Co-evolution of public procurement, supplier innovation, and governance: a case study on municipal waste management innovation

This paper develops a perspective to the relationship between public procurement and supplier innovation as a co-evolutionary process. The co-evolution results from successive rounds of technology development, service practice... [ view full abstract ]

This paper develops a perspective to the relationship between public procurement and supplier innovation as a co-evolutionary process. The co-evolution results from successive rounds of technology development, service practice change, and development of new governance arrangements. Particularly when an innovative solution involves a more complex setting than a binary relationship between buyer and supplier, systemic innovation emerges from novelty developed in multi-partite interaction. Public service process innovation, technological innovation by suppliers, and new governance arrangements co-evolve in succeeding steps.
To employ the co-evolutionary perspective in an empirical context, two case studies from the domain of municipal waste management services are analysed. The first case innovation is a waste collection logistics system developed in collaboration between a municipal waste utility and a small private enterprise, and diffused and further elaborated in other municipalities. The second case concerns a pneumatic waste collection system through pipe networks for residential city districts. In both cases, the innovative solutions have been developed, adopted and diffused through co-evolutionary process where innovation, collaborative development, and competition through procurement mechanisms have ensued.
The results indicate that these case innovations generate improved service performance which is achieved through a system-level novelty emerging from co-evolution of the three main components: innovative technology solution developed by suppliers, waste collection service improvement, and associated governance arrangement needed to deploy the novel practice and accommodate needs of multiple parties. As the innovative systems diffuse by procurement of new installations, they are elaborated and new functionalities are introduced. Impacts of these innovative waste management systems are observed in multiple categories: higher service quality experienced by customers, improved service productivity, and lower environmental footprint. Furthermore, information technology plays an essential role as an enabling factor for performance-based contracting. Only when information and communication technologies and associated data management practices are deployed effectively can sophisticated performance contracts with incentive/sanction mechanisms be introduced, monitored and enforced.