Procurement – is it time for change in the public sector?

Procurement is an unavoidable part of the construction ecosystem, a process which should encourage competition and foster innovation – if it’s working. But, unfortunately, all too often it doesn’t, and reform is needed. In the private sector, innovation and good ideas are key to business performance. To be successful and boost the bottom line, firms need to retain a certain level of control and effectively monetise their good ideas. Innovative work allows them to steal a march on their competitors, and by the time others cotton on they will have likely made strong enough returns to move on to invest in the next good idea. 

In the public sector, however, the sharing of ideas is encouraged alongside collaboration in the name of the greater good – rightly maximising the value of the taxpayer’s pound. There is immense pressure to get the most value out of the tax payer’s money, and all too often innovation is lost in the battle between controlling good ideas and sharing good ideas.

Cost-saving is a need which ought to be prioritised, yet the developer-side disadvantages are such that innovation is being stifled. Open and honest collaboration, whilst being encouraged is not working effectively. There is no incentive for companies to share their bright ideas when part of a framework or when pitching for new work.

If regulation or oversight could enforce the system more effectively, we could move towards a fairer and more collaborative procurement process

A public sector framework might sit half a dozen talented and nimble firms round a table with the aim of encouraging innovation, but unsurprisingly individuals often prefer the ignominy of silence to speaking out and potentially enlightening competitors to an idea that they haven’t had a chance to implement or monetise. With a major bid looming, less and less collaboration happens as each party wants to keep their potentially winning strategy to themselves.

The way that contracts are increasingly being written is also problematic. Rightly so, the rights of an idea developed whilst part of a framework will likely be assigned to the client, who will share with others as a means of maximising the value of that idea or product. However, the IP rights to ideas previously developed by a firm are also often handed over to the client, and again shared with competitors. This practice is disadvantageous to innovators and ultimately commoditises innovation – customers receive value the investors do not and innovation is stifled.

Monetisation is a key part of this equation; as much as the public pound should be given value, innovation is paid for by profits. Companies must be adequately rewarded for their work but at the moment there is little incentive for the sharing of innovative ideas. There is effectively only one opportunity to impress with a new idea before the USP is lost.

There are two ways in which this procurement issue could be solved, and it is important that a solution is found. In an industry where operating costs are frequently similar between firms, innovative techniques and developments are the difference-makers. It is widely accepted that the construction industry has lagged behind others in terms of innovation; to accelerate our development we must reward bright ideas and not discourage the innovation we all seek.

Monetisation is a key part of this equation; as much as the public pound should be given value, innovation is paid for by profits

One option would be a form of ‘Innovation fund’. Public sector bodies could employ a group of firms with the sole purpose of innovation on a retainer fee structure. The need to realise a ROI on each idea would not exist and this would cover the costs of development and contain optional bonuses for successful work.

Alternatively, and granting more control to developers, an even simpler system could be in play whereby rather than owning the IP outright, employers license the innovation they require in order to use it, from the firm who originated it. Although this process does already exist, whether because of cynical contract-writing or reluctance to sign up to terms, it is rarely-used.

If regulation or oversight could enforce the system more effectively, we could move towards a fairer and more collaborative procurement process. Ultimately, key players in the industry need to cooperate and consider the problem as a group to come to a mutually agreed solution. The benefits of such improvements to the system will be reaped not simply by developers and innovators, but by the public sector too. Innovation is necessary for our industry and must be allowed to flourish.