Practising Innovation in Public Sector Procurement: Working with the Anchor Institutions
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IPEC Research
Practising Innovation in Public Sector Procurement
Authors
Conrad Parke
Centre for Local Economic Strategies (CLES)
As the Co-ordinator of the Birmingham Anchor Network, Conrad has been working with the procurement managers and officers from each of the Network partners, and the following two briefs will capture some of the learning from this experience:
Part 1: Working with the Anchor Institutions
The first brief (Working with the Anchor Institutions. Research brief no. 11/2024 – 4) introduces the concept of anchor institutions—major public sector entities with substantial local influence—as catalysts for economic inclusivity, highlighting the potential benefits of innovative procurement in Birmingham. The brief explains how standard public sector procurement practice needs to change and, in particular, innovate if the potential of public sector spend is to be truly unlocked for greater economic benefit.
Part 2: Mobilising the Power of Local Spending – East Birmingham Inclusive Growth Strategy – coming next week
The second brief (Mobilising the Power of Local Spending – East Birmingham Inclusive Growth Strategy. Research brief no. 11/2024 – 5) will delve into the practical application of the Anchor Institutions within East Birmingham, the city area facing significant socioeconomic challenges. The brief outlines some of the practical barriers and the innovative procurement approaches they are now trying to introduce.
Together, these two pieces underscore the transformative potential of innovative procurement policies in supporting small local businesses, fostering job creation, and distributing economic growth more equitably. These two pieces provide valuable insights into the policy framework and the practical hurdles of embedding social value in public procurement.
Key Points from the First Brief
- Anchor Institutions as Economic Catalysts: Anchor institutions, such as universities, hospitals, and local authorities, are positioned as significant economic drivers capable of fostering local growth by prioritising spending with local businesses and SMEs.
- Birmingham Anchor Network’s Approach: In Birmingham, the Anchor Network is piloting a collaborative response to the Procurement Act, aiming to develop a consistent approach to make it easier for SMEs to engage in procurement opportunities. This collective response includes defining shared barriers and coordinated solutions across anchor institutions.
- Barriers to Innovative Procurement: The brief highlights barriers to innovative procurement, such as procurement processes heavily focused on compliance, cost-saving priorities, and risk aversion, often excluding smaller, local businesses from participating.
- Lessons from the Past and Future Directions: The brief reflects on lessons from the Public Services (Social Value) Act 2012, emphasising the need for clear, unified approaches to avoid market fragmentation and genuinely supporting local enterprises with social value missions.
- The Role of the 2023 Procurement Act: The Procurement Act is seen as an opportunity to encourage innovative procurement practices, emphasising local economic benefits and reducing barriers for small businesses. However, the Act’s vague language may lead to varied interpretations, creating inconsistencies across institutions.
Download the full publication below.
IPEC Research
Transparency on the reporting of public procurement information
Authors
Maria Fernanda Ibarra Gutierrez
University of Manchester
Dr. Luis Ospina-Forero
University of Manchester
Prof. Elvira Uyarra
University of Manchester
With the public sector spending £400Bn per annum, and the need to deliver more for less across local, regional and national government, the need to better understand how money is being spent is absolutely necessary for reasons such as:
• Procurement markets and trends monitoring: Governments can describe spending and time trends, and compare performance across entities, regions, contract types, etc.
• Data-driven procurement policy-making: Governments can assess efficiency gaps to identify areas for reform, monitor the impact of new policies, and understand potential trade-offs of different strategies.
• Transparency and accountability: Civil society can monitor the procurement system.
Another important aspect is to understand where the opportunities for innovation lie through identifying where procurement-powered innovation has created new value, whether it’s through open innovation challenge calls or other means. Owing to the challenges around reporting, this has proven to be a challenge.
IPEC Research, a centre funded by the Innovation Procurement Empowerment Centre, commissioned a paper through experts from the University of Manchester to identify some key barriers affecting the transparency of public procurement information in the UK, including data quality issues such as lack of unique identifiers, duplicated records, inconsistent dates, and missing data fields.
The paper makes the argument that improvements in data collection, quality, and availability in public procurement is important to support accountability, transparency and to inform policy reform.
The authors found three main challenges:
- No central repository to publish a call (there are several) with inconsistent recording periods.
- Many fields are left blank by the buyers.
- The procurement data doesn’t provide an end-to-end flow from pre-information to contract award and expenditure.
The report suggests that it is important to improve the collection, compilation, quality, storage and availability of procurement information. The authors argue that the Act will address some of the problems mentioned in the report. For instance, there will be a platform for suppliers to register and store their details to avoid having different names for the same suppliers. Also, there are plans in the Act to join into a single database the information to centralise procurement data.
Download the full publication below.
