Procurement systems in both the European Union and the United States have long supported public investment in private innovation – through “innovation partnerships” in Europe, for example, and through the Small Business Innovation Research (SBIR) program in the United States. So too have both systems encouraged procurement between public agencies across borders (known as “joint procurement” in Europe, and “cooperative purchasing” in the United States).
Reminder: on May 14, 2020, at 9:00 ET / 15:00 CET, a free public webinar (joined by the experts highlighted here) will discuss “Recovering from the Pandemic: European Initiatives, U.S. Perspectives.” Information & Registration.
Efforts to spur innovation through procurement have taken on a special urgency in Europe now, as European states look for new technologies to fight the COVID-19 pandemic, and governments join together to purchase critically needed supplies. Much as open trade will help the European and U.S. economies recover from the pandemic (as the European Commission’s chief trade economist, Lucian Cernat, has pointed out), open exchanges of best practices will help the global procurement community. By sharing lessons internationally – looking to U.S. and United Nations experiences in similar contexts, for example – the international procurement community may gain new insights on these important initiatives.
Purchasing Innovation
In a unique twist to innovation procurement, the European Innovation Council organized a special ePitching session with procuring agencies on 30 April 2020. This session connected public and private procurers from the health sector with EIC-funded companies providing medical supply solutions and innovative biotechnologies in response to the COVID-19 pandemic. The event was launched, staff member Bertrand Wert explained, to allow procuring entities to access innovations from proven suppliers, who were already grantees to the European Innovation Council. Those firms “pitched” innovative technologies to procuring agencies, per the agencies’ special needs in the pandemic. The EIC also facilitated continuing exchanges between the innovators and large procuring agencies.
The European Commission has launched another initiative, European Assistance for Innovation Procurement (Eafip), to train procuring agencies across Europe in innovative procurement. The training goes directly to procuring agencies, and teaches officials how to procure for innovation.
Stephan Corvers, whose company supports Eafip, took part in an April 3, 2020 webinar on using innovative procurement to combat COVID-19, part of ongoing Eafip training by the Corvers consultancy. Stephan Corvers recommends building on these efforts — to encourage procuring agencies to “horizon scan” for emerging technologies, and to develop a “rapid deployment” force to deal with procurement in emerging crises (much as the United States deploys emergency procurement authorities under FAR Part 18).
With procurements of innovation launched, the challenge for the European procuring entities will be to integrate innovation with normal procurement practices. European Commission staff member Jekaterina Novikova works with innovators and procuring agencies to close this gap. Experience in the U.S. SBIR program – specifically, in efforts to bridge innovations to market – may offer useful lessons for the European procurement community.
In the United States, Thomas Hendrix and others have developed strategies for spanning the “valley of death” – the gap between initial innovation and deployment during which most innovations falter and fail. (Crystal Santerre-Funderburg and Christopher Yukins wrote on the “valley of death” in the U.S. system in Joint Public Procurement: Lessons Across Borders (G. Racca & C. Yukins, eds., 2019), in their chapter assessing failures in the U.S. procurement system to carry innovative technologies to production.)
Thomas Hendrix argues that the key to success is integrating innovative technologies with established programs of record (in the United States, typically large defense programs). Funding available through those established programs, he argues, can carry the innovations through development and to production.
Joint Procurement
Another key procurement strategy in the pandemic has been “joint” procurement – cooperative efforts among buying agencies to coordinate their purchases of critical medical supplies. Joint procurement allows cooperating agencies to concentrate their purchasing powers and skills, and to draw upon their shared infrastructures (such as existing contracting methods, warehouses and transport systems) to buy critical items quickly.
While the European Commission’s efforts to launch a joint procurement to purchase medical supplies for the COVID-19 pandemic gathered the most public attention, European Commission staff member Ivo Locatelli has recently written on a long-standing efforts in the European Union to facilitate joint procurement. (A 2019 volume edited by co-moderators Gabriella Racca and Christopher Yukins, Joint Public Procurement and Innovation, included a chapter by Ivo Locatelli on process innovations in European procurement, including joint procurement.) As Ivo Locatelli’s more recent piece noted, to date European joint procurement has been relatively limited – in the tens of millions of Euros annually – but offers important potential for the future, as there are plans potentially to use joint procurement for vaccines and other essential medical supplies in Europe.
Around the world, joint procurement across borders has been constrained by doubt about which law to apply: the law of the agency sponsoring the contract, or the purchasing agency (in another jurisdiction)? In the United States, a major cooperative network sponsored through the National Association of State Procurement Officials (NASPO), known as NASPO Valuepoint, annually oversees roughly $12-15 billion in sales, and may offer a potential solution for the choice-of-law problem – and thus facilitate coordinated buying in a pandemic.
Justin Kaufman, the general counsel to NASPO ValuePoint, explained in his chapter in Joint Public Procurement how NASPO ValuePoint resolves this choice-of-law conundrum: one participating government (after consulting with other member governments) typically will put a master agreement in place with a vendor. Before another government (a state agency or municipality, for example) may purchase from that agreement the purchasing agency must enter into a supplemental agreement (a “Participating Addendum”) with the vendor. The supplemental agreement can specify the purchasing agency’s legal requirements – for transparency, competition, warranties, etc. – to make clear the vendor’s legal obligations in selling to the purchasing agency. While this adds transactional complexity, it means (at least in principle) that the vehicle can be readily used across borders, even potentially across international borders.
The United Nations has taken a different approach to coordinated purchasing, which UN agencies such as UNOPS are doing on behalf of nations and peoples around the world in the COVID-19 pandemic. As UNOPS senior counsel Benedetta Audia will discuss at the May 14 webinar, the UN agencies, acting in flexible consortia, coordinate their purchases to concentrate demand and facilitate supplier vetting, and use existing UN resources (such as warehouses and emergency transport systems) to distribute needed supplies. Distribution through the UN consortium can bypass national export and import barriers, which may be vitally important to ensure that supplies can be delivered and redistributed as the pandemic shifts.
As these international examples show, there are remarkable parallels between procurement systems around the world. Procurement systems in Europe and the United States have followed parallel pathways to fund innovative technologies, and many procuring agencies around the globe have sought to cooperate to procure vitally needed supplies and services to fight the COVID-19 pandemic.
