The “innovative” character of a product/service: one of the possible conditions of the negotiated market

Do you offer an innovative service or product that you are the only one (or among the few companies in your sector) to be able to offer? Are public authorities in your target market?
Do you fear public procurement procedures?
What if the innovative nature of your product or service allowed you to participate in a negotiated market (and therefore without a prior competitive bidding procedure)?
A possibility which is offered by Decree No. 2018-1225 of December 24, 2018, carrying various measures relating to public procurement contracts.
In order to promote innovation in public procurement, this decree creates a three-year experiment, allowing buyers (public entities) to enter into negotiated contracts without advertising or prior competition, for their innovative purchases of an amount less than €100,000.
What are the conditions to qualify for this special procedure?

Conditions to benefit
of the experiment

Two conditions are set by this decree to award a contract without advertising or competitive bidding as part of the experiment:

• the purchase must be innovative,
• the amount of the requirement must be less than 100,000 euros excluding tax.

It is thus possible, for a public buyer, to conclude an over-the-counter contract with a company for the acquisition of an innovative solution, even though a traditional solution could meet the need, or several other economic operators could offer alternative innovative solutions.

1• An innovative purchase

• What is an innovative purchase for the public buyer?

This is “ new or significantly improved works, supplies or services ” (Article R. 2124-3 2° of the Public Procurement Code).

It is specified in this same article that:“the innovative character may consist of the implementation of new production or construction processes, a new marketing method or a new organizational method in the practices, the organization of the workplace or the external relations of the company ».

This innovative purchase allows the public entity to use the negotiated procedure when the need consists of an innovative solution. It can therefore be not only a technological innovation of product or process but also a structural, organizational or marketing innovation linked, for example, to digitalization or interconnection. The solution may already be available on the market. On the other hand, the production of a personalized product, the characteristics of which do not differ significantly from those of products already manufactured, does not constitute innovation.

Thus, the definition of innovative purchasing remains quite broad, which leaves a certain flexibility of assessment to public buyers, particularly with regard to the sector concerned. This definition was informed by a set of clues proposed in the Practical Guide to Innovative Public Purchasing from the Directorate of Legal Affairs (hereinafter DAJ) of the Ministry of the Economy and Finance, responsible for providing clarification on the rules applicable in this area.

• Group of clues to characterize an innovative public purchase

It is considered, in a simplified way, that an innovation corresponds to a new idea, an invention that has been implemented and launched (or in the process of being launched) on the market.

To ensure the innovative nature of its purchase, the public buyer, initially, will be able to collect information on the sector of activity concerned: state of the art and competition, patents, standards, etc.

Subsequently, the buyer could use the following questions, proposed by the DAJ of the Ministry of Economy and Finance, in order to identify the clues that characterize an innovative solution:

1. Does the solution make it possible to respond to a need in a more efficient way (in terms of costs, quality, deadlines, environmental and/or social aspects, etc.)?
2. Does the solution exist on the market?

• Is it widespread within the private sector? From the public sector? How long ago?
• Does it correspond to a new use of an existing solution?
• Is the solution patented?

1. Should the solution be partially adapted to the needs of the public person (personalization)?
2. Should we create a new solution, because it does not exist on the market?

• Should we resort to R&D?
• Should it only be the subject of developments based on the buyer’s specifications?

1. What type of innovation is this (if the first elements of analysis are conclusive)?

• Is it a disruptive innovation (which disrupts the market) or an incremental innovation (= which improves what already exists, “significantly improved”)?
• Is it an innovation of product (good or service), use, process (production or distribution method), marketing (design or packaging or promotion or pricing), organization (workplace, external relations of the company), social innovation?
• Is this a “mature” innovation, that is to say in the commercialization phase, or rather industrialization? In the design phase?

The accumulation of positive answers to these questions highlights the presence of an innovative solution.

2• A need of less than 100,000 euros excluding tax

These are articles R. 2121-1 et seq. of the Public Procurement Code, which sets the conditions for evaluating the amount of need for any public purchase.

Thus, if nothing prevents the buyer from entering into several contracts to acquire different innovative solutions intended to satisfy the same need, the cumulative amount of these contracts must not exceed the threshold of 100,000 euros excluding tax.

Thus, in your approach to making your product/service, considered innovative, known to public buyers, including the proposal to use the negotiated market procedure could give you a competitive advantage, if you manage to convince your (future) public client of the effectiveness of your solution.

LEGALPROTECH AVOCATS can help you determine whether or not your product or service would benefit from this procedure.

By Samuel DENIN – LEGALPROTECH-AVOCATS Lawyer

(Source: Practical guide to innovative purchasing by the DAJ of the Ministry of Economy and Finance)