Public Procurement as a Tool to Stimulate Innovation: Science and Technology Report

Lord Rees of Ludlow Excerpts

Tuesday 13th September 2011 Grand Committee

[Lord Rees of Ludlow]

My Lords, my comments this afternoon will be somewhat oblique to the main thrust of the report, but I will conclude with a specific recommendation. As the noble Lord, Lord Krebs, explained, our committee was concerned with the mindset within government, whereby innovative procurement is inhibited because it is safer to use an established contractor and a well tried technique. But sometimes there is a compelling need for something that has never been achieved before and, in these cases, innovation is a prerequisite and risk-taking is unavoidable. The key issue then is how to jumpstart or accelerate R&D.

In this context, we can perhaps learn from historical precedents dating back nearly 300 years. Specifically, we should emulate the British Government’s response to the need to determine longitude at sea, a crucial requirement both for the Navy and civilian shipping. As is well known, in 1714 the Government set up the longitude prize, which offered £20,000—equivalent to many millions in today’s money—for a method that would determine longitude to better than 30 miles, with smaller sums for achieving less precise targets. This prize was administered by one of the first quangos, the Board of Longitude. It stimulated a variety of approaches—most famously, of course, John Harrison’s accurate chronometer.

There are some more recent precedents. We have heard a lot about DARPA, run by the US Department of Defense. It is extolled in our committee’s report as an effective agent of innovation, mainly for the defence sector, but often with spin-offs of commercial or social benefit. One way DARPA has achieved all this is by offering high-profile prizes. For instance, a few years back, it organised a competition for driverless vehicles. These robotic cars had to navigate a long, complicated path in the Mojave Desert. In the first year, no competitor did more than seven miles. A year later, 22 entries did better than that. The total investment by contestants, commercial bodies and universities was far more than the $4 million offered in prizes. The net effect was to stimulate the technology and raise the profile of those who had succeeded in an engineering challenge.

DARPA is, of course, publicly funded. In the US, the powerful incentive of prizes is recognised by entrepreneurs in the private sector. Pre-eminent in such ventures is the X Prize Foundation, a wide ranging and highly professional enterprise that has the savvy and the organisational infrastructure to establish, organise and monitor grand challenge prizes on various themes. It describes its mission as,

“inspiring the revitalisation of markets which are currently stuck due to existing failures or a commonly-held belief that no solution is possible.”

First, there was the much publicised prize for suborbital space flight, which was won in 2004. Under the auspices of this foundation, this has led to a diversified menu of grand challenges, spanning not just technology but societal and social issues. There are prizes for fuel-efficient cars, cheap genome sequencing, robotics, better ways of diagnosing TB, for cleaning up oil slicks and so forth. The special virtue, or USP, of these big prizes is that they enlist the interest of many people and organisations taking diverse approaches to reach the goal. They thereby release much investment, totalling a sum far larger than the prize itself. They bring about a tremendous focus of competitive talent. To the individual, or the small company, the prize money of several million dollars is a significant incentive. To the big company, the publicity and the PR are more important. These prizes have a high public profile.

If the challenge is manifestly of public interest and importance and incremental progress can be quantified, then these prizes not only attract continuing interest from the public, but have an important educational function. They also offer PR to the engineering profession and raise the profile and the schemes of innovators.

Here in the UK, there have been modest initiatives along these lines. In 2008, ESTL ran a grand challenge competition to help design robotic systems to help ground troops seeking to probe hostile environments. Competitions run by the SBRI have led to innovative contributions to, for instance, mobile phone security. But these precedents could be more widely followed. Organisations such as the SBRI and the TSB could build on what has been done already and establish Longitude-style prizes with a mixture of public and private support, perhaps in association with learned societies and academies. Better still, could not the UK trump what is being done in America by something really high profile? How about celebrating 2012 by, for instance, a series of Olympic or Diamond Jubilee grand challenge prizes open to the world?