Innovation-Friendly Procurement

Governments across Europe account for roughly 14 percent of GDP in public procurement spending. When that spending is directed toward novel solutions rather than off-the-shelf products, it functions as a powerful lever for industrial policy, economic development, and the improvement of public services. Innovation-friendly procurement is the umbrella concept for the set of legal instruments, procedural approaches, and evaluation methods that make this possible within the constraints of European procurement law.

What is innovation-friendly procurement?

Innovation-friendly procurement operates at two levels: the specification of what is being procured, and the procedure used to find and select the best solution.

At the specification level, a traditional prescriptive specification describes exactly what product or process the buyer requires. An innovation-friendly specification describes the outcome or function that is needed, leaving the solution space open to the market. Under Article 42 of Directive 2014/24/EU, technical specifications may be defined by reference to performance or functional requirements rather than specific technical standards, allowing suppliers to propose solutions that meet the need without being identical to what the buyer assumed existed.

At the procedure level, Directive 2014/24/EU introduced the innovation partnership (Articles 31 and 72) as a new procedure type specifically designed for procurements where a solution does not yet exist on the market. The innovation partnership allows the contracting authority to select partners and collaborate through a structured R&D phase, with the option to purchase the resulting solution at the end, all within a single procurement procedure.

Pre-commercial procurement (PCP), which sits outside the main directives but is governed by Commission guidance, allows authorities to procure R&D services in competitive phases without a commitment to purchase the resulting product, sharing risk and results with suppliers. This route is used extensively in Horizon Europe contexts.

The competitive dialogue procedure and competitive procedure with negotiation (Articles 30 and 26 of Directive 2014/24/EU) also support innovation by allowing dialogue with multiple bidders before finalising specifications, enabling the buyer to learn from the market what is technically possible before committing to requirements.

For SMEs, innovation procurement can be particularly valuable. Small, technology-focused businesses often have the most novel solutions but lack the scale to compete in large, prescriptively specified tenders. An outcome-based specification that rewards the quality of the solution rather than compliance with a detailed technical checklist levels the playing field considerably.

Why it matters for bidders

Innovation-friendly procurement rewards depth of thinking over volume of compliance evidence. A supplier with a genuinely superior technical approach to a public challenge can compete more effectively in a functional specification or innovation partnership than in a commoditised open tender. Understanding which procedures signal genuine openness to innovation, and being able to articulate the value of a novel approach in the buyer's terms, is a core competitive capability for innovative SMEs.

Procurement simplification for SMEs is the complement to innovation-friendly design: reducing the administrative burden of participation makes innovation tenders accessible to businesses that cannot absorb the cost of responding to complex conventional tenders.

Example

A Dutch national ministry responsible for infrastructure challenges the market to develop a road pavement material that reduces tyre noise by 30 percent compared to the current standard, using pre-commercial procurement. Three consortia, each including at least one SME, are selected to develop competing prototypes over 18 months. At the end of the development phase, the ministry evaluates the prototypes against independently measured acoustic performance. The top-performing solution is then subject to a public procurement for commercial deployment, giving the winning consortium a significant first-mover advantage in the European market.

Frequently Asked Questions

Can a small company propose a solution that does not yet exist as a finished product?

Yes, particularly in innovation partnership and pre-commercial procurement procedures. These are designed precisely for situations where the market does not yet have a ready-made solution. In a standard open procedure, the supplier is expected to deliver a known, specifiable product or service: proposing something not yet built carries risk for both buyer and supplier. The innovation partnership procedure manages this by building in R&D phases before any commitment to purchase.

How does innovation procurement affect the evaluation of bids?

Functional and outcome-based specifications shift evaluation toward quality of approach, technical credibility, and understanding of the buyer's problem rather than price-competitiveness alone. Award criteria in innovation procurement typically weight technical quality and methodology heavily, often 60 percent or more, with price playing a secondary role. This favours suppliers who have invested in genuinely understanding the problem and developing a credible solution.

Are there EU funding programmes that support innovation procurement?

Yes. The European Innovation Council (EIC) and Horizon Europe both support innovation procurement through specific instruments. The European Commission's Procurement of Innovation Platform provides guidance and case studies. Some member states also operate national innovation procurement programmes with dedicated funding for buyers willing to procure novel solutions.