Why collaboration can promote innovation in public procurement

How do we encourage public procurement to be more pioneering? In a recent webinar, a panel of experts gave their views on how projects can foster more innovation and provide greater value for money.

With the public purse making a considerable outlay on procurement in the UK, we might expect a greater emphasis on ensuring value for money. But experts convened for a recent WBEF webinar pointed out that innovation has not until now been a priority.

Public sector seeks to balance spending with social goals

The UK spends around £300bn a year on public procurement, with local government accounting for £70bn of this sum. Total procurement spending is more than £1tr if human resource processes are also factored in, according to Rikesh Shah, head of the Innovation Procurement Empowerment Centre (IPEC) at Connected Places Catapult.

A government-funded programme that collaborates closely with local authorities and central government agencies, IPEC aims among other things to improve pipeline management, design thinking and experimentation. ‘To rethink traditional procurement approaches and create more value for citizens’ is IPEC’s overall goal, Rikesh says. Despite the vast public sums involved, ‘the need to do more for less has never been greater,’ he stresses.

Integrating environmental and social goals into procurement strategies without undermining the primary objectives of public projects is crucial as well, says Scott Tacchi, head of modern methods of construction (MMC) at Sir Robert McAlpine Ltd. Achieving this balance remains a challenge, and failure to meet it consistently has led to fewer schools, hospitals and social housing projects, he says.

Collaboration can help share responsibility and benefits

To improve innovation in procurement, there needs to be shared responsibility and collaboration between the public and private sectors. It is unfair for the public sector to invest heavily in research and development (R&D) while the private sector avoids risk but benefits from successful projects, says Rikesh.

He would also like to see a more problem-oriented approach, in which the public sector and vendors work together to identify issues and direct their R&D efforts accordingly. This requires moving from a risk-averse culture where a single decision-maker can hinder progress to a culture of internal alignment and openness to innovation, he says.

Scott highlights several instances where procurement frameworks have been a strategic tool for improving innovation. These include the Department for Education’s 2020 off-site construction framework, which featured incentives for contractors that found innovative ways to meet key performance indicators with more work, and focused on innovation rather than price competition.

He also mentions National Highways, which is developing its next generation of collaborative alliance-based framework models where risk and reward are shared equitably among parties.

Emphasis should be on value not cost

Value is absolutely crucial in capital programmes, says Scott. He highlights the importance of clearly identifying the value that derives from capital assets, rather than focusing solely on cost reduction. ‘Many know the cost, few know the value,’ says Scott. It takes a skilled construction professional to explain the effect of cuts and their long-term impact on service provision, he notes.

‘There needs to be much greater trust between clients and contractors and a move away from the historic contracting model of conflict,’ Scott adds. He advocates open and honest dialogue where lessons learned can be shared to avoid creating siloes and repeating mistakes.

He also criticises tender processes that prioritise the most economically advantageous bids. ‘Cheapest is never the most innovative. We should be looking at the life of the project,’ he says. He believes the lowest-cost approach encourages contractors to price projects below the actual cost of completing them, which can lead to conflicts later on.

Transparency and engagement enable better outcomes

Transparency in the procurement pipeline enables companies – whether SMEs, tier-one contractors or others in the supply chain – to make informed investment decisions early on, such as developing software or acquiring resources to remain competitive, states Graeme Atkinson MRICS, co-founder and director of Procur3d Consulting Ltd.

He also stresses the importance of early engagement with the market through, for example, prior information notices, particularly when it comes to encouraging innovation. He goes on to say that engagement helps create certainty in the market and the decision-making process for investing in innovation.

Rikesh adds that the public sector ‘need[s] to be a bit more vulnerable and say where we're stuck, and share that upfront with the market’. He believes in working with the market to save more and achieve better results, rather than simply demanding lower prices or reducing budgets each year. That, he says, would be unlikely to result in best value or optimal outcomes.

Graeme calls on procurement teams to increase their understanding of the market by mapping their supply chain's capability to innovate. Similarly, Rikesh believes horizon scanning should be used more extensively, especially with the capabilities afforded by AI.

Procurement frameworks can support SMEs

More innovative SMEs would be encouraged to bid by a procurement framework that is friendlier for them, says Graeme. The challenges they face include overly complex requirements, a trend towards large-scale procurements and a lack of capacity among public-sector organisations to manage multiple smaller contracts.

On the positive side, Graeme mentions that SMEs can benefit from various programmes and initiatives tailored to their needs, such as dynamic purchasing systems, which provide more flexible and accessible procurement opportunities.

Furthermore, new procurement regulations under the Procurement Act 2023 place greater emphasis on creating opportunities for innovative companies, including SMEs, to contribute more effectively to the public sector.

Flexible assets better suited to long-term use

Before joining Connected Places Catapult, Rikesh served as head of open innovation at Transport for London. When procuring lamp-posts he noted that their basic designs have remained largely unchanged, but points out recent innovations including sensors and new materials could be incorporated in future to reduce operating costs.

Looking ahead, Rikesh explains that these assets might incorporate new functions as well, such as electric vehicle charging points or air-quality sensors, particularly with the anticipated advent of connected autonomous vehicles.

He emphasises the importance of thinking ahead and innovation in public infrastructure projects to ensure assets remain relevant and beneficial, continuing to provide value for money as societal needs and technologies evolve.

Rikesh also states that we need more case studies of organisations using procurement to enable innovation. If readers want to offer such examples, they can share them with IPEC.

Note that the views expressed here by Scott Tacchi are his own and do not necessarily represent those of Sir Robert McAlpine Ltd.

How do we encourage more innovation in public procurement projects? While innovation can cut delivery times and reduce overall cost, this webinar examines how we can also manage the risk of introducing innovative technology and overcome reluctance to adopt new methods.