APPENDIX 5: INTERNATIONAL USE OF PUBLIC
PROCUREMENT AS AN INNOVATION POLICY TOOL|
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
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.
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
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.
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
Individual countries within the EU "claim to
implement demand based strategies; none actually have systematic
evidence of their impact yet."
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.
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."
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.
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
An often-quoted example of good government coordination
in stimulating innovation is Singapore. This country committed
itself to "being a global hub for computer storageand
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."
175 Innovation Union, Europe 2020 Flagship Initiative,
SEC(2010) 1161 (October 2010) Back
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