Innovation encouraging public procurement in civil engineering - Different roads leading to different romes
Bart Lenderink is a PhD student in the Department of Construction Management and Engineering (CME) of the faculty of Engineering Technology (ET). His supervisors are prof. dr. ir. J.I.M. Halman, Dr. J.T. Voordijk and prof. dr. ir. A.G. Dorée. His research focusses on the use of public procurement to encourage innovation in civil engineering projects and programmes.
Innovation encouraging public procurement strategies are highly relevant as a means to address the increasing societal and environmental challenges we are facing now and in the near future. As the largest user of raw materials and a major contributor to CO2 emissions, the civil engineering industry has a significant impact on these challenges. Small improvements in this industry can already have a significant effect on the Sustainability Development Goals (SDG’s) set by the United Nations (United Nations, 2020). Moreover, the civil engineering industry plays an essential role in improving our ability to cope with the negative effects of climate change and ensuring the upkeep of public infrastructure with limited budgets in the years to come. As such, the development and improvement of more sustainable and cost-effective solutions in civil engineering is essential for addressing these societal and environmental challenges.
Large public clients have a major influence on the extent to which innovations can be developed and implemented within civil engineering projects and programmes. In fact, contractors and other suppliers are highly dependent on these clients to provide incentives and suitable conditions within public tenders for projects and programmes for innovations to flourish. Yet, despite their potential influence on innovation, public clients are often reluctant to actively encourage innovation in public tenders for civil engineering projects and programmes. A possible explanation for this reluctance is a lack of knowledge with respect to the use of innovation encouraging strategies within public procurement.
This research focusses on the use of public procurement to encourage innovation in civil engineering projects and programmes, and aims to contribute to addressing the substantial societal and environmental challenges withing the field of civil engineering. The main research question of this study is:
What are the main options for public clients to stimulate innovation through public procurement in civil engineering projects and programmes?
This main research question is divided into four sub-questions, each corresponding to one of the chapters in this thesis:
- What reasons, approaches and methods for stimulating innovation through public procurement can be found in literature?
- How can the implementation of innovations be encouraged and assessed in public tenders for the award of civil engineering projects?
- What determining factors and mechanisms influence the successful development and implementation of radical innovations within civil engineering projects?
- How to select an effective innovation-encouraging procurement strategy for specific projects or programmes in the field of civil engineering?
A qualitative research approach was selected based on the exploratory and explanatory nature of the research questions in combination with limited existing theoretical and empirical knowledge on the use of innovation encouraging public procurement in the field of civil engineering.
Chapter 2 of this PhD thesis provides an answer to the first sub-question by presenting a structured literature review on different concepts, rationales and approaches for encouraging innovation through the use of public procurement. The initial findings of the literature review showed that a wide range of different concepts and abbreviations are used in academic articles and policy documents to describe the phenomenon of stimulating innovation though public procurement. Moreover, they pointed out that these concepts and abbreviations are associated with different reasons and methods used for stimulating innovation, which can make it difficult for public organizations to decide why, how and to which extend they will encourage innovation through public procurement. The literature review addresses this problem in three ways. First, it provides a review on the different streams of literature, dichotomies and typologies with respect to encouraging innovation through public procurement. Second, it discusses various approaches on an individual level and comparing them in a structured overview. Third, it provides guidance on the suitability of these approaches in different situations. Based on this literature review we found that one of the main ways to differentiate these approaches is to separate them into three categories based on the categorization of the OECD (2011).
- Regular procurement, which can be made more innovation-friendly;
- Strategic procurement of innovations, where public clients demand new technologies products and services to address a specific need or societal challenge;
- Procurement of R&D services.
Chapter 3 provides an answer to the second sub-question, by presenting a design-oriented study in which a method to trigger and assess innovations in tenders for bridge projects is developed, implemented and evaluated. Encouraging innovation in civil engineering projects and programmes can contribute to achieving policy goals, addressing societal challenges and obtaining specific objectives. Despite their potential, innovations are rarely included in the scope of tender assignments and the evaluation of tender offers. An explanation for this is the perceived difficulty by public clients to trigger and objectively evaluate innovations in the award of tender assignments. To address this problem a new method to trigger and assess innovations in tenders was developed, implemented and evaluated within a bridge project. Using this method tenderers were explicitly requested to include up to three innovations in their tender offer for this project, which were assessed in the evaluation of the tender offers. The findings of this study indicate that it is possible to trigger and assess innovations in tenders for civil engineering project in line with procurement regulations and their underlying values. Furthermore, the study showed three main ways to encourage innovation within tenders for civil engineering projects:
- Provide incentives to tenderers for including innovations as part of their tender offer;
- Provide solution space within the description and requirements of tender assignments to allow for the inclusion of innovations by tenderers;
- Use innovation as a selection criterion in shortlisting tender candidates to determine which candidates are invited to submit a tender offer for the civil engineering project.
