legislation, such as the option to purchase innovative solutions, to centralise purchasing, and to do joint cross-border and joint EU-wide procurement. Several interesting procurement success stories in the health sector were presented.

More information:

Slashing the administrative burden, improving access for SMEs, preventing corruption and allowing for social and environmental considerations: more articles on the reform of public procurement