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Innovation Partnerships – So What’s New?

It's been over three years since the Public Contracts Regulations 2015 came into effect. Pamela Milford considers the impact of the Innovation Partnership procedure, one of the new procurement processes that was introduced by the legislation.

Regulation 31 of the Public Contracts Regulations 2015 introduced a completely new procurement procedure called the Innovation Partnership. This procedure was designed for use where there is a need for “an innovative product, service or works that cannot be met by (those) … already available on the market”.

It is interesting to note that only a very small number of Innovation Partnership procedures have been launched in the UK in the last 3 years – just nine in total between 26th February 2015 and 26th February 2018 and it is questionable whether all nine were legitimate Innovation Partnership procedures. On further investigation, two of the contracting authorities advised that the wrong procedure had been identified in the contract notice. Further, only one of the notices includes any detail on the mechanics of the innovative procedure which supports its use. Finally, given the nature and description of the requirements set out in the contract notices, there is some doubt as to whether the contracting authorities are indeed seeking innovative products, services or works that could be identified by use of the Innovation Partnership procedure.

In view of the interest in this procedure around the time that the Public Contracts Regulations 2015 came into force, it is perhaps surprising that the number of such procedures is low. Which begs the question – why has the Innovation Partnership procedure been so little used, and was it really necessary?

The answer appears to lie in the level of constraint involved in the process and the availability of more flexible alternative procedures.

There is a sizable challenge for any client or procurement officer seeking authority from senior officers or members to commence a procedure which may not guarantee a viable solution as an outcome. One of the natural consequences of an Innovation Partnership procedure is, of course, that solutions may fail during the research and development phase.

In addition, there is a legal obligation to pay every partner for their research and development, even though it might not be used for the subsequent purchase of the resulting supplies. This means that the contracting authority should have sufficient financial resources and senior officer commitment to spend those resources as a prerequisite to commencing the procedure. This is less palatable when there is no guarantee of a successful result.

Associated intellectual property (IP) risks also need to be considered. The regulations require authorities to set out in the relevant procurement documents the arrangements regarding IP. Depending on what is agreed, this could potentially leave authorities open to the risk of IP litigation, which is especially prevalent in fields which involve high levels of innovation.

In accordance with the principles underpinning procurement legislation, the procedure should not be used in such a way as to prevent, restrict or distort competition. To that end, an Innovation Partnership may be established with one or several partners conducting separate research and development activities. However, this will increase financial outlay and may lead to tricky 'tightrope walking' when it comes to ensuring transparency in the process and the requirement to maintain confidentiality.

The regulations foresee that a contracting authority should be enabled to terminate the Innovation Partnership arrangement during the implementation phase if certain intermediate targets are not being met. This right to terminate, without a need for a manifest breach of contract on the part of a partner, may give rise to certain difficulties when compared with the general termination rights that must be incorporated into all regulated public contracts and may be fertile grounds for litigation if badly handled.

The figures speak for themselves – compared with the nine Innovation Partnership procedures advertised in the UK over the last three years, there have been 508 Competitive Procedure with Negotiation and 235 Competitive Dialogue notices in the UK over the same period. Perhaps it is not a procedure that the UK needs, but it is certainly another potential tool in the armory of procurement professionals faced with procuring solutions in a climate of increasing demands.

If you want to know more about innovation partnerships or any other aspect of public procurement, speak to Pamela and our commercial team today on 029 2048 2288.

*All figures taken from TED.europa.eu

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