What is innovation?

An innovation is the market launch of a new idea that has been put into practice and helps to optimise products, procedures, services or processes. In terms of public-sector procurement, this means that innovative procurement processes contribute in the long term towards optimising and increasing the efficiency of purchasing.

They can be transferred to comparable institutions or organisations within the public sector. When put into practice, procured innovative products, procedures and services can significantly improve the productivity and efficiency of the purchaser, e.g. from a financial, process and/or environmental perspective.

There are basically two ways to promote innovation. Firstly, innovation can be supported on the supply side by funding research and development within the private sector and within public research institutions (innovation supply). Innovation can also be triggered on the demand side through the needs of both public and private-sector contracting authorities leading to the development of innovative products, services and procedures (innovation demand). 

The potential for innovations is enormous

The potential of innovation demand through innovation-oriented procurement is huge: the annual volume of public-sector procurement in Germany is around EUR 300 billion. If just one percent of this procurement volume were used for more new products and services, this would provide a EUR 3.0 billion boost to innovation.

That is more than the nation and the states provide in a year to fund research and innovation within companies (EUR 2.1 billion). By increasing public-sector demand for new products, procedures and services, this also creates considerable potential for innovation and technology within the German economy in general.

However, a greater amount of inspection, justification and documentation is required within public-sector procurement bodies in order to procure innovations than would be required for standard products and services. This means that such public-sector purchasers require specific economic and technical qualification to enable them to master the specifics of innovative public procurement (e.g. feasibility measurement methods, procurement market analysis, conformity with public procurement law, technical analysis).

That said, the extra effort is worth it: the development and implementation of innovations are essential for a modern industrialised nation such as Germany. Public sector demand at all levels is therefore extremely important: purchasing innovative products, procedures and services plus the procurement process itself creates potential for better management performance through new technologies and innovations with greater benefit than ever before.

From the perspective of public-procurement law – first and foremost the economic principle – innovative products and services offer many advantages. They can be economically superior when it comes to public-sector procurement. They can also help achieve objectives in areas such as energy efficiency, environmental protection, safety, health, consumer protection and occupational safety.