Public procurement is a strategic demand-side policy tool that can stimulate innovation in the economy. It can function as a catalyst to provide the space of close collaboration between the public sector and the private sector to develop innovative solutions. The chapter starts by briefly describing the current state of play of innovation in Croatia. Then, it overviews the concepts of innovation procurement. Lastly, the chapter introduces the enabling elements of innovation procurement: (i) regulatory and institutional framework, (ii) strategy, (iii) monitoring system (iv) capacity-building system, (v) stakeholder engagement.
Innovation Procurement in Croatia
Boosting Innovation in the Public Sector
Abstract
Embedding innovation1 in public services can drive efficiency and effectiveness, enhance services to meet citizens’ expectations and needs, and address evolving environmental and societal challenges, such as climate change and ageing societies (Monteiro, Hlacs and Boéchat, 2024[1]). Recently, public procurement has been increasingly used as a demand-side policy tool, called innovation procurement, to stimulate innovation in the economy. Like in many OECD countries and/or EU Member States, the uptake of innovation procurement is still at an early stage in Croatia. According to the EC report on the strategic use of public procurement for innovation in the digital economy, Croatia ranked low among the countries analysed (27 EU members, the UK, Norway, and Switzerland) in innovation procurement policy frameworks. The report pointed out some weaknesses, including a lack of strategy, a lack of a dedicated capacity-building system, and a lack of a structured monitoring system for innovation procurement. (European Commission, 2021[2]) Although Croatia ranked better in 2024, primarily due to the availability of sectoral strategies which recognise the relevance of innovation procurement, the country’s performance was still below the European average on seven out of ten indicators. Some weaknesses identified in the 2021 report remain, including a lack of a dedicated capacity-building system and a lack of a structured monitoring system for innovation procurement. (European Commission, 2024[3])
The European Council recommendation on the 2019 National Reform Programme of Croatia underlines the need for the institutional set-up for public procurement to improve compliance and enable strategic procurement to achieve policy objectives and ensure efficient public spending. To address these findings, the Government of Croatia has made several commitments in its National Recovery and Resilience Plan (NRRP), adopted by the Council of the European Union in 2021, including Measure No. 263: Programmes and activities aimed at designing and managing innovative public procurement, and Measure No. 264: Training of procurement officers on innovation public procurement procedures.
Croatia is an ‘emerging innovator’ and the gap between its performance and the OECD average is shrinking. In 2023, Croatia's GDP per capita in purchasing power parity (PPP) terms reached 77% of the OECD average, which is above the Slovak Republic (73%) and the same as Hungary (77%), but still under Poland (80%), the Czech Republic (92%) and Slovenia (92%). Croatia is also above Bulgaria (64%) but under Romania (78%). (OECD, 2024[4]) Nevertheless, this income convergence reflects improvements in the business environment, institutional quality, labour, and product market liberalisation, and macroeconomic stability. Figure 1.1 provides further indicators – gross domestic expenditure on research and development (R&D) (GERD), R&D expenditure of the business sector (BERD), government budget allocations for R&D (GBARD), and higher education R&D (HERD) – as benchmark for Croatia in terms of R&D related expenditures.
Note: This visualisation compares Croatia's position on key science, technology and innovation quantitative indicators against groups of other countries/territories. Values for Croatia are indicated as dots on the graph. The scale represents the population of countries/territories being compared. 4 colour bars split the distribution of values observed in the selected group of countries into four ranges, i.e. 0% - 25%, 25% - 50%, 50% - 75%, and 75% - 100%. A black bar indicates the median at 50%.
Source: Calculations based on OECD (2021), STI.Scoreboard platform, https://www.oecd.org/sti/scoreboard.htm.
In 2020, Croatia's R&D intensity stood at 1.25%, aiming to reach 2.5% by 2025 and 3% intensity by 2030. (European Commission, 2023[5]) The achievement of these objectives requires further measures and budgetary planning with a special focus on increased budgetary support for R&D which must be complemented by performance-based funding for public research organisations (PROs) and initiatives to stimulate private sector investment in R&D. However, fragmentation and fragile governance within innovation and the public research sector pose challenges. (EC/OECD, 2024[6]) The NRRP is addressing this underinvestment with the savings expected to result from the reform of institutional research funding.
