This document discusses innovative procurement processes and their application in the social and health care sector. It defines innovation and identifies different customer types in public procurement, including end-users, relatives, paying customers, politicians, and indirect customers. It then outlines a procurement process for innovative public procurement, including defining requirements, determining supplier requirements, and evaluating proposals. Key conclusions are that social and healthcare units seldom have dedicated innovation units, more research is needed on their R&D activities, and innovative procurement requires identifying customer needs early and discussing principles like IPR with suppliers.

1. 1
Innovative procurement processes and
their use in social and health care sector
Timo Kivistö, Daniela Grudinschi, Jukka Hallikas,
Sanna Sintonen

2. 6
Theoretical background

3. 7
Definitions
Innovation definition by OECD
• Product innovation
• Process innovation
• Marketing innovation
• Organisational innovation
In procurement context
• New to the organisation
• Can be classified with more challenge

4. 8
The customers in public procurement
End-users
• Use the object - pay a part of the cost
• Values: commercial customer service
Relatives
• Values: commercial customer service
The paying customer
• In the group – management – unit chiefs – employees
• Values: customer service, economic values, savings
Politicians
• Partly same values – economic values, widely accepted political values as
social politics, environmental politics, local economy
• There can party politics and individual political values

5. 9
The customers in public procurement
Indirect customer
• The employer of the using customer
Indirect customer
• National Social Security Fund
Direct customer – 100 pct paying customer

6. 10
Other aspects of innovative procurement
In relation to time the product can be
• Off-the-shelf product
• New product or service, which can be developed in a reasonable time
• The product is being innovated constantly during its lifecycle
In relation to origin the product can be
• Technology push
• Demand pull
The way how requirements are defined
• Resources, process, end products, value
• In physical products value for a certain use
• Performance based acquisition

7. 11
Evaluation of the innovative procurement
objects

8. 12
Innovation object cases
We searched innovations from national innovation bodies and
from innovation bodies of major national healthcare
organisations
• Vinnova (43), Tekes (53) as innovation bodies
• SLL Innovation (35), NHS Innovation (SW) (30) as the
innovation bodies of the major healthcare providors

9. 13
Classification of potential innovative
procurement objects
• Cases reperesent floowing product/service categories
• Development of a single service
• Development of multiple services
• Development of services, equipment and premises
• Coordination services
• Services
• Support services
• Enabling technology
• Materials
• Premises
• Other
• Together
3
2
2
21
43
3
61
19
2
11
167

10. 14
Procurement processes for innovative
public procurement
1. Defining the scope of the procurement object
• Make-or-buy of ongoing services, development services
• Strategic decision to own premises, equipment
• Are there other customers than the public unit
• Life cycle cost
• Product to be developed
2. Defining the customer types
• Public units, other customers
3. Defining the customers within the customer types
• Eg. The using customer, paying customer

11. 15
Procurement processes for innovative
public procurement
4. Defining the customer values
• General customer service vales
• Measurable product or service specific values
• Generally accepted values such as environmental and social values
• Economic values – savings, reduced cost
• Other economic values
• Political values from party poltics or individual.
5. Reverse marketing for innovations
6. Supply market research / search for innovations
• Which are the sources for innovation
• Are the innovations which are not in the market

12. 16
Procurement processes for innovative
public procurement
7. Competition set-up
• Which supplier group is invited to tender
• The scope of the RFP
• Is the change or development process within or out of the scope
• Partial deliveries vs. economics of scale
• Large framework agreements vs small monetary value
innovations

13. 17
Procurement processes for
innovative public procurement
The rest of the process follows the traditional procurement
8. Requirements definition
• Economic goals
• Innovation goals
9. Defining the quantity
10. Determining supplier requirements
• Innovation capability
11. Determining the award criteria
12. Select procurement procedure

14. 18
Procurement processes for innovative
public procurement
13. Notice
14. Request for proposal
15. Proposal evaluation

15. 19
Discussion

16. 20
Observation concerning the organisations
• The healthcare producers innovation organisations concentrated in
distribution and commersialisation of the inventions made by the
personnel
• They provided services for enterprises for testing and evaluation of
new products
• They did not search for innovations from the market

17. 21
Procurement process applicability
to procurement categories
Development services can be bought from consultants or engineering
companies
• This affects from which supplier group you are searching for the
innovation
• Same goes for coordination services, services, enabling technologies and
premises
• In those the development make-or-buy decision must be made, shall the
change process be within the RFP
Enabling technology and materials
• Enabling technology or materials are designed for small customer groups and
thus small monetary value – they are likely to be left out from traditional
framework agreements

18. 22
Procurement process applicability
to procurement categories
• Coordination services
• Are coordination services procured together with services or separately
• All procured from one supplier might cause higher risks or inflexibility
• SLL evaluates innovative products on contract basis for push products
• Supply market research was not mentioned in description of the
organisation nor in cases

19. 23
Procurement process applicability
to procurement categories
• Innovative parts in the procurement process
• The scope of the procurement object, competition set-up and innovative
requirements
• In commercial requirements the innovation incentives must be mentioned
• These phases need supplier coordination
• The effects of the procurement legislation
• Does not restrict the use of innovative procedures
• The requirements must be non-discriminative
• The evaluation should be based on the criteria in the tender documents

20. 24
Conclusions

21. 25
Conclusions
• In the market there are off-the-shelf innovations, but only few search
for them
• The national innovation bodies and those seeking fundind want to make their own
innovations
• The monetary values of innovations is small amd therefore not interesting for
commercial players
• The units in social and healthcare sector seldom has an innovation unit
• In one organisation the innovation unit was the assistant director of nursing, who
was supported by a testing group in later phases of the development
• More research of the R&D activities of the public units is needed

22. 26
Conclusions
• The customers and the customer values
• Public organisations seldom measure customer satisfaction in the detail of
different customer groups
• If the true needs of the customer is not recognised in the early phase, then they
shall have to be made in later phases (open -> negotiated)
• Value from procurement contracts
• There should be a discussion forum with suppliers and procuring units, where the
principles of innovative procurement, such IPR and incentives should be
discussed