Innovation procurement has been in the spotlight in the last few years and the European Commission actively encourages public buyers across Europe to use this approach. Although innovation procurement entails important benefits in terms of adequacy of the solution, modernization of the public services and efficient use of the public funds, it is not unusual that public buyers are reluctant to apply it due to the lack of knowledge and expertise on how to conduct such a procurement.
In this article, you will learn 10 key aspects to prepare your innovation procurement project successfully. From the identification of your needs to the publication of the tender, the step-by-step approach explained below provides all the information you need to start thinking about the actions to be carried out and the necessary resources.
1. Work in a structured way
If you are considering initiating an innovation procurement project, the first step is to become familiar with how it works and embrace a solid methodology that allows you to assess the feasibility of the project.
A fantastic example of a solid and comprehensive methodology is the approach developed under the European Assistance For Innovation Procurement (EAFIP) initiative of the European Commission. This initiative supports public procurers across Europe in developing and implementing innovation procurement, promoting good practices and encouraging them to use this instrument to boost the digital-green economy recovery.
2. Have a clear picture of what you need
The innovation procurement process starts with an unmet need for innovation solution, i.e., a need that cannot be satisfied with the products or services already available in the market or can only be satisfied at excessive cost or with unacceptable risk.
It is essential for public buyers to identify unmet needs within their organisation on a regular basis to (i) have sufficient time for an effective understanding of the needs, (ii) develop a plan to ensure their timely satisfaction, and (iii) avoid that unidentified needs become an urgent problem.
3. Involve practitioners and end-users in the definition of the needs
When defining the functionalities of the desired solution, it is essential to consider the point of view of practitioners and end-users since usually they are in a better position to understand the problem and define the aspects that need to be solved. It is important to keep in mind that innovation procurement needs to be driven by their needs, otherwise the innovative solutions coming out of the procurement will not be accepted and/or used afterwards. If your organisation is not an end-user, it is recommended to involve the real end-users in this process.
4. Understand what the market can offer
Once you have defined your need in a functional way, the next step is to conduct a state-of-the-art analysis to identify what is available in the market and the Technology Readiness Level (TRL) of solutions. It enables to gather all relevant information available in the public domain (existing products, product under development, published literature and scientific studies) whether IPR protected or not. To do so, it is essential to ensure that the individual or team responsible for the search has relevant technological, industry and scientific expertise.
5. Interact with the market
Conducting an EU wide market consultation, which should be announced in the Tenders Electronic Daily (TED) through a Prior Information Notice (PIN), will provide the necessary basis for starting the procurement.
To achieve these objectives, there are some aspects that you need to consider:
- Communicate the identified needs must openly and clearly to all potentially interested bidders.
- Mention your desire for an innovative outcome in the announcement of the market consultation.
- Give the suppliers sufficient time to ask questions and provide their views on the progress of ongoing product development and the feasibility of the proposed procurement approach.
- Identify the right market segments and effectively disseminate the market consultation well in advance to ensure broad participation.
- Guarantee the security of confidential information, trade secrets and intellectual property.
6. Get a clear picture of the costs and benefits, and the value of your project
Develop a business case based on a cost/benefit analysis of the solutions you aim to purchase to fulfill your need. The analysis of the costs versus benefits of starting an innovation procurement is conducted for each unmet need defined in terms of functionality/performance improvements, for which no solutions are available in the market. You can use the business case as a tool to support investment and project management decisions before, during and after the project.
The cost/benefit analysis of a business case for starting a project is based on three financial indicators: the Net Present Value (NPV), the Internal Rate of Return (IRR) and the Return On Investment (ROI).
7. Clearly know how you want to procure
Design your procurement strategy – including the choice of procedure and the provisions to include in the tender documents – based on the analysis of the results of your market consultation and business case. In innovation procurement, the procurement strategy will be defined based on the maturity of the solutions that could tackle the unmet need. The maturity of the solutions is assessed based on the TRLs, as explained in number 4.
8. Set up mechanisms to monitor the contract execution
Establish contract monitoring milestones and KPIs which can be monitored and assessed to improve. Prepare upfront the ways in which you will evaluate the project and, after its completion, extract and share lessons learned. In order to be able to monitor the performance of the economic operator, the public procurer should begin by creating a list of the performance indicators (or “smart indicators” or “key performance indicators (KPIs)”), against which the activity of the economic operator will be judged.
In addition, intermediate targets (milestones) for the achievement of a specific objective, will express the progress set for the end of a period, which is shorter than the contract term.
9. Ensure a multidisciplinary and strongly committed team
Having a multidisciplinary team in your organization and a strong senior management commitment are vital to implement an innovation procurement project. Procurement teams play a vital role to ensure that the organization business case is realized. They are actively involved in the preparation of the procurement, the tender process, the contracting and the performance monitoring to ensure quality and affordability. In addition, procurement teams can help reduce costs by applying contract performance clauses such as value engineering.
10. Take into account your project will take time and effort
The planning phase of public procurement include different steps/tasks from the needs assessment to the state-of-the-art analysis and the market consultation, as well as the definition of functional and technical specifications, cost and pricing questions, and the choice of procurement procedures.
The organization should define upfront the capacity and resources needed to implement an innovation procurement project by establishing a timeline and clear milestones, as well as the person hours needed to complete the different tasks.
In order to successfully implement an innovation procurement, the preparatory actions are particularly relevant and public buyers should spend time and resources to do so. The decision-making process should start within the organisation when identifying and prioritizing the needs, researching the market and analysing the potential costs and benefits of the project. Then, the interaction with the market is essential to receive feedback and gain knowledge. Based upon this interaction, the public buyer will be able to design the procurement strategy and set up adequate mechanism to monitor the contract execution.
If you liked this article about Innovation Tender preparation and want to get examples from real use cases, don’t miss the Procure4Health Insight #4. 10 things you need to consider when preparing your innovation tender that you will find in the Procure4Health Community platform.
Join our Community and enjoy the reading!
An associated webinar is available in the Procure4Health YouTube channel!
