Europe can invent. But can it buy what it invents?

When I first saw that the European Commission had proposed a new Public Procurement Act, I thought I knew roughly what kind of news this was.

Another European Act. Another promise to simplify rules. A little innovation, a little digitalisation, some “Made in Europe” language.

Important, perhaps, but not necessarily something I needed to read 200 pages about.

Then I noticed what public procurement actually covers.

It is not mainly about how the European Commission buys things. It is about how governments, municipalities, public universities, hospitals, transport operators and other public organisations across Europe spend money. Together, public procurement represents roughly 15 per cent of European GDP.

That changes the scale of the question quite dramatically.

When a municipality buys software, a ministry commissions research or a public hospital buys equipment, it cannot simply choose the supplier it likes best. Public money requires a process: suppliers must be treated fairly, decisions must be transparent and someone must be able to explain afterwards why this particular company won.

That is what procurement is for. It is not bureaucratic theatre. Without such rules, public purchasing would be far too vulnerable to favouritism, bad decisions and private relationships.

Still, after reading more about the Commission’s proposal, I began to think that procurement may be one of the less known reasons Europe finds it difficult to turn innovation into scale.

Not because the rules literally force governments to buy the cheapest option. They do not.

But because they can make the familiar option much easier to defend.

The cheapest bid is not the whole story

I had assumed that public procurement law was one of those areas where the formal answer was simply: buy the lowest bidder.

That turns out to be too simple.

The current European rules already allow public buyers to consider quality, environmental impact, social effects, innovation and the full cost of a solution over its lifetime. The law does not say that a municipality must buy the cheapest possible software, regardless of whether it works well.

And yet price-only purchasing remains common, while innovation procurement is still uneven across Europe. The European Court of Auditors found that competition for public contracts declined over the past decade, with fewer bidders and a growing number of procedures attracting only one bid.

So there is a more interesting question than whether the law permits innovation.

Why does a system that permits quality and innovation still so often reward price, certainty and suppliers that have been around for a long time?

I think the answer is partly hidden in a very understandable public-sector instinct: choose the decision that will be easiest to justify afterwards.

Imagine a municipality buying an AI system to help residents find the right service.

One supplier offers a familiar platform with years of public-sector references, a clear implementation plan and a price that fits neatly into a spreadsheet.

Another is a smaller company with a more interesting approach. Its system might produce better results, save time for residents and civil servants, and become more valuable over time. But it also requires testing, integration and perhaps a different way of working.

The first proposal is easier to compare. The second asks the buyer to make a judgement.

That is where innovation often gets stuck.

A known product can be specified in detail. An established supplier can show years of references. A low initial price can be explained in one line.

The possible value of something new is harder to put in a tender document. It may only become visible later, through better outcomes, lower costs, resilience or productivity. It may depend on whether people actually adopt the new system.

Nobody needs to write “prefer the incumbent” into the rules. A process designed around comparability and defensibility can produce that result on its own.

Innovation runs on a different clock

This is particularly visible when the purchase involves technology.

A new solution may initially cost more because it includes development, experimentation, staff training or organisational change. Its real value may only become visible after it has been used for a while.

That does not make it a good purchase automatically. Public buyers should not be asked to fund every promising demonstration.

But it does mean that the purchase price is often the wrong clock for judging innovation.

A price is immediate and measurable. Long-term value is more difficult. It involves assumptions, future behaviour and outcomes that may be real but are not yet visible.

The strange result is that an organisation can be legally free to buy something better, while still being practically organised to buy something safer.

That matters for Europe because public organisations are not small customers. They are often the market.

Europe spends a great deal of energy on research, start-ups, strategic technologies and private investment. But a young company also needs someone willing to buy what it has developed.

If Europe can fund the research, help create the company and then make it unusually difficult for public institutions to become early customers, there is a gap in the chain.

The technology makes it out of the laboratory, but not necessarily into a real market.

The Commission is trying to change more than the paperwork

The new proposal does contain a large amount of administrative repair.

It would replace three existing procurement directives with one directly applicable regulation. It would simplify procedures, make market consultation more normal, limit unnecessarily excessive demands for turnover or previous public-sector experience, and connect national procurement systems through a shared digital infrastructure.

All of that sounds sensible. The fact that a small company may need to navigate several systems, repeatedly submit the same information and satisfy requirements that have little to do with its ability to deliver does not help Europe create a more dynamic market.

But the more interesting part of the proposal is that it tries to change what counts as a good purchase.

The Commission wants price and quality to be assessed together as the normal approach. It also proposes a new innovation procedure.

This is more significant than it sounds.

Instead of beginning with a fixed technical specification, a public buyer could begin with a societal challenge. It could ask the market for ideas, establish how it will judge value, test promising approaches and then purchase the solution that proves itself.

A city would not have to begin by saying: “We need this exact system.”

It could begin by saying: “We need to reduce waiting time for this group of residents. What might work?”

That is a very different relationship between a public organisation and the market around it.

The proposal also makes room for suppliers to retain intellectual property developed in such a process, unless there is a good reason not to. That matters because a company that solves one public problem may then be able to offer the solution to others.

There is also a European-preference dimension, especially in strategic sectors. I am less interested in treating that as a simple “buy European” story. European origin is not a guarantee of quality or innovation.

But the broader shift is clear. The Commission increasingly sees public purchasing not just as a way to spend money correctly, but as a way to create resilience, demand and industrial capacity.

The part a new Act cannot solve

I find this more interesting than I expected because it points to a limitation in the way Europe often talks about innovation.

We tend to focus on invention, capital and infrastructure. Those are all essential. But institutions matter too.

A new regulation can make it easier to consult the market. It can make quality more prominent. It can create a proper route for testing and buying something that does not yet exist.

What it cannot do is make an organisation comfortable with uncertainty.

That depends on procurement expertise, organisational culture, political expectations and the degree to which someone is personally blamed when an experimental project does not work.

If a new system fails, there will be uncomfortable questions about why the organisation took the risk. If a familiar supplier disappoints, that can look like an unfortunate continuation of normal practice.

That is probably the deepest procurement problem.

Europe has spent years encouraging companies to innovate. Its public institutions have often been rewarded for buying what they can most easily defend.

The proposed Public Procurement Act is not a solution to Europe’s wider innovation gap. But it is an acknowledgement that innovation policy does not end with inventors, investors and factories.

It also depends on whether the institutions that spend public money can learn to buy something new.

Related

I have written before about procurement from the opposite direction: how regulation becomes tangible through procurement, contracts and buyer caution. That earlier piece is The Hot Potato of Compliance.