Public Procurement of Innovative Solutions (PPI)

Public procurement of innovative solutions (PPI) positions the public sector as an early adopter and anchor customer for innovative products and services that are near market readiness or newly available. Unlike pre-commercial procurement, which funds the R&D phase, PPI uses standard EU procurement procedures to purchase solutions that already exist but have not yet achieved significant commercial scale. The act of public purchase itself provides the market validation that enables the innovating company to attract private customers and investment.

What is Public Procurement of Innovative Solutions?

PPI is not a distinct legal procedure under Directive 2014/24/EU. It is an approach to procurement strategy, supported by European Commission guidance and funding instruments, under which buyers deliberately choose to procure innovative solutions rather than established off-the-shelf products.

In practice, a PPI procurement uses whichever standard EU procedure is appropriate for the subject matter: the open procedure, the competitive procedure with negotiation, or another route. What distinguishes PPI from standard procurement is the intent: the contracting authority explicitly frames the requirement around an innovative capability rather than a proven commodity.

Key features of a well-structured PPI procurement include the following.

Outcome-based specifications. The buyer defines what it needs in terms of performance and outcomes, not detailed technical specifications that would exclude novel approaches. This is sometimes called functional or performance-based specification.

Preliminary market engagement. Buyers typically conduct preliminary market engagement and market consultation to understand the innovation landscape before drafting requirements.

Aggregated demand. Joint PPI programmes across multiple contracting authorities pool demand to create a larger first-customer signal, making the commercial case for the innovating company more compelling.

Award criteria that recognise innovation. Quality criteria in the award evaluation explicitly address innovative features, scalability, and long-term value, rather than weighting price so heavily that innovative solutions cannot compete.

Why it matters for bidders

For innovative companies, identifying PPI-oriented contracting authorities is a high-value prospecting activity. Buyers pursuing PPI strategies actively want novel solutions and have structured their procurement to allow them to win. They represent a fundamentally different kind of customer from authorities running commodity procurement.

Clues that a procurement is PPI-oriented include outcome-based specifications, pre-market engagement activities, reference to innovation strategies in the contract notice, and award criteria that include innovation-related quality factors.

Example

A group of Nordic municipalities collaborates on a joint PPI programme to procure AI-powered energy management systems for public buildings. No single municipality has sufficient scale to attract innovators, but the group's aggregated demand of EUR 12 million across 200 buildings creates a viable first-customer opportunity. They run an open procedure with outcome-based specifications, award criteria that explicitly value energy reduction performance and integration capability, and a five-year contract that gives the winning firm time to demonstrate results.

Frequently Asked Questions

Is there specific EU funding available to support PPI?

Yes. The European Commission's innovation procurement support programmes, including instruments under Horizon Europe, provide grants to help contracting authorities design and run PPI programmes, and to facilitate joint cross-border PPI initiatives. The EAFIP initiative (European Assistance for Innovation Procurement) has specifically supported many PPI programmes.

Can SMEs participate in PPI procurement?

Yes, and PPI is particularly beneficial for innovative SMEs. Where demand is too small for large incumbents but valuable enough to attract scale-ups, PPI can create space for smaller innovators. Buyers can also divide contracts into lots to make participation more accessible.

What is the difference between PPI and standard procurement of a technology product?

The distinction is intent and design. A standard technology procurement buys a proven, commercially established solution against detailed technical specifications. A PPI procurement deliberately creates space for solutions at the edge of market readiness and structures criteria to allow innovative approaches to compete. The procedures used may be the same; the specification and evaluation approach differs.

How does a buyer avoid favouring one specific innovator?

Through thorough preliminary market engagement before drafting requirements, and by writing functional specifications that do not incorporate one supplier's proprietary technical approach. Any supplier involved in the pre-market engagement phase must be handled carefully to avoid the "prior involvement" distortion prohibited under Article 41 of Directive 2014/24/EU.