In the realm of procurement, municipalities grapple with risk aversion, especially when considering innovative approaches. This article explores strategies to address this obstacle. Through insights from the PROCEDIN project’s whitepaper, we aim to share knowledge on the tools needed to overcome these challenges and foster innovation in public procurement.

Navigating Risk Aversion while Unpacking the Challenges

What drives risk aversion?

     1.COMPLEXITY OF GUIDLINES

The intricate guidelines for public procurement of innovation contribute to risk aversion. Lack of know-how and difficulty in acquiring experience intensify the challenge.

2. RESOURCE CONSTRAINTS

Innovative procedures demand more time and effort, potentially jeopardizing other activities. The lack of strategic procurement expertise, particularly in decentralized settings, adds to the challenge.

3. RESTRICTIVE NATIONAL LAWS

Some countries set procurement standards higher than EU regulations, contributing to risk aversion.

4. AUDITORS AND LAWYERS

Risk-averse auditors and legal experts may apply rules more restrictive than national/EU legislation, impeding innovation.

5. SUPPLIER COMPLAINT PROCEDURES

Severe delays caused by procedures for handling supplier complaints can discourage buyers from pursuing innovative approaches.

6. COMPLIENCE CULTURE

A culture cantered on compliance, especially where corruption is a concern, poses a threat to innovative procedures. Procurement personnel accustomed to compliance-centric regimes may resist transitioning to more creative approaches.

7. CHANGING NATURE OF BUSINESS RELATIONSHIPS

The transition from traditional contracting to outcome/performance-based contracting poses challenges in power dynamics and business relationships, contributing to risk aversion.

Addressing Risk Aversion – Strategies and Insights

Case-studies of successful initiatives can be found, e.g. at the website of the European commission: PCP examples, PCP impact, PCP & PPI projects. The Urban Agenda Partnership for Innovative and Responsible Public Procurement offers also many good practices.

• REDUCING IMPACT AND LIKELIHOOD

Conventional responses toward risk aversion involve reducing the impact or likelihood of risk events. This is typically addressed by providing high-quality case studies, fostering learning communities, and promoting knowledge-sharing.

• TOLERATING RISKS

An alternative perspective involves acknowledging and tolerating risks. This approach is often overlooked, but it is crucial for embracing uncertainty inherent in POI.

The BUILD and PROCEDIN projects revolve around enhancing the adoption of innovation procurement. This extract represents the collection of weak points that we want to address with the training and capacity building activities. 

FREE TRAINING ON INNOVATION PROCUREMENT

Hence, the BUILD project is organising a free webinar on PPI, focusing on sharing knowledge through best cases from our network of expert buyers.

Don’t miss out! Register here by the 5th March.