Questions/Answers

The Public Procurement Service(PPS), as a central government purchasing body of the Republic of Korea, is responsible for procuring goods, services, and public construction works as required by public bodies. In this era of digital transformation, PPS introduced an innovation-centered public procurement initiative that is expected to be more efficient and sustainable and increase social values. Government procurement occupies a very large portion of and has a significant influence on the national economy, accounting for 10 to 20 percent of the gross domestic product. Taking advantage of such large purchasing power in the public sector, the Innovation Procurement Initiative(the Public Procurement for the Innovation(PPI)) aims to support the SDGs by shoring up job creation, creativity, and innovation through the application of innovative technologies for improving public services that allow citizens to attain substantiality, safety, and eco-friendliness. While goods and services with multiple sales records had upper hands in the established public procurement market, their early-stage counterparts with much fewer sales records, even if technologically innovative, had difficulty joining the government procurement market. In order to overcome such problems and facilitate the development of new technology-based goods and services toward improving the quality of public services and establishing an inclusive, non-discriminatory society, since 2019, PPS has introduced and operated the Innovation Procurement(PPI) system, which is a new public procurement paradigm for supporting the technological innovation of small- and medium-sized companies.

The Innovation Procurement Initiative is a system to enhance social values and eventually increase the quality of public services by using government purchasing power. In particular, the Initiative strongly supports technological inventiveness for the socially vulnerable, young entrepreneurs, etc., also contributing to sustainability. The initiative conforms to Category 1 - Fostering Innovation to Deliver Inclusively and Equitable Services - in terms of its innovation regarding how inclusive and equitable services are fostered.

The Innovation Procurement initiative is a form of government support for technological innovation that aims to improve public safety, the environment, health, and digital access. Given the services it supports, the initiative can provide various types of support for the 2030 Agenda Goals, from Goal 2 (Promote sustainable agriculture) to Goal 14 (Conserve and sustainably use the oceans, seas, and marine resources for sustainable development), including Goal 3 (Ensure healthy lives and promote well-being for all at all ages) and Goal 5 (Achieve gender equality). If the Initiative is to represent the single most aligned SDG, it would be Goal 8 (Promote sustained, inclusive and sustainable economic growth, full and productive employment, and decent work for all). Among the detailed goals of this SDG, the Initiative particularly conforms to Goal 8.3 (Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation and encourage the formalization and growth of micro-, small- and medium-sized enterprises, including through access to financial services).

The Innovation Procurement Initiative contributes to the development of sustainable technologies, promotion of entrepreneurship, government use of innovative prototypes, provision of demonstration opportunities for products of innovative companies(start-ups and ventures), and improvement of quality and performance of Innovative Products. Of the innovation procurement companies registered with PPS, 98% are small- and medium-sized companies. Such companies participating in the initiative and developing new technologies are able to achieve growth through government support for technological innovation and capacity-building, while the government provides better public services. Therefore, the initiative supports the creation of a healthy ecosystem and virtuous cycle for the society and economy.

Due to COVID-19, many innovative digital solutions have been promptly introduced to help prevent the spread of infectious diseases. However, there are some classes of socially-disadvantaged people who have difficulties using such digital solutions, particularly the disabled and elderly. For example, many kiosks have been introduced at restaurants, airport immigration, and government offices, but such devices pose a challenge for people with visual or hearing impairments. Through the Innovation Procurement Initiative, an AI-based smart information public service system that communicates with users through sign language or voice was developed to allow for the provision of customized public services. The system provides information in voice or sign language video in response to requests for public service information made by users in sign language. It has been registered with Inno-KONEPS, PPS’ e-procurement platform exclusive for innovative solutions and installed in subway stations and the Daejeon City Hall. Using the methods for promoting technological innovation and innovative growth mentioned above, PPS has contributed to solving marginalization issues and improving government services by creating and publicizing best practices through the Innovation Procurement Initiative.

Innovative products are being actively used to solve gender inequality problems among internal members of the Public Procurement Service. “LISTEN2ME” is a mobile app for reporting workplace harassment or sexual harassment damage and protecting victims. It is a reporting system through which victims can safely submit reports and receive notifications and, it responses no matter the time or place. It has a real-time memo function that allows users to easily record damage and aims to prevent secondary damage by allowing reports to be handled promptly.

The Innovation Procurement Initiative eventually targets the entire citizens. Especially, to resolve social issues with the vulnerable groups, target groups are specified by the project. For example, the construction industry, which accounts for 13.6% of Korea’s gross domestic product, is an industry where workers on worksites must be protected from safety accidents. In 2020, the fatality rate of all accidents in the construction industry was 2.0, four times higher than the 0.46 recorded industry-wide and 0.5 of the manufacturing industry. More than half of such fatal accidents occurred on construction sites. Korea also has the highest occupational accident death rate among OECD member countries. It is thus necessary to find ways to prevent accidents, especially falls, on construction sites. In response, we developed and are currently commercializing a simple wearable airbag, like those used in cars, to protect workers from falls. It reduces the impact of falls by 55% and automatically sends a text message or makes an emergency call, providing information such as the location of the accident victim, to the relevant manager through an integrated communication application, allowing for rapid accident response.

