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See version in english Public Procurement, Innovation and Policy. International Perspectives, Veiko LEMBER, Rainer KATTEL et Tarmo KALVET (dir.)

LIVRES : LEMBER Veiko, KATTEL Rainer et KALVET Tarmo (dir.) Springer-Verlag Berlin Heidelberg, 2014, 309 p.

Public Procurement, Innovation and Policy. International Perspectives, Veiko LEMBER, Rainer KATTEL et Tarmo KALVET (dir.)

Veiko Lember, Rainer Kattel, Tarmo Kalvet

Cette rubrique recense et commente les ouvrages et autres publications en droit de la concurrence, droit & économie de la concurrence et en droit de la régulation. Une telle recension ne peut par nature être exhaustive et se limite donc à présenter quelques publications récentes dans ces matières. Auteurs et éditeurs peuvent envoyer les ouvrages à l’intention du responsable de cette rubrique :

Innovation is not the first thing that comes to mind when thinking about public procurement. Other, conflicting, criteria have taken hold of government purchase programmes. Efficiency, value-for-money, and competition have been at the centre of the analysis of public procurement, corresponding to as many phases in the development of modern economies. In many instances, these principles have damaged the ability and the incentives of actors to innovate. In Public Procurement, Innovation and Policy, Veiko Lember, Rainer Kattel and Tarmo Kalvet gathered researchers from 11 countries to produce a lengthy and detailed analysis of the interactions between public procurement and innovation in these jurisdictions.

The formidable purchasing power of governments provides an opportunity for governments to promote, create the condition, or directly order solutions that go beyond the simple criteria of cost or efficiency. In a short introductory chapter, the authors outline the goals and the origins of Public Procurement and Innovation Policies (PPIP), building on the existing literature to establish clear trends and categories of policies. They propose to divide innovation-oriented public procurement policies into four categories : (1) technology policy, (2) R&D policy, (3) generic policy, and (4) what the three main authors refer to as “no policy,” where public purchasing is done traditionally and without any concern for innovation. They then endeavour to test these categories on the 11 different countries selected for the analysis : Australia, Brazil, China, Denmark, Estonia, Greece, Hong Kong, Korea, Sweden, the United Kingdom, and the United States. The book’s structure is relatively simple : the introduction is followed by a general chapter titled “Theory and Practice,” and by 11 chapters on as many countries. A conclusion syntheses the findings and deepens analysis of the most significant results. This methodology reveals interactions between the institutional environment and the ability of actors—private and public—to foster innovation through public procurement.

Throughout the book, three main themes reappear in almost every chapter : the role of the institutional structure on PPIP, the impact of neo-liberal thinking, and the fact that innovation as a policy cannot be analysed in a vacuum but has to be assessed in a context of transition from industrial policies to more modern and pro-competitive economic policies. These three findings are explained below.

The starting point of the book is that from a governmental perspective PPIP is at the nexus of many institutional actors, such as competition authorities, ministries, legislators, the military, innovation-promoting agencies, local, regional, national, and supranational institutions. In many instances these institutions pursue different and conflicting goals. Their coordination is complex and sometimes impossible. For instance, in order to fulfil their primary mission, competition authorities must enjoy a certain degree of independence from central governments. The authors contend that these multiple actors, the way they interact (or not) with each other is central to understanding the development of innovation as a driver of public procurement. The institutional aspect has been mostly left out of the literature, hence the need to focus on the institutional set-up’s effects on innovation. In the Swedish and the UK examples, institutional structures are shown to be an obstacle to innovation : in Sweden, a multilayered set of public institutions often contradict each other, and the essence of the decision-making power is too defused for innovation to truly take form in the context of procurement. Agencies in charge of promoting innovation have no power to enforce the rules they propose. However, the UK government has demonstrated that a similar institutional set-up could be overcome, and the healthcare sector provides examples of good use of tender processes to promote innovation, with schemes where the purchasing agent simply called on the 106 (2015) 24 PPLR, Issue 3 © 2015 Thomson Reuters (Professional) UK Limited and Contributors private sector, to solve a problem, without providing an array of specifications. The UK turned its procurement institutional structure around to re-centralize the purchasing power, ahead of any attempt to foster innovation through public purchasing. Importantly, several authors such as Dae-In Kim (Korea), Max Rolfstam and Robert Ågren (Sweden), and Linda Weiss (USA) point at the relationships between the institutions and the SMEs. Small businesses are a central theme in the book : nimble, more entrepreneurial actors are more likely to innovate and to react to innovation incentives. However they are also more cost-concerned, are more likely to compete on costs, and lack the resources for major innovations and substantial projects. Countries differ significantly on their approach to supporting SMEs and the cases of Hong Kong and South Korea discussed in the book provide examples of these antithetic positions. The Hong Kong tender rules following the World Trade Organization (WTO) model of that puts efficiencies and value for money first, favouring big businesses. In Korea on the contrary, public procurement often disproportionately favours SMEs, which are not the most innovative actors of the economy and tend to compete on price. Overall, the Korean example shows that promoting SMEs does not amount to promoting innovation, if this aspect of their work is not put forward at the policy design level.

