How public procurement, subsidies and regulatory sandboxes can support innovation
Published on 22nd April 2025
The government can support innovation in several ways. The primary way it can do so is to focus on the products and services it procures through public procurement. It can also support the private sector through subsidies, or by allowing for regulatory sandboxes where new products or applications can be tested in a more flexible legal framework.
Public procurement
Firstly, different levels (EU, federal, regional and local) can use public procurement to support innovation. In doing so, the terms PPI (Public Procurement of Innovative Solutions) and PCP (Pre-Commercial Procurement) are often used to refer to, respectively, innovative solutions that already exist but are not yet scalable, and innovative solutions that still require new research and development.
(a) Competitive dialogue and innovation partnership
While any procurement procedure can theoretically be used for the procurement of innovative public contracts, the Public Procurement Act 2016 provides for two procurement procedures that are ideally suited for this purpose, namely the competitive dialogue and the innovation partnership.
Similarities:
| Competitive dialogue / Innovation partnership | |
| Application for participation | Both require an application for participation and have a deadline of at least 30 days. |
| Selection of participants | Only selected entrepreneurs can participate; number of applicants may be limited. |
| Award criterion | Best value for money. |
| Equal treatment | No discriminatory disclosure; confidential information protected. |
| Sequential phases | Both can proceed in stages, limiting the number of solutions/offers. |
Differences:
| Competitive dialogue | Innovation partnership | |
| Legal basis | Article 39 Public Procurement Act | Article 40 Public Procurement Act |
| Purpose and focus | Determine means of meeting needs. | Development and procurement of innovative products/services/works. |
| Structure and phases | Continue until solution(s) are found. | Structured in phases with interim targets and payments. |
| Negotiations | Dialogue concluded upon solution(s) found. | Negotiation of offers, except final offer; no negotiation of minimum requirements/award criteria. |
| Termination of proceedings | Dialogue concluded upon solution(s) found. | Can be terminated after each phase; number of partners can be reduced. |
| Intellectual property rights | Confidential information protected. | Specific arrangements for intellectual property rights. |
| Payment and reimbursement | Possible prize money/fees. | Payments based on interim targets. |
| Specific criteria | Best solution for needs. | Capacities in research, development and implementation of innovative solutions. |
For the record, we point out that one could also use a competitive procedure with negotiations (MPMO).
(b) Non-price-related criteria
Innovation can also occur in more traditional public procurement, for example by giving more weight to non-price criteria.
For example, the new tender for the construction of offshore wind farms in the Princess Elizabeth zone encourages citizen participation. In this regard, article 19 of the Royal Decree of 3 June 2024 stipulates that 10% of award criteria (10.000 points out of 100,000) can be awarded to candidates for the share of civic participation (for indirect civic participation only the percentages above the minimum share of 1% of the total investment cost). This is also referred to as the 'innovation in business model' criterion.
The use of non-price criteria in public procurement is further encouraged by the EU Clean Industrial Deal. Indeed, the European Commission is announcing a reform of the public procurement regulatory framework in 2026. This will pay particular attention to targeted procurement and non-price criteria for sustainability, resilience and 'local content' requirements with a view to accelerating decarbonisation without compromising the competitiveness of European companies.
(c) Standard clauses
Finally, one could consider - as is already the case for sustainability - the elaboration of certain standard clauses that could be used by contracting authorities to achieve innovative public procurement.
Subsidies
Secondly, the government can support innovation through subsidies.
Innovation subsidies are provided at various levels. The EU notoriously has the Horizon Europe fund for general innovation, but also specific funds such as the Innovation Fund, funded by the proceeds of the EU ETS for innovative low-carbon technologies.
Within Belgium, subsidies around innovation are mainly allocated by the regional actors, VLAIO (Flanders), DGO6 (Wallonia) and Innoviris (Brussels). Subsidies at this level are very diverse in nature, but have some common features. For instance, they usually focus exclusively on companies with headquarters, or at least activity, in the concerned region. In addition, it is sometimes required that the receiving company is financially sound, or that it increases local employment. Certain subsidies, such as the Ecology Premium+, are tied to requirements such as joining an energy policy agreement or having an energy audit carried out.
It is beyond the scope of this insight to discuss individual innovation subsidies and the conditions that companies must meet to receive the subsidies as well as to retain the subsidies.
However, some general requirements can noted. For instance, any subsidy must have a legal basis. Moreover, the disbursing authority will be bound by the broader principles of good governance, including, specifically, respect for the principles of equality and transparency.
Given the limited availability of subsidies, careful spending is recommended.
Finally, the disbursing authority should monitor the recipient's compliance with the conditions for obtaining and maintaining the grant.
Regulatory sandboxes
Third, innovation can occur because the government withholds its regulating competence. In certain cases and under certain conditions, a regulatory sandbox can be used to test new products or services.
Regulatory sandboxes are innovative tools deployed by the government to encourage new technologies and business models. These zones provide a temporarily more flexible legal framework, allowing companies and research institutions to experiment with fewer restrictions from-existing laws and regulations.
The best-known field where regulatory sandboxes occur is the energy sector. The Flemish legal framework for this is provided by Title XIV/1 Energy Decree and Title X/1 Energy Decree. In the Walloon Region, Article 27 of the Electricity Decree provides the legal basis for 'Projets pilotes'. However, neither region can deviate from the mandatory European prescribed rules on the organisation of the energy market In Flanders, the Flemish Government has the power to approve regulation-free zones. In Wallonia, the CWaPE is competent to approve such projects. As a result, in the latter Region, a derogation on network tariffs or technical regulations, for example, can also be granted.
Moreover, the Flemish Region also provides a framework for regulation-free zones outside the energy sector in Art. III.119 et seq. of the Administrative Decree. These provisions provide a general legal basis for creating regulatory zones in areas other than energy law.
The EU AI Act also provides for regulatory sandboxes. This allows companies to set up AI system development, training, testing and validation projects within a controlled environment before putting these systems into service. In that context, personal data collected for other purposes can be reused for clearly defined training purposes. Participation in regulatory sandboxes should guarantee free access for small and medium-sized enterprises (SMEs) and start-ups. Besides sandboxing, the EU AI Act also allows for testing under real conditions, prior to deployment.
Fiscal regime
For the record, we also point out that the state can support innovation through fiscal measures. For more details on this, we refer to our earlier insight on the topic.
Osborne Clarke comment
Osborne Clarke offers legal advice and support regarding innovative legal solutions, both in the field of public procurement, AI, energy law and broader public law. We assist clients in drafting or complying with the terms of a tender or subsidy; in drafting the contractual framework around an innovative solution or generally in implementing new regulations in internal business operations.
You can contact one of our legal experts for assistance on a specific case.
