How cities can flex their purchasing power to stimulate innovation

Article by Sam Markey and Andrew Watkins: “But the “power of the purse” can be a game-changer. City governments spend $6 trillion annually buying goods and services from private sector suppliers, amounting to 8% of world GDP in 2021. These delivery contracts represent a huge commercial opportunity for suppliers, but also a policy tool for local authorities to shape markets and steer private sector research and development…

In recent years, local and national leaders have been rediscovering the power of public procurement and dismantling the legislative and cultural barriers that have limited its potential. Analysis by the OECD endorsed public procurement as a strategic instrument that can be used by government to promote innovation, facilitate diversity of thought and address societal challenges

A growing number of city authorities are using these powers to drive not just delivery but transformation:

  • Faced with the challenge of waste collection from properties using narrow rear alleys as a dumping ground, Liverpool City Council (UK) used an innovation-friendly procurement approach to engage the market, and identify, evaluate and integrate a new solution. Installing communal waste collection points with below-surface storage restored the alleys to being community spaces, promoting a sense of belonging and neighbourliness. Clearly marked disposal points for recycling saw adoption rise by 270%, while new ways of working saw the cost of collection fall from £56 to £32 per property, and a carbon footprint reduction of 60%.
  • In Norway, where ferries provide vital transport infrastructure and are therefore largely operated as public services, regional governments require that all new ferry contracts must use low-emission technologies where possible. This market pull has seen electric-powered ferries replace diesel ferries, cutting emissions by 95% and costs by 80%.
  • As part of an ambitious Green New Deal that aims to electrify 6,000 properties in Ithaca, New York State, the city secured a 30% discount on the cost of heat pumps and other retrofit technologies by orchestrating demand into an advance bulk purchase.
  • Through the YES San Francisco Urban Sustainability Challenge, the City of San Francisco is partnering with the public-private sector to launch 14 new technologies to be deployed locally to support sustainability goals…(More)”.

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