As people’s interest in the efficiency and quality of public services has increased, the necessity of promoting innovation procurement has emerged. As a task of the comprehensive innovation promotion plan for 2019, among the 2030 agendas, the Innovation Procurement Initiative was established to create new values and realize social values in the fields of health, the environment, safety, and energy. In July of the same year, relevant ministries jointly prepared an “innovation-centered public procurement plan,” reported the plan at a cabinet meeting, and established the legal grounds and systems for setting up a joint public-private “pan-government strategy team” and embodying Innovation Procurement. In October 2020, as a result of the amendments to the Government Procurement Act, the Procurement Policy Review Committee was launched to serve as a public procurement control center, and the current policy system was completed. The committee, chaired by the Minister of Economy and Finance, is composed of the PPS administrator and vice-ministers of the Ministry of the Interior and Safety, the Ministry of Trade, Industry and Energy, and the Ministry of SMEs and Startups and not more than 20 private members. It is responsible for adjusting public procurement-related systems and policies. Innovation Procurement is conducted, in practice, by the Public Demand Identification Committee, which is a subcommittee of the Procurement Policy Review Committee. Matters related to the public demand identification system, procedures, and evaluation are determined through the Public Demand Identification Committee.

Budding but innovative products from SMEs struggled to join the established public procurement market, which could hamper the growth of their manufacturers. So it was necessary to match up them with public user entities for technological demonstrations through actual product use and removal of entry barriers to those SMEs. For example, solar-powered CCTV security and lighting products for places such as mountains and islands were being sold at only 45 units annually. PPS’ establishment of Inno-KONEPS, a specialized e-procurement platform for innovative solutions established in 2020 served to create public demand for and support the sale of such novel products.

To identify innovative products for public services, PPS has operated a supplier-suggestion method where innovative SMEs propose their novel goods/services for greater public services and also run a consumer-suggestion method where user entities propose their needs and the most fitful innovative products are searched among SMEs’. Moreover, to ensure active participation of citizens and institutions, from 2021, PPS has also operated ‘the Incubating System’ that applies the ideas of public entities and the public to Innovation Procurement and ‘the Scouting System’ that directly identifies SMEs with promising products outside the existing procurement market and supported development of their innovative products.

The Innovation Procurement Initiative was established by benchmarking the outstanding innovation procurement systems of other countries, including the United States’ innovative product pilot purchase project (CSO: Commercial Solutions Opening) and public procurement (conditional purchase) technology development support project (SBIR PHASE), Canada’s public testbed project (BCIP: Build in Canada Innovation Program), the United Kingdom's SBRI (Small Business Research Initiative) and GTC (Gov Tech Catalyst), and China's self-developed product government procurement system.

The Innovation Procurement Initiative features diverse, new, and cutting-edge technologies. In carrying out the initiative, the social value and the innovative nature of products are thoroughly reviewed. In addition, the government's response supports the project’s aim of improving public services.

Innovation procurement systems have been operated by many countries in various forms. In Canada, for innovative products (services) prior to commercialization, government bodies participate in the testing and use of the products as projects to support product commercialization. Korea has a good practice where a pilot purchase project has been conducted after the introduction of the Innovation Procurement Initiative, after which related projects have been expanded to other local governments (sub-national level). One such project was carried out to solve the problems of the information gap and technological marginalization through the distribution of public Wi-Fi to remote villages in mountainous areas, where Internet access is limited, in connection with the local government’s network. After trial use in Jecheon City, the project was stabilized. Thereafter, the project was expanded to the mountainous regions and 12 cities and administrative districts, thereby contributing to narrowing regional information gaps by facilitating Internet access.

The Innovative Procurement Initiative has a suitable practice to be readily shared with the rest of the world. Amid the prolonged pandemic and surging confirmed cases, hospitals across the nation suffered a shortage of beds. Fortunately, the Smart Negative-Pressure Quarantine Module(an emergency tent) and Negative-Pressure Isolation Carrier designated as ‘Innovative Products’ by PPS, however, greatly eased the burden of those hospitals and protected public health in a timely manner, quickening the transport and treatment of confirmed patients at a much lower expense. Those devices could be readily used in other countries hardest hit by the pandemic, preventing medical challenges from growing, with swift installment at a lower cost. And recipient countries can use the equipment according to the context they are in.

