Public Procurement for Innovation

Public Procurement for Innovation

Eu-SPRI Forum on Science, Technology and Innovation Policy series

Edited by Charles Edquist, Nicholas S Vonortas, Jon M Zabala-Iturriagagoitia and Jakob Edler

This book focuses on Public Procurement for Innovation. Public Procurement for Innovation is a specific demand-side innovation policy instrument. It occurs when a public organization places an order for a new or improved product to fulfill certain needs that cannot be met at the moment of the order. The book provides evidence of the potential benefits to public and private actors from the selective use of this policy instrument and illustrates the requirements and constraints for its operationalization. The book intends to significantly improve the understanding of key determinants of effective public procurement aiming to promote innovative capabilities in the supplying sectors and beyond. It provides both case studies and conceptual contributions that help extend the frontier of our understanding in areas where there are still significant gaps.

Chapter 5: Forward commitment procurement and its effect on perceived risks in PPI projects

Hendrik van Meerveld, Joram Nauta and Gaynor Whyles

Subjects: economics and finance, economics of innovation, innovation and technology, economics of innovation, innovation policy, politics and public policy, public administration and management

Extract

This chapter is based on research (Van Meerveld, 2012; Van Meerveld et al., 2012) and the practical experiences of the second and third authors of this chapter in facilitating forward commitment procurement projects conducted as part of the Department for Business, Innovation and Skills (BIS) Innovation for Sustainability Programme and the Low Carbon Building (LCB) Healthcare Network. Although the application of forward commitment procurement (FCP) is limited to a few pilot projects, the outcomes demonstrated are most promising in that they have delivered innovative solutions into the market. Two of the case studies have led to the development of new and innovative solutions and one is progressing towards early adoption of an innovative solution. The chapter applies a theoretical framework in order to examine in more detail how the FCP methodology works, and to provide insights into how the process could be improved and replicated. Its focus is on the role of the market engagement phase of the FCP process. The chapter adopts a case study approach following Yin (2009), and is aimed at answering the following question: What are the effects of adopting the forward commitment procurement framework on the risks perceived by public sector customers and suppliers in projects concerning public procurement for innovation? Procurement involves transactions which involve agencies in the form of customers and suppliers. Therefore, agency theory and transaction cost economics are used to develop the theoretical framework.

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