In the STEPPIN Framework – which deals with the issue of stimulating innovation by incorporating standards in public procurement -- most people will associate the need for standards with manufactured goods or technical products. However, it is actually the service economy which holds the largest share of the European GDP⁽¹⁾   .  

In fact, more than 70 percent of European service companies have innovation activities in the European Union – many of them in cooperation with the public sector. Reason enough to have a closer look at the interaction between public procurement and innovation in services.

Danish research and consulting group DAMVAD recently conducted a study to explore what drives innovation and innovative deliverables in the service industry. Although this study focuses exclusively on Denmark ⁽²⁾ , it may be a microcosm of the larger EU model and there are many interesting insights that we can apply on a broader scale when it comes to service innovation in public-private cooperation.

The study shows that half of the 65 percent of the companies which supplied services to public institutions report they have delivered innovative services to the projects they’ve supported. Yet 74 percent of the municipalities said that these newly developed service products did not meet their demands.

Given that risk-reduction is the primary concern for public officials⁽³⁾ this dichotomy does not seem promising. STEPPIN might ease the purchasers’ risks (and therefore increase the satisfaction of purchasers with innovative services) as the project aim is to facilitate the use of standards in procurement. Standards for their part have an intrinsic characteristic to reduce risk.

A second finding in the study revealed that, when it comes to innovation, there is a clear connection between the competencies of public actors and public-private cooperation. A full 70 percent of Danish municipalities report that there is no unit in their organisation equipped with the required knowledge and expertise to give advice on how to develop innovative procurement.

• STEPPIN recognises the need to develop these personal skills. For example, the STEPPIN knowledge base will be an easy-to-use tool with information about standards, products, networks and methodology.
  
  A third finding in the Danish study reveals that only less than half (41 percent) of public authorities are making cooperation with service companies to develop innovative services and products a priority.

• This result coincides again with the earlier findings of STEPPIN that innovation is not a purchasing criteria.
  
  Yet there are some bright spots. According to DAMVAD partner, Torben Vad, the study provides an answer to how this dilemma of “innovation-reluctance” can be solved: “Public and private actors should work together to leverage new and existing best practice tools and guidelines for innovative procurement.”
  

One such tool currently in development is the STEPPIN best-practice handbook which can serve as a guide for the use of standards in the procurement processes.

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⁽¹⁾  In 2006, 63,9 % of GDP in the European Union (Source: Eurostat)

⁽²⁾ For this study (from 2007) DAMVAD has questioned 2207 companies and 98 local Danish authorities.

⁽³⁾ Cf. STEPPIN Newsletter, year 1, issue 2 (“Purchasing innovation or what makes a purchaser tick”)