To ensure the Innovation Procurement Initiative taking firm root, PPS formed the Innovation Procurement Division in 2019 and made systematic modifications required for its operation. Because of PPS’ active publicity and positive results, the demand for pilot project testing by public bodies soared. In response, PPS established the Office for Deputy Director General for Innovation Procurement, a specialized innovation bureau, in 2021 and expanded it to include the Innovation Procurement Division, the Innovation Procurement Operation Division, and the Defense Procurement Innovation Division. Pilot projects have increased in scale from KRW 2.3 billion in 2019 to KRW 28 billion in 2020.

As this project can be continuously supported and encouraged through budgets for government policies and procurement projects, it is considered to have a high level of project sustainability. Remarkable progress has been made by the project over the past three years with a high level of user satisfaction. Institutional participation in trial purchasing projects in 2020 was 58.7% for local governments and local public enterprises, 24.8% for public bodies, and 11.8% for central government bodies. In 2021, local governments showed 62% participation. Considering the improvement made so far of public services through innovative technologies, the projects are expected to continue.

Yes

To manage the performance of the Innovation Procurement Initiative, performance indicators most suitable to each project, based on research findings, have been used. As for Inno-KONEPS, quantitative indicators are operated based on user satisfaction, number of information inquiries, number of users, performance, and scale of product registration. Evaluation is objectively made to improve the quality and services of the project. The subjects of the latest questionnaire were public bodies, participating companies, and local residents who were trying out innovative products. The questionnaire, which was conducted online and through survey URL and telephone survey, had about 140 participants.

The satisfaction indicators in the questionnaire are grouped into two categories: one with project operation (responded by user entities) and the other with product use(Innovative Prototypes). The former group has fourteen indicators including work satisfaction, product diversity, quality, and price. And the latter involves ten indicators including operability, convenience, quality, price, and innovation.

The results of the questionnaire on user satisfaction with the Innovative Products (targeted at those with direct or indirect experience of using innovative products) were positive, showing 80.2 points out of the full 100 points. However, it seems necessary to make improvements in terms of price and variety. The answers to the questionnaire showed that about 49% of companies supplying Innovative Products continuously increase their number of employees every year, and 65% of those companies had shown a net increase in recruitment after their participation in the Innovative Procurement project. As for satisfaction with the operation of Innovation Procurement projects, the evaluation scores for work satisfaction (86.2 points), reliability of PPS (85.0 points), and necessity of the projects (81.0 points) were high despite the fact that the projects were in their early stages. Therefore, the initiative can be considered to conform to the purpose of its operation.

To ensure stable operation, government-wide governance was established and is being carried out with the participation of all institutions related to the Innovation Procurement system. The Public Demand Identification Committee and Procurement Policy Review Committee, chaired by the Minister of Economy and Finance, are composed of the PPS administrator and vice-ministers of the Ministry of the Interior and Safety, the Ministry of Trade, Industry and Energy, and the Ministry of SMEs and Startups and not more than 20 private members. It is responsible for adjusting public procurement-related systems and policies. Innovation Procurement is conducted, in practice, by the Public Demand Identification Committee, which is a subcommittee of the Procurement Policy Review Committee. Matters related to the public demand identification system, procedures, designation(or revocation of the designation) for the Innovative Product, target-setting in public purchase, and evaluation are all determined through the Public Demand Identification Committee.

The goal of this project is to improve people's daily lives through Innovative Products. For that reason, the system is designed to listen to voices from diverse stakeholders including user entities, suppliers, and the public, and procure Innovative Products to meet their needs. To that end, Innovative Products are being sought out by gathering inventive ideas through the ‘People’s Ideas’ at Inno-KONEPS, a specialized e-procurement platform for innovative solutions. An organized cooperation system is being established based on the demand for Innovative Products from public user entities and the identification of the most suitable products. In addition, the system is being operated to facilitate companies’ entry into the public procurement market by discovering promising companies outside of the public procurement market by way of scouting. In this respect, the project can be viewed as an organized system in which citizens, the government, and companies participate, cooperate, provide support, and make developments.

Through the Innovation Procurement Initiative, public administration has been put into the hands of the people, and society is being improved through the development of new technologies based on a system that is free of the previous system’s limitations. Proceeding with innovation in public administration requires listening to the demands of citizens using public services, socially-vulnerable groups, public bodies conducting projects, companies developing products, people working in various fields and worksites, and finding relevant solutions. When the Innovation Procurement Initiative was introduced in 2019, we experienced difficulties in discussing projects with government departments and establishing a systematic base. However, given the areas in which service improvements could be achieved through technological innovation, the initiative became well-established in only three years, with many companies and institutions giving positive evaluations and actively participating. Public services are universally and commonly necessary for all countries and societies. Through Korea’s Innovation Procurement Initiatives and many innovative technologies and products that have been developed through it, we will work to solve common environment- and sustainability-related problems worldwide. We will also make continuous efforts to ensure that our best practices continue to contribute to the development of efficient, innovative solutions by sharing relevant information.