Innovation Procurement
Procurement designed to drive innovation: pre-commercial procurement, innovation partnerships, and innovation-specific framework mechanisms.
Definition
Innovation Procurement covers procurement approaches designed to drive innovation in goods, services, and processes purchased by the public sector. Common mechanisms include Pre-Commercial Procurement (PCP, structured R&D investment in early-stage innovation), Innovation Partnership procurement (combining R&D and subsequent purchase for unmet requirements), and innovation-friendly framework structures (lots specifically for novel or unproven capability, supplier engagement supporting innovation). The Procurement Act 2023 Competitive Flexible procedure provides design freedom that supports innovation procurement.
How it works in practice
Innovation Procurement faces a fundamental tension: procurement regulation emphasises certainty and equal treatment, innovation requires exploration and asymmetric supplier engagement. The various mechanisms manage this tension differently. Pre-Commercial Procurement separates R&D investment (where IP and commercial freedom is preserved for suppliers) from subsequent procurement (where competitive procurement applies). Innovation Partnership keeps both R&D and procurement within a single procurement with phase gates and competition. Innovation-friendly frameworks accept that some lots will support unproven capability with adjusted evaluation criteria. The UK Government Innovation Strategy and various sector innovation programmes (Defence Innovation Accelerator, NHS Innovation Service, Innovate UK) sit alongside conventional procurement and provide alternative routes to public sector innovation engagement. For suppliers with novel capability the strategic question is which route fits: conventional procurement (for capability the market can broadly deliver), Innovation Procurement mechanisms (for capability the market does not yet deliver), or innovation programmes (for very early-stage capability needing R&D investment before procurement). The Subsidy Control Act 2022 affects innovation procurement design where public investment is combined with subsequent purchase; designs need to comply with subsidy control principles. The PA 2023 transparency regime increases visibility of innovation procurement experiments and supplier outcomes.
Common questions
What is Pre-Commercial Procurement?
A procurement approach where the buyer pays suppliers to develop early-stage solutions to an unmet requirement, with IP and commercial freedom preserved for the suppliers. PCP separates R&D investment from subsequent procurement (which runs as conventional competitive procurement after the R&D outputs are evaluated). PCP is used in some innovation-focused public sector programmes.
How does PA 2023 support innovation procurement?
The Competitive Flexible procedure provides design freedom that supports innovation procurement: phase gates, supplier engagement, iterative refinement of requirement. The Act also retains the Innovation Partnership concept within Competitive Flexible. The supplier conduct record applies to innovation procurement outcomes alongside conventional procurement.
Should SMEs target innovation procurement?
For SMEs with genuinely novel capability yes; innovation procurement mechanisms can give SMEs access to public sector R&D investment and subsequent procurement where conventional procurement might disadvantage them against established competitors. For SMEs delivering broadly-available capability conventional procurement remains the dominant route.