CASE STUDY:

Forward Commitment

Procurement

FCP Key Features:

Practical supply chain •management toolStimulates innovation •in response to customer ‘unmet’ needsAddresses •environmental challenges cost effectivelyManages innovation •risk

Forward Commitment Procurement: practical pathways to delivering innovation

Forward Commitment Procurement (FCP) is a new approach to procuring socially beneficial services and products that effectively harnesses innovation to improve public services.

Building on the success of FCP demonstration projects, the Department for Business, Innovation and Skills (BIS) is working to increase awareness, capability and adoption of this practical procurement tool across the public sector. Its ‘Innovation through Procurement’ Programme aims to help deliver better, cheaper solutions to meet pressing social, economic and environmental challenges, such as climate change.

To this end, in November 2008 we launched the Innovation for Sustainability Competition.

“The aim of the Innovation for Sustainability programme is not only to develop a portfolio of FCP projects driving innovative solutions that can be picked up by others, but also to create a broad base of public sector leaders and professionals who understand and can apply FCP approaches to deliver innovative solutions”. – Fergus Harradence, Deputy Director, Innovation Policy, the Department for Business, Innovation and Skills

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“Innovation will be the key to some of the biggest challenges facing our society, like global warming and sustainable development. We need to use all the tools at our disposal to unlock solutions”. – Innovation Nation

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CASE STUDY:

Forward Commitment

Procurement Forw

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“Sustainable development needs innovation; not just in terms of new products and services, but also in how we go about procuring them. FCP is a new and effective tool that should be adopted more widely.” – Maggie Manton, member of the FCP Competition Project Board, Centre of Expertise for Sustainable Procurement, Office of Government Commerce

“It is the lack of credible, articulated demand that is at the root of the relative failure of innovation in the UK environmental goods and services sector, not any lack of research, invention or innovative aspirations.” – Dr Jonathan (Jack) Frost, former Chairman of the Environmental Innovations Advisory Group and Chairman of the FCP Competition Project Board

Harnessing the power of public sector procurement to drive innovation for the social goodInnovation will be the key to meeting some of the biggest challenges facing our society; climate change, energy and resource efficiency, waste and water management and economic sustainability to name just a few.

As a society we need better and more cost effective solutions to meet these challenges. Yet the products and services required to deliver what is really needed are often not available in the market, are too expensive, or are unproven.

Bringing these innovative products and services to market is a difficult task, but the potential rewards are enormous. The UK public sector spends around £175 billion a year on goods and services. Using new tools such as Forward Commitment Procurement makes visible to potential suppliers the unmet needs of the public sector in a way that manages risk and supports investment and innovation.

Over the last 5 years the UK Government has drawn together public and private sector procurement, innovation and supply chain management expertise to develop the FCP model, pioneering the use of procurement as a tool to drive innovation.

Creating the market conditions to support innovation

Meeting the public sector’s sustainability objectives often requires new and innovative solutions, including ones that aren’t actually yet available on the market. Because they aren’t available no one demands them, and because there is no demand the private sector doesn’t invest in supplying them. It’s stalemate, Catch 22…

In essence, FCP unlocks the stalemate by providing the missing demand – or ‘market-pull’ – for new products and services. It does this by making the market aware of needs, not in vague, general terms but in the context of a credible procurement process that offers to buy solutions that meet those needs once they’re available at the right price.

Letting suppliers know exactly what solutions buyers need is a way for government bodies to effectively improve the way they manage the supply chain in the sector, explained Dr Jonathan (Jack) Frost, former Chairman of the Environmental Innovations Advisory Group and Chairman of the FCP Competition Project Board. “It is the lack of credible articulated demand that is at the root of the relative failure of innovation in the UK environmental goods and services sector, not any lack of research, invention or innovative aspirations. To use FCP as a tool you need to know what you want to achieve, be committed to achieving it and be able to convince the market that you really want it.”

The results: better, cheaper products and services

FCP provides a practical approach to help innovating companies and procurers to work together to deliver better products and services.

Forward Commitment Procurement (FCP) is a practical supply chain management tool that creates the conditions needed to deliver innovative, cost effective products and services.

Designed primarily for the public sector, the Forward Commitment Procurement approach was developed in partnership with the Office of Government Commerce (OGC) to be fully in line with public procurement regulations.

In brief, FCP involves providing the market information of unmet needs and, critically, the incentive of a Forward Commitment: an agreement to purchase a product or service that currently may not exist, at a specified future date, providing it can be delivered to agreed performance levels and costs.

Although designed to address the particular barriers to market faced by environmental innovations, the approach is also being used to support the procurement of innovative solutions in other markets, such as sustainable development, healthcare and construction.

“The public sector, as both custodian of the common good and a major purchaser of environmental goods and services, is a natural lead market for environmental products and services. FCP provides a practical mechanism to enable public sector organisations to fulfill this role, while at the same time delivering the cost effective solutions they need to pressing problems such as climate change and economic and social sustainability”. – Gaynor Whyles, Director JERA Consulting

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The Department for Business, Innovation and Skills Innovation for Sustainability programme is building on the success of FCP demonstration projects.

Zero Mattress Solution for PrisonsHistorically, the majority of waste mattresses and pillows from Her Majesty’s Prison Service (HMPS) were sent to landfill or incinerated as clinical waste. The increasing costs of disposal together with a drive to reduce volumes of waste to landfill driven by the SOGE (Sustainable Operations on the Government Estate) targets brought this problem into focus. HMPS worked with the DTI/DEFRA Environmental Innovations Advisory Group and OGC in the first Forward Commitment Procurement (FCP) demonstration project to deliver an innovative solution to this problem.

In line with the principles of FCP, HMPS identified their unmet need and consulted with the market to find a way to deliver their requirement in a cost effective way. This led to a fundamental shift in the procurement approach and, after trials, the procurement in March 2009 of a fully managed Zero Waste Mattress system.

Outcomes? A zero waste mattress and pillows solution, sooner than expected and with significant cost savings – estimated to be in the region of £5 million over the life of the contract.

“The outcomes of this pioneering project have exceeded all expectations from both a sustainability and financial savings perspective” – Geoff Sykes, Head of Procurement Compliance and Mattress Project Manager, MoJ.

The results speak for themselves: innovative new covers will reduce turnover, and all but eliminate the need for clinical waste disposal; no end-of-life mattresses will be sent to landfill, but instead will be recycled into useful products.

It doesn’t end here; HMPS are committed to auditing the zero waste outcomes of the contract, and will look to continual improvement in performance all aspects of the contract.

“Procurement has been talked about for years as a tool for sustainability, but the HMPS zero waste mattress project was one of the few truly innovative examples that CEMEP came across” – Julie Hill, Member of the Commission on Environmental Markets and Economic Performance which recommended FCP as a market-pull mechanism

CASE STUDY:Forward Commitment Procurement

FURTHER INFORMATION:

For more information about this project or to find out more about FCP contact Karen Andrew on 0114 259 3128

www.bis.gov.uk

fcp@bis.gsi.gov.uk