Transparency on the reporting of public procurement information: lessons from handling compiled procurement information
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IPEC Research
Leveraging Public Procurement to Drive Local Innovation
In an era of complex societal challenges and rapid technological advancement, governments are constantly seeking innovative ways to address public needs and stimulate economic growth.
Authors
Dr Chloe Billing
Research Fellow at the University of Birmingham
In an era of complex societal challenges and rapid technological advancement, governments are constantly seeking innovative ways to address public needs and stimulate economic growth. One powerful yet often overlooked tool at their disposal is public procurement. With public expenditure on goods and services accounting for 10-15% of GDP in OECD countries, strategic use of this purchasing power has the potential to catalyse groundbreaking solutions and drive innovation across various sectors.
This research briefing investigates the intersection between public procurement and innovation policy. The study explores how governments can harness their buying power to not only meet immediate needs but also foster a culture of innovation in the private sector. By acting as lead customers, catalysing new solutions, and employing strategic procurement techniques, public authorities can create a ripple effect of innovation that extends far beyond the initial purchase.
The research examines several key aspects of innovation-driven procurement, including:
- Theoretical foundations and real-world evidence supporting procurement as an innovation policy instrument
- Factors influencing procurement’s impact on innovation, including scale, technical capacity, and political considerations
- International case studies showcasing successful implementation across sectors like healthcare, energy, and transport
- The role of emerging technologies in enabling more transparent, efficient, and innovative procurement practices
- An analysis of the UK’s new Procurement Act as an opportunity to embed innovation in public purchasing
The work also highlights the challenges faced in realising procurement’s full potential as an innovation driver. From risk aversion to fragmented budgets, the study offers insights into overcoming these barriers and provides recommendations for policymakers and public sector leaders.
As we navigate an increasingly complex world, the strategic use of public procurement presents a unique opportunity to address pressing societal needs whilst simultaneously fostering innovation and economic growth. This research offers in-depth analysis and recommendations for harnessing public procurement as a catalyst for innovation.
Leveraging Public Procurement to Drive Local Innovation
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IPEC Research
Public Procurement of Innovation: Impacts, Evidence, and Methodological challenges
Public procurement, representing around 12% of GDP in OECD countries, is increasingly recognised as a powerful tool for driving not only innovation but also broader goals like sustainability and economic development.
Authors
Dr. Oishee Kundu
University of Manchester
Prof. Elvira Uyarra
University of Manchester
Public procurement, representing around 12% of GDP in OECD countries, is increasingly recognised as a powerful tool for driving not only innovation but also broader goals like sustainability and economic development.
This research brief synthesises research findings on the impacts of PPI, looking at both theoretical and empirical evidence, as well as methodological challenges in studying its effects.
Public procurement has the potential to shape innovation by:
- Creating demand for new technologies and services (demand-pull effects).
- Facilitating the diffusion of innovations.
- Encouraging firm-level investment in R&D.
- Influencing market structures to support new products and innovations.
Studying PPI involves several complexities, including:
- Defining what constitutes innovation-oriented procurement.
- Establishing clear causality between procurement actions and innovation outcomes.
- Addressing issues related to data access and transparency.
Further research should aim to:
- Improve data collection and linkages.
- Focus on long-term impacts. Explore the effects of PPI across different regions and sectors.
Download the full publication below.
Public Procurement of Innovation: Impacts, Evidence, and Methodological challenges
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IPEC Research
IPEC Research Symposium
As part of our work to realise the opportunities arising from over £300 billion annual UK public procurement spend, this week we participated in the first IPEC Research Symposium, organised by the Innovation Procurement Empowerment Centre at the amazing Alliance Manchester Business School.
This brought together academics from leading universities across the UK – Manchester, Birmingham, Bath, Cardiff, Stirling, Nottingham, Oxford, Lancaster – and Autonomous University of Madrid. 30 speakers, researchers and policy leads convened to share evidence and ideas to boost the impact of innovation procurement.
The Innovation Procurement Empowerment Centre (IPEC) is a major initiative of Connected Places Catapult and a key plank of our work is to develop research capacity in this critical area. We have entered a long-term partnership with the Universities of Birmingham City-REDI and the Manchester Institute of Innovation Research (University of Manchester), gathering evidence to build the case for doing procurement differently. It will generate tools for policy development and support public and private sectors in implementing innovation through procurement, driving investment and better outcomes.
The Public Procurement as a Catalyst for Innovation workshop explored the impacts, measurement, and best practices of innovation procurement. Key themes that emerged include:
- The growing importance of evidencing how public procurement can drive innovation and address major challenges, while achieving efficiency and value for money. Academics from the University of Manchester presented research using advanced data analysis techniques like network analysis and AI language models to quantify the impact of innovation procurement on firm productivity and gain insights into complex public sector supply chains.
