The public sector is a huge purchaser of goods, services and infrastructure.
In the UK last year, 42 per cent of the £6.2 billion worth of outsourcing contracts came from the public sector, according to consultancy Arvato. And across the EU, the European Commission estimates that 14 per cent of GDP is generated through public procurement.
For good reasons, including evidencing value for money, public procurement is legally regulated. Put simply, a public procurement process works as follows: a public authority will advertise the contracting opportunity, evaluate the tenders received and award the contract to the one that scores the highest against its stated evaluation criteria.
But in our latest piece of smart cities research, Osborne Clarke urges a rethink among public sector bodies when it comes to working with the private sector on innovative projects.
This “smarter” procurement requires a more creative approach to working within the legal framework. How can the public engage with innovative companies within the rules to drive new solutions to provision of public services? Proposed ideas could then be trialled in parallel to see which might meet the public requirements before entering into the final contract for supply.
This more creative approach could also mean the outputs from innovative projects being shared for the benefit of other public sector bodies across the UK and even Europe.
So instead of going to market with an opportunity for a contract to, for example, install a traffic flow system for Bristol – the old way of doing things – let’s instead go to market with an opportunity to research what an intelligent transport system for the city might be. Then share outputs, standards and the findings of the research, rather than simply committing to purchase a system that could leave the city stuck with an outdated solution.
There are some examples of this innovative approach having been successful in the UK in recent years.
One is the Low Carbon Networks Fund’s £250 million in funding for pilot projects aimed at improving the efficiency of the electrical distribution network, which could result in billions of pounds of savings. Meanwhile in Sheffield, the Sheffield Smart Lab, a joint initiative by the city council, Ferrovial Services and Amey, allows organisations to test their smart solutions relating to energising the city centre and supporting people to live independently.
Currently, however, it is all too often the case that “smart procurement” is not being adopted by procurement officers simply because many haven’t been up-skilled in the possibilities, and see procurement regulations as a constraint. The situation may be improved by a new Innovation Partnership Procedure, which gives public sector procurement teams a flexible set of rules to buy in a more innovative way.
There is no doubt that the public sector will need to invest in training procurement professionals to meet future needs. Learning from examples of where innovative procurement has driven novel and effective solutions can kick-start a procurement sea change.
Catherine Wolfenden is partner and head of the Regulatory Group at Osborne Clarke. To learn more about Osborne Clarke’s insight on smart cities and to read our latest white paper, written in collaboration with The Lawyer Research, please visit smartcities.osborneclarke.com