The UK's AI Opportunities Action Plan -- a procurement view

The UK Government has today published its AI Opportunities Action Plan, focused on “Ramping up AI adoption across the UK to boost economic growth, provide jobs for the future and improve people's everyday lives”. The plan heavily focuses on public sector AI adoption and formulates a series of recommendations to boost AI procurement. In this post, I highlight some aspects from a procurement perspective.

The action plan has three goals: (1) invest in the foundations of AI;
(2) push hard on cross-economy AI adoption; and (3) position the UK as an AI maker, not an AI taker.

The second goal further details that “The public sector should rapidly pilot and scale AI products and services and encourage the private sector to do the same. This will drive better experiences and outcomes for citizens and boost productivity”, and thus foresees a significant role for the adoption of AI by the public sector. The plan stresses that “AI should become core to how we think about delivering services, transforming citizens’ experiences, and improving productivity. … government should also focus on its role as a major user and customer of AI and how it uses its powers to catalyse private sector adoption”.

Coupled with the current budget and expectations of public sector productivity gains, the action plan will put AI adoption top of the agenda for public sector organisations (if it wasn’t there already…).

The plan also formulates a series of core principles underpinning those goals, which include the need to “Invest in becoming a great customer: government purchasing power can be a huge lever for improving public services, shaping new markets in AI, and boosting the domestic ecosystem. But doing this well is not easy - it will require real leadership and radical change, especially in procurement.”

Focus on AI procurement

In more detail, under section 2 of the plan, the public sector should adopt a “Scan > Pilot > Scale” approach with several implications for procurement — which the plan considers will need to be thought of differently. The procurement implications will mainly concern the pilot and scale phases of the proposed approach. The plan sets out the following:

Pilot - rapidly developing prototypes or fast light-touch procurement to spin up pilots in high-impact areas, robust evaluation and publishing results. This will require:

34. Consistent use of a framework for how to source AI - whether to build in-house, buy, or run innovation challenges - that evolves over time, given data, capability, industry contexts and evaluation of what’s worked. Where appropriate, the government should support open-source solutions that can be adopted by other organisations and design processes with startups and other innovators in mind.

35. A rapid prototyping capability that can be drawn on for key projects where needed, including technical and delivery resource to build and test proof of concepts, leveraging in-house AI expertise, together with specialists in design and user experience.

36. Specific support to hire external AI talent. Creation of a technical senior civil servant stream, benchmarking of internal AI-related role pay to at least 75% of private-sector rate and a technical AI recruitment screening process.

37. A data-rich experimentation environment including a streamlined approach to accessing data sets, access to language models and necessary infrastructure like compute.

38. A faster, multi-stage gated and scaling AI procurement process that enables easy and quick access to small-scale funding for pilots and only layers bureaucratic controls as the investment-size gets larger. Multi-staged “Competitive Flexible Procedures” should be encouraged, and startups compensated for the rounds they make it through.

Some of these proposals go to the current weaknesses in public sector AI procurement, such as the absence of a clear and consistent framework for the procurement of AI, limited use of open source solutions, limitations in accessing public sector specific data (on which section 1.2 includes more recommendations), or, notoriously, a large digital skills gap in the public sector. Implementing measures to address these issues would clearly make a difference. However, the plan does not contain any details on the level of public finance available to make the required investments — especially in public sector digital skills — and the press release accompanying the plan solely mentions investments committed by private companies seeking to develop data centres or a consultancy tech hub. The government’s response to the plan does not provide details either. Without a dedicated and ambitious investment plan, these recommendations cannot be implemented.

Moreover, some of the other proposals around prototypes and light-touch procurement processes can be problematic when coupled with the Procurement Act 2023 (soon to enter into force).

First, it is worth highlighting that the procurement of prototypes and their development is susceptible of direct award under the Procurement Act 2023, even where the benefits do not accrue exclusively to the contracting authority for its use in the conduct of its own affairs (as still the requirement under PCR2015, reg.14), and without this necessarily requiring the output of the development/prototype to be transferred to the contracting authority (s.41 PA23 and Sch.5 paras 2 and 3). Moreover, under current guidance on Intellectual Property Rights (IPR), the preferred option is to leave IPR under supplier ownership “where the creation of any New IP created cannot easily be separated from the (Supplier’s) Existing IP. For example, where suppliers provide software as a service solutions (SaaS), New IP (principally code) cannot be separated from the supplier’s Existing IP because it all resides as a single entity on a remote server.” In that case, the contracting authority is advised to acquire licenced rights.

