Government doesn’t have an innovation problem – it has a demand problem

Government must change what it buys and how it works with suppliers if it wants to unlock innovation across public services, according to Toni Peters, deputy director of commercial innovation at the Department for Business, Innovation, Science and Trade (BIST).

Speaking at Think Innovation for Government 2026, Peters (Pictured) challenged the assumption that procurement legislation was preventing public sector organisations from adopting new technologies and approaches.

“My first message is procurement isn’t the problem. It’s definitely a demand problem,” she said.

“What the Commercial Innovation Hub will tell you is this is a cultural problem, and it is a behavioural problem. People buy what they’ve always bought, and they buy it in the way they’ve always bought it, and that means they get the same outcomes they always got.”

Peters leads the 14-person Commercial Innovation Hub, which works across central government and the wider public sector to help organisations adopt innovative approaches to procurement. She argued that the UK was good at funding research and development but struggled to commercialise the resulting products and services.

“We have the innovations, we have the great ideas, we fund the research and development,” she said. However, too many promising businesses struggled to secure government contracts and achieve the scale needed to succeed.

Peters warned that this risked turning the UK into an “incubator economy”, where intellectual property and economic opportunities were ultimately lost overseas.

A new approach to buying innovation

Peters used the session to introduce the newly launched Procurement of Innovation Playbook, which provides a framework for public sector buyers looking to adopt innovative products and services. It draws on approaches developed across government, including the Home Office’s Accelerated Capability Environment and the Ministry of Defence’s Commercial X.

Rather than specifying a particular technology or solution, she urged organisations to start by identifying the problem they needed to solve.

“Frame the problem, don’t define what you want. Don’t give solutions. What is the problem that you’re trying to solve?”

That means engaging suppliers earlier, testing potential solutions through demonstrations and pilots, and considering long-term value rather than simply selecting the cheapest bid.

“Don’t just send out a paper-based ITT [invitation to tender] saying fill in ‘250 words and come back to us. And if you score a five, you’re the winner,’” she said.

Peters also stressed that innovation should not automatically mean AI.

“AI is sometimes the answer. But the commercial innovation part is solution agnostic. You will never hear us start with there’s an AI solution for that.”

From procurement to delivery

The Commercial Innovation Hub has already supported several projects designed to demonstrate the benefits of a different approach.

Working with the Ministry of Housing, Communities and Local Government (MHCLG) on augmented planning decisions, the hub helped reduce a procurement process that would typically take six to nine months to just 14 weeks.

Peters attributed the improvement to greater supplier engagement, demonstrations instead of extensive paperwork and faster evaluation.

Another project, involving AI tutoring tools for the Department for Education, resulted in seven of eight contracts being awarded to UK-based suppliers. The procurement was structured to allow SMEs to participate, with suppliers progressing through a three-stage research and development process.

The hub also worked on procurement for the driving theory test, helping to replace an input-based specification with a challenge focused on the outcomes required.

Making innovation business as usual

Looking ahead, Peters outlined plans for a Commercial Innovation Gateway, an interactive environment where public sector buyers and suppliers could discuss challenges, develop partnerships and explore new solutions.

The hub is also working on published challenge pipelines and a marketplace for innovative products and services. The ambition, she explained, was to make innovative procurement part of everyday government buying rather than something requiring specialist intervention.

“What’s really key in the life cycle here is that failure and failing fast is a learning lesson,” said Peters.

She added that innovation depended on closer collaboration between government and industry, with buyers clearly communicating their challenges and suppliers helping identify potential solutions.

“Innovation can only work if the public sector and industry work together.”