procurement of innovation

Procurement of innovation is when a contracting authority needs a solution that does not yet exist on the market and works with suppliers to develop it. Unlike buying existing innovative products — the most common form of innovative procurement — procurement of innovation requires research and development to create something new.

How does procurement of innovation work?

The process begins when a contracting authority identifies a need that cannot be met by available products or services. Rather than writing a detailed requirements specification for a known solution, the authority describes the problem to be solved. A suitable procedure is then chosen to develop the solution with suppliers:

• Innovation partnership: Development and purchase under one contract, per Article 31 of Directive 2014/24/EU. For cases requiring significant R&D and close buyer-supplier collaboration.
• Pre-commercial procurement (PCP): Multiple suppliers develop competing solutions in parallel. Purchase happens through a separate procurement afterwards. Falls outside the procurement directives as it covers R&D services only.
• Design contest: Suitable when solution design is the core need, without extensive R&D.
• Competitive dialogue: Works well when the authority has a defined need but requires market input on how to meet it.

The choice depends on how much R&D is needed and whether the authority wants to combine development and purchase or keep them separate.

Why does procurement of innovation matter?

EU member states spend around 14% of GDP on public procurement, yet only a small fraction goes towards developing genuinely new solutions. The European Commission has identified procurement of innovation as a key strategic tool for improving public services while addressing major societal challenges.

A thorough market dialogue early in the process helps authorities understand what the market can offer. Tools like Cobrief can help suppliers discover these opportunities and assess whether they match their capabilities.

Procurement of innovation demands more preparation than buying off-the-shelf solutions, but it enables authorities to develop entirely new approaches to complex challenges — and creates new markets for innovative businesses.