Innovation Procurement Reflections on the Development of a Swedish National Policy for Innovation Procurement Göran Marklund Head of Strategy Development

Göran Marklund Background The Innovation Strategy, Innovative Sweden – a strategy for growth through renewal (Ds 2004:36), is the Governments platform for the activities to strengthen Swedish competitiveness. One part of the strategy concerns innovative public investments. It argues, among other things, that public agencies in their roles as procurers, while simultaneously satisfying public needs, more strongly could stimulate technological development and business opportunities. (Ministry of Industry and Trade, N2006/2915/NL)

Göran Marklund Targets Through public demand, as expressed in public procurement processes: Generate new, more functional and more efficient solutions for the needs of public agencies. Generate new and internationally competitive products (goods and services) and processes in Swedish industry. ….through the efficient and simultaneously strengthening interactions between the satisfaction of public needs and industrial innovation.

Göran Marklund Innovation Procurement Public procurement: The acquisition, whether under formal contract or not, of works, supplies and services by public bodies at whatever level (local, regional, na- tional, European) and by utilities. (EU, Wilkinson Report, 2005) Innovation Procurement: The purchase of goods or services that do not yet exist or require new features, and hence require research and innovation to meet the specified user needs. (EU, Wilkinson Report, 2005)

Göran Marklund Incentive Structures Critical Factor – Incentives drive behavior – for individuals and organizations – Analysis of incentive structures is fundamental to public procurement policies Two Central incentive Structure Challenges a)Incentive Assymetries – Risk-Reward Ratios – Organizations-Units-Individuals b)Fragmentizations – Scale and Scope – Organizations-Units-Individuals Two Central Dimensions a)Users-Producers – Demand and Supply Incentives b)Time Perspectives – Short-term, Medium-term and Long-term Perspectives

Göran Marklund Critical Dimensions Short-term Public Needs - Existing Goods and Services - Low Innovation Challenges Information Challenges Long-term Public Needs - Non Existent and hard to specify Goods and Services - High Innovation Challenges Radical Uncetrtainty Challenges Medium-term Public Needs - Non Existing Goods and Services - Substantial Innovation Challenges Uncertainty Challenges Research Development Substantial Little Uncertainty ParametricalGenuine Innovation Procurement Innovation High Low Medium Tme Perspective ShortLong Medium Public Demand Need Connections – Customer Connections Industrial Renewal Market Formation – Growth Potential

Göran Marklund Critical Dimensions Short-term Public Needs - Existing Goods and Services - Low Innovation Challenges Information Challenges Long-term Public Needs - Non Existent and hard to specify Goods and Services - High Innovation Challenges Radical Uncetrtainty Challenges Medium-term Public Needs - Non Existing Goods and Services - Substantial Innovation Challenges Uncertainty Challenges Public Demand Need Connections – Customer Connections Tme Perspective ShortLong Innovation Procurement Innovation High Low Medium Industrial Renewal Market Formation – Growth Potential

Göran Marklund Innovation Procurement Measures Short-term Public Needs - Existing Goods and Services - Low Innovation Challenges Information Challenges Product Procurement Long-term Public Needs - Non Existent and hard to specify Goods and Services - High Innovation Challenges Radical Uncetrtainty Challenges Pre-commercial Procurement Medium-term Public Needs - Non Existing Goods and Services - Substantial Innovation Challenges Uncertainty Challenges Functional Procurement Public Demand Need Connections – Customer Connections Tme Perspective ShortLong Innovation Procurement Innovation High Low Medium Industrial Renewal Market Formation – Growth Potential

Göran Marklund Methods Public Strategy Measures Desired BehaviorsActual Behaviors Instructions Financial Measures Monitoring Analysis Evaluation

Göran Marklund Proposals Incentives for Innovation Procurement in Public Agencies – Percentage of Procurement Budget or Total Budget – Incentives for Development of Procurement to a Strategic Function Method Support for Innovation Procurement – Innovation Procurement involves R&D – R&D-funding agencies should support R&D-quality in Innovation Procurements Overview and Reform of Procurement Policy and Structures – Policy Targets and Agent Responsibilities – Method Development, Evaluation and Monitoring