Public spending holds untapped potential to unleash innovation

Experts explain how new procurement legislation can help public authorities leverage their purchasing power to drive innovation.

15.01.24 LONDON, Connected Places Catapult, the UK’s innovation accelerator for cities, transport, and place leadership, today published ‘The Art of the Possible in Public Procurement’ – a new report from the Innovation Procurement Empowerment Centre (IPEC). The report is co-authored by an expert team with experience in innovative legal and procurement processes and was unveiled at a House of Lords reception. It encourages council leaders, innovative teams in public authorities and ambitious businesses to take advantage of the new possibilities – reinforced by the Procurement Act 2023 – that can be used to drive innovation.

With approximately £300bn a year being spent on UK public procurement, public sector organisations have an indispensable role in fostering innovation and supporting ambitious small businesses. Local Government alone accounts for approximately £70bn of that spending which has huge potential to level-up economic growth and productivity in the UK.

The Procurement Act 2023 received royal assent on 26 October. In November, the Cabinet Office produced a guidance note ‘Transforming public procurement: our innovation ambition’ which outlined the intent that, ‘over time these developments will make public procurement into one of the most powerful levers to drive innovation nationally’. The authors of ‘The Art of the Possible’ set out ways in which this ambition can be achieved and how the new rules encourage more ways of engaging innovative companies during procurement processes. They highlight the importance of attracting innovative suppliers; cementing partnerships; ensuring transparency and value sharing; and transformative collaboration.

The report brings principles to life through case studies of procurement best practice, including:

  • how TfL developed and incentivised a three-way partnership between carriers, innovators and themselves to reduce the adverse impact of freight with Freightlab;
  • how Leicestershire Children’s Services used an innovative two-tier contractual framework to procure solutions that helped to achieve ambitious social and environmental goals;
  • and how Staffordshire County Council used a joint tendering arrangement with neighbouring councils to increase their purchasing power and overcome their struggle securing a new sexual health service provider.

The report points to the introduction of the ‘competitive flexible procedure’ as the single biggest change implemented through the 2023 Act. The new procedure gives creative contractors a ‘wider palette of colours’ with which they can design procurement solutions. The authors also highlight the importance of assessment criteria favouring the ‘most advantageous tender’. They point to wording from the National Procurement Policy Statement, which is included in the Act. ‘All contracting authorities should consider the following national priority outcomes alongside any additional local priorities in their procurement activities:

  • creating new businesses, new jobs, and new skills.
  • tackling climate change and reducing waste, and
  • improving supplier diversity, innovation, and resilience.’

Speaking at a reception at the House of Lords to mark the publication of the report, Rikesh Shah, Head of the Innovation Procurement Empowerment Centre at Connected Places Catapult said:

“The Procurement Act 2023 reinforces the ability of public authorities to get better value for money by getting smarter with their spending. In recent years, technology has changed at such a rapid rate that new types of innovators are emerging. This is creating a huge opportunity for public authorities to unlock value.

“Every procurement made has the potential to support a new idea and generate new economic activity. By further empowering public authorities as they get smarter with spending, we can support more diverse suppliers and find more cost-effective, sometimes more localised, solutions to our biggest challenges.”
Rikesh Shah, Head of the Innovation Procurement Empowerment Centre at Connected Places Catapult

Malcolm Harbour CBE, Associate Director at Connected Places Catapult and former Chair of the powerful European Parliament Internal Market Committee, said:

“We all want public money to be well spent. But to maximise the power of every pound we need everyone involved in public procurement to show relentless ambition to enhance the impact of what they spend. We also need to have the courage to try new ways of doing things, and challenge suppliers to respond to procurement processes with fresh thinking.”

Mr Harbour, who was awarded the CBE for services to the British economy, continued,

“The very best procurement processes set challenging delivery targets, responding to national and regional priorities and stretching the innovative capability of suppliers.”

Read the full report here.