Governments are under increasing pressure to improve the cost effectiveness of public services while addressing complex challenges like climate change, public health crises, and digital transformation. Innovation is essential in overcoming these issues, and public procurement plays a central role in fostering it. By strategically utilising public procurement, governments can stimulate the development of new products, services, and technologies to address emerging societal needs, thus improving public services and strengthening the business ecosystem, especially for SMEs. 

This paper explores innovation procurement, which uses public procurement as a strategic tool to drive economic growth, improve public sector performance, and foster technological advancements. Unlike innovative procurement, which focuses on enhancing procurement processes, innovation procurement focuses on acquiring novel solutions that create value and address public challenges. It encourages investment in research and development, promotes competition, and empowers public sector managers to adopt innovative solutions. 

Despite its potential, challenges persist, including concerns about the sustainability of public demand for innovation. An analytical framework developed in this project identifies four pillars to address these challenges: 

(1) improving solution design, 

(2) creating inclusive solutions, 

(3) reducing barriers to innovation adoption, and 

(4) promoting policy tools that encourage R&D. 

Case studies illustrate how public innovators can overcome these barriers. The report emphasises the importance of capacity building, stakeholder collaboration, and measuring innovation outcomes. Governments are encouraged to coordinate procurement across sectors to scale up innovative solutions, ensuring that public procurement can drive innovation, improve services, and stimulate economic growth.