Capturing Value in Innovation Procurement: A Business Case Methodology

Anne Rainville and Ramona Apostol
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Anne Rainville: Management Consultant, Vtrek BV, The Netherlands and Research Fellow, Maastricht School of Management, the Netherlands
Ramona Apostol: Senior Legal Advisor, Corvers Procurement Services, the Netherlands and Research Fellow, Maastricht School of Management, the Netherlands

No 2017/2, Working Papers from Maastricht School of Management

Abstract: Since 2000, the European Union (EU) has promoted innovation procurement to improve public services while supporting economic growth. Despite these potential benefits, it has become evident that procurers are not participating in innovation procurement to the extent expected – both for pre-commercial procurement (PCP), and the public procurement of innovative solutions (PPI). Key barriers are a lack of incentive and a high risk-aversion on behalf of procurers. In this paper, we introduce a business case methodology for innovation procurement that can help to overcome these barriers by capturing project value and providing justification for project approval. We describe how to construct a business case for PCP or PPI across six steps: 1) needs identification and assessment; 2) prior art analysis and intellectual property rights (IPR) search; 3) analysis of the standards’ landscape; 4) preliminary estimates; 5) open market consultation; and 6) detailed economic calculations. Using case studies from Transport for London and the Lombardy Region of Italy, we apply elements of this methodology to show how it can be applied in practice. The methodology can be directly applied by public procurement practitioners during the preparatory phase, and provides valuable insight for policy makers into decision parameters for innovation procurement. Through multidisciplinary research, it furthers academic discussion of technical and economic evaluation of demand-side mechanisms. Further elaboration of the business case methodology is required for its extension to tender design and project management, as is investigation into its congruence with the new innovation partnership mechanism introduced in 2014.

Pages: 18 pages
Date: 2017-05
New Economics Papers: this item is included in nep-ino and nep-ppm
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http://web2.msm.nl/RePEc/msm/wpaper/MSM-WP2017-2.pdf First version, 2017 (application/pdf)

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