Kivistö et al_innovative procurement processes

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Innovative procurement processes and their use in social and health care sector

Timo Kivistö, Daniela Grudinschi, Jukka Hallikas,

Sanna Sintonen

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Theoretical background

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Definitions

Innovation definition by OECD

• Product innovation

• Process innovation

• Marketing innovation

• Organisational innovation

In procurement context

• New to the organisation

• Can be classified with more challenge

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The customers in public procurement

End-users

• Use the object - pay a part of the cost

• Values: commercial customer service

Relatives

• Values: commercial customer service

The paying customer

• In the group – management – unit chiefs – employees

• Values: customer service, economic values, savings

Politicians

• Partly same values – economic values, widely accepted political values as

social politics, environmental politics, local economy

• There can party politics and individual political values

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The customers in public procurement

Indirect customer

• The employer of the using customer

Indirect customer

• National Social Security Fund

Direct customer – 100 pct paying customer

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Other aspects of innovative procurement

In relation to time the product can be

• Off-the-shelf product

• New product or service, which can be developed in a reasonable time

• The product is being innovated constantly during its lifecycle

In relation to origin the product can be

• Technology push

• Demand pull

The way how requirements are defined

• Resources, process, end products, value

• In physical products value for a certain use

• Performance based acquisition

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Evaluation of the innovative procurement objects

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Innovation object cases

We searched innovations from national innovation bodies and

from innovation bodies of major national healthcare

organisations

• Vinnova (43), Tekes (53) as innovation bodies

• SLL Innovation (35), NHS Innovation (SW) (30) as the

innovation bodies of the major healthcare providors

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Classification of potential innovative procurement objects

• Cases reperesent floowing product/service categories

• Development of a single service

• Development of multiple services

• Development of services, equipment and premises

• Coordination services

• Services

• Support services

• Enabling technology

• Materials

• Premises

• Other

• Together

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2

2

21

43

3

61

19

2

11

167

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Procurement processes for innovative public procurement

1. Defining the scope of the procurement object

• Make-or-buy of ongoing services, development services

• Strategic decision to own premises, equipment

• Are there other customers than the public unit

• Life cycle cost

• Product to be developed

2. Defining the customer types

• Public units, other customers

3. Defining the customers within the customer types

• Eg. The using customer, paying customer

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4. Defining the customer values

• General customer service vales

• Measurable product or service specific values

• Generally accepted values such as environmental and social values

• Economic values – savings, reduced cost

• Other economic values

• Political values from party poltics or individual.

5. Reverse marketing for innovations

6. Supply market research / search for innovations

• Which are the sources for innovation

• Are the innovations which are not in the market

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7. Competition set-up

• Which supplier group is invited to tender

• The scope of the RFP

• Is the change or development process within or out of the scope

• Partial deliveries vs. economics of scale

• Large framework agreements vs small monetary value

innovations

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The rest of the process follows the traditional procurement

8. Requirements definition

• Economic goals

• Innovation goals

9. Defining the quantity

10. Determining supplier requirements

• Innovation capability

11. Determining the award criteria

12. Select procurement procedure

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13. Notice

14. Request for proposal

15. Proposal evaluation

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Discussion

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Observation concerning the organisations

• The healthcare producers innovation organisations concentrated in

distribution and commersialisation of the inventions made by the

personnel

• They provided services for enterprises for testing and evaluation of

new products

• They did not search for innovations from the market

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Procurement process applicability to procurement categories

Development services can be bought from consultants or engineering

companies

• This affects from which supplier group you are searching for the

innovation

• Same goes for coordination services, services, enabling technologies and

premises

• In those the development make-or-buy decision must be made, shall the

change process be within the RFP

Enabling technology and materials

• Enabling technology or materials are designed for small customer groups and

thus small monetary value – they are likely to be left out from traditional

framework agreements

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• Coordination services

• Are coordination services procured together with services or separately

• All procured from one supplier might cause higher risks or inflexibility

• SLL evaluates innovative products on contract basis for push products

• Supply market research was not mentioned in description of the

organisation nor in cases

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• Innovative parts in the procurement process

• The scope of the procurement object, competition set-up and innovative

requirements

• In commercial requirements the innovation incentives must be mentioned

• These phases need supplier coordination

• The effects of the procurement legislation

• Does not restrict the use of innovative procedures

• The requirements must be non-discriminative

• The evaluation should be based on the criteria in the tender documents

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Conclusions

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Conclusions

• In the market there are off-the-shelf innovations, but only few search

for them

• The national innovation bodies and those seeking fundind want to make their own

innovations

• The monetary values of innovations is small amd therefore not interesting for

commercial players

• The units in social and healthcare sector seldom has an innovation unit

• In one organisation the innovation unit was the assistant director of nursing, who

was supported by a testing group in later phases of the development

• More research of the R&D activities of the public units is needed

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Conclusions

• The customers and the customer values

• Public organisations seldom measure customer satisfaction in the detail of

different customer groups

• If the true needs of the customer is not recognised in the early phase, then they

shall have to be made in later phases (open -> negotiated)

• Value from procurement contracts

• There should be a discussion forum with suppliers and procuring units, where the

principles of innovative procurement, such IPR and incentives should be

discussed

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Kivistö et al_innovative procurement processes