The public sector is coming under increased pressure to pioneer new services and adopt innovative operating models. This pressure is not just coming from structural reforms being made to services, such as the ongoing social and health service overhaul. Part of it is coming from the underlying political goal to open development opportunities in the public sector for corporate ideas, and thus provide companies with reference cases, speed up their growth and improve their opportunities to export new products and services.
22.5.2017
Procurement Pioneers Benefit from Innovation Partnership
Johanna Lähde
Related services
To date, innovation-positive public contracting authorities in Finland were stuck between a rock and a hard place. Procurement regulations did not allow for product development cooperation with private companies to lead to a finished commercial product or to the purchase of a service directly from the partner company. Many projects were stifled before they could get off the ground.
New Innovation Partnership Offers Solutions
Fortunately, the reform of the Public Procurement Act has changed things. Innovation partnership is a new concept allowing contracting authorities to combine the product development phase and the contract for the finished solution into a single whole.
A public-sector purchaser can choose innovation partnership when there are no ready solutions on the market for the contracting authority’s needs—in other words, when it is necessary to create something new. The object of innovation can be very different in different procurement projects. For example, innovation partnership could be used to develop robotics or artificial intelligence solutions for welfare services or to seek new solutions for the energy efficiency and comfort of buildings.
The contracting authority can choose one or more innovation partners with which to engage in development work. The contracting authority can reduce the number of partners during the development phase of the product or service and can purchase the solution from the company whose results are best suited to the authority’s needs.
Innovation Partnership Raise New IPR Challenges in Public Contracts
Innovation partnership also poses new contractual challenges. The contracting authority needs to decide in advance the model according to which the authority and its partners will share any IPRs that may be created in the partnership. The Public Procurement Act also requires that the contracting authority state the IPR arrangements in the request for tender documentation.
Though contracting authorities may be tempted to demand all rights to inventions or software for itself, this contractual model is one that corporate partners rarely find acceptable. It makes more sense to find a middle ground in which the contracting authority’s competitive edge (if such is being sought) is secured without preventing the partner from commercialising its development work elsewhere. Ownership of IPRs is rarely a financially sound choice contracting entities, and sufficient rights can be secured through extensive rights of use. After all, contracting authorities seldom plan on commercialising the results of development work themselves.
In a situation with several innovation partners, the definition and protection of existing IPRs takes centre stage. Only by making sure that none of the parties’ existing rights are abused can the willingness of each partner to contribute their expertise to the project be ensured and an open and innovative development environment created. The best results are always obtained when it is a win-win situation for everyone involved.
Latest insights
Article published 2.10.2018 – Public Procurement
Is This a Public Procurement – Do We Need a Tender Process?
Article published 27.8.2018 – Public Procurement
Responsibility is Routine in the Corporate World – What About Public Contracting Entities?
Article published 20.6.2018 – Public Procurement
When Group Companies Compete against Each Other in Public Procurement
Article published 9.2.2018 – Public Procurement
Too Many Public Procurement Disputes in Finland
Johanna Lähde
Anna Kuusniemi-Laine
Johanna Lähde
Anna Kuusniemi-Laine
Latest references
The Finnish Climate Fund – Investments in growth companies – towards a carbon-neutral society
We have advised the Finnish Climate Fund as it has invested in Finnish projects that, for example, support the green transition of various industries, leading towards a carbon-neutral society. The Finnish Climate Fund is a Finnish state-owned special-assignment company. Its operations focus on combating climate change, boosting low-carbon industry and promoting digitalisation. The Climate Fund invests in large-scale projects in which the fund’s investment is crucial to enable the project’s realisation in the first place, on a larger scale or earlier than with funding from elsewhere. Investment in Aeromon that specialises in emissions measurement and mapping We advised the Finnish Climate Fund in its investment in Aeromon Oy. The funding will be used to further advance technology relating to software systems and measuring capacity. Aeromon’s technology enables the location and measurement of fugitive emissions generated by industrial plants and landfills almost in real time and in a mobile way by using unmanned aerial vehicles. The company has developed the measuring methods and equipment as well as the algorithms required for processing the signals. For their part, Aeromon’s solutions promote development towards zero-emission society. Investment in Joensuu Biocoal We advised the Finnish Climate Fund in its investment in Joensuu Biocoal Oy. Joensuu Biocoal will build a torrefied biomass production plant, which is the first commercial-scale production plant of its kind in Finland. The torrefied biomass produced by Joensuu Biocoal will primarily replace the use of coal in industrial processes in the cement and steel industries, which still use a lot of coal. For its part, building the plant accelerates the transition away from coal in process industries and helps reduce the carbon dioxide emissions from industry in the medium term. Investment in QHeat that specialises in geothermal heat generation We advised the Finnish Climate Fund in investment in Quantitative Heat Oy (QHeat). The funding will be principally allocated to the purchase of new, more efficient drill equipment for drilling medium-deep heat wells. Geothermal heating is part of the solution for transitioning away from the use of fossil fuels for heating as heat wells generate heat energy-efficiently and without combustion. Medium-deep heat wells can also be used for cooling real estates, in which case they can store energy to even out seasonal variations. Geothermal heat production has a great deal of potential for climate action in applications such as low-emissions heating solutions. Investment in Finn Recycling We advised the Finnish Climate Fund in its investment in Finn Recycling Oy, developer of a regeneration solution enabling the reuse of waste sand generated by metal foundries. The funding’s purpose is to accelerate the deployment of reclamation equipment and the company’s entry into the international market. The annual global consumption of sand products is 40–50 billion tonnes. Particularly foundry processes in the metal industry generate waste sand tens of millions of tonnes each year. Finn Recycling’s solution extends the service life of foundry sand, reducing the use of virgin sand and the amount of waste sand and greenhouse gas emissions generated by foundry processes.
