Innovation partnership and innovation procurement
Innovation procurement lets a public buyer fund the development of a solution that does not yet exist, then buy it. UK and Irish routes for SMEs.
Updated on September 5, 2026
An innovation partnership is a single public contract that combines the research and development of a new product, service or works solution with the purchase of the result. It lets a buyer fund the development of something the market does not yet offer, without having to run a second competition to buy it.
How it works
The Procurement Act 2023 (verified 2026-09-05) does not keep innovation partnership as a named procedure. In England, Wales and Northern Ireland the same outcome is achieved inside the competitive flexible procedure, which a buyer designs itself: it can be structured in successive research, prototyping and evaluation phases, each with its own objectives, payment and decision point, with one or several partners carried forward, and with the purchase of the finished solution built into the same contract. The Act's objectives include having regard to innovation, and buyers are encouraged to use the flexibility for exactly this purpose. In Ireland the named innovation partnership procedure still exists under the 2016 procurement regulations, with the same phased structure.
Above the thresholds the process is advertised through a tender notice on Find a Tender, or on eTenders in Ireland; below them it can be run more simply. Whichever route is used, the documents must set the phase objectives, the payment for each phase, the grounds for ending the partnership between phases, the performance and cost levels the final solution must reach, and the ownership of intellectual property in the results.
Other routes exist alongside it. The Small Business Research Initiative funds feasibility and prototype work in staged competitions, and Ireland runs comparable pre-commercial procurement challenges, but neither commits the buyer to purchase at the end.
What it means for a bidder
This kind of contract is built for start-ups and innovative SMEs: it pays for development, secures a first public reference customer and can lead to a firm order if the solution performs. It is also demanding, with contractual milestones, shared governance and intellectual property terms that deserve careful reading before you commit.
Before bidding, check that the buyer has done real preliminary market engagement showing that no existing product meets the need, that the phase timetable matches your development capacity, and that the payment for the research phase genuinely covers your costs. This is a contract, not a grant: an innovation grant or challenge fund carries no obligation on the funder to buy anything.
Example
A fictional English waste authority needs a sensor that reports the fill level of underground bins reliably, which no available product does. It runs a phased competitive flexible procedure worth an estimated £350,000, appoints two young companies for a paid prototyping phase, then keeps the one whose prototype passes field testing. That firm goes on to fit 400 bins under the same contract.
Frequently asked questions
Must the buyer purchase the solution developed?
No. It buys only if the solution reaches the performance levels and cost ceilings set in the contract, and it may stop the partnership at the end of any phase.
Who owns the intellectual property?
Whatever the contract says. Common practice leaves ownership with the supplier and gives the buyer a licence, but other arrangements are used, so negotiate this early.
Can a single company bid alone?
Yes. The buyer may also carry several partners in parallel and compare their solutions phase by phase.