EU funding governance in Croatia is led by the Ministry of Regional Development and EU Funds, alongside the Ministry of Finance, which manages the European Structural and Investment Funds (ESIF) and the NRRP, respectively. The Ministry of Sea, Transport, and Infrastructure coordinates significant projects related to Research, Development, and Innovation (RDI). These ministries, in collaboration with the Croatian Science Foundation and HAMAG-BICRO, implement RDI interventions. The Ministry of Science and Education oversees national and EU funding for R&D, supporting public research organisations, competitive projects, and reforms under the NRRP aimed at fostering excellence through performance-based (European Commission, 2023[5]).
The Croatian innovation ecosystem benefits from a network of 117 higher education institutions, 25 public research institutes, innovation agencies, incubators, accelerators, and intermediaries that drive innovation across various sectors. The NRRP reforms promote excellence through performance-based funding for public research organizations and aim to consolidate them (European Commission, 2023[5]). Policy governance focuses on improving inter-institutional cooperation, coordination, and efficient management of the science, technology, and innovation agenda, providing regular funding opportunities for every lifecycle stage in RDI.
The institutional framework for RDI policy in Croatia is shaped by a collaborative agenda and the governance of EU funding. At the strategic level, the Ministry of Science and Education and the Ministry of Economy jointly oversee the RDI agenda. The former focuses on research, technology transfer, and industry-science collaboration, while the latter emphasises innovation, technology adoption, and market entry for new products and services. HAMAG-BICRO acts as an implementing body in calls for startups and SMEs related to innovations, supporting the innovation of SMEs through dedicated financial instruments. Their efforts are aligned through the Croatian Smart Specialisation Strategy (S3) 2023-2029 and coordinated via the National Innovation Council, the Interministerial Working Group, and Thematic Innovation Councils, which engage both industry and research sectors.
The concept of smart specialisation relies on the entrepreneurial process of discovery, uncovering economic domains where a country or region could excel. This empowers entrepreneurs to merge knowledge of science, technology, and engineering with market potential, identifying the most promising activities (OECD, 2013[7]). Smart specialisation also necessitates a broad perspective to identify competitive strengths through meticulously mapping national and international landscapes (Foray et al., 2012[8]). Finally, it promotes cross-sectoral collaborations inherent to allow the understanding of diverse perspectives, facilitating knowledge exchange, and stimulating innovation performance (Carayannis and Rakhmatullin, 2014[9]).
The European Commission made research and innovation strategies for Smart Specialisation Strategy (RIS3) a prerequisite to receiving funding from the European Regional Development Fund (ERDF) over the 2014-2020 and 2021-2027 programming periods. In addition, the smart specialisation approach is progressively recognised as a catalyst for decentralised innovation policies in numerous countries and regions globally. In Latin America (Argentina, Brazil, Colombia, Chile, Mexico, and Peru), Canada, or the Gippsland region in southeastern Australia are already working on or reviewing their innovation strategies inspired by the smart specialisation.
Croatia’s latest smart specialisation strategy envisages an ambitious governance and co-ordination framework, with a new Policy Delivery and Monitoring Unit at the Ministry of Science and Education, and a focus on policy co-creation with the research and private sector. To achieve this, the strategy seeks to revitalise the National Innovation Council's role by expanding its research and innovation policy coordination across various institutions within the national innovation system. Additionally, the Ministry of Science and Education and the Ministry of Economy, as co-chairs of the National Innovation Council, will establish a Policy Delivery and Monitoring Unit. This unit will provide analytical and technical support for the Council’s activities and oversee the monitoring and evaluation (M&E) of programmes across the policy mix.
