Public governance

Generating an innovation dividend from public spending

 

Welcome remarks by Angel Gurría,

Secretary-General, OECD

OECD Forum on Procurement for Innovation

OECD, Paris, 5 October 2016

(As prepared for delivery) 

 

 

Ladies and Gentlemen,

 

I am delighted to open the first OECD Forum on Procurement for Innovation, and to welcome leaders and experts in public procurement from so many different policy communities and countries. Let me begin by thanking the EU Commissioner for Internal Market, Industry, Entrepreneurship and SMEs, Ms. Elżbieta Bieńkowska and the Minister of Economy of the Slovak Republic, Mr. Peter Žiga, for joining us today.

 

I would also like to thank our Forum partners: the Slovak Republic Presidency of the Council of the European Union, the Secretariat of the European Research Area and Innovation Committee, and all the participating countries.

 

Public procurement is a key part of the economy

 

This is a timely meeting for the procurement community. The perception of public procurement has undergone a sea change. It is no longer seen as a back-office function, but rather as part of the frontline, as a strategic tool for achieving key policy objectives. Objectives like boosting the development of SMEs, improving outcomes in health, and tackling global challenges such as climate change and inequality.

 

Public procurement is one of the nerve centres of our economies: it represents, on average, 12% of gross domestic product (GDP) and 29% of total government expenditures across OECD countries. Used strategically, it can help make our economies more productive, our public sectors more efficient, and our societies and economies more inclusive, our institutions more trusted – all vital conditions for achieving the universal Sustainable Development Goals (SDGs).

 

The role of sub-national governments

 

Public procurement is most visible and most keenly felt by citizens at the sub-national level. Its impact at the local level is huge. Which is why I am pleased to see so many representatives from cities and regions here today.

 

According to our data, sub-national governments across the OECD, numbering almost 134,000, are responsible for 59% of public investment and 40% of total government expenditure. They manage, on average, around half of all public procurement contracts, which means that when we are thinking about how to create space for innovation through public procurement, we also have to think local, think urban, think rural, think regional. We need all levels of government to work together to avoid fragmentation of demand and to ensure that services actually meet the needs of citizens.

 

And it is citizens that stand to gain from innovation, which drives jobs, productivity and growth.

 

Fostering innovation through public procurement

 

Procurement can be a great tool to promote innovation. The OECD’s new report, Anti-corruption and integrity in the public sector, highlights many examples of countries and stakeholders taking procurement innovation seriously. A number of countries are setting targets. Finland introduced a 5% target for innovative public procurement, while the Netherlands sets aside 2.5% of their procurement spending on innovation.

 

Using procurement as a tool to promote innovation also ensures that policies are tailored to specific contexts. For example, the OECD is supporting Mexico’s effort to strengthen procurement strategies for the construction of Mexico City’s new international airport.

 

The strategy has broken down construction works into 21 co-ordinated phases designed to deliver what the administration have said will be the world’s most sustainable airport and a hallmark of Mexican innovation.

 

Our procurement experts also worked closely with Expo Milano to help deliver last year’s event, and we are working with Egypt, notably on the New Suez Canal project. This will bolster Egypt’s long-term competitiveness in international trade and develop a new economic zone, including sustainable cities, running alongside the canal corridor. This kind of support creates opportunities for investment and innovation.

 

Users’ perspectives are also increasingly being brought in to support innovation. For example, close to 1,000 firefighters across the EU were consulted on the decision to procure the next generation of Smart Personal Protective Systems. The initiative was aimed to reduce firefighter injuries and casualties, but also highlighted the importance of cross-border collaboration with many EU Member countries taking part.

 

We are also witnessing a shift in the focus of procurement from cost compliance to value creation, leading to even greater value-for-money. Innovative solutions, such as telemedicine technologies or eco-friendly building constructions, are supporting the transition to a low-carbon world and making possible ever greater access to knowledge.

 

Overcoming barriers to public procurement for innovation

 

Despite these many positive examples, there is still much to be done to overcome the barriers to innovation in public procurement. These include the lack of incentives and awareness; the growing disconnect between public procurement and policy objectives; and the fragmentation of public procurement markets. We need to find solutions together to address these challenges.

 

Importantly, we must move away from a culture of risk aversion to one of risk management. Supporting innovation does not necessarily mean that risks will be higher than in conventional procurement practices, but it does rely on procurers having the right skills to evaluate and manage risks. This has to be a priority for all authorities, at every level of government.

 

Ladies and Gentlemen, Thomas Edison boiled down innovation to the following maxim: “There’s a way to do it better – find it”. Our economies rely on innovators “finding it”, but innovators also rely on policymakers to create the right conditions for innovation to be unleashed and diffused through the economy. The OECD contributes by showing how procurement can be a part of this dynamic process.

 

The stakes couldn’t be higher. So let’s be bold, let’s be innovative, and let’s be forward-looking as we design, develop and deliver better procurement policies for better lives.

 

Thank you.