developing a framework for measuring public procurement of innovation. what are the key user needs?...

Expert Workshop on the Measurement of Public Procurement of Innovation

OECD, Paris

4th February 2013

Session I: Developing a framework for measuring public procurement of innovation – What are the key user needs?

Can they be met?

John Rigby, Manchester University

Manchester Institute of Innovation Research 1

Procurement of Innovation: Measurement Issues

• The PCP to PPI link subject of recent policy reviews

• While PCP can be demand / supply / hybrid policy, link to PPI (procurement of actual goods and services) from PCP is envisaged clearly in the law / procedures / policies of the EU and is the focus in new directives (Innovation Partnerships) (Apostol, 2012 PPLR)

• PCP / Innovation Partnerships and Competitive Dialogue discussions reveal concern over structure / system as well as output

• Implications for measurement?


Procurement of Innovation: Measurement Issues

System / Rules / Practices of Procurement

Outputs of Procurement Impacts

Ease of Use Procurement of goods and services

Economic and social improvement in key areas of grand challenges and wherever procurement of innovation is undertaken

Widely diffused and engaged with

Risk reduction effects Employment creation

Appropriate applications of the methods of PCP and PPI

Projects moving from Stage 1-3 to Stage 4 (across the gap)

Technological capability development

Procurement capability enhancement

Shortening time to innovation / market

Venture capital investment in the SMEs involved


Elvira Uyarra, (John Rigby)

Jakob Edler, Luke Georghiou, Jillian Yeow

Manchester University

Session III: Asking businesses about their involvement in innovation procurement and its

impact – the UNDERPINN Project

Expert Workshop on the Measurement of Public Procurement of Innovation

Session III Presentation

The UNDERPINN Study

– Public Procurement of Innovation, what was done and some findings from the Suppliers’ Survey

– Issues raised by the Study for understanding innovation in terms of its practices and its outcomes, and for objectivizing and measuring these


UNDERPINN Study Starting point: Public demand..

• Has great potential to spur innovation – but underutilised?

Three aims

• Innovation effects of procurement practices

• Understanding the supplier‘s perspective

• Process and institutional context of public procurement

Methods

• Literature review

• Multiple case studies

• Supplier survey, not matched pairs / control group

• Institutional analysis and context analysis

Funding: BIS/ESRC/NESTA/TSB, (through UK IRC)

Team: Edler, J., Georghiou, L., Uyarra, E., Gee, S., Yeow, J, James, A., McMeekin, A.,

Thomas, S., Cousins, P., Maddock, S., Cram, C.


Survey details • CATI survey on suppliers to public bodies conducted between

June and July 2011

• 800 responding organisations across sectors or areas of government > 10% response rate

• Structure:

– Types of innovation

– Procurement profile: main categories, main clients, tendering modes and procurement practices

– Procurement and innovation: main drivers and barriers, comparing public and private.

– General assessment


Type Categories %

Size (employees) Less than 10 82 10%

Between 10-49 297 37%

Between 50-250 226 28%

More than 250 190 24%

Age <5 years 32 4.0%

between 5-10 years 147 18.4%



> 50 years 33 4.1%

Type of organisation Private 649 81.1%

Social enterprise 139 17.4%

Main category of goods

and services supplied

Facilities & Management

services

91 11%

Healthcare equipment, supplies

and services

116 15%

Office equipment & IT 61 8%

Professional services 159 20%

Social community care, supplies

& services

133 17%

Other (incl. utilities, education,

transport)

54 7%

Works 145 18%

Main client NHS 195 24%

Local Government 423 53%

Central Government 121 15%

Profile of respondents


UK public sector

UK public sector (sample)

Supplier Population

Population : 8198 organisations across the three areas of government

We used information for central government, local authorities and NHS

Our population would supply goods and services for central &local gov and NHS, but also other parts of the public sector as well as the private sector

Central government

suppliers 22%

NHS suppliers

49%

Local government

suppliers 30%

Sampling

9 Manchester Institute of Innovation Research

Four key findings

1) Suppliers to public bodies show considerable innovation

activity - but heterogeneous picture.