In my view, the combination of these two aspects could result in the use of public contracts to subsidise the development of prototypes that remain in private ownership and, importantly, this would be done through non-competitive procedures. Moreover, this could also lead to the subsequent direct award of contracts to scale up the deployment of the prototype on grounds of the IPR exclusivity thus generated (s.41 PA23 and Sch.5 para 5). In my view, this approach would be problematic and create a potential loophole in competitive procurement of AI solutions. It would thus be highly advisable to revise guidance on IPR, specifically in relation to the development of AI prototypes, to avoid this situation — perhaps with a default position being to retain IP under Crown ownership in these cases. It would also seem that there is a broader reflection to be had on the interaction between R&D grants and procurement contracts, as procurement approaches to prototyping can create other difficulties (eg on liability to third parties, etc).

Second, the use of competitive flexible procedures (CFPs) should be considered in more detail. Under the Procurement Act 2023, CFPs are a ‘DIY’ procedure because each contracting authority can come up with its own design and requirements, thus making each CFP unique. This would significantly raise participation costs and be prone to litigation and other problems. In that regard, it would be desirable to create a single ‘AI CFP’ to be used across the board, to save AI companies (and specially the tech start-ups targeted in the AI action plan) from having to spend resource ‘learning’ the rules of the relevant CFP, but also to reduce the need for specialist knowledge at contracting authority level. Given the extremely limited experience with competitive dialogues and innovation partnerships to date, expecting contracting authorities to develop very tailored approaches to CFPs seems excessively optimistic in any case.

The plan then moves from piloting to scaling up and sets out the following:

Scale - identifying successful pilots that can be applied in different settings to support citizens (e.g. to reduce waiting lists or minimise time and cost to complete paperwork) and rolling them out beyond organisational boundaries. Scale is essential if AI is to have a meaningful impact on productivity, effectiveness and citizen experience, as well as maximising government spending power. Moreover, doing this well and procuring in a way that benefits innovators is a powerful lever for upending the cliché that the UK is good at invention, but poor at commercialisation. It will require:

39. A scaling service for successful pilots with senior support and central funding resource. The government should support a select number of proven pilots to scale - with central finance and tools available to avoid fragmentation across systems and budgets - and achieve up to national level reach.

40. Mission-focussed national AI tenders to support rapid adoption across de-centralised systems led by the mission delivery boards. An example of tendering to enable scale is the NHS’s AI Diagnostic Fund allocating £21 million to twelve imaging networks, covering 66 NHS trusts across England, significantly speeding up the roll out of AI diagnostic tools nationwide. However, these tenders should be designed to encourage new entrants, avoiding reliance on commercial frameworks where possible.

41. Development or procurement of a scalable AI tech stack that supports the use of specialist narrow and large language models for tens or hundreds of millions of citizen interactions across the UK.

42. Mandating infrastructure interoperability, code reusability and open sourcing. The AI infrastructure choice at-scale should be standardised, tools should be built with reusable modular code components, and code-base open-sourcing where possible.

As above, this section also includes recommendations that would focus on key areas of current weakness, such as the need to provide additional support to scale up successful pilots, as well as taking a more decided approach to interoperability and open source.

However, this approach also raises some questions, as it seems very central government focused. It is unclear whether the same type of approach would be helpful in the context of local AI procurement, or how to avoid significant levels of procurement centralisation in the rollout of scaled-up solutions. The issue of “commercial frameworks” (or vehicles) is also intriguing, as it seems counterintuitive that commercial vehicles should be avoided at the point of scaling-up, when the solutions should be sufficiently standardised and volume could be a significant driver of cost for the public sector. It can well be that each scaling-up context is different and, in that case, avoidance of commercial vehicles might not always be the way forward. More generally, a reflection on whether to use (open) frameworks or dynamic markets also seems necessary, and there are good reasons to think that in fast-moving markets, (open) frameworks are not the way to go.

The plan contains a further procurement-related recommendation to enable public and private sectors to reinforce each other: “Procure smartly from the AI ecosystem as both its largest customer and as a market shaper. Innovative AI suppliers from the UK and around the world should be engaged to support demand and encourage investment. Procurement contract terms should set standards (e.g. quality), requirements, and best practice (e.g. performance evaluations). “Contemplation” clauses should be included in contracts to ensure the government remains agile to a rapidly changing AI ecosystem by mandating that contractors regularly assess and adopt newer technologies.”

At this level of generality, it is hard to disagree with the recommendation. However, as mentioned above, the extent to which the public sector digital skills gap is reduced will be determinative of how far AI procurement can go in contract design, contract and performance management, and other crucial tasks. I am also not sure whether ‘contemplation’ means technological update requirements, or rather rights to curtail, modify or terminate the contract for the contracting authority on technological (or other?) grounds. Some further thinking also seems required here.

