Public procurement of innovation (PPI)
The government can use procurement as a way of encouraging the market to come up with innovative solutions. This can be done either by actively seeking an innovative solution or by offering market players the scope to provide innovative solutions. Innovation is vital for economic growth and progress. While innovative solutions are often more sustainable, they may also be driven by other considerations.
The government can engage in PPI in one of two ways – by providing market players with the scope to develop and/or offer an innovative solution or by conducting a targeted search for an innovative solution to its problem.
The term PPI is often confused with innovation procurement. PPI is results-led: an innovation is purchased. Innovation procurement, on the other hand, involves the use of innovative features when designing the procurement process. Innovation procurement processes are often used for PPI. These can also be combined. For instance, Erasmus MC used market consultation in conjunction with competitive dialogue (innovation procurement) to obtain a smart solution (PPI) from the market to solve the problem of how to clean all of its hospital beds.
Getting started with PPI
Innovative solutions can generate substantial long-term gains. In the short term, however, PPI does involve taking risks. It is important for your organisation to be aware of this, and to be able to manage the risks effectively. Be aware, in advance, that invitations to tender for innovative solutions place a great demand on the professionalism of your procurement process.
You can use your procurement policy to encourage the development of innovative solutions in the market. The difference between a regular procurement process and a PPI procedure lies mainly in the formulation of the requirement and the way you interact with the market. The guiding principles for PPI are as follows:
- Begin early
- Get to know the market
- Actively assess and manage the risks involved
- Competition is not simply a formality
- Use flexible procedures
- Aim for broader performance-based rather than rigid technical specifications
- Make information freely available to all bidders
- Determine a strategy for managing intellectual property
- The terms of the contract are determinative