- The importance of taking a holistic, systems approach to procurement that considers the broader ecosystem of buyers, suppliers, and stakeholders. Research using administrative data from TED and Contract Finder in the UK demonstrated the value of clever data analysis in unlocking insights from existing procurement data sources.
- The potential for innovation procurement to drive positive local economic and social outcomes, such as supporting local businesses, creating jobs, and advancing sustainability goals. Examples included research conducted by researchers at City-REDI (University of Birmingham) on retrofitting social housing and the Catapult’s West Midlands Diatomic project.
- The need for cultural change, capacity building, and sharing of best practices to fully realise the potential of innovation procurement. While the new UK Procurement Act presents opportunities, challenges remain around data quality, skills, and embedding innovation across the commissioning lifecycle.
- The importance of collaborating across academia, government, and industry to build the evidence base for innovation procurement, champion success stories, and co-create practical tools and guidance. IPEC’s “Art of the Possible” report and ongoing research partnerships exemplify this approach.
Participants left energised to build on the momentum and partnerships from the workshop to position public procurement as a key catalyst for innovation and public good. Key next steps include improving data infrastructure, developing case studies and practical guidance, and fostering communities of practice to accelerate learning and adoption of innovation procurement practices.
IPEC Research
Sparking innovation in the market: the role of expert support hubs
By adopting innovative solutions, the public sector can make services work better for people, and cut costs
In the UK’s drive for growth, we need to make full use of the lever that public procurement of innovation offers. In the past, the UK has not done that, but the Government is making important reforms to public procurement, which will be supported by an ambitious Learning and Development plan to ensure that public sector organisations have the knowledge, skills and models to grasp the opportunities created by reform. This new report shows that national and regional hubs focused on improving public procurement of innovation have a significant positive impact, delivering more for the public and rewarding innovation by businesses. A dedicated UK Innovation Procurement Hub would help to make sure that the programme for improvement includes building capability to procure innovation better.
The Innovation Procurement Hubs explored by this research are predominantly public sector-led. They offer information and advisory services and provide networking, all of which deliver value to procurement bodies and suppliers. There are differences between approaches, and quantitative assessment is ongoing, but the hubs deliver significant added value and there is strong support for their continuation.
The UK can learn from these examples, and select what approaches best fit our needs. A Hub would develop and share information and advice on innovation procurement. It would model and replicate successful approaches. It would accumulate learning and expertise over time, continually improving the efficiency of the delivery of the services. By acting primarily in a coordinating capacity, rather than seeking to direct centrally, it would minimise unnecessary duplication.
Innovation Procurement Hubs: Examples from Europe and beyond
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reports
Sparking innovation through the market: a review of pioneering practice
Public procurement in the UK is failing to reach its potential as a driver of innovation and growth.
Public procurement in the UK is failing to reach its potential as a driver of innovation and growth. When Government spending accounts for roughly 39% (2018-19 figures) of the UK’s GDP, it is clear how large that potential is. In 2019, the figure was more than £292 billion and the value grows almost every year.
While complex factors contribute to this failure – such as a lack of clear and coordinated government policy, difficulty in getting stakeholders to buy into an idea, and capacity and capability bottlenecks – existing tools for the better use of public spending are being woefully underused.
Along with other European nations, the UK has strived to improve public procurement so that it goes beyond simply buying products and services. It wants public spending to stimulate new markets, achieve better value for money, meet citizens’ expectations and expand market opportunities for businesses of all sizes – goals that can fuel longer-term economic growth and increased public value. Indeed, the UK recently mandated that all public procurement activities should be developed with innovation outcomes in mind.
There are many ways of promoting ‘innovation procurement’: innovation partnerships, pre-commercial procurement and accelerators to name just three. These and other methods have been promoted by the European Union, while the UK government outlined its approach in the Transforming Public Procurement innovation procurement green paper published in December 2020.
Several programmes and platforms have also been established to encourage innovation procurement. Among these are GOVTECH Catalyst, the Mayor of London Innovation Challenges, Innovate UK, CIVTECH and ARIA. However, each of these operates in its own way and with slightly different objectives, causing difficulty for both suppliers and buyers.
This issue is compounded by the lack of a national competence centre in the UK – a notable absence because such bodies currently provide great value and coordination in five EU nations, with efforts underway to establish them in at least five more.
Responses to the green paper suggest it has its flaws (including insufficient consideration of SMEs and the need to confront lacklustre uptake by local authorities), but these should not trigger a ‘baby and bath water’ reaction. Within it are the foundations of a sound approach to promoting innovation procurement and untapping the UK’s latent potential.
This latest report from our work on innovation-friendly procurement looks at the benefits of treating public procurement as a strategic tool, available procedures and pioneering practice.
Innovation Procurement: Unlocking Best Practice for the UK
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