Public Procurement of Innovation (PPI) - the new approach to tenders

PPI promotes new technologies, services and methods, and popularises them on the market, says Paweł Nowakowski.

PPI is a new approach to tenders that seeks innovative solutions for carrying out of public policy | Photo credit: Fotolia

By Pawel Nowakowski

12 Oct 2016

PPI is a new approach to tenders that seeks innovative solutions for carrying out of public policy. This policy encompasses a few important aims: stimulation of new technologies and services, economic and societal growth, and more effective implementation of public responsibilities.

The key feature of PPI is that contracting authorities do not define detailed technical specifications of sought products or services, but instead describe the final result they wish to obtain.

This approach enables companies to present innovative solutions that have not been available on the market on a large scale yet. Indeed, in PPI price is no longer the most important selection criteria element, and that makes public procurement not merely a financial and administrative task, but a process involving a variety of factors.

However, it needs to be noted that PPI differs from another type of innovative procurement, that is, Pre-Commercial Procurement (PCP), which concerns products or services that have not been fully developed yet and need further research and testing.

The EU supports PPI through dedicated legislation, in particular by new procurement directives from 2014 facilitating innovative solutions and emphasising flexible procedures for innovative contracts: innovation partnership, the competitive procedure with negotiations, and competitive dialogue.


Additionally, the EU has prepared financial instruments to help public authorities implement PPI. One of the most important tools is The EU Framework Programme for Research and Innovation, Horizon 2020, with its dedicated calls aimed at financially supporting PPI implementation.

The European Commission also co-financed a series of pilot PPI projects. Among them is the PAPIRUS project (Public Administration Procurement Innovation to Reach Ultimate Sustainability).

Coordinated by a Spanish entity Fundacion Tecnalia Research & Innovation, and carried out by an international group of partners, PAPIRUS aimed to implement a new public procurement process focused on providing nearly zero energy materials for the repair and construction of buildings. As a result, four international public procurements were announced in 2015.

In line with PPI, PAPIRUS was targeted mainly at innovative small and medium sized enterprises (SMEs) that usually do not make business with public authorities. Therefore, the tenders were divided into lots, thus facilitating the access for SMEs.

For public authorities the most important lesson learnt from PAPIRUS was the ability and need for deep dialogue with the market. It is crucial for successful implementation of PPI to discuss with the market all steps of the tender starting from design of the tender (award criteria) and finishing on informing suppliers how to submit offers and fill in documentation.

Public authorities must continuously ask suppliers about new solutions, award criteria, indicators to be fulfilled, and risk that should be taken into account while installing specific products. The dialogue needs to be open and transparent to avoid being suspected of corruption.

There are numerous benefits from PPI for both enterprises and public authorities. The former can gain more popularity and reach more customers, while the latter can use the flexibility of PPI to obtain innovative solutions tailored to their needs, save costs in the long term and perform their tasks taking into account broader challenges such as energy efficiency.

Since 2011 five per cent of European companies have had contact with PPI. It is expected that by 2020 significant changes in public procurements in the EU will have occurred.

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