The succession of chapters and case studies paints an unexpected picture : that the question of neo-liberal thinking connects to the notion of innovation through the SME question. In a context where government is reduced to a minimum, public procurement does not in principle favours a certain type of business. Private actors should be able to respond to government tenders regardless of their size. However as soon as the government deviates from a purely Chicago school-type of economic governance, it either promotes big businesses through sizeable projects (in Hong Kong or in the United States), or favours SMEs under a series of public policy principles (in South Korea). The various examples cited in the book reveal that the key to the successful involvement of SMEs lies in policy design—the Hong Kong example in that regard shows the negative impact on innovation of the strict application of the WTO Agreement on Government Procurement (GPA)’s four principles (namely public accountability, value for money, transparency, and fair and open competition). According to the editors, and to Eric Baark and Naubahar Sharif (Hong Kong), the GPA gospel has an annihilating effect on innovation, because innovation simply does not find its place under the headings of accountability, value for money or transparency. Competition can foster innovation, but the Hong Kong example proves that without a government effort to include innovation in procurement policy, firms have an incentive to compete on cost only. The GPA not only distracts from other policy goals in government purchasing, it also makes it easy for neo-liberal proponents to counter calls for policy considerations, using the GPA principles. Innovation for instance can easily be dismissed under the “value for money” principle. Hong Kong’s focus on these four principles without any attempt to infuse parallel goals or to drive innovation results in a purely efficiency-focused and process-based set of policies, in which there is no space for thinking outside these principles. These four principles are in turn insufficient to deliver anything else than what they stand for. The Hong Kong case study sheds light on the inadequacy of the free-trade doctrine to tackle the issue of innovation in public procurement. In the neo-liberal approach to public policy, the authors find the main limit to PPIP : they cite extensive and exhaustive previous research on the widely-held view that economic social and other side-goals should not be explicit part of the government purchasing decisions or policy as it distorts competition and free trade. This has created a movement towards public procurement as a “level playing field,” which does not say anything about innovation and does not incentive buyers to encourage it. The dominance of neo-liberal policies in some countries, such as Estonia and to a certain extent Denmark, is a central point in the explanation over the failure of these governments to encourage PPIP. As often in the discussion over the merits of state intervention, the economic crisis has altered the debate : Denmark provides a case study of how concerns over future growth have been a driver for the inclusion of innovation in the discussion of public procurement reform. The Denmark chapter highlights the positive effects of these progresses with successful examples of innovations emanating from public procurement in the Book Review 107 (2015) 24 PPLR, Issue 3 © 2015 Thomson Reuters (Professional) UK Limited and Contributors healthcare sector. This aspect of the book is built on literature that shows how the relationship between innovation and public procurement is more complex than originally thought. The example of the UK shows that even in a “cost-saving” effort, the crisis effect can lay the foundation for successful innovation programs ; this is the case when the state, under cost pressure, moves towards acting as a strategic single client. Other results of the study are counter-intuitive : The detailed analysis of each country’s public procurement practice reveals numerous other elements that create success or failure in governments’ attempts to use procurement for innovation. In almost all countries, the three main authors note, higher innovation outputs are generated when the government has a monopsonist position and when it targets technology early in its life-cycle. This itself goes against neo-liberal policies that purports to achieve maximum efficiencies by reducing the role of the state. The picture that emanates from the book’s multiple references to the effect of “small government” thinking on innovation is that it is difficult to analyse public procurement without thinking about the role of the state in general. The comparative approach and the focus on the institutional conditions that manage—or fail—to bring about innovation is buttressed throughout the book by an analysis of the transnational forces that impact PPIP. The influence of the WTO has been disastrous on the role of innovation : by focusing on efficiency and cost, the WTO model of procurement has relegated innovation among the criteria taken into accounts in tender processes. Despite the negative link between the WTO model and PPIP, the shift from industrial policy to more complex approaches of public procurement began with the development of the WTO approach in the 80s, to then gradually evolve into pro-competitive schemes. The dramatic extension of trade rules and the acceleration of exchanges lead to a more international public procurement world, which in turn impacted innovation. The transnational perspective is present throughout the book, despite each chapter being focused on one jurisdiction. For instance, the introduction mentions early on that because innovation is complex by nature, the question of the skills and training of civil servants is central in the effectiveness of pro-innovation public procurement. That issue appears to have been addressed in Australia, while it is clearly holding back innovation in Brazil.

