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Functional public procurement for innovation, welfare and the environment

Public procurement can be a great driver of innovation and thereby an important instrument of innovation policy. By using functional specifications, the buyer describes the problem to be solved and what needs to be achieved, instead of describing a product as the solution, which is often the case today. 

Functional public procurement is potentially a powerful innovation policy instrument for two reasons: Firstly, the volume of public procurement is enormous (see FACTS section). Secondly, functional public procurement can influence, not only the speed, but also the direction of innovation processes.

Since the direction of innovation trajectories can be influenced, functional procurement is particularly valuable in innovation policies whose objective it is to save the environment and climate – for example by enhancing innovation processes in the direction of solar power instead of coal. This can substantially contribute to transformative changes of the innovation system by means of creating new innovation trajectories.  

Functional procurement opens for:

  • innovations based on creativity, including
    • higher quality public services, based on the new product procured
    • products changing the directions of innovation processes
  • higher productivity and increased welfare
  • increased competition between 
    • different suppliers
    • different products to solve the same problem.

To capture these benefits is a matter of transforming product procurement into functional procurement. There are no legal obstacles to such a transformation. On the contrary, functional procurement is strongly encouraged by the European Commission, which is the organisation that decides about the procurement rules in Europe. In the Swedish National Procurement Strategy, adopted by the Swedish Government in 2016, functional procurement is given an important role as an instrument that may enhance innovation. Increased use of functional procurement will make innovation policy more holistic and contribute to further replacing the linear (R&D-push-dominated) view, since procurement works from the demand side.

The approach in the work in this research theme is interdisciplinary and the research focus lies on functional procurement. This means that participants from all disciplines in all faculties are welcome to participate. Ideally the research theme will include members from CIRCLE and other parts of Lund University, as well as researchers from the rest of Sweden. Also policy-makers from relevant public agencies and practitioners having pursued functional procurement (Swedish and international) are invited. This is to secure that practical experience is influencing the research and to facilitate that new knowledge created is implemented. Finally close links will be kept with international research and policy in the field, for example by means of organising conferences. We will also try to find forms that make it possible for non-Swedish researchers, policy-makers, and practitioners to actually participate in the work as affiliates.

If you are interested in participating in this theme, please send an e-mail to charles.edquist@circle.lu.se

Research focus

The early work with the theme will identify research issues, and all new members of the group are expected to contribute to this discussion.

At this stage possible research issues in this theme are:

  • Build systemic empirical knowledge about functional procurement:
    • do case studies of examples of functional procurement
    • carry out surveys and systematic interviews
    • build data bases.
  • Carry out studies about why transformations from product procurement to functional procurement is slow, and what can be done about it.
  • Functional procurement is generic and can, in principle, be used in all economic sectors. One issue is to address in which sectors it is best suited. Related to this is the issue of which problems shall be mitigated – environmental, social, health related, economic?
  • The development of an action plan for implementing functional procurement is an important (directly policy-oriented) task.

Publications

Example of research output related to this theme:

Edquist, C and Zabala-Iturriagagoitia, J M (December 2020) "Functional procurement for innovation, welfare, and the environment" Published in Science and Public Policy, December 2020. (external site)

You can choose to view the publication or download it.  

Theme coordinator Charles Edquist states:
– This is one interpretation of the state of the art in the field. Members of the research theme are encouraged to contribute others.

CONTACTS

Theme coordinator

Charles Edquist

Contact details and further information:

Lund University research portal

Personal external website

 

 

FACTS

TYPES OF PROCUREMENT

  • Public procurement – public agencies on a national, regional or local level buy products, i.e. goods and services.
  • Product procurement – the buyers describe what product they want to buy.
  • Functional procurement – the buyer describes the problems that need to be solved or the functions that need to be fulfilled by means of the procurement.

 

PUBLIC PROCUREMENT VALUE

  • Swedish public procurement amount to about 800 billion SEK per year – approximately 17 % of the GDP. The value of public procurement is approximately as large as the value of industrial production in Sweden.
  • The World Trade Organization covers public procurement of 1.7 trillion US dollars every year – approximately 15 % of the global GDP.