Inovatyve procurements

Innovative public procurements

Innovative public procurement (IPP) serves as a means to promote innovation within the public sector. One of the weaknesses of the Lithuanian innovation system is the insufficient utilization of innovation demand measures. Consequently, it is challenging to encourage the public sector to invoke innovations in strategically important areas such as energy consumption, healthcare, waste management, and others. Annually, more than 7 billion euros of state budget funds are allocated to public procurement in Lithuania (source: https://vpt.lrv.lt/lt/statistika-ir-analize/pirkimu-vykdytoju-zemelapis-svieslente-1/), which could be leveraged to promote innovation by increasing the demand for innovative solutions.

Currently, the Law on Public Procurement provides an indirect possibility to carry out IPP by implementing new procurement procedures. In Lithuania, new procurement methods such as competitive dialogue and innovation partnership enable contractors to consult with suppliers at the initial stage of procurement regarding the most modern project implementation solutions. Other provisions of the Law on Public Procurement facilitate the implementation of innovative projects. For example, a technical specification can be prepared describing the desired result or indicating the functional requirements of the procurement object, thereby allowing for the submission of alternative offers.

Although legal acts regulating public procurements permit IPP to be conducted, procurement executors often avoid them. Due to a lack of competence and practice, they are hesitant to take additional risks associated with purchasing innovative solutions. Furthermore, there is a lack of recommendations on how IPP should be carried out. To address this issue, the Ministry of Economy and Innovation has prepared the Guidelines for Innovative Public Procurement, which encourage contractors to follow when conducting IPP.

The Technology and Innovation Law of the Republic of Lithuania defines innovative public procurement as procurement in which the procuring organization, while specifying the purchased object in the technical specification, incorporates requirements aimed at acquiring innovative products. These products may include goods, production, construction, or other processes that are most conducive to effectively fulfilling the functions of the procuring organization or achieving strategic goals. Additionally, public procurement conducted in the fields of water management, energy, transport, or postal services is carried out according to procedures that foster conditions and incentives for suppliers to offer and supply innovative products (source: https://e-seimas.lrs.lt/portal/legalAct/lt/TAD/3a00ca517f7d11e89188e16a6495e98c/asr).

It is noteworthy that the Ministry of Economy and Innovation has established the Innovative Public Procurement Competence Center. This center is tasked with providing methodological advisory support to procurement organizations involved in planning, organizing, and executing IPP initiatives. The Innovative Public Procurement Competence Center is set to develop methodological materials for businesses and procurement organizations, aggregate and disseminate the knowledge gained from completed IPP projects and offer consultations to both public sector entities and representatives from businesses and academia seeking to participate in procurement processes.

The Innovation Agency, in collaboration with the Public Procurement Supervision Service, establishes the competence center.

In December 2022, a working group formed by the Ministry of Economy and Innovation, along with representatives from the Public Procurement Service and the Innovation Agency, prepared and published guidelines for IPP. The purpose of these guidelines is to assist contractors in taking the initial steps towards implementing innovative public procurement by providing the latest and most detailed information (source: https://eimin.lrv.lt/uploads/eimin/documents/files/Inovatyvi%C5%B3_vie%C5%A1%C5%B3j%C5%B3_pirkim%C5%B3_gair%C4%97s_2023-01-17.pdf).

Executing IPP goes beyond merely meeting the expectations of procurers. While the procuring entity primarily purchases to fulfill its own needs and provide public services, it is equally crucial to strive for improved operational outcomes and meet societal expectations to the best of its ability. This entails not only ensuring the delivery of high-quality public services but also continuously seeking ways to enhance them. The European Commission, in its Communication on Guidelines for Innovative Solutions in Public Procurement (European Commission, Brussels, 18.06.2021, C(2021) 4320 final, https://ec.europa.eu/transparency/documents-register/detail?ref=C(2018)3051&lang=lt) issued on June 18, 2021, emphasizes the significance of innovation for the EU's green and digital transformation. Innovation promotes sustainable healthcare systems and long-term cost reductions in the public sector. Furthermore, by fostering innovation in both the private and public sectors, it enhances the competitiveness of European industry and fuels economic growth. Additionally, IPP has the potential to address various social challenges.

Therefore, instead of conventional public procurement methods, opting for IPP can:

• Enhance the effectiveness and efficiency of public services.
• Address procurement challenges innovatively, benefiting both the procurement executor and other public sector entities in specific cases.
• Contribute to the growth of innovative small and medium-sized businesses (SMEs).

In 2018, the European Commission published Guidance on Innovation Procurement, which provides advice on implementing innovation procurement and offers numerous examples of good practice.

Pre-commercial procurement

One effective strategy for addressing significant social challenges in the public sector is through pre-commercial procurement (PCP), also known as state orders for scientific research and experimental development (hereinafter referred to as R&D). In this process, the state acquires R&D services to tackle social issues. PCP serve to enhance the innovative capacities of companies, activate innovative initiatives, and foster business and scientific partnerships in developing products essential for addressing the social and economic challenges faced by the state (Description of the procurement procedure for scientific research and experimental development services, approved by the Government of the Republic of Lithuania on January 15, 2020, Resolution No. 22).

According to this resolution, the Innovation Agency is tasked with overseeing PCP and providing methodological and other assistance to procurement executors and participants. It is noteworthy that the Ministry of Economy and Innovation, to comply with the requirements outlined in the Government of the Republic of Lithuania's resolution No. 22 dated January 15, 2020, "On the approval of the description of the procedure for the procurement of research and experimental development services" has endorsed the procedure for assessing the compliance of PCP documents with the pre-commercial procurement requirements. This assessment is conducted by the coordinating organization before initiating PCP (source: https://e-seimas.lrs.lt/portal/legalAct/lt/TAD/489540b1a68b11ee8172b53a675305ab?positionInSearchResults=0&searchModelUUID=ea0aabd5-1548-4016-9c7e-6d4167722dc7).