The new strategy strongly emphasises evidence-based policy and increases the effectiveness of funding for research and innovation. This is important because, with the current and planned programme mix, Croatia’s use of EU funds is more about absorbing financing and less about building capacities to ensure effective spending of available funds – for example, the potential use of public budget spent through public procurement.2
Croatia defined the following seven thematic priority areas in its current smart specialisation strategy:
Personalised health;
Smart and clean energy;
Smart and green transport;
Security and dual use – awareness, prevention, response, remediation;
Sustainable and circular food;
Customised and integrated wood products;
Digital products and platforms.
Each priority area identifies a transformational objective supported by a tailored policy mix. Some areas envisage using multistakeholder testbed pilots to develop various solutions (for example, remote healthcare, personalised medicine, or integrated transport solutions). In addition, thematic areas 2, 3,4, and 7 recognise public procurement as a potential vehicle to progress.
Nations and regions have been encouraged to include innovation procurement in their S3. For example, the Slovenian RIS3 2014-2020 established Strategic Research and Innovation Partnerships (SRIPs) as flexible institutional structures for each of the priority areas, with a mandate – among other things – to design efficient innovative procurement and pre-commercial measures for coherence and predictability of funding instruments over time (Przeor et al., 2016[10]).
Innovation procurement practices can generate economic growth and stimulate technological advancements by creating new market opportunities and incentivising investment in research and development (Monteiro, Hlacs and Boéchat, 2024[1]). Innovation procurement can also help countries achieve the objectives set out in their respective S3. The next sections showcase, through existing best practices, how the themes defined in Croatia’s current S3 could be backed by innovation procurement.
1.2.1. Personalised Health
Innovation procurement can drive personalised health by enabling healthcare systems to adopt advanced technologies, such as precision diagnostics and AI-driven treatment plans, tailored to individual needs. By prioritising innovation, public procurement facilitates access to novel tools and solutions, improving patient outcomes and enhancing healthcare efficiency. This approach supports more targeted care, helps collaboration with innovative suppliers, and aligns healthcare delivery with sustainability goals through prevention and individualised treatment strategies.
The Procure4Health project is a growing community of European health organisations interested in the procurement of innovation. Its 33 founding partners actively promote innovation procurement through knowledge sharing and capacity building; networking and matchmaking; identification of common needs and the launch of joint actions to address them as well as influencing policy on procurement of innovation (Procure4Health, 2022[11]).
In the Netherlands, Erasmus University Medical Centre initiated the procurement “Robotic Bed-washing Facility”. In this procurement, the Erasmus University Medical Centre asked the market to design a more cost-efficient solution to disinfect 70 000 hospital beds and mattresses annually in a way that would also use less energy and water. Erasmus University Medical Centre used the Forward Commitment Procurement principles including a series of market soundings that stimulated cross-supply chain interaction, a competitive dialogue, and outcome-based requirements. In the selection phase, less emphasis was put on past experiences with bed-washing facilities than on regular procurements. The contract was won by IMS Medical. This company offered a robotic solution that includes high-precision cleaning robots from the automotive industry. The costs per bed were lowered by 35% and the CO2 footprint was lowered by 65%. Furthermore, patients of the Erasmus University Medical Centre had cleaner beds and cleaning quality became more consistent (OECD, 2017[12]).
In 2017, the EU-funded MAGIC pre-commercial procurement selected the MAGIC-GLASS project, led by the Italian start-up Tech4Care with the support of Ulster University in Northern Ireland and the company miThings in Sweden, for developing an innovative solution for stroke rehabilitation. The MAGIC-GLASS solution applied the consolidated mirror therapy approach in a Virtual Reality (VR) environment to provide patients with an improved rehabilitation experience. MAGIC-GLASS is an integrated system for upper limb motor rehabilitation, designed for post-stroke treatment. It leverages gamified activities and immersive VR environments to maximise the patient’s adherence and engagement. Using a portable hardware platform, the patient can perform rehabilitation comfortably at home employing a set of adaptive serious games, with remote monitoring by clinical staff and further communication features. The clinical study showed the feasibility of integrating the solution into the current care pathways, to improve effectiveness of and adherence to the rehabilitation plan. The system and the method used by MAGIC-GLASS are unique and patented (European Commission, 2021[13]).
