profit from procurement

Driving Innovation Through Procurement

15/04/2024

What is innovation in procurement?

The Chartered Institute of Procurement and Supply (CIPS) defines innovation in procurement as, ‘Procurement innovation refers to innovative solutions, products and processes that help to develop and drive value within an organisation.’

Even today, procurement is often viewed by many organisations as a function which exists purely to drive down costs. While cost reduction is extremely important, to focus solely on that is a gross disservice not only to the value of the function itself, but also to the organisation.

To reduce and control costs should be a ‘given’ in any procurement team, but not at the expense of enhanced quality, service delivery and innovation. When elevated to the strategic level and aligned to the organisation’s business strategy, procurement can lead the way in driving innovation.

This can increase profit and competitive edge in the private sector and significantly improve services and quality of life for communities in the public sector, while both sectors will benefit from enhanced organisational reputations, reduced risk and increased customer satisfaction.

The Procurement Act and Innovation

The Procurement Act, which comes into effect in October 2024, recognises the importance of innovation and how it will assist public sector procurement achieve its key objective of delivering best value for taxpayers.

The Government’s aim for introducing the Act is to empower public sector bodies to achieve innovative solutions through loosening up some of the more restrictive process-driven procurement procedures of the past.

Achieving best value for taxpayers will simply not be possible without public sector procurement actively seeking improved services through using innovative solutions from suppliers. Indeed, the new rules require procurers to drive innovation to assist in the delivery of national strategic priorities.

To facilitate this, the Procurement Act, enables the public sector to engage more fully with suppliers before and during the tender process using new rules known as *Pre-Market Engagement and the Competitive Flexible Procedure (CFP). Both these rules benefit the buyer and supplier alike: the buyer can explore more freely and deeply what innovative solutions are available in the market to meet their needs and tailor their procurement strategy accordingly, while the supplier has the opportunity to suggest and showcase their innovative solutions to meet them.

For procurement to drive innovation, it is critical that innovation is embedded in the organisation’s procurement strategy, supported by a culture of innovative thinking and delivery.

To ensure that innovation is not overlooked from the procurement process, it has to be specifically included in it. For every tender opportunity, the procuring organisation should be able to define what their needs are to be met by the supplier. In every instance and prior to issuing the tender, the procurer should ask the question, ‘Can these needs be met by a more innovative solution (through the supply of goods, services or works)?’.

The purpose of the question is to place innovation firmly into the procurement process (during Pre-Market Engagement) such that the appropriate innovative response is considered and sought every time prior to issuing the tender.

By simply asking, ‘Can these goods, services or work be provided with a more innovative solution?’, early in the procurement process (PME), the market will be able to offer the same (or better) service, but with a more innovative and efficient solution.

Conclusion

Innovation is a fundamental requirement to deliver best value for taxpayers.

Public Sector procurement, through the introduction of the new rules in the Procurement Act, has been handed a golden opportunity to embrace it as part of its culture, embed it in its procurement strategy and lead the way in driving innovation through procurement.

Authors: Douglas MacKellar & David Turner

Douglas MacKellar and David Turner are experienced procurement professionals in both the public and private sectors. They bring a ‘hands on’ approach to learning, guiding their clients through procurement activity by demonstrating what they have learned by ‘doing’.

Back to news