Innovation: Selecting a Procurement Process

There are no absolute criteria for defining the best route to market for innovation (every project is different) however in making your decision there are two important factors you should consider:  

  • the complexity of your project (including the ability of your organisation to adopt the innovation) and
  • the level of uncertainty, based on the nature and size of the research and development gap of the project

!! Stop and Think !! 

Appetite and Management of Risk

Appetite for risk in the public sector is usually low. This means that staff, including budget holders and senior decision makers, will often choose a procurement process which offers the least risk. Unfortunately, this can lead to using procurement routes processes that may not be optimal to deliver innovation.  

Whatever procurement process is chosen,  it is important to actively identify potential risks and create a mitigation and management plan from the outset.  Risk should continue to be managed throughout the process. This will involve good risk management of innovation projects with strong governance. 

    Level of Uncertainty (or the Research and Development Gap)

    There is uncertainty in all innovation projects, whether it’s related to the outcome of the project, or parts of the project that are unknown and cannot be accurately measured.  

    Unlike general regulated procurement exercises, for innovation you may not have fully documented specific background information and/or a history of potential products or services.  This is particularly the case when the innovation project involves creating new goods or services that do not yet exist.

    You may not for example have:

    • product or service costs (either new or those from existing goods and services)
    • supply chain partners in place or
    • definitive solutions to solve the problem

    Even if some research has been carried out in the Discovery and Definition phase, it is normal that levels of uncertainty remain.  You may still be uncertain as to what the final solution will be, however you will have your research information to inform the most appropriate procurement process for your project. 

    The further away from the market the potential goods or service is from implementation, the larger the R&D gap will be for the project.

    Understanding the current Technology Readiness Level (TRL) of the goods or service helps to assess the gap between the current status of a product and the desired outcome.  

    TRL’s help those involved in R&D to make decisions concerning the development and transitioning of technology. There are a number of online tools available to assist users in defining the TRL level such as those for Horizon Europe

    Having defined the gap, you need to detail the R&D steps and resources required to close this gap.

    The greater the uncertainty in closing the gap,  the more likely it is that specific R&D is required to reduce that level of uncertainty. 


    Complexity refers to both organisational complexity and the technical complexity of the project.

    It relates to areas such as the:

    • project scope
    • differences in user’s needs
    • organisational dynamics and structures
    • policies and regulations affecting the project e.g. legal, data, systems integrations
    • new technology complexity and
    • skill sets of staff (both within the project and with entities outside of the project)

    These factors will help you determine the type of procurement process that should be used. Please note the above is not a comprehensive list – every situation will have differing areas of complexity which need to be considered.

    An example of differing complexity:

    An Innovation project within a single organisation is required to develop a new automated technology to receive payment for a visitor attraction.  This offers little complexity.

    Whereas a project to create and codevelop highly specialised zero emission vehicles, based on data from 3 pilot areas, for all public sector organisations, each with differing requirements, may present both technical and organisational complexities that require different consideration from a procurement process.

    The below diagram shows how the level of complexity and uncertainty influences the procurement process chosen for your procurement exercise:


    The above diagram is a matrix with two axis.  The x axis shows increasing complexity and the y axis shows increasing uncertainty due to an increasing research and development gap.  

    A combination of the complexity and uncertainty axis result in four possible outcomes in terms of which procurement process to use.  These possible outcomes are:

    Outcome 1: Low complexity and low R&D gap.  This can result in using either an open or restricted procurement process or the possible use of an existing Dynamic Purchasing System (DPS) or existing Framework Agreement.  The use of an existing DPS or Framework Agreement are subject to the applicability of the original terms of the Contract Notice and terms.

    Outcome 2: High complexity and low R&D gap.  This can result in using a procurement process involving negotiation where the highly complex aspects of the project would be better undertaken through a process of negotiation working in partnership with contractors.  

    As a result there are a number of negotiated procurement process options that can be used.  These include -

    • Competitive Dialogue.  To use this procurement process the buyer may not have a precise understanding of the requirement and will use the competitive dialogue process to describe: the need; to set out their minimum requirements; and define the award criteria that will be used.  Competitive Dialogue allows bidders to submit initial solutions after being successful at the selection stage.  It allows buyers to negotiate proposed solutions with bidders.  Here the specification requirements concentrate on the buyer's needs without having to detail the nature, characteristics or solutions to be offered.
    • Competitive Procedure with Negotiation or a Negotiated Procedure without Prior Publication.  Competitive Procedure with Negotiation is a complex procurement situation where the buyer may be unable to define how to meet its needs technically and/or cannot specify the legal or financial requirements of the contract.  A Negotiated Procedure without Prior Publication should be limited to cases where publishing a call for competition e.g. a Contract Notice, has been unsuccessful, is not possible or would take too long in an extreme emergency such as the pandemic.
    • Innovation Partnership.  This will be used in complex cases where there is no current solution available on the market to meet the need of the buyer.   Buyers can proceed with one or more partners undertaking separate R&D activities.  Innovation partnerships are structured in successive phases, based on the R&D steps undertaken e.g. design, manufacturing, etc., and you (as the buyer) may set intermediate targets that need to be met.

    Outcome 3: Low complexity and high R&D gap.  This is where there is a large gap between what the market can supply and your need. In such cases a research only phase may be used to determine whether the need can be met.  This research only phase (a Pre Procurement Process) can produce the necessary data to allow you to then carry out a further procurement exercise for implementation. 

    And finally Outcome 4: high complexity and high R&D gap.  This is is where a possible innovation project would benefit from trials or pilots to gauge its possible success or scalability.  In such situations it is usually thought that the project has potential and, as a result, other funding methods have been found.  For example to conduct trials or a pilot you may have sourced finance via grants, endowment funds, charity funds, etc.  Where a pilot or trial has been carried out a further procurement exercise may be required to scale up the project.

    !! Stop and Think !!

    Please note before selecting any procurement option:

    • an open innovation must exist and
    • work should have been carried out to assess the market

    Please note that other procurement processes can be used for innovation.  Examples are direct awards, the light touch regime and Voluntary Ex-Ante Transparency Notices (also known as VEAT).  However these other processes can be used only where appropriate conditions apply and where regulations permit.