In 2019, a buyers group with leading healthcare organisations from the Netherlands, the UK, Sweden, Belgium and Germany selected the Bulgarian company Checkpoint Cardio to participate in their NIGHTINGALE pre-commercial procurement. In 2021, Checkpoint Cardio came out of the clinical tests of the five hospitals as the best performing and cheapest solution. The Checkpoint Cardio solution is a robust early warning system for acute deterioration of patients' health condition in and out of hospital that learns and adapts to individuals in different situations (European Commission, 2022[14]).
In Serbia, the GovTech programme, initiated by the Office of the Prime Minister, spearheads the digital transformation of the public sector. It responds to the global imperative for public sectors to embrace innovative technologies, enhancing decision-making and public services across vital sectors like healthcare, education, social inclusion, smart cities, and public administration. The programme unfolds in three phases: firstly, educating the public sector on leveraging disruptive technologies; secondly, inviting challenges from public entities for tech solutions; and finally, inviting startups and research organisations to propose innovative solutions, with funded entities developing prototypes or final products for implementation. This pioneering programme bridges the gap between public sector needs and startup dynamism, transcending traditional procurement barriers and ushering in a wave of disruptive technologies set to revolutionise public sector operations and modernise practices on an unprecedented scale (GovTech Serbia, 2023[15]).
In the United Kingdom, the NHS Innovation Accelerator (NIA) accelerates the uptake of high-impact innovations for patient, population, and NHS staff benefit. It also provides real-time practical insights on spread to inform national strategy. As part of an annual international call, the NIA invites applications from exceptional individuals representing innovations that meet a real need. Applications undergo a robust, multi-stage assessment process involving a college of expert patient, clinical, and commercial assessors. This panel is drawn from a wide range of organisations including NHS England and NHS Improvement, AHSNs, the National Institute for Health and Care Excellence (NICE), and The Health Foundation. Successful applicants join an existing community of innovators (‘Fellows’) with a passion for sharing their learning and expertise, which are collated in case studies, an annual research report, and a quarterly INSIGHTS newsletter. The NIA’s unique support model has a dual focus on the innovation and the innovator. Fellows receive bespoke support, including access to mentorship from a range of high-profile experts, links with AHSNs and other stakeholder organisations, peer-to-peer learning and support, a dedicated learning programme, presentation and networking opportunities, and a bursary (NHS, n.a.[16]).
1.2.2. Smart and Clean Energy
Croatia has made substantial strides in developing smart and clean energy initiatives, largely driven by its commitment to EU climate targets and its goal of achieving greater energy independence. Croatia's approach integrates renewable energy, modernised grid infrastructure, energy efficiency measures, and digital solutions to manage and optimise energy usage.
Croatia has implemented various energy efficiency projects, focusing on retrofitting buildings and improving energy use in industry and transportation. Through national and EU-funded programmes, Croatia encourages residential and commercial sectors to adopt energy-efficient technologies, such as LED lighting, efficient heating and cooling systems, and improved insulation. These measures are central to Croatia's National Energy and Climate Plan (NECP), which seeks to reduce overall energy consumption (Ministry of Environmental Protection and Energy, 2019[17]).
Croatia promotes electric vehicles (EVs) and supports the expansion of EV infrastructure as part of its broader sustainability goals. National programmes offer incentives for purchasing electric and hybrid vehicles, while investments are being made to expand EV charging networks. In addition, the European Union’s Alternative Fuels Infrastructure Regulation (AFIR) entered into force on April 13, 2024, introducing numerous obligations for Croatia. This new legislation will remain in force until the share of electric vehicles in the EU reaches 15%, translating to about 200,000 vehicles for Croatia (Spasić, 2024[18]). Efforts to electrify public transportation, particularly in urban centres like Zagreb, are also underway, supported by partnerships with EU funding programmes. Furthermore, the AFIR regulation obligates member states to provide EV chargers for private electric vehicles on all main roads every 60 kilometres by 2025, and for heavy vehicles by 2030. Consequently, Croatia needs to facilitate the installation of additional EV chargers with a total capacity of 100 MW to 150 MW by 2030 (Spasić, 2024[18]).
