OECD expert workshop on the measurement of public procurement of innovation. Developing a framework for measuring public procurement of innovation. What are the key user needs? Can they be met? presentation by John Rigby

1. 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

2. 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?
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3. 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
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4. 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

5. 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
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6. 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.
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7. 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
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8. 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%
between 10-25 years 231 28.9%
between 25-50 years 117 14.6%
> 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
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9. 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
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10. 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.
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11. Innovation and Public Contracts
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12. Product innovation
(432)
Process innovation
Service innovation (540)
(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
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13. 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.
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14.  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
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15. 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
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The most
effective
practices
are the
least
frequent

16. 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
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17. 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.”
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18. 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
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19. 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
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