Public Procurement as a Tool to Stimulate Innovation: Science and Technology Report

Baroness Warwick of Undercliffe Excerpts

Tuesday 13th September 2011 Grand Committee

[Baroness Warwick of Undercliffe]

My Lords, I intervene briefly to re-emphasise the importance of the report and to hope that the Government will return to the recommendations as they develop what they promise will be a significant programme of reform.

I, too, pay tribute to the noble Lord, Lord Krebs, and his eminent committee for the robust, trenchant and fearless way in which they have approached this vital issue. “Fearless” may seem an odd word to use, but many reports over the years have tried to persuade successive Governments to take this subject seriously. In this report, there are recommendations that the Government may find inconvenient but which in my view go to the heart of the problem. That is why I urge the Government to keep these recommendations in mind, even if, as their response suggests, they do not all find immediate favour.

The Government’s response to the report has some very encouraging aspirations and sentiments, but I feel that it does not yet grasp the magnitude of the persuasion, mindset change and culture shocks that will be needed to change a decades-old approach. I recall being part of the government technology foresight programme discussions, some years ago now, which started with such promise and with the engagement of commercial, industrial and small business interests. The programme had some really good outcomes and certainly encouraged a better understanding of government decision-making processes, but it would be difficult to argue that it produced the significant departmental engagement in the use of new technologies and processes that had been hoped for.

I do not think it is possible to exaggerate the importance of the report’s main themes: that a clear vision for publicly funded projects can have a huge influence on the behaviour of both purchasers and providers, and that embracing innovative ideas and processes must be embedded in the minds of all those involved in government procurement projects.

I should explain that my interest in this area stems from my involvement with the university sector and its role in developing innovative ideas, in both science and the humanities, that could aid our country’s development and prosperity. The university sector was particularly encouraged by the 2007 report of the noble Lord, Lord Sainsbury, The Race to the Top, to which the Science and Technology report refers, which showed that there had been a dramatic increase in knowledge transfer from all universities and that UK universities’ performance in this area now compares to the United States. I do not know the example used by the noble Lord, Lord Hodgson, of universities and intellectual property. I can say only that the usual criticism of universities is that they are far too ferocious in their protection of intellectual property.

I saw the previous Government’s investment in its Ten Year Science and Innovation Framework as part of its procurement framework, albeit on the supply side. On the demand said, I applauded the Sainsbury report’s encouragement of the use of departmental R&D budgets to support innovation and to harness the power of government spending to create demand for innovative products and services. However, as I know David Willetts, the Minister for Universities and Science in another place, recognises, building productive links, particularly with small and medium-sized enterprises, is problematic for universities, just as it has proved challenging for government departments in their purchasing processes to engage effectively with myriad small enterprises.

I noted that the Government in their response to the report take head-on the committee’s finding that there is conflicting evidence of the contribution of SMEs in promoting innovation. The Government clearly continue to see the engagement of SMEs as crucial, but it would be helpful to hear from the Minister what new initiatives are planned to make this happen. I certainly agree with the Government’s view that departments will need to use more open procurement methods to drive up competition. They will need to engage with industry much earlier in the procurement process, and they will need to specify the outcomes and outputs rather than the product that they believe they want to buy. I hope that the Minister will explain in more detail how that is to be achieved.

I said I wanted to be brief. I refer to two recommendations in the report to which the Government in their response have given a rather dusty answer. The report recommends that a Minister should be responsible for both procurement and innovation. The Minister would formulate a national framework and would be accountable for how well procurement decisions are made. It further recommends that there should be a lead Minister in each government department with these specific responsibilities in order to create a high-level network across government. Although I appreciate the Government’s argument that the Minister for the Cabinet Office has responsibility for central government procurement policy and that each department’s procurement activity is subject to ministerial oversight, I am tempted to say, “It was ever thus”, and therein lies the problem. Something more radical is needed. The same arguments were applied to the approach to science in government departments, and I do not think that anyone doubts the change in attitude that has followed the creation of the chief scientist post to drive the agenda, together with a senior scientific adviser in each department.

The committee of the noble Lord, Lord Krebs, has tackled a long-standing problem. It has taken advice from a range of well informed practitioners, whose only aim is to promote innovative ideas to improve our country’s effectiveness. They have looked at a plethora of reports on this subject, which all show that the present processes do not work well enough. Indeed, they do this country a disservice. So I hope that the Minister will be willing to say that she will look again at the way in which government can be held to account for how its £236 billion of public procurement funds is spent and turn to the committee’s recommendations for inspiration.