Some Croatian cities, including Zagreb (Radičević, 2024[19]), Rijeka (City of Rijeka, n./a.[20]), and Split (ARUP, 2022[21]), are pursuing smart city initiatives that incorporate clean energy and digital solutions to enhance urban sustainability. These projects often focus on energy-efficient lighting, smart waste management, water systems, and the integration of renewable energy sources.
Innovation procurement can drive smart and clean energy by encouraging the development and adoption of cutting-edge technologies that enhance energy efficiency, sustainability, and decarbonisation. Governments and organisations can incentivise the private sector to create innovative solutions such as renewable energy systems, energy storage, smart grids, and electric vehicle infrastructure through targeted procurement policies. By prioritising energy-efficient products and services, innovation procurement can lower emissions, reduce reliance on fossil fuels, and foster a circular economy. Moreover, public-private partnerships can accelerate clean technologies' market growth, align economic growth with environmental goals, and promote a transition to greener energy systems.
In Italy, the Integrated Energy Service Framework Agreement (IESFA) is a performance-based contract for the management of heating, cooling, and electrical systems through which the supplier must guarantee a pre-determined “comfort situation”, operation and maintenance, energy savings (measured through a measurement and verification programme) and carbon dioxide reduction. Consip – an Italian company that is owned by the Italian Ministry of Economy and Finance and provides frameworks and consultation for the procurement of public goods and services – has this contribution to sustainable market development for energy services started in 2006, when IESFA was published, under the form of Consip’s first Energy Performance Contract (EPC). This is a contract in which energy service companies are motivated and encouraged to optimise energy consumption and resource management to improve their profitability and to refund the cost of the energy efficiency measures put in place (OECD, 2017[12]). Figure 1.2 shows the calculated results obtained for the previous three editions of the framework agreement. In 2014, Consip received the European Energy Service Award (EESA) in the "Best European Energy Service Promoter" category for its project titled "Heat and Save: From Energy Saving to Public Efficiency." This project showcased the outcomes of the integrated energy service framework agreement's first and second editions.
Note: (CAs) is the number of public entities that have used the framework agreement; (EEMs) is the number of energy efficiency measures carried out during the performance of the framework agreement; (TOEs) is the estimated tonnes of oil equivalent saved by implementing energy efficiency measures; (tCO2) is the estimated amount of tonnes of carbon dioxide saved thanks to the implementation of energy efficiency measures.
In Denmark, a group of water procurers lead by the Danish Water and Wastewater Association (DANVA) joined forces in 2016 and launched a pre-commercial procurement to find a way to recycle and reuse valuable resources in wastewater. During the process, the cleantech startup AquaGreen perfected an innovative solution that removes all forms of germs in the sludge, makes it inactive and odour-free and at the same time removes the water, which is otherwise expensive and difficult to get rid of. Even before the PCP was finished in 2019, customers were already in line with AquaGreen. Moreover, still in 2016, Aquagreen received a EUROSTARS grant from the EU Horizon 2020 programme to address the fish farming market (European Commission, 2019[22]).
The AI4Cities was a three-year EU-funded project bringing together leading European cities looking for artificial intelligence (AI) solutions to accelerate carbon neutrality. Six European cities joined forces to ask suppliers to provide AI solutions for mobility and energy challenges that would ultimately contribute to reducing CO2 emissions and meet their climate commitments. To achieve this objective, the Buyers Group - Helsinki, Amsterdam, Copenhagen, Greater Paris, Stavanger, and Tallinn - went through a PCP process, first defining the needs and requirements of those solutions on the mobility and the energy fields that had to be developed to move towards carbon neutrality, and followed by challenging the private sector and other relevant stakeholders to design innovative solutions applying the use of AI and related enabling technologies, such as big data applications, 5G, edge computing and IoT. As a result, several promising AI projects have been identified to reduce CO2 emissions in their energy and mobility domains.
