Public Procurement of Innovation

Innovation in public procurement generally refers to innovative solutions in the design and delivery of public services. Public procurement of innovation offers an enormous potential market for innovative products and services. Used strategically, it can help governments boost innovation at both the national and local level and ultimately improve productivity and inclusiveness.

Public procurement has been considered a significant instrument for innovation stimulus in the developing countries’ service delivery strategy for many years. Innovation is also emphasized as an aspect in public procurement law. Thus further qualitative procurement criteria are stipulated alongside the efficiency principle, thereby, for example, bringing in innovative aspects together with social and environmental considerations.

The promotion of innovation in public procurement is an important element in the economic affairs and energy policy of the government of Uganda. Goals such as conservation of natural resources and energy efficiency are tightly linked to innovation. These targets may be achieved not only through a supply-oriented policy such as the promotion of research and innovation projects, but also from the demand side through public procurement of innovative products, system solutions and services. The high level of innovation and technology potential of public procurement oriented towards innovation is reflected in the immense cost saving and efficiency in service delivery.

Innovation is possible in many areas, it occurs usually in an initial implementation of products and techniques (marketable innovation) that have already been used in another sector or application. An innovation may also be associated with the implementation of a new technology or a new business model that is yet to appear on the market (non-marketable innovation)

Demand for innovation by states occurs against the background of increasing digitalization and where tight budgets are of supreme importance. Procurement of innovation often results in significant added value for the public sector and companies.

Public procurement’s primary target is to procure products and services economically. In doing so, the procurement of innovative products and services can enhance cost-efficiency by considering life-cycle costs over the long-term and boost performance, thereby producing cost savings. This becomes a question of ascertaining the best cost-benefit ratio. This may occur due to lower energy and water consumption costs, use of auxiliary and operating materials, or the disposal of products. In addition to actual economic demand, innovative products and the provision of services often bestow concrete improvements in administrative procedures and the concomitant enhancement of service quality and user-friendliness.

Public contracting authorities are obliged to act according to the principles of efficiency and economy in the procurement of supplies, services and works. Of course, this instruction explicitly includes the consideration of innovative criteria. The procurement of new products and services may be more economical than the conventional solution when the medium and long-term utility value and total life-cycle costs are taken into consideration. In many cases, innovative services and products with positive environmental effects, for example through energy savings, are linked.

Finally, the population’s demand for new products and services stimulates innovative activity in the economy and bolsters the rapid introduction of newer technologies in the market. Small and medium-sized enterprises (SMEs) profit especially, as they require reference projects for their innovative technologies to woo potential (private) clients and positively influence their purchasing decisions.