In Finland, over 30 billion euro is spent on public procurement every year. These public investments have tremendous potential for new innovations and business.
“New innovations are only rarely able to participate in public tenders,” says Director Reijo Kangas from Tekes, Finnish Funding Agency for Innovation.
Security and reliability are commonly emphasized in public procurement. This, however, comes at a price. The buyers rarely get anything better or more than what they asked for on the procurement notice. The weakness of the European public sector in buying innovative solutions compared to its United States equivalent has been officially recognized. Start-ups and new ideas are notoriously absent in public procurement.
Public procurement make up over 15% of Finland’s GDP, which means they would be a powerful policy tool for trade and industry. The role of public procurement is even more important during economic downturns. Kangas has a word of advice for public procurement decision-makers.
“When making an investment, it’s worth keeping in mind how that investment could create new business, which would in turn create new jobs,” Kangas highlights.
In Finland, building digital services for the public sector seems to be particularly challenging.
“The Digibarometri (‘Digital Barometer’) report for 2014 indicated that applying information technology has taken off slowly in Finland,” Kangas says.
This is partly explained by public procurement models, which have been created for procuring existing solutions. When a new road or hospital is being built, the end result is already set in stone. Current procurement models are ideal for traditional building projects, but the same can’t be said for developing digital services. At its worst, rigid procurement models that are badly suited for R&D projects and processes can make the public sector unable to buy the latest technology.
“Instead of investing in 1970s technology, we could choose 2010s technology,” Kangas quips.
A push for procurement skills
Tekes has taken the bull by the horns with its Smart Procurement program. The program is pushing the public sector to take its procurement skills to the next level. When the public sector starts to buy new innovations, there will be new markets for the products and services of Finnish SMEs, too. “We want to open up markets for new innovations. References from the public sector are worth their weight in gold for companies looking to expand abroad,” Kangas says.
The SILVER project of Forum Virium Helsinki and 12 other organisations in five different countries also focuses on developing the procurement of innovations. The participating organisations are using a pre-commercial procurement (PCP) process to purchase the R&D process of technology that increases the quality of life for the elderly by supporting independent living. Unlike traditional procurement models, this enables the purchasing of services still under research and development. If the PCP process of the SILVER project is proven to be useful, it may be adopted more widely in the public sector.
Developing effective digital services in the public sector is still possible, despite the rigid procurement regulations. Kangas cites the Kutsuplus smart bus service of Helsinki Region Transport (HRT) as a great example. The subscription system for Helsinki’s on-demand buses was developed by Ajelo Ltd, a company founded by a group of researchers from Aalto University, which is now developing the technology into a global export.
“It’s worth thinking about how smart, user driven services could help make more of existing infrastructure in many other places, too,” Kangas points out.
At its best, new digital services can both harness today’s infrastructure for more effective use and enable better services for residents.
“On the other hand, that will require cities to take on a new role as an enabler, by giving space to companies’ latest innovations.”
HRT’s Kutsuplus service, which operates in the Helsinki Metropolitan Area, is the world’s first fully automatized on-demand public transport service. Its control and service system has been developed by Ajelo Ltd, founded by a group of researchers from Aalto University.
SILVER – Aiming for a better everyday life for the elderly
The first objective of the SILVER project is to establish and execute a pre-commercial procurement (PCP) process to run cross-border call for tender. The second objective is to use the pre-commercial procurement process developed to identify new technologies and services to support the independent living of the elderly. At the same time, home care services could be produced more efficiently.
Seven solutions were selected for the first phase of the PCP process, one of which was the Helping Hand. This intelligent robotic hand provides mobility support for the elderly when their own muscles are not strong enough to get up from a chair.
In the second phase, the three most promising ideas are refined into prototypes. The best prototypes will be taken into the third phase, which is field testing.
Text: Petja Partanen, Tarinatakomo
Photo: Lauri Eriksson, HSL
The article is published as part of the Forum Virium Helsinki´s Building an Open City -release. Read more >>