1.2.3. Smart and Green Transport
Croatia is part of the EU’s broader effort to establish an alternative fuel network, including biofuels, compressed natural gas (CNG), and hydrogen. Key transport hubs and corridors are gradually integrating these alternative fuel options to reduce reliance on fossil fuels, supporting a transition to greener transport options for both personal and commercial use.
Croatia is implementing smart traffic management systems (ECOMOBILITY, 2019[23]) (European Commission, 2023[24]) that use digital technologies to monitor and manage traffic flow, improve safety, and reduce emissions. These systems include adaptive traffic lights, real-time data collection, and predictive analytics to ease congestion in urban areas. Additionally, intelligent transportation systems (ITS) are being introduced on highways to improve logistics efficiency and enhance the experience for both local travellers and tourists (European Commission, 2023[25]).
Croatian cities are investing in cleaner public transport options, such as electric and hybrid buses, to reduce urban air pollution (INTERREG Europe, 2024[26]). The goal is to make public transportation a more attractive and environmentally friendly option, supported by EU funds and local government programmes focused on fleet upgrades and modernisation.
Innovation procurement helps the advancement of smart and green transport systems by facilitating the development and implementation of eco-friendly technologies and solutions. Through public procurement processes, governments can incentivise suppliers to design and deliver innovative transport options, such as electric and hybrid vehicles, smart traffic management systems, and sustainable public transport solutions. By prioritising green criteria in tender specifications, authorities can promote the adoption of low-emission vehicles, energy-efficient infrastructure, and alternative fuels, thereby reducing the carbon footprint of transportation networks. Furthermore, innovation procurement can facilitate the integration of digital technologies, such as real-time data analytics and smart sensors, to optimise traffic flow, enhance safety, and improve user experience, ultimately leading to a more sustainable and efficient transport ecosystem.
In Norway, since 2011, the Norwegian oil and gas operators Equinor and Gassnova completed two consecutive pre-commercial procurements that developed and tested cost-effective solutions for full-scale carbon capture, transport, and storage. This is a cornerstone in the EU's climate strategy to reduce CO2 emissions of energy-intensive industries and reach climate neutrality by 2050. Recently the Norwegian government and the EFTA surveillance authority approved a 2,5Bn EURO budget for a full-scale roll out of the solution, which by 2050 could capture 14% of the CO2 emitted across the entire EU (European Commission, 2021[27]).
Also in Norway, the Norwegian Public Roads Administration challenged the market for solutions that make it possible to detect incidents in tunnels, provide information about what is happening and help with self-rescue. The development project is one of four innovation partnerships that received funding from Innovation Norway in 2017. The Norwegian Public Roads Administration receives project support in the implementation from Innovation Norway, Difi and the National Program for Supplier Development (LUP, 2024[28]).
In the EU, the FABULOS (Future Automated Bus Urban Level Operation Systems) project has received funding from the European Union’s Horizon 2020 research and innovation programme and ran from 1 January 2018 until 31 March 2021. It focused on how cities can systematically use automated buses. The goal is to procure the operations of an autonomous bus line. During the field-testing phase of the project pre-commercial procurement, selected robot bus prototypes were tested as small fleets of shuttles. Despite the tight COVID-19 restrictions, all six pilots were carried out according to plan: two field tests per commercial consortium. A total of 2 807 passengers were taken onboard the shuttles and approximately 14 000 kilometers were driven in open road conditions in Finland, Estonia,Norway,the Netherlands, and Greece. The FABULOS project ended in 2021 and concrete plans for follow-up projects have been confirmed in the cities of Helmond, Lamia, and Helsinki (FABULOS, 2021[29]).
