Denmark and the Nordics: Innovation Procurement Pioneers

At a Glance

Why Denmark and the Nordics Are Global Leaders

Traditional procurement assumes the government knows what it wants to buy and the market can supply it. But what about climate solutions, healthcare innovations, advanced cybersecurity tools, and smart city technologies that require R&D no vendor has yet undertaken? Innovation procurement — using public purchasing power to stimulate the development of novel solutions — addresses this gap. Denmark and the broader Nordic region have been global pioneers in developing and scaling these approaches.

Denmark’s Innovation Procurement Ecosystem

Denmark spends approximately €35 billion annually on public procurement, representing roughly 15 percent of GDP — one of the highest proportions in the OECD. The government has made a strategic decision to use this spending to drive innovation in areas of national priority.

Denmark’s approach operates through several channels:

• Pre-Commercial Procurement (PCP) — Active since 2014, funding multiple vendors through progressive R&D phases (concept, prototype, pilot) before selecting solutions for full commercial procurement.
• Challenge-based procurement — Identifying problems and inviting innovative solutions rather than specifying technical requirements.
• GovTech program — Opening procurement to startups through accelerator-style programs, mentoring, and simplified access.
• Public-private innovation partnerships — Structured frameworks for government and industry to co-develop solutions.

Case Studies

Hospital Robotics PCP

Rather than specifying what technology hospitals should use, the Danish government defined the problem — healthcare-acquired infections that cost billions and endanger patients — and invited innovative solutions.

The PCP proceeded through three phases: concept, prototype, and pilot. The result was Blue Ocean Robotics, a company that developed an autonomous UV disinfection robot that has since achieved commercial viability and been deployed in hospitals across Denmark and internationally. The PCP not only solved the original problem but created a commercially successful product and a thriving company.

Climate Solutions PCP

Denmark’s climate-focused PCP addressed urban flooding through sustainable infrastructure. Rather than procuring traditional drainage systems, the government sought innovative approaches. The result: permeable asphalt technology in Copenhagen, which absorbs rainwater rather than channeling it into overwhelmed sewer systems — simultaneously addressing flooding, reducing sewer overflow pollution, and mitigating urban heat islands.

The GovTech Startup Program

Denmark’s GovTech program recognizes that startups often possess the most innovative solutions but face the greatest barriers to government procurement:

• Challenge definition sessions where government agencies define problems startups might solve
• Simplified application process — reduced documentation requirements
• Mentoring and technical support to navigate procurement requirements
• Pilot contracts providing startups with revenue and references

The Broader Nordic Landscape

Across all five Nordic countries, combined public procurement exceeds €100 billion annually. Key success factors identified in Nordic innovation procurement research (Nordregio, 2023):

Table: Nordic Innovation Procurement Landscape

How Innovation Procurement Differs from Traditional Procurement

Table: Traditional vs. Innovation Procurement

Lessons for the United States

1. Define problems, not solutions — Challenge-based procurement consistently produces better outcomes than specification-based procurement in innovation contexts.
2. Share risk — Vendors will not invest in R&D without confidence that successful solutions will find a market.
3. Provide a pathway from development to deployment — The EU innovation partnership model specifically addresses the “valley of death” that kills promising innovations.
4. Create specialized capacity — Innovation procurement requires different skills and institutional support than traditional procurement.
5. Open procurement to startups — Denmark’s GovTech program demonstrates that small firms often have the best ideas but the biggest barriers to government contracting.

The Innovation Gap: The EU spent an estimated €13.4 billion on innovation procurement in 2020, representing 3.3 percent of total public procurement. The US lacks comparable aggregate data, reflecting the fragmented nature of its innovation procurement mechanisms (European Commission, 2021).

Cross-Cutting Role in Global Best Practices

Denmark/Nordics are the co-model (with the EU) for Pillar 7 (Innovation Procurement Pathways) in the proposed Seven-Pillar Framework for US Reform. They demonstrate Pattern 7 (Innovation Pathways) and provide the template for a US Federal GovTech Program.

Sources: Nordregio (2023), Brogaard (2017), Nordic Innovation (2024)