Public procurement rules stifling innovation, claims EU project

August 6, 2004

Brussels, 05 Aug 2004

Public procurement rules in the European Union are currently hampering innovation because the public sector is not encouraged to act as a 'launching customer' for innovative products and services, researchers working on an EU funded project have claimed.

The potential contribution that public procurement can make towards stimulating innovation is highlighted by the fact that public sector purchases in the EU in 2002 amounted to 11 per cent of the bloc's total GDP - some 9.61 trillion euro. By making its procurement procedures more innovation friendly, therefore, the public sector could massively increase the EU's innovative potential.

INNO-UTILITIES is an initiative funded under the 'innovation and SMEs [small and medium sized enterprise]' section of the Fifth Framework Programme (FP5), and is coordinated by Eurescom, an organisation encouraging collaborative research in the field of telecoms. One of its main objectives is to suggest overall improvements to public procurement procedures, and specifically to transfer the insights into innovative procurement gained within the telecoms industry to other public utility sectors.

'The EU procurement directives don't leave enough room for effective tendering of innovations,' according to Eurescom's project coordinator, Anastasius Gavras. The main reason for this, he said, is a lack of sufficient interaction between user and producer in the procurement process.

Another member of the project team, procurement specialist Leif Hommen from Lund University in Sweden, adds: 'EU legislation has only tolerated such interaction, but hasn't fostered it. Implicitly, the legislation regards user-producer interaction as an aberration from normal market relations. Possibilities for interactive learning leading to innovation have thereby been diminished.'

Instead, the INNO-UTILITIES partners are developing a new procurement model based on a three step approach. In the first instance, the prospective buyers of a product or service (in this case public sector bodies) get together to jointly define their requirements. Next, this group of buyers invites potential producers to an open discussion of the requirements and technological capabilities for the development of an innovative solution to their needs.

Only in the third stage will the potential buyers invite the producers to submit tenders based on the jointly defined requirements. Under traditional methods of public procurement, an open invitation to tender is often the first stage in the process. 'This collaborative approach will minimise the risks of unclear requirements and, thus, lead to a better return on investment for innovative products and services,' concluded Mr Gavras.

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CORDIS RTD-NEWS / © European Communities

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