At the core of the book’s comparative approach is the sensitivity to the transferability of models and success-stories, an important element that is regularly left out of collective works that merely juxtapose analysis. Baark and Sharif for Hong Kong and Linda Weiss for the United States pay particular attention to the transferability issue. This aspect is particularly striking in the context of the United States public procurement policy in the defence sector, probably one of the most successful innovation-encouragement policies worldwide. In the US chapter, Linda Weiss, from the University of Sidney, warns that this may not be possible to recreate this success in other sectors. Conscious of the possible limited public benefits of innovations emanating from defence public procurement, the US government insisted on the development of dual-use products through public tenders (products that have both civilian and military applications). This has been encouraged by experiences that have spilled over from the military sector and that have sometimes led to the creation of entirely new markets, such as the internet, the first mass-produced computer, and the entire semiconductor market. The reasons behind these watershed moments are linked, in the authors’ analysis, to the US institutional framework, made of federal, state, civilian and military agencies. Linda Weiss sees this framework as having generated an array of policies that encourage the state and the innovative participants to collaborate, sometimes long after the development of the technology and its application in the original sector or market for which it was developed. Private and public sector, she writes, work together to create a market, or adapt new technologies to the mass markets where it can generate substantial profits and benefits for the community. Despite the limited transferability of military inventions, policy-design spill-overs have proved that other economic sectors can learn from the defence tender policy design. The chapter on the US discusses at length the Small Business Innovation Research, a scheme implemented to emulate the beneficial effects of the cooperation between the public and the 108 Public Procurement Law Review (2015) 24 PPLR, Issue 3 © 2015 Thomson Reuters (Professional) UK Limited and Contributors private sector, between SMEs on the one side and on the other side major industrial groups that are defining elements of the US defence public procurement programmes.

The book would have benefited from a more detailed study on how corruption and bid-rigging impact innovation outcomes in public procurement. Despite this omission, the book is overall a work of superior quality, and demonstrates a real effort towards a better understanding of the relationship between innovation and public procurement. One exception is the chapter on China by Chen Jin and Cheng Chunzi which is rather descriptive, plagued with approximations (“[t]here are 20 nations which are accepted as innovational nations worldwide including the U.S., Japan, Finland, South Korea and so on”). The two authors claim that competition is an obstacle to PPIP, without any data or analysis to back this. In addition, the chapter concludes that the government should increase the scale of public procurement and the share of procurement in GDP, a conclusion that may be in line with the current economic objectives of the People’s Republic of China, but which does not relate to the issue of innovation.

The book will be most useful to researchers and decision-makers focusing on public procurement, entrepreneurship, and competition law and policy.

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  • Hong Kong Competition Association


Knut Fournier, Public Procurement, Innovation and Policy. International Perspectives, Veiko LEMBER, Rainer KATTEL et Tarmo KALVET (dir.), January 2016, Concurrences Review N° 1-2016, Art. N° 77970, pp. 263-264

Editor Springer

Date 30 September 2013

Number of pages 320

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