Could public procurement boost innovation?

Traditionally, when the public administration buys a product, it specifies which product it wants from among those available on the market, trusting that it will satisfy its needs.

This article is based on research by Mónica Reig & Krista Timeus

But what if, instead of asking for a particular product, the administration asked for a solution that has not yet been developed? Is it possible to buy innovation?

According to data from the Organisation for Economic Co-operation and Development (OECD), public procurement accounts for between 13% and 20% of gross domestic product worldwide. This volume of business empowers public administrations to become local innovation boosters; converting traditional purchasing processes into the procurement of innovative solutions just might be the lever that sets this economic engine in motion.

As part of the Partners Programme at EsadeGov, Programme Director Mónica Reig and researcher Krista Timeus have developed a case study to analyse the experience of the cardiology service at Hospital de la Santa Creu i Sant Pau in Barcelona.

Cardiogram

The institution adopted a model of public procurement of innovation for its implantable cardioverter-defibrillator (ICD) service. This innovative experience came in second place at the Silver Economy Awards, an initiative funded by the European Commission that aims to promote projects that have a significant impact on quality of life for the ageing population.

Until 2014, the hospital called for bids whenever it needed to buy ICDs. The relationship with the company that supplied the devices therefore ended at the time of delivery and did not take advantage, for example, of the huge amount of data that these devices send in real time to the manufacturer's servers. The cardiologists would download these data from the ICD during each patient's periodic appointments. As a result, all patients had to visit the hospital regularly, regardless of whether they had problems or not.

Under the new model, the company not only sells the ICDs but also supplies, monitors and maintains the devices remotely

Under the new model, the company not only sells the ICDs but also supplies, monitors and maintains the devices remotely for periods of four years. This is a clear example of public-private cooperation. The company collaborates closely with the hospital by sharing all ICD data in real time, thereby allowing hospital professionals to review these data periodically without having to schedule an appointment for the patient if no problem is detected. This system benefits the patient and – by saving resources – also the hospital.

In turn, the supplier works closely with hospital professionals to meet patients' needs and can add new ICDs that were not initially included in the contract, thereby accelerating the pace at which the available innovations are introduced. Unlike the previous model, this contract gives the company security, allowing it to introduce innovations and become more competitive.

The experience of Hospital de Sant Pau, Medtronic (the company that won the contract) and the Agency for Health Quality and Assessment of Catalonia (AQuAS) was presented at the International Congress of Public Management (CLAD).

Four key factors that contributed to the success of this case were identified:

1. Financing

Hospital de Sant Pau's public procurement of innovation project benefited from the STOPandGO Project, part of the European Commission's Horizon2020 programme. This support took the form of technical advice on legal, ethical, regulatory and administrative aspects.

2. Public beneficiary leadership

The hospital's cardiology team, aware of the need to improve their service, took the initiative to launch the innovation process. This bottom-up initiative made it possible to define and lead the project in accordance with the needs of the final beneficiary, thereby increasing the chances of success.

3. Cooperation between public administrations

The cooperation between Hospital de Sant Pau and AQuAS in the preparation of the STOPandGO project and the implementation of the programme were essential to its success. This cooperation made it possible to combine the technical knowledge of the hospital's medical team with the legal and administrative experience of AQuAS.

4. Risk management

Under the traditional procurement scheme, the hospital had to assume all the risk by buying the ICDs – some of which might have problems – all at once. Under the new scheme, the contractor is responsible for monitoring the devices, which reduces the frequency of failure. Each time there is a problem, a committee meets to analyse it, thereby guaranteeing transparency in all cases.

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