EU Innovation Act: Public Innovation Procurement

The Commission is thus responding to analyses such as the Draghi Report, which view the removal of barriers to investment as an essential prerequisite for Europe to regain its global competitiveness. Analyses of international patent data show that, in recent years, the EU has lost significant ground in global comparison, particularly when it comes to radical innovations that are essential for tapping into new markets (see cepInput 2/2026).

The reasons for Europe’s lack of innovation are manifold: barriers exist at every stage of the innovation process. Small innovative companies, in particular, suffer from a lack of access to testing infrastructure and venture capital. Regulatory fragmentation among Member States, for example, regarding the exploitation of intellectual property resulting from publicly funded research—also poses a barrier to the commercialization and scaling of new business models. Overall, the Commission views the lack of coordination in Member States’ innovation policies as a key reason for untapped innovation potential.

Public procurement is a lever for promoting innovation that has so far been neglected by many member states. The Commission proposes making greater strategic use of public procurement in the EU as a tool for scaling up innovative products, services, and technologies. This can have a stimulatory effect at several stages of the innovation process: the awarding of R&D contracts, the procurement of innovative solutions still to be developed, or the procurement of existing solutions that are not yet widely adopted in the market.

The basic advantages of this instrument are evident. Unlike traditional R&D funding, it can directly create demand for innovative solutions, thereby accelerating the development and scaling of markets. The public procurement sector, accounting for about 14% of EU GDP, represents a potentially powerful lever. At the same time, public institutions and companies take on the role of early adopters of innovation. In the medium term, this can also contribute to improving the quality and cost-efficiency of public services.

To harness this potential, public procurement agencies must first establish the necessary institutional capacities. Units and procurement processes for innovation-driven procurement must be set up, and staff must be trained. In-depth technological and legal knowledge of how innovation processes work is essential. Comprehensive risk management is also crucial. Public procurement of solutions that have not yet been commercialized has a fundamentally different risk profile than traditional procurement. In this context, innovation risks are partially pooled. To limit risks to public budgets, an intelligent procurement design is needed, including multi-stage project selection processes and balanced arrangements for sharing risks and future revenues. Municipal institutions, in particular, as the backbone of public procurement in Europe, are likely to be overchallenged in many cases without external assistance.

Cross-border cooperation is therefore essential. Existing EU guidelines should be further developed into a common EU model for innovation procurement, including central points of contact to provide advice to public institutions. In particular, the establishment of joint, voluntary procurement platforms for innovative solutions can serve as a means to pool expertise, realize economies of scale, and better distribute fiscal risks. Limiting individual risks would also allow for a stronger focus on the high-risk segment of radical innovations. Involving private companies in the financing and strategic management of such platforms can provide the necessary market expertise. The EU would thus move closer to the successful U.S. model of agile innovation support geared toward rapid scaling.