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Innovation Partnerships: a new route to market

Friday February 27th, 2015

As a phrase, ‘Innovation Partnerships’ ticks all the right boxes in the procurement world. In an environment where innovative solutions, creative procurement and collaboration is widely regarded as the way forward, Innovation Partnerships sounds like an ideal proposition. But what are they? Government Opportunities

“To my mind, they’re there to develop substantially new services, products and even works compared to those already in the market,” says Jennifer Robinson of law firm Pinsent Masons.

In January 2014 the European Parliament updated the EU rules on public procurement, introducing new provisions allowing for environmental and social considerations and innovation to be taken into account when public contracts are awarded.

Part of this update was the introduction of Innovation Partnerships. These partnerships are intended to enable the procurement of goods, services or works that cannot be delivered by the current options available to the market. This new mechanism allows contracting authorities to team up with either a single or multiple partners to research and develop an innovative outcome. Essentially, Innovation Partnerships allow public authorities to launch a call for tender bids without pre-empting the solution, leaving room for suppliers to come up with an innovation in partnership with the authority. The procedure can be structured into successive stages of research and development and delivered without going out to further procurement for each stage of R&D, prior to subsequent purchase.

Ms Robinson explains: “If you’re just looking for the next upgrade to what you have, and that upgrade is readily available on the market, then Innovation Partnerships wouldn’t be for you. If you’re developing something substantially new or trying to solve problems in the market, whether they be social or economic or of a green nature, then Innovation Partnerships would work for you.”

Similarities can be drawn between Innovation Partnerships and Competitive Dialogue. Competitive Dialogue solutions are developed in dialogue, while Innovation Partnership solutions are developed once a single or multiple partners have been identified. The main advantage of the Innovation Partnerships procedure is that it allows the contracting authority to pursue a staged development process. For example, if initial research showed that the desired solution was unlikely to be achieved, the authority could then stop the Innovation Partnership process rather than making further, potentially fruitless, commitment to it.

However, Innovation Partnerships could have drawbacks for contracting authorities. Ms Robinson cautions: “There are quite a number of restrictions on how you run an Innovation Partnership compared to how you run a Competitive Dialogue. One example is the obligation that you have to specify what your minimum requirements are. In a way that’s implicit in all tender processes by virtue of the principles of transparency and equal treatment, but it’s also spelled out in the Article 31 provision relating to Innovation Partnerships.

“There is also the requirement to make sure that as you’re developing a product, it corresponds to minimum performance levels; so again, in a way that might be more broadly scoped within other procurement procedures. For example, in Competitive Dialogue as you move from outline solutions to detailed solutions to final tenders, you may not exactly be scoping for what’s to happen at each stage, whereas I think this sounds a lot more specific here in terms of how things develop.”

Innovation Partnerships can award according to ideas-based proposals, but isn’t this risky? The answer is yes if the right skill set doesn’t exist within the contracting authority. The people involved and their knowledge of the requirement are two key elements to success, just as with Competitive Dialogue.

On the subject of risk Ms Robinson warns there is thedanger of making material change in the scope, from what is advertised compared to what is ultimately awarded or delivered. She says: “Do your research. Question if you have the right person for the job to then go on to develop and deliver for you, because presumably research on a particular widget or particular model of computer, for example, may stray from one type into another field and you may be looking at a situation where you don’t have the right person for the job.

“You can perhaps manage that by having, as the EU is encouraging you to do, a number of partners involved. That way you have flexibility. Building in flexibility from the start is essential for that reason. I think that also ties in with a Directives point around the risk if you’re doing something innovative and new, and then you’re buying that and creating a niche for that, then guarding against risk of competition law. One of the ways you can guard against that is having a number of people involved and spreading the opportunity.”

There is debate as to whether Innovation Partnerships are necessary. PASS Consultant Eddie Regan believes there is indeed a role to play for them.

He says: “In certain markets where innovation is a key element of contracts, such as defence, there is a definite role to play. The other key advantage is that the contracting authority is driving the innovation, rather than the contractor, which allows for better control over the outcomes.”

Innovation Partnerships are certainly intriguing and it will be interesting to see them in use. However, the response to Innovation Partnerships from procurement professionals has been a mix of interest and wariness,

Mr Regan explains: “Like the introduction of Competitive Dialogue in the 2006 Regulations, a lot of people are waiting to see how the first couple of these pan out before considering its use. It’s also important to remember that it has a very limited usage – most things in procurement have been done before.

“My initial thought was that Innovation Partnerships will be used in sectors where innovation is important, such as health, defence and science. However, I’ve already been told by one buyer that they could see a use for a research project they were planning on social care; so I suppose, realistically, it’s only limited by the mind.”

Innovation Partnerships are not just a new tender procedure; they are a new route to market. The jury is still out as to how and where they will be best used. The EU will publish its guidance in 2016 as to how it sees Innovation Partnerships working. Until then, watch this space.

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