Innovation Partnerships: An effective but under-used tool for buying innovation

The most likely reasons for these Innovation Partnerships not being used may include the fact that this is still a relatively new procedure (introduced by the latest suite of EU public procurement directives in 2014) and therefore there is a lack of familiarity with its use, or that there is a general misunderstanding of what the procedure is designed to achieve.

However, in an era where demand for public sector services increases as budgets decrease, the public sector should start to consider alternative routes to procurement. While it is encouraging to see that an increasing number of authorities now utilise the Competitive Procedure with Negotiation or Competitive Dialogue (which permit interaction with bidders throughout the process, unlike the Open or Restricted procedures), it is questionable whether any of these procedures are really suitable where the authority wishes to purchase something which is truly “innovative”. In this article, we explore the Innovation Partnership procedure in more detail and how using this procedure could transform the way in which authorities procure more innovative goods, services and works.

What is the Innovation Partnership procedure?

In a nutshell, it is essentially a procurement process combined with an R&D contract. Authorities are then able to purchase the ‘end result’ of the R&D exercise, without having to undergo a new procurement procedure. Authorities may choose to appoint a number of partners to participate in the R&D phase, but may subsequently only purchase one/some of those solutions.

Why does this procedure result in more innovative solutions?

The procedure was designed to drive innovation. Indeed, it may only be used in circumstances where a solution is not already available on the open market. Therefore, participants in the Innovation Partnership will be asked to create something which does not already exist and should be tailored towards solving a particular problem or ‘challenge’ set by the authority.

This procedure may also be particularly attractive to SMEs/start-ups, who often find it easier to innovate in comparison with their larger competitors and therefore the purchasing authority is perhaps likely to obtain a more innovative product or service.

One of the key advantages of an Innovation Partnership is that the R&D phase is separate to the subsequent purchase of the solution. In other words, the authority is not (usually) under any obligation to purchase the ‘end result’ of the R&D exercise, but has the option to do so if it wishes. Therefore, it may be easier to discourage internal stakeholders from imposing selection criteria which inadvertently exclude SMEs/start-ups (e.g. minimum turnover requirements, parent company guarantees etc.), as the authority is not committed to actually purchasing at the end of the procurement process which will select the innovation partner(s).

What existing precedent is there?

There are a number of Innovation Partnerships which already exist within the UK including:

• the development of a hospital entertainment system which combines patient records;
• exploring solutions to minimise the effects of driver fatigue on the public transport network;
• finding new and untested solutions to reduce the adverse impact of roadworks by making them safer, smarter and more inclusive; and
• exploring solutions that will enable police officers to reduce evidential capture time by 50% during a collision investigation.

In the majority of the existing examples, the authority selects up to five partners to participate in the Innovation Partnership. The authority pays a grant to contribute to their R&D costs. At the end of the R&D phase, the authority will then select its preferred solution(s)which may lead to a potentially lucrative contract for the selected supplier(s). However, there are other examples of authorities selecting only one partner to participate in the R&D phase, or selecting a number of partners who are each allocated their own unique area to focus their R&D efforts.

When may an Innovation Partnership be appropriate?

Innovation Partnerships will be particularly helpful where:

• a solution to a ‘problem’ is required;
• the authority does not have the budget to fund the entirety of the research required to investigate potential solutions on its own or appoint a third party to do this; and/or
• the authority wishes to retain the flexibility to explore a solution(s) in more detail (including potentially working with the supplier(s) as part of the R&D phase) before awarding a contract to purchase the goods, services or works.

While in theory the same objective could be achieved via a Competitive Procedure with Negotiation or Competitive Dialogue, this would require a fairly complex procurement process which factors in additional stages to conduct R&D. In an Innovation Partnership, a contract for R&D services can be awarded following a fairly simple procurement procedure (noting that the contract is usually drafted such that the authority is not under an obligation to purchase any results of the R&D phase, but has the option to do so if it wishes. Conceptually, this may appear more attractive to the supplier market and in particular, SMEs and start-ups.