1.2.4. Security and Dual Use – Awareness, Prevention, Response, Remediation
Innovation procurement can be essential in enhancing security measures and addressing dual-use concerns by enabling the acquisition of advanced technologies that improve awareness, prevention, response, and remediation capabilities. Governments can leverage procurement strategies to obtain cutting-edge solutions such as surveillance systems, cybersecurity tools, and emergency response technologies that protect critical infrastructure and public safety. By focusing on innovative products and services, authorities can encourage suppliers to develop integrated security solutions that address contemporary threats, ranging from terrorism to cyberattacks. Additionally, innovation procurement helps collaboration between the public and private sectors, facilitating knowledge sharing and the development of best practices in security management. This collaborative approach ensures that procurement not only meets current security needs but also adapts to emerging challenges.
In the EU, the I-LEAD project focused on addressing the challenges that operational Law Enforcement Agency (LEA) practitioners faced in defining their innovation needs effectively. Using a structured, methodological approach supported by research, industry partners, and a diverse group of stakeholders, I-LEAD built the capacity to monitor the security research and technology market. This approach facilitated a stronger alignment and adoption of innovations by LEAs, to establish a sustainable, pan-European LEA network. To achieve this, I-LEAD assessed high-readiness European research and emerging technologies, promoting direct adoption within networks such as ENLETS and ENFSI where applicable. It identified priorities for five practitioner groups, outlined areas needing standardisation, and provided recommendations for integration into LEA procedures. Finally, I-LEAD advised EU Member States, through the EDBP-ESTP procurement group, on leveraging project outcomes in PCP and PPI initiatives (European Commission, 2024[30]).
In France, the French Ministry of Interior (MININT) plays a central role in addressing the country’s safety and security needs, overseeing law enforcement agencies to protect people and property, and managing crisis response through firefighting services. Beyond public safety, MININT also manages the relationship between central and local governments and addresses both legal and illegal immigration. As project co-ordinator of the iProcureNet initiative – a 5-year European Commission-funded project running from May 2019 to April 2024 – MININT leads all activities related to the iProcureNet Network + Community. iProcureNet aims to foster a collaborative ecosystem of security procurement stakeholders, including procurers, legal advisors, and prescribers, to share insights on procurement trends, identify needs, and promote joint and innovative procurement practices across EU member states.
1.2.5. Digital Products and Platforms
Innovation procurement is pivotal in advancing digital products and platforms by enabling public authorities to acquire cutting-edge technologies that enhance service delivery and improve user experience. By prioritising innovative solutions in procurement processes, governments can promote the development of applications, software, and digital infrastructure that streamline operations and facilitate data sharing across sectors. This approach encourages suppliers to invest in research and development, leading to the emergence of smart, interoperable digital platforms that address diverse public needs. Additionally, by adopting agile procurement practices, authorities can more rapidly adapt to technological advancements and evolving user requirements, ultimately enhancing public service efficiency and accessibility while promoting digital transformation in society.
In the Netherlands, the Ministry of Economic Affairs and Climate Policy challenged the workspace hardware market with its IWR 2021 project, which included in its scope all ICT hardware for the national offices and employees of the central government, applying sustainability and circularity criteria to all tenders in this category. In doing so, the project set a new standard in the field. For example, this was the first time an ICT tender requested CO2 footprints and carried out a Life Cycle Analysis calculation for all products (ICLEI, 2022[31]).
Public procurement accounted for 19.98% of GDP in Croatia in 2023 (MINGO, 2024[32]). Croatia recognises the critical role of public procurement in supporting the government’s broad strategic goals to contribute to the country’s economic growth and recovery. The OECD’s innovation country report on Croatia underlined the need to improve the framework conditions for innovation and to leverage other government policies (such as public procurement) to raise demand for innovation (OECD, 2014[33]). Innovation procurement can contribute to the digital and green transformations of the national economy.
