I am chairing a European Union project (A Mutual Learning Exercise, MLE) on innovation related public procurement. The first report in this initiative has been published by the European Commission. It focusses on functional specifications for achieving innovations by means of public procurement, is written by me, and has the title “Developing Strategic Frameworks for Innovation Related Public Procurement”. It can be downloaded at: https://rio.jrc.ec.europa.eu/en/library/mle-innovation-related-public-procurement-report-developing-strategic-frameworks-innovation – under ”reports”, sections 3 and 4 are the most central ones.
The report focuses on four specific kinds of procurement, namely (1) direct innovation procurement, (2) catalytic innovation procurement, (3) functional regular procurement, and (4) Pre-Commercial Procurement (PCP). (1) – (3) are also called Innovation-Enhancing Procurement (IEP). IEP is the procurement of products that may be new, i.e. innovations. PCP is not procurement of innovations, but procurement of research results. Hence, PCP is research policy, not innovation policy. (Research may influence innovation, but it is not innovation.)
The report empahasizes the importance of functional procurement and functional specifications for innovation. Functional procurement can be defined as the procurement of products by an authority/unit that describes a function to be performed (or a problem to be solved) instead of describing the product that is to perform the function. In functional procurement, a public agency specifies what is to be achieved rather than how it is to be achieved. Functional regular procurement is pursued by means of functional specifications instead of product specifications. Hence, it is a matter of the manner in which a procurement call is set up and the tender documentation is formulated. It opens up for innovation (new products) but does not require it. The general conclusion is that functional specification is needed for all the four different kinds of procurement listed above. To achieve innovation through public procurement it is, somewhat paradoxically, more important to emphasize functional specification than to pursue innovation procurement.
In the 2014 EU Procurement Directives it is stated that “Functional and performance-related requirements are also appropriate means to favour innovation in public procurement and should be used as widely as possible.” A consensus view emerging is that a substantial part of the more than 2 trillion Euros that are yearly used for public procurement in the EU should be transformed into functional procurement. A crucial part of EU policy – and national policies – should therefore now be to facilitate and enhance such a transformation. Now the issue is implementation: to identify obstacles to the transformation and create means to overcome them.
Sweden is the only country where the government has developed – in 2016 – a national strategy for public procurement where innovation procurement – actually meaning functional procurement – is central. This unique strategy is described in some detail in the report. Functional procurement may develop into the most important innovation policy instrument in Sweden.
The final version in terms of content can be downloaded here – click ‘Reports’.