Case published 7.2.2023
Finnish Climate Fund – Investments in Hydrogen and Circular Economy Growth Companies
We advised the Finnish Climate Fund in three separate financing arrangements in the autumn of 2021. In these arrangements, the Finnish Climate Fund invested a total of EUR 16.5 million in Finnish growth companies with solutions that have significant emissions reduction potential in the hydrogen and circular economies over the coming decades. Aurelia Turbines The Finnish Climate Fund has decided on a EUR 5 million capital loan to Aurelia Turbines Oy to speed up the deployment of more efficient industrial gas turbines. For the first time, the Climate Fund’s funding includes a sustainability incentive. Aurelia Turbines makes more efficient gas turbines for industrial needs. These gas turbines have been designed to flexibly use various degrees of hydrogen and other energy sources. Hydrogen will play an important role in the transition towards a low-carbon society. The hydrogen economy will be built on a value chain of hydrogen production, storage, transport and utilisation. Aurelia Turbines’ solution is estimated to have a cumulative emissions reduction potential of around 1.5 Mt CO2e over a ten-year period. In addition to emissions reduction, the Finnish Climate Fund’s financing will support the development of the hydrogen cluster in Finland. Betolar The Climate Fund has granted a EUR 7 million capital loan to materials technology company Betolar Oyj. The investment—the Climate Fund’s first in a digital solution—will be allocated to a marketplace with major emissions reduction potential. Cement production is one of the greatest emission sources caused by human activity, accounting for roughly 7% of global carbon dioxide emissions annually. The significant emissions reduction potential of Betolar’s solution is based on replacing virgin raw materials with existing industrial side streams, which could reduce emissions caused by the raw materials of concrete by up to 80% compared to traditional concrete products The digital platform is intended as a digital marketplace for Betolar’s solution as well as a meeting place for side stream suppliers and concrete manufacturers. This digital marketplace can enable significant emissions reductions to be realised sooner and on a larger scale. Magsort The Finnish Climate Fund granted a EUR 4.5 million capital loan to Magsort Oy’s circular economy solution to utilise steel industry side streams. Steel and concrete production are significant sources of emissions. With Magsort’s solution, almost all metal can be recovered from waste slag—and in the future the remaining slag could even be ground into cement. The more efficient utilisation of steel slag in industry not only creates considerable export potential but also major cumulative emissions reduction potential over the next decade, as much as 7.5 MtCO2e. The Finnish Climate Fund is a Finnish state-owned special-assignment company. Its operations focus on combating climate change, boosting low-carbon industry and promoting digitalisation. Approximately 65% of the Climate Fund’s investments relate to climate change and about 35% to climate-related digitalisation.
Case published 28.12.2021
Finnish Climate Fund – Investment in Green Hydrogen Company P2X Solutions
We advised the Finnish Climate Fund in its investment in P2X Solutions Oy, a green hydrogen and Power-to-X technology company. P2X Solutions will construct a 20 MW green hydrogen production plant, which will run on electricity produced by renewable energy and produce green hydrogen. The Finnish Climate Fund’s investment amounted to EUR 10 million. P2X will refine part of the green hydrogen further utilising Power-to-X technology. It will implement circular economy solutions and capture carbon dioxide emissions from a Finnish industrial plant. P2X will produce synthetic biofuel from the green hydrogen and caught carbon dioxide, thereby supporting the development of emission-free society. The Finnish Climate Fund is a Finnish state-owned special-assignment company. Its operations focus on combating climate change, boosting low-carbon industry and promoting digitalisation. Approximately 65% of the Climate Fund’s investments relate to climate change and about 35% to climate-related digitalisation. P2X is a producer of green hydrogen and forerunner of Power-to-X technology in Finland with a vision to produce green hydrogen and refine it further into synthetic fuels in a cost-effective manner.
Case published 22.12.2021
Procurement Cases – Procurement Law Services
We have helped many of our clients navigate shifting procurement legislation. We have acted on behalf of both purchasers and tenderers in negotiated proceedings, life cycle projects, service outsourcing projects, data system procurements and reorganisations of operations. We put innovative new procedures and results-based procurements into practice. Here are a few of our procurement case references.
Case published 19.4.2017