|
|
|
 mess@ge home
Table of
contents
|
Innovative procurement in the European Union
A recent report to the European Commission by an independent expert group on raising EU R&D intensity singles out innovative public procurement as a particularly effective demand-side mechanism for increasing private sector R&D activity, expenditure and output. In addition to the use of this instrument in direct policy measures, the report also discusses possible indirect measures, i.e. “technology procurement policy … aiming at promoting private procurement … as a complement to public procurement” (E. Amanatidou et al.: Improving the Effectiveness of Direct Public Support Measures to Stimulate Private Investment in Research, Brussels, January 2003). E-procurement – procurement via electronic media – can be situated squarely within this proposed policy framework. However, there are good reasons for doubting that e-procurement can also be innovative procurement, especially if it is conducted under the EU’s current set of public procurement rules. Innovative procurement in the European Union Regular and Innovative Procurement Procurement refers to the purchasing of a product, i.e. a material good or an intangible service. It may be carried out by either private-sector or public-sector actors. In the case of public utilities, such as telecoms, it may be carried out by private-sector actors under public sector regulations. There is an important distinction to be made between regular procurement, which concerns the purchase of ready-made, already existing products whose characteristics are well known or can be readily ascertained, and innovative procurement, which involves placing of an order for a product that does not yet exist, but which could probably be developed within a reasonable period of time. In the case of innovative procurement, additional or new innovative work is required to fulfil the demands of the buyer. Whereas competitive market conditions can be relied upon to ensure the efficiency and effectiveness of regular procurement, this is not the case with innovative procurement – for the simple reason that there are no established markets for products that have not yet come into existence. Hence, innovative procurement has become a problematic undertaking within the institutional framework that has been imposed on telecoms and other public utilities by the EU directives on public procurement, the main thrust of which has been to ensure competitive market conditions in public procurement. As innovation analysts Edquist, Hommen and Tsipouri state in the concluding chapter of their book “Public Technology Procurement and Innovation”, there is “a considerable degree of tension between the EU procurement rules and the need to accommodate … technical change”. Auctioning versus interactive learning Mainstream economic theory provides the essential rationale for the present EU policy on public procurement, in the form of auction theory. Auction theory treats the interaction between a single buyer and a number of private suppliers as a game in which each side tries to take advantage of the other’s weaknesses. The weakness of the buyer is that he is supposed to know less about the product than the suppliers do. The suppliers are supposed to take advantage of their superior knowledge. The weakness of the suppliers is that they do not control the rules of the game. Instead, the buyer does. Thus, the buyer can gain advantage by designing the best kind of auction. Auction theory is a useful way of thinking about regular procurement. However, innovative procurement is a different situation, where the same conditions do not apply. For example, it is often the case in innovative procurement that the buyer actually knows more about the new product or technology than the suppliers. This possibility is not taken into account in auction theory. Innovation theory provides a better guide to innovative public procurement. It does consider the possibility that the buyer is more knowledgeable. More generally, innovation theory deals with relations between buyers and sellers in situations where products have not yet been fully defined and standard markets have not yet been established. In innovation theory, innovative procurement is usually treated as a special form of user-producer interaction, which is fundamental to product innovation. Thus, innovative procurement is not a purely ‘anonymous’ market transaction based only on cost- and price-signals. Nor does it take place in the context of vertical integration, where one organisation is “captured” by another. Rather, the buyer and seller remain independent, but they co-operate by sharing a range of information about user needs and how best to meet them. This means that communication between the buyer and seller must follow a network model of close and extensive communication, rather than conforming to the model of anonymous market signalling, restricted to the exchange of information about quantities and prices. From this perspective, the institutional and regulatory framework governing innovative public procurement should be modified in order to allow and encourage closer collaboration and more extensive exchanges of qualitative information about user requirements between buyers and sellers. Currently, the EU directives on public procurement do not promote this kind of relationship between user and producer. Rather, “present EU legislation merely allows interaction to take place – and then only in special cases” (Edquist, Hommen, Tsipouri). Although it makes some provision for innovative collaboration between firms and public agencies through a so-called “negotiated procedure”, EU procurement legislation has really only tolerated such interaction, not fostered it. Implicitly, the legislation regards user-producer interaction as an aberration from normal market relations. Possibilities for interactive learning leading to innovation have thereby been diminished. EU project INNO-UTILITIES It is from this theoretical and policy perspective that the European research project INNO-UTILITIES, led by Eurescom, will investigate cases of innovation-friendly procurement carried out by European telecom operators. E-procurement projects will be a special focus, and one main objective will be to determine whether – and, if so, how – e-procurement can also be innovative procurement in the sense discussed here. However, this research proceeds from a standpoint of initial scepticism. The foregoing observations on the current EU procurement legislation raise doubts about policy proposals, which assume optimistically that information technologies can be used to radically improve buyer-seller interactions in the context of direct or indirect public-technology procurement. In order for that to occur, a number of institutional problems and policy issues should first be solved. Further information on EU
project INNO-UTILITIES is available at: Please send us your comments on this article. |
||||||||||||
