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Blog: Innovation and competitiveness: public procurement as the way forward?

Met dank overgenomen van A. (Andrus) Ansip, gepubliceerd op vrijdag 7 april 2017.

Many people underestimate the influence that governments can have on innovation, or are perhaps unaware of it.

By using its purchasing power effectively and imaginatively, the public sector can act as a 'smart buyer' to attract industry into developing products and services for wide social use.

This is not only an efficient way to modernise public services.

It also creates opportunities for companies to get their research results to market and to win leadership in new markets. As a concept, it is not new - some countries have been doing this for decades - and everyone has gained.

In the United States, military demand contributed largely to the development of GPS technologies. R&D procurements allowed U.S. authorities to create new markets for biotechnology and nanotechnology applications for diagnosing Alzheimer's disease.

Fuel cell powered buses became a reality in Japan thanks to R&D procurements. In Sweden, government-awarded contracts helped to cut dependence on nuclear energy by 15%.

But as a whole, Europe is not making the most of R&D procurement compared with other parts of the world.

Our expenditure in this area is significantly less. Only a small share of public procurement in Europe is aimed at innovation, despite the public sector being our largest single spender with at least 15% of GDP.

For me, this is a missed opportunity to stimulate innovation using procurement - especially at a time of general budget constraints. But I am pleased to say that the situation is now improving.

In recent years, EU-funded research and innovation programmes have encouraged public buyers to join forces in contracting for new products and services that address specific public sector challenges.

The result is 15 cross-border Pre-Commercial Procurements (PCPs) involving dozens of companies, universities and research centres across Europe. You can see more details on this map:


PCPs share not only the risks but also the benefits of R&D between procurers and suppliers.

For example, one PCP brings together a consortium of hospitals to develop a telemonitoring system that can integrate and analyse data of intensive care unit patients - wherever they are. The aim is to reduce mortality rates due to hospital infections by 25%.

In another, national road authorities are working together to reduce traffic jams by using virtual modelling of road infrastructure to improve the efficiency of traffic management systems.

You can see the full list of projects here and watch some real-life examples in these videos.

The results and impact so far are impressive.

Firstly, the PCPs open a route to market for startups and SMEs, which win 71% of contracts.

This creates international growth opportunities for all types of innovative companies in Europe, even the smallest startups - which need help to grow and expand outside their home markets.

In addition, 28% of PCP contracts are awarded to companies from another country than the procurers. This is significantly more than the average amount of cross-border public contract award in Europe.

And the R&D is being done here in Europe, creating growth and high-quality jobs: a good fit for the Digital Single Market. Nearly all contractors working in the PCP procurements do 100% of the R&D for the contract in Europe.

So not only are public services being improved and made more efficient, European companies are getting opportunities for cross-border growth as well as market leadership.

But think how much could be achieved if governments and public administrations directed more of their spending towards innovation. Given PCP results to date, the impact on EU competitiveness could be substantial.

This will be food for thought for the Estonian EU Presidency conference on innovation procurement to be held in Tallinn in October. It will be a good opportunity for EU countries to commit their public sectors to more innovation procurement and act as the 'smart buyers' I mentioned earlier.

Here, national funding can combine with EU resources to stimulate these innovation markets. Under Horizon 2020, the largest EU research and innovation programme ever, €58 million is available in 2017 for those smart buyers who want to apply to start new innovation procurements.

Technical support and advice can help to reduce the risk-averse attitude that often leads public procurers to play it safe. This is why the Commission set up an EU-wide network of national centres on innovation procurement and the European Assistance for Innovation Procurement initiative to train and assist public procurers.

Tapping into a multi-billion euro public procurement market is a useful way to stimulate innovation and competitiveness throughout Europe. That does not mean abandoning any notion of cost-effectiveness: the public purse also has to benefit - and public needs have to be properly met.

Innovation has a clear role to play in efficient procurement.

And efficient procurement has a role to play in stimulating innovation.

Another blog soon.


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