Leveraging Public Procurement to Drive Local Innovation

In an era of complex societal challenges and rapid technological advancement, governments are constantly seeking innovative ways to address public needs and stimulate economic growth. One powerful yet often overlooked tool at their disposal is public procurement. With public expenditure on goods and services accounting for 10-15% of GDP in OECD countries, strategic use of this purchasing power has the potential to catalyse groundbreaking solutions and drive innovation across various sectors.

This research briefing investigates the intersection between public procurement and innovation policy. The study explores how governments can harness their buying power to not only meet immediate needs but also foster a culture of innovation in the private sector. By acting as lead customers, catalysing new solutions, and employing strategic procurement techniques, public authorities can create a ripple effect of innovation that extends far beyond the initial purchase.

The research examines several key aspects of innovation-driven procurement, including:

• Theoretical foundations and real-world evidence supporting procurement as an innovation policy instrument
• Factors influencing procurement’s impact on innovation, including scale, technical capacity, and political considerations
• International case studies showcasing successful implementation across sectors like healthcare, energy, and transport
• The role of emerging technologies in enabling more transparent, efficient, and innovative procurement practices
• An analysis of the UK’s new Procurement Act as an opportunity to embed innovation in public purchasing

The work also highlights the challenges faced in realising procurement’s full potential as an innovation driver. From risk aversion to fragmented budgets, the study offers insights into overcoming these barriers and provides recommendations for policymakers and public sector leaders.

As we navigate an increasingly complex world, the strategic use of public procurement presents a unique opportunity to address pressing societal needs whilst simultaneously fostering innovation and economic growth. This research offers in-depth analysis and recommendations for harnessing public procurement as a catalyst for innovation.