Chapter 4 provides an answer to the third sub-question, by presenting the results of an in-depth case study on how a public client managed to develop and implement a radical green innovation in a civil engineering project. The use of integrated project delivery methods can be an effective way to encourage incremental innovation in regular civil engineering projects. However, for encouraging the development and implementation of radical innovations in such projects the unilateral allocation of the innovation risks to the main contractor is undesirable since these risks are more difficult to assess and manage. This is due to the significant gap between required and acquired technological knowledge and skills which need to be bridged involving large inherent uncertainties during the implementation of such innovations in a project. The case study results led to the identification of three essential factors for the successful development and implementation of a radical green innovation in this project:
- Government championship, through a proactive participation of the public client in the initiation, development and realization phases of the project and the willingness of the public client to bear innovation risks;
- The application of innovation risk management strategies and the availability of a fall back option;
- The establishing of favourable organizational and relational conditions.
A review of the literature revealed that each of these factors could be traced back to existing literature. Yet, this study revealed that it was the well-considered conjoint application of these three factors by the public client which explained the successful implementation of the radical innovation in this civil engineering project.
Finally, chapter 5 provides an answer to the fourth sub-question by presenting a typology and guidelines for selecting innovation encouraging procurement strategies in the field of civil engineering. Furthermore, a multiple case study is presented which is among the first to classify different types of initiatives with respect to the use of innovation-encouraging procurement strategies in the field of civil engineering. A significant amount of research has been carried out on how public clients can encourage innovation through the procurement of goods and services and the development of dichotomies and typologies in this area reflect this. However, there is still a lack of knowledge on which procurement strategies and tendering methods can be effectively used to encourage specific types of innovation within larger public initiatives such as civil engineering projects and programmes. The developed typology in this study uses three factors to distinguish different types of civil engineering initiatives with respect to encouraging innovation through public procurement:
- The scope and time frame of the intended project or programme;
- The degree of innovation that needs to be realized in the specific project or programme;
- The intended level of cooperation/competition in the client-contractor relationship.
In addition to the typology, a general guideline is developed and proposed for the selection of an effective innovation-encouraging procurement strategy. In this guideline six coherent procurement strategies are described with respect to the proposed procurement methods in relation to the type of initiative and desired client-contractor relationship.
Based on the conducted research presented in this PhD thesis, chapter 6 provides a discussion on the scientific contributions of this PhD thesis. First, it contributes to the debate on how the terms innovation and innovativeness can be operationalized. In specific, these terms were adapted to in the specific context of innovation in bridge project allow for the assessment of innovation in tender offers in such a project. Second, it contributes to the debate on how different types of innovation can be encouraged through public procurement. In specific, this study is among the first to study the mechanisms that affect the development and realization of radical innovations in a civil engineering project. Third, it contributes to the debate on how the government can encourage innovation in the field of civil engineering. In specific, the study has combined insights from three streams of literature to develop a typology on civil engineering initiatives with respect to the selection of public procurement strategies for encouraging innovation. Furthermore, a guideline is developed for the selection of innovation encouraging procurement strategies based on literature and a multiple case study of 8 civil engineering projects and programmes.
This PhD thesis also has important implications for public clients of civil engineering project and programmes. First, in line with previous research the results of this research indicate that procurement decisions of public clients have a decisive influence on the extent to which innovation is likely to occur within civil engineering projects and programs. As such, this research stresses the essential role public clients play in encouraging innovation within the sector. Second, the results show that innovation encouraging procurement strategies can be used by clients for different purposes, such as achieving policy goals, addressing societal challenges or obtaining specific goals within a project or program. Third, the results of this research indicate that the selection of an effective innovation-encouraging procurement strategy in particular depend on three factors with respect to the civil engineering project or programme at hand: 1) the scope and expected timeframe, 2) the intended degree of innovation to be realized, and 3) the type of client-contractor relationship. A careful consideration of these factors in combination with the use of the developed guidelines can aid public clients in selecting an effective innovation encouraging procurement strategy. Lastly, the results indicate that the conjoint application of three factors favours the realization of radical innovations within civil engineering projects: 1) government championship, through a proactive role of the public client in all stages of the project, 2) the deliberate application of risk management strategies and inclusion of a fall-back option, and 3) the establishment of favourable organizational and relational conditions.