A New Approach to Public Procurement

Promoting innovation in Procurement

Public procurement is a vital component of government operations and plays a crucial role in promoting innovation, supported in the public sector by the development of international regulations and guidelines. Procurement innovation involves the use of innovative techniques and methods in the procurement process to achieve better results and promote efficiency. Our Staff Writer provides your 101 introduction to what this means.

There are three leading innovation methods employed in procurement innovation permitted by international prescript for public procurement.

  • Competitive Dialogue: This method involves a structured dialogue between the procurement authority and potential suppliers. The aim is to identify the most suitable solution for a particular procurement requirement. This method allows for flexibility and innovation in the procurement process, and it has been widely adopted in European countries.
  • Innovation Partnerships: This method involves a collaborative effort between the procurement authority and potential suppliers to develop innovative solutions to a specific procurement requirement. It allows for the sharing of risks, costs and benefits between the parties involved and has been adopted in the UK, where it is referred to as Competitive Innovation Procurement (CIP).
  • Pre-Commercial Procurement (PCP): This involves the procurement of R&D services to develop new solutions to specific procurement requirements. Competitive procedures are used to select the best solution, and the results are then owned by the procuring authority. This method has been adopted in several European countries, including Denmark, Spain and Sweden.

In addition to these three methods, there are a number of other innovative procurement techniques that can be used to promote innovation in the public sector. These include:

  • Open innovation: This approach involves the procurement authority inviting suppliers to submit innovative ideas and solutions, regardless of whether they are already on the market. This can help to identify new and innovative solutions that would not otherwise be considered.
  • Challenge prizes: This approach involves the procurement authority offering a prize to the supplier that can develop the most innovative solution to a specific problem. This can be a very effective way to stimulate innovation, as it provides a clear incentive for suppliers to develop new and innovative solutions.
  • Co-creation: This approach involves the procurement authority working with suppliers to co-create innovative solutions. This can help to ensure that the solutions developed are tailored to the specific needs of the procurement authority and that they are more likely to be successful.

These are just a few of the many innovative procurement techniques that can be used to promote innovation in the public sector. By using these techniques, procurement authorities can help to ensure that they are getting the best value for money from their procurements and that they are supporting innovation in the economy.

Pricing and Value of Innovation
When procuring innovation, it is important to consider the pricing and value of the innovative solutions. There are two key methodologies to consider: competitive pricing for innovation and value-based pricing.

  • Competitive pricing for innovation: This methodology involves the use of competitive procedures to identify the best value for money for innovative solutions. It is based on a competitive process that encourages suppliers to offer innovative solutions at competitive prices. This approach has been widely adopted in public procurement, and it has been found to be effective in promoting innovation.
  • Value-based pricing: This approach involves the assessment of the value of innovative solutions based on their expected benefits, such as improved efficiency, cost saving and other non-financial benefits. Value-based pricing enables the procurement authority to evaluate the potential impact of innovative solutions on their operations and to make informed decisions on the most appropriate solution to adopt.

In addition to these two methodologies, a new approach called collaborative value pricing has emerged as a promising methodology for procuring innovation.

  • Collaborative value pricing: This approach combines the principles of competitive pricing and value-based pricing and involves a collaborative effort between the procurement authority and potential suppliers to identify the best value for money for innovative solutions. It encourages suppliers to offer innovative solutions that are tailored to the specific needs of the procurement authority and to provide a pricing structure that is based on the value of the solution. This approach promotes collaboration between the procurement authority and suppliers, which can lead to the development of innovative solutions that are better aligned with the needs of the procurement authority.

By using these pricing methodologies, procurement authorities can ensure that they are getting the best value for money from their procurements and that they are supporting innovation in the economy.

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