Overall impression (aka hot take)

My overall impression is that the plan targets central government and specific types of AI, and that it contains recommendations that will be difficult and expensive to implement. Without a clear view of the level of public investment that will be available to implement the plan, it is hard to assess its likely impact — although issues such as overcoming the public sector digital skills gap and the compounded complexity of AI procurement and procurement under new rules seem to me to pose a significant challenge. I think it will be difficult for contracting authorities outside of central government, and in particular at the local level, to finds way to implement the plan in their own operations, despite the clear push for local level public sector AI adoption.

Linked to this, I think the procurement-related proposals in the action plan merit some further discussion and consideration. In that regard, they can be the basis for more focused thought, especially in relation to non-central government AI adoption, such as work carried out under the National Taskforce for Procurement of AI in Local Government proposed by the Ada Lovelace Institute,

Is Circular Economy a move towards or away from sustainability? A short piece on the (ab)use of the concept of circularity [guest post by Dr Lela Mélon]

With business sustainability in mind and in search of sustainable governmental behaviour, especially in terms of public purchasing practices, circularity seems like a fitting concept for fulfilling public needs in a sustainable manner (see eg Geissdoerfer et al: 2016). Given the hurdles with the implementation of green public procurement practices across the EU, and the struggles in furthering sustainable public procurement (going beyond environmental to also add social concerns), I expected that circular public procurement would be an exception and applicable only to a handful of cases. And indeed, it did not take much research to verify that the application of circularity across European public procurement is scarce at its best: while listed under green public procurement, circular public procurement exhibits few best practices across the EU that mostly arose at the local level (see eg this 2018 best practice report).

While it might be argued that circularity by definition requires local action, that does not prevent the development of practices at a regional, national or even supra-national level in specific sectors with potential to become circular, e.g. energy sector, construction sector and waste management. Yet, whether we speak about circularity in the framework of private markets or public procurement, it is absolutely indispensable to embed circular practices in the framework of sustainability and not simply formulate it under the framework of waste management.

Much has been said on recycling, less on the cycle. Seeing circularity as an exercise of recycling and bringing materials back into the loop has been widespread, leading to even higher production and consumption and straying away from true sustainability. That being said, the underpinning reasons for such developments do not lie solely in private market practices, but also stem from the lack of knowledge on circularity and policy incoherence on the national and EU level in general.

What is (true) circularity?

Applying to both private and public markets, the notion of circularity should be clear. Recycling comes last. The whole purchasing procedure needs to be rethought and redesigned to accommodate more sustainable decisions and close the loop of linear practices as in ‘buy, use, dispose.’ Already at the stage of making the purchase decision, circularity demands us to rethink: do we need the product, service or works in question? Could we upcycle a product that we already own to fulfil that need? Could the need be filled by buying a service instead of the product or conversely leasing or renting the product? If the answer to those questions is no, then we need to purchase the product, service or work in question demanding a long life-time evaluation model.

Here the companies engaging in circular production need to provide a life-long guarantee, user manual, strategic design that facilitates reparability, minimal use of raw materials and energy (and its responsible sourcing, accounting for the social aspect of sustainability), use of renewable energy and efficient service and maintenance in case of a product fault. Spare part guarantee, service agreements, small repairs, standard components and easy disassembly are the must-haves under a truly sustainable circular economy.

Reuse and sometimes upcycling are the key. Recycling under a circular model is truly the last resort and its success in extracting useful materials for further production actually depends on the way the product was designed: the absence of hazardous materials, the possibility to disassemble the product into different materials with ease, the possibility of downcycling and upcycling of the materials. These notions all run counter to the current linear economy: and the implications of such systemic change on business models and private markets as we know them will be significant, causing significant policy spill over effects and demanding the elimination of existing policy incoherences inhibiting such a transition. This piece aims to provide further food for thought on the system as it is regarding private and public markets; discussing the current state of affairs, the impediments to a higher uptake of circular practices and the policy spill over effects of a successful implementation of circularity as a general exercise.

Where are we at? – the European Commission’s Action Plan

In terms of EU policy on circular economy in general, the European Commission has issued an ambitious circular economy package—which surprisingly focuses on waste management and bringing resources back in the loop—coupled with two subsequent implementation reports in 2017 and 2019. While the package recognises that the value of circular economy lies also in job creation, savings for businesses and the reduction of EU carbon emissions; the action plan on the matter focuses heavily on reforming the waste management legislation, albeit briefly reflecting also on the broader aspects of circular economy such as job creation, innovative design, business models, research, re-manufacturing, product development and food waste. The wrong signal is therefore sent to the private and public market: the focus on getting scarce materials back into the loop instead of a systemic change of production processes themselves. This influences private and public markets and reinforces the idea that the only issue with traditional linear production and consumption processes is the scarcity of (raw) materials.

Further reinforcing this idea, the EU study on Accelerating the