INNOVATION IN PUBLIC PROCUREMENT: SHAPING THE FUTURE OF PUBLIC SERVICES

Innovation in the public sector is about creating value: doing things better, cheaper or quicker. But it is not always about technology or building shiny new products.

There could also be a particularly knotty problem to solve or a strategic, emerging theme that needs addressing around policy, process or people. In all of these cases, I would encourage leaders to look at their issues through the lens of problem solving and innovation.

Currently the UK public sector spends over £300 billion on third party goods and services every year, so is in a great position to shape new markets through innovation. Innovation is critical to the public sector to ensure we can get more with our spend, and at the same time, create new innovative products that could be sold around the world.

Sometimes authorities fall into a trap of trying to do everything themselves, but public bodies need to work with the market to co-create new ideas and solutions. A key starting point is to define the problem and go out to the market with a mission focused approach and setting out the right conditions to successfully scale, which includes using the right procurement route to market.

Citizens demand more

Ultimately, it is important to innovate because our citizens expect more, and we in the UK are the engine room of creative innovation. In this regard, we are in a good place: barriers to entry for smaller companies wanting to try new ideas have reduced, and we are seeing more diversity of thought with different types of innovators entering the market.

If we embrace different thinking, we will be able to better represent the city, region or country we serve.

But challenges do remain. There is still a large aversion to risk: senior leaders potentially worry about what key stakeholders such as the media or politicians might say. The key is to put the right safeguards in place, engage early with stakeholders and objectively build the evidence through testing new ideas.

Another issue is the fear of failure. Change is generally hard, especially in the public sector and it is difficult to do anything new at scale. This fear must be overcome by winning hearts and minds internally and externally.

During my time as Transport for London’s head of open innovation, much was learnt about the role of data, and its value. The authority’s decision to open its data to app developers, for instance, meant that for every £1 spent, £130  in benefit was generated. At its peak, we had over 700 apps (businesses) creating new products through TfL data; our focus was to define the right challenges and produce the right supporting data – the market brought the innovation.

In a rapidly evolving landscape, the role of public services is undergoing a profound transformation. As we navigate the complexities of societal challenges, technological advances, economic shifts, new business models and environmental concerns, the need for innovation in public procurement has never been more critical. It is within this context that the Innovation Procurement Empowerment Centre (IPEC) sets out on a mission to reshape the future of public services through helping to scale innovative procurement solutions from market innovators.

Unveiling the Power of Procurement as an Innovation Catalyst:

Public procurement, often viewed as a bureaucratic necessity, possesses a latent power to drive innovation whether its funding from the market or new ideas, from the wide ecosystem of innovators from start-ups, academia, scale-ups, Venture Capitalists, corporates and many others. Traditionally bound by rigid procurement policies and procedures, doing everything internally and risk-averse cultures, procurement practices have been slow to adapt to the dynamic needs of our communities. At IPEC, we recognise that unlocking this potential requires a paradigm shift – a shift towards innovation-friendly procurement methods whether it’s a continuous improvement or a transformative change.

“Unlocking the true potential of public procurement requires a cultural shift—a move from risk aversion to innovation drive. At the Innovation Procurement Empowerment Centre (IPEC), we believe in empowering public authorities to shape markets through identifying intractable problems and wield the diverse array of available tools, turning procurement into a dynamic force for positive change that delivers better, cheaper and quicker outcomes. Our mission-led approach, supported by robust research, new tools and techniques and a growing community of advocates, is paving the way for a future where public services are synonymous with progress, co-development, iteration, agility, and positive societal impact. Join us on this transformative journey, where innovation is not just encouraged but embedded in the very fabric of public procurement.”

Rikesh Shah, Head of the Innovation Procurement Empowerment Centre (IPEC)

The Cultural Shift in local governments and public services: From Risk-Averse to Innovation-Driven:

One of the primary challenges we aim to address is the cultural inertia within public procurement. A low appetite for risk and experimentation has, historically, hindered the exploration of alternative mechanisms available to public buyers. It’s not a lack of tools; it’s a hesitancy to wield them. IPEC stands as a catalyst for this shift in culture, advocating for a move from over-specification to embracing the diverse array of available innovative tools.

Numbers that Speak Volumes:

Consider this: £63 billion is annually spent by UK local government on third-party service suppliers. Astonishingly, 23% of public tenders receive only one bid, highlighting a significant challenge in the public procurement landscape. Moreover, independent studies reveal that only a minimal 5% of businesses participating in procurement processes report that public procurement effectively incentivises innovation. This sheds light on the pressing need for a shift in the procurement paradigm, emphasising not a lack of innovative tools in public procurement, but rather the under exploitation of the available mechanisms.

IPEC’s Mission-Led Approach: A Blueprint for Change:

IPEC’s Cohort Program, is designed and refined through collaborative efforts with councils and local authorities, are a testament to our commitment to catalyse change in public procurement. By providing mission-led support, we guide public authorities in integrating innovation-friendly procurement procedures and policies into their strategic agendas. Our approach isn’t just about changing processes; it’s about fostering a mindset that perceives procurement as a dynamic force for positive change.

Research and Evidence: A Cornerstone of Progress:

To shift perceptions and practices, we recognise the importance of a robust evidence base. IPEC engages in original research, evaluation, and thought leadership initiatives to drive the narrative. By advancing the understanding of the adoption and diffusion effects of innovation procurement, we aim to build a compelling case for its greater use.

Building a Community of Advocates:

Beyond programs and research, IPEC is about building a community – a network of advocates and empowered procurement enthusiasts who champion the cause of innovation in procurement. Through our digital platform, events, and publications, we aim to connect like-minded professionals and facilitate a continuous exchange of knowledge and insights.

The Road Ahead:

As we embark on this journey, the road ahead is both exciting and challenging. In Year 2, we expand IPEC, fueled by additional resources and a growing community. Yet, our eyes are firmly set on the future. Year 3 holds promises of further growth, strategic innovation partnerships, and an unwavering commitment to driving positive change in the public procurement landscape. The journey of innovation in public procurement is not just about changing processes; it’s about redefining the narrative of public services. At IPEC, we invite all stakeholders to join us on this transformative journey, where procurement becomes a catalyst for a future where innovation is not just encouraged but embedded in the DNA of public services. Together, we shape a future where public procurement is synonymous with progress, agility, and positive societal impact.

Rikesh Shah participated in a recent Connected Places Catapult webinar tilted ‘Smarter Spending: the Power of Public Procurement to Drive Innovation and Growth’ from which this piece has been written. Join him and the rest of the team in our 90-minute online live case study on 4th of December to learn how innovation delivers digital connectivity for Manchester.