2) There are procurement practices that are more innovation

friendly and make a difference in terms of innovation and

competitiveness of suppliers.

3) Innovation friendly procurement practice not as common as

they should be.

4) There are a set of common barriers.


Innovation and Public Contracts


Product innovation (432)

Process innovation (540) Service innovation

(605)

Respondents have introduced a mix of

product, process and service innovations in

the last three years (N=800) 200

73 246

62

1) Suppliers innovate, but very heterogeneous picture - much is hidden

Larger companies slightly more innovative Service providers more innovative Product


2) Procurement practices make a difference

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

product service process

All sample

Those having experienced innovation friendly procurement practices more often

Share of those suppliers having actually introduced a new or significantly improved product/service/process innovation in the last three years

Innovation pays off: 60.4% of respondents reported having won a contract because of an innovation.

This figure raises to 72.2% for those more exposed to innovation friendly practices.


Catalytic effects: The innovations introduced as a consequence of bidding for contracts or delivering to public sector enabled or increased sales in other public, private and overseas markets for 81%, 57% and 30% of cases.

These shares are higher for those experiencing innovation friendly procurement

2) Procurement practices make a difference

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

public private overseas

All sample

Those having experienced innovation friendly procurement practices more often

% of sample for whom public sector contract/bidding has increased or enabled sales in other markets


3) Use of practices not ideal

19%

10%

37%

31%

9%

72%

55%

61%

26%

6%

22%

28%

48%

15%

38%

33%

31%

23%

24%

33%

33%

37%

39%

46%

46%

47%

48%

49%

51%

56%

58%

59%

60%

66%

Provisions related to intellectual property

E-auctions

Restricted tender

Non-OJ tender procedure

Private finance initiative

Electronic submission of tenders

Framework agreement

Open competitive tender

Negotiated tender

Incentive contracts such as profit-sharing …

Competitive dialogue

Full life-cycle costing considerations

Emphasis on sustainability criteria

Advanced communication of future needs

Outcome-based specifications

Early interaction with procuring organisation

Innovation requirements in tenders

encouraged innovation (% out of those that experience it) frequently experienced


The most effective practices are the least frequent

4) Key barriers to innovation in procurement

• Differences by category: healthcare & works suppliers: too much emphasis on price; Social and community care organisations: contracts not long enough

• Differences by firm size: Large companies emphasise the lack of risk management

• Lack of market / technological knoweldge; poor use of supply chains


4) What suppliers say…

”Knowledge and appetite for innovation differs vastly across different sectors e.g. councils vs. the NHS.”

“[Procurers] pretend to be after innovation but they're after the lowest price.”

“If you always ask for what you always had you'll always get what you always got. I.e. technical and performance specifications don't allow for significantly innovative approaches.”

“There is no direct communication between the bidder and the 'user', all is via the restrictive interface that is the procurer. This results in poor specification and ineffective procurement. As a bidder, you need this dialog to innovate effectively.”

“The procurer has already defined a specification that could be better specified by consultation with the potential private sector providers.”

“[It’s] All to do with the willingness and quality of the procurers. Some of them are like sending a non driver to buy a car, others are like Jenson Button.”


Procurement of Innovation: Challenges for Measurement and Indicators I

• Procurement data poor quality

– Not good records; poor relevance of functional to industrial categories

• Public sector fragmented

– UK 30,000 procurement organisations; no central portal (at time of UNDERPINN study)

• Many purchases below legal threshold

– Majority of purchases currently falling outside threshold, so difficult to research


Procurement of Innovation: Challenges for Measurement and Indicators II

• Public sector market characteristics – Some single suppliers, some supply to many organisations:

inherent difficulty distinguishing which procurement was instrumental

• Diversity of supply firms – Increasing role of non-profits but they have different

innovation dynamics

• Innovation by suppliers difficult to attribute to procurement by public sector – Many firms have multiple supplies to many CAs and a mix

of public and private clients


developing a framework for measuring public procurement of innovation. what are the key user needs?...

Government & Nonprofit