Global Technical function: Grant funding, Providing incentives
Technical Function Unit: Providing investment subsidies, Public grant funding for demonstration
Geographic Area: Finland

Innovation in public procurements -funding scheme of Tekes in Finland

In Finland, the public sector annually spends approximately €27 million on public procurement. By utilising innovation, the public sector can produce cheaper and better services for its citizens.

Aided by fresh solutions, the public sector can satisfy the demands of future generations. In order to support procurement of innovation, Tekes is providing incentives for preparing an innovative procurement.

The challenge

The Finnish National Innovation Strategy emphasises user-driven innovation and demand driven innovation policies. This strategy was inspired by increasing evidence that demonstrates that the low success rate of traditional producer-research driven innovation, where up to 70% of new products tend to fail in the commercial market place, is mainly due to the lack of initial potential customer/user involvement in the definition and R&D phases of the products. The innovation strategy defines public procurement as a demand driven innovation policy tool. The intention is to develop public procurement practices, in order to create opportunities for and encourage innovative procurements.

The measure

Based on this National Innovation Strategy, in 2010 the Finnish Ministry of Employment and Economy published its "Demand and user-driven innovation policy framework and action plan". This plan identified public procurement as an efficient method to promote the development (pre-commercial procurement) and deployment of innovation (public procurement of new products and services) not only in the public but also in the private sector (catalytic procurement). Additionally, the action plan endorsed a measure for the Finnish research and innovation funding agency TEKES, to deploy a  financial incentive scheme providing investment subsidies to encourage Finnish public procurers to undertake more of the above three types of procurements.

TEKES funds the planning of public contracts with the aim of renewing services and activities. This funding is targeted at all contracting authorities, and typically covers 50% (depending on type of cost, funding can vary between 25% and 75%) of total project costs. The procurement must be extensive enough to have an impact on the development of the sector, at least regionally. The planning and preparation of an innovative procurement should encourage active dialogue with potential tenderers and end-users. Additionally, strategic commitment to an innovative procurement is expected of the contracting authority. The funding is grant funding.

Lessons learnt

The TEKES support program is growing gradually in size. For 2012 a budget of 6 Mio EURO was used for Public grant funding for demonstration to support 5 PCP projects. All types of Finnish organisations which are governed by public procurement law can apply for this TEKES support to undertake a PCP project via open calls for proposals published by TEKES. The procurement must be based on a real need, and the procurement process based on the EU PCP model.

The funding typically amounts to 50% of a project's total costs. Payments will be made in arrears in accordance with progress made in the project.

The initiative has resulted to other programs supporting the same goal e.g. The Smart Procurement programme. The programmes aims to ensure that public procurement practices have a more positive  impact on the economy as well as on the commercialisation of new products and services.

The maturity on the GML scale is estimated is to be 7 since the scheme is working but not yet transferred to other regions.