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Written by Rikesh Shah, Head of IPEC, Connected Places Catapult

The new Procurement Act provides a greater focus for everyone in the public sector (not just commercial managers) to use their budgets to create new value by bringing in innovation from the market. With the financial challenges facing public agencies and the pressure to solve multiple problems that urgently need to be addressed from the climate emergency, transport and housing, etc., the need for market innovation has never been so important. The recently published National Procurement Policy Statement and the updated Social Value Model emphasises the government’s desire to use public procurement to implement its policy objectives.

The UK public sector already spends more than £380bn with the private sector annually through public contracting. As we see advances in technology and the government’s push for innovative ideas to solve public policy challenges, this budget can be further optimised through bringing in new innovative solutions to deliver better, quicker, cheaper and greener outcomes. Good ideas tested in the UK can also be exported and supported UK PLCs more broadly. By using its strong purchasing power, the public sector at local, regional and national levels can shape markets by stimulating innovators of all sizes – from start-ups, scale-ups, corporate or academic spinouts, to realise new benefits. Public agencies should each be ambitious in using their significant purchasing powers to inspire and integrate innovative products or solutions into business-as-usual delivery. Through the different discussions that I have had, it is encouraging that the government and the innovators from the private sector recognise this opportunity. 

The new Procurement Act focuses on a wide range of areas that will make procurement simpler and more efficient. In my role as the Head of the Innovation Procurement Empowerment Centre, I believe it is absolutely right that the Act places a good focus on innovation. Funded by the government through Innovate UK, IPEC is working with local authorities, governmental arms-length bodies, devolved authorities and national departments to empower and upskill different specialist staff from procurement, innovation, services, tech and data and many other to make the most of procurement-based challenges. IPEC is also working with senior leaders on helping to curate the right culture for innovation through procurement to thrive in different organisations. See www.ipec.org.uk

 Whilst the theory above sounds right, in order to enable this, we need the right leadership, culture, capacity, capability and more to create an entrepreneurial culture and mindset in the public sector that embeds the right conditions for innovators from the market to respond to key challenge areas by testing, iterating and potentially scaling innovative solutions through the use of public procurement.  I was reading a paper from Lina Svensberg recently and she talks about the process of venture development in the public sector which is common in the private sector (as innovation is what is needed to keep a company a strong going concern) but it is much more difficult to apply in the public sector as you dealing with unknowns and, as such greater risk. 

The challenge of addressing culture also came out strongly in our IPEC Research Survey when we asked public bodies across the UK on the barriers to innovating through procurement.

When speaking with different public bodies, one area is common; the need to bring in, test and scale innovative ideas through using procurement continues to be a barrier whether it’s risk, fear of failure, organisation silos, procurement or managing change. 

To be clear, it’s not that public agencies aren’t using market innovation to solve some of their knotty challenges; we have seen Transport for London, Dorset Council, Rail Delivery Group, Sunderland City Council, Westminster City Council. Bristol City Council, Transport for West Midlands and many others in the UK creating the right culture and processes to drive more public and private collaboration through the use of procurement. But, we need this approach across the public sector where we collaborate with the market to solve some of the challenges in a new way through having an entrepreneurial approach of innovating and experimenting with the market rather than simply relying on the tenacity of a brilliant individual in these public bodies trying to drive to change in an environment where the conditions don’t assist.  

The Procurement Act can help stimulate more market innovation if we take advantage of it. Here are some areas of focus that stand out for me:

• Competitive Flexible Procedure: This procedure allows contracting authorities to design a bespoke, multi-stage procurement process that enables R&D and scaling to take place in one procedure. This engagement throughout the process can lead to more creative and effective outcomes. This will also support applying new and emerging technologies.
•  Pre-market engagement: The Procurement Act 2023 promotes early engagement with the market to gather the right intelligence, consider and refine different solutions before formally starting the tendering process. This includes the obligation to publish a preliminary market engagement notice where the market is being consulted, which helps ensure a level playing field and attracts new entrants.
• Central Digital Platform: A new central digital platform, delivered through Find a Tender Service, will streamline the process of finding and bidding for contracts, making it easier for suppliers to participate in public procurement, particularly start-ups, SMEs and other innovators. The platform will provide a source of data on procurement activity as well as contract performance for higher value contracts.
• Transparency by publishing pipelines: The Procurement Act 2023 requires contracting authorities (those that spend £100m+ on public contracts) to publish a forward-looking procurement pipeline, which includes information about current and future public contract opportunities at an estimated value of £2m and above for the next financial year. This enables innovators to plan any engagement including assessing whether to bid, well in advance.
• Most Advantageous Tender: Contracts do not have to be awarded based solely on the lowest price; instead, they can consider a broader range of factors, including quality, social value, and environmental impact. This creates an opportunity to bring in new innovative solutions providing better value overall.
• Open frameworks: Companies can apply to enter frameworks at specific junctures following its award which provides the opportunity for better value for money and more flexibility for innovators.

Whilst there is an emphasis on transparency, it would be even better to have more data at a micro level on where the public sector is allocating budgets and funding for innovation, as well as publishing how much value has been realised. Also, furthermore, is there an opportunity to reduce the worry of large penalties when a public body is trying to do the right by using an outcome-based procurement?

I look forward to seeing how the new Procurement Act will be a catalyst – through market innovation – in creating better public policy outcomes. It can create an environment where staff at all levels, suppliers of all sizes, stakeholders from across the UK and the end citizen work closer together in unison and provide a much greater return.

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