I recently had the opportunity to participate in a roundtable on July 17th, where leaders from local government and the digital transformation sector came together to discuss the challenges and opportunities of driving innovation through procurement.

The roundtable featured perspectives from the Ministry of Housing, Communities and Local Government (MHCLG), the Greater London Authority, Scottish Local Government, and the Innovation Procurement Empowerment Centre (IPEC). Each brought unique insights on digital transformation and public sector innovation.

It was agreed that local authorities face significant challenges, such as addressing climate emergencies, navigating health and social care issues, managing financial pressures, and meeting the demand for more citizen-centric approaches. These challenges underscore the need for innovation through partnerships and bringing in external expertise. However, procuring these relationships is fraught with challenge, often held back by a risk-averse culture, limited budgets, and fragmented approaches.

Contrary to its intended role in safeguarding public funds, procurement processes were highlighted as obstacles to innovation. According to research, only 23% of tenders receive more than one bid (Tussell), and just 5% of suppliers (CBI) found it easy to innovate within the public sector. An independent study commissioned by IPEC revealed that only 14% of respondents viewed public procurement as an enabler for innovation. While these statistics paint a challenging picture, they also highlight opportunities for the public sector to reshape markets through innovative procurement, especially as technology advances and barriers to entry decrease.

Challenges in local government innovation

The roundtable  identified key challenges for local governments in fostering innovation:

1. Outdated systems: Local government systems need modernisation to become more resilient and capable of adopting new technologies. While exploring shared services and joint procurement can lead to economies of scale and better resource utilisation, it was generally felt that it was questionable as to how successful shared services have been to date.

2. Financial constraints: Severe budget limitations hinder local governments’ ability to innovate and effectively serve citizens. Additionally, local governments struggle to attract and retain skilled personnel, often losing out to the private sector for top talent.

3. Data management: It was agreed that good data would be at the heart of any future innovation of local government services and here again Local Authorities are really struggling as data-sharing practices are often inefficient and, in many cases, manual. Establishing proper data standards and achieving seamless data sharing across local authorities are critical to overcoming this challenge.

4. Leadership and culture: Leadership is key to driving change. Local government leaders must foster a culture that embraces experimentation and accepts failure as part of the innovation process. This shift is necessary to move away from cost-based decision-making and towards value-driven procurement.