Public procurement as a tool to stimulate innovation - Science and Technology Committee Contents


In this appendix we summarise the evidence received on what lessons can we learned from how other countries use public procurement as a tool to stimulate innovation.


In recent times the EU has placed innovation at the heart of their policy with a view of maintaining the EU's competiveness on the global market. The EU has a target of increasing spend on R&D from 0.8% of GDP to 3% of GDP by 2020 which "could create 3.7 million jobs and increase annual GDP by Euro 795 billion by 2025."[175]

The recent EU communication Innovation Union aims to "improve conditions and access to finance for research and innovation in Europe, to ensure that innovative ideas can be turned into products and services that create growth and jobs." One strand of specific activities revolves around the strategic use of individual governments' procurement budgets to finance procurement of innovative products and services. The Communication also introduces an innovation scoreboard based on 25 key indicators.[176] Another area of work is the ongoing evaluation of current EU directives to possibly introduce legislation to make cross border joint procurements easier to counter the current public procurement fragmentation landscape.[177]

The UK is a member of the PRO-INNO project which is looking to develop an SBRI-type programme for the EU. In Europe the UK is considered a leader in implementing the SBRI model which the European Commission calls pre-commercial procurement.[178]

Other projects include the Lead Markets Initiative which aims to reduce the carbon emissions and energy requirements of healthcare buildings; and the SCI-network project, "a network to share experience across the EU on procurement of innovative sustainable construction."[179]

Individual countries within the EU "claim to implement demand based strategies; none actually have systematic evidence of their impact yet."[180] One example of a "true lead market through procurement" is a data exchange system developed in Estonia that allows government databases to communicate with each other. The technology has been exported to other countries.[181]


For years the USA has been considered as the example to follow with regards to R&D-based solutions to the public sector. Their SBIR scheme has been running for 28 years and issues around $2 billion worth of contracts annually and since its inception the programme "has involved more than 15,000 firms, developed more than $21 billion worth of research and over 45,000 patents."[182] These figures are very impressive. However, peer reviewed academic evaluations pointed out that the finance provided by government was often only a replacement for the private investment in R&D to which companies were already committed.[183]

The Defense Advanced Research Projects Agency (DARPA) is an agency of the US tasked with developing new technology for the US military. DARPA is seen as "very successful in the use of 'demonstrators' and 'grand challenges' in driving innovation through procurement."[184]

Other countries

An often-quoted example of good government coordination in stimulating innovation is Singapore. This country committed itself to "being a global hub for computer storage—and took the measures to train people, build up a research capability, and provided attractive inward investment terms in this technology. Over 40% of global mass storage technology, and over 70% for high-end computing storage, comes out of Singapore as a consequence."[185]

175   Innovation Union, Europe 2020 Flagship Initiative, SEC(2010) 1161 (October 2010) Back

176 Back

177   PP24. Back

178   PP21. Back

179   PP18. Back

180   PP16. Back

181   Q40. Back

182   PP21. Back

183   The effects of Government-Industry R&D programmes on Private R&D: The case of the Small Business Innovation Research Programme. Wallsten, SJ., The RAND Journal of Economics (2000) Back

184   PP02. Back

185   Ibid. Back

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