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Public procurement rules in Europe hamper innovation - INNO-UTILITIES explores innovation-friendly alternatives

Public procurement rules in the European Union hamper the adoption of innovative products and services, according to EU project INNO-UTILITIES. The project explores innovation-friendly alternatives to European procurement procedures, which will help to increase the efficiency of public sector purchases.,

Public procurement rules in the European Union hamper the adoption of innovative products and services. Under the current procedures, the public sector is not encouraged to act as a launching customer for innovative products and services, researchers from EU project INNO-UTILITIES claim. "The EU procurement directives don't leave enough room for effective tendering of innovations," said project coordinator Anastasius Gavras from European research organisation Eurescom. The main reason for this, according to INNO-UTILITIES, is insufficient interaction between user and producer in the procurement process. "EU legislation has only tolerated such interaction, but hasn't fostered it," explained procurement expert Leif Hommen from Lund University in Sweden. He concluded: "Implicitly, the legislation regards user-producer interaction as an aberration from normal market relations. Possibilities for interactive learning leading to innovation have thereby been diminished." As a recent example of an inefficient procurement procedure, Mr Gavras gave the case of the toll collect system in Germany. The lack of knowledge about the capabilities and technological risks of the alternative technologies contributed to the significant delay of the German toll collect system, which failed to meet its initial deployment deadline in 2003, according to Mr Gavras. The important role of public procurement for innovation is underlined by the fact that public sector purchases in the European Union amount to 11 percent of the GDP, or 9.61 trillion euro in 2002. There are no valid data about the share of innovative products and services, but Mr Gavras estimates this to be in the range of 1 trillion euro per year. In order to improve the efficient use of these purchases, INNO-UTILITIES has been working on a new model for procurement processes, which is based on a three-step approach: In the first step, the prospective buyers of an innovative product collaborate in order to define their requirements. In the second step, this group of potential users invites potential providers to a joint discussion of requirements and technological capabilities for the development of an innovative product. Only in the third step will the potential buyers ask the providers to submit a tender, based on the jointly defined requirements. "This collaborative approach will minimise the risks of unclear requirements and, thus, lead to a better return on investment for innovative products and services," said Mr Gavras. ,About INNO-UTILITIES INNO-UTILITIES is a European research project, which aims at making procurement in the area of public utilities more innovation-friendly. In addition, the project develops a network-centric secure information server for storing highly sensitive information on fraud and security events in telecom networks. INNO-UTILITIES started in October 2003 and has a duration of two years. It is funded by the European Union under Framework Programme 5 in the area "Innovation and SMEs". Project partners are Eurescom as coordinator, the Greek SME Virtual Trip, the Universities of Patras (Greece) and Lund (Sweden), and Portugal Telecom.,