Innovation is defined as the implementation of a new or significantly improved product, service or process, including but not limited to production, building or construction processes, a new marketing method, or a new organizational method in business practices, workplace organization or external relations inter alia with the purpose of helping to solve societal challenges or to support the Europe 2020 strategy for smart, sustainable and inclusive growth, according to Article 2 (22) of the Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement (hereinafter referred to as the EU Directive) and Article 3 (9) of the Public Procurement Act of Croatia (hereinafter referred to as the PPA), which transposed the EU Directive. (European Commission, 2014[34]) (Croatian Parliament, 2016[35]) The Guidance on Innovation Procurement published by the European Commission mentions incremental innovation and transformative innovation as the different degrees of innovation. Incremental innovation refers to existing solutions that are used in a new way or in a new sector, or innovative combinations of existing solutions. On the other hand, transformative innovation refers to significantly improved solutions, or innovative solutions that are new to the market (European Commission, 2021[36]).
The Guidance on Innovation Procurement further defines innovation procurement as any procurement that has one or both of the following aspects:
buying the process of innovation – research and development (R&D) services – with (partial) outcomes
buying the outcomes of innovation, generalised as public procurement of innovative solutions (PPI).
PPI allows the public sector to use its purchasing power to act as an early adopter of innovative solutions which are not yet available on a large scale, on a commercial basis.
This report uses the definition of innovation procurement provided by the European Commission in its report. Innovation procurement, which procures the process of innovation and/or its outcome, should be distinguished from the concept called innovative procurement, which is often used to refer to innovative ways of carrying out procurement processes (See Figure 1.3.).
Source: Created by the authors
Innovation procurement represents a shift in the role of the procurement function, from a focus on procuring goods and services at the lowest cost to using procurement as a catalyst for creativity, problem-solving, and strategic value creation. Under innovation procurement, the public sector identifies its needs, challenges and problems that it would like to address, and request economic operators to propose solutions which can address these needs. This makes innovation procurement different from what is being called as traditional procurement where the public sector specifies exactly what it wants through technical specifications without providing economic operators with the flexibility to come up with innovative solutions.
Innovation procurement can bring many benefits to the public sector and citizens. The Guidance on Innovation Procurement lists the benefits of innovation procurement: (i) boosting the economic recovery, the green and digital transition, and the resilience of the EU, (ii) delivering higher quality public service on an optimal budget, (iii) addressing an arising need, (iv) modernising public services, (v) helping start-ups and innovative SMEs launch and grow, and (vi) moving markets towards innovation.
Promoting innovation procurement also contributes to achieving the Sustainable Development Goals (SDGs). Using public procurement as a strategic tool to stimulate innovation will allow the public sector to act as a platform for public sector innovation and incentivises the private sector to align their business strategies with relevant and prioritised SDGs for their specific sector and products. As such, achieving the 17 goals of the 2030 Agenda becomes more attainable when the public and private sectors join forces under a shared vision, and strategic innovation procurement can play a key role in advancing these goals through collaborative efforts. Furthermore, SDG target 12.7 focuses on the promotion of public procurement practices that are sustainable, following national policies and priorities.
The rest of this report assesses the current state of play of innovation procurement in Croatia with the purpose of identifying challenges and recommendations for the way forward. In Chapter 2 and Chapter 3, the analysis will focus on the enabling elements of innovation procurement: (i) regulatory and institutional framework, (ii) strategy, (iii) monitoring system (iv) capacity-building system, (v) stakeholder engagement (See Figure 1.4). Chapter 2 focuses on (i), (ii) and (iii), while Chapter 3 focuses on (iv) and (v). Chapter 4 summarises policy recommendations and presents the action plan table to implement these recommendations.
Source: Prepared by the authors
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← 1. In this paper, in line with the OECD’s 2018 Oslo Manual, "innovation" encompasses the process of undertaking innovative activities and the resulting outcomes.
← 2. For the period 2021 – 2026 most of the activities in digital transformation are financed through the Recovery and Resilience facility (RRF) but also as activities in Horizon, Erasmus+, ESIF, and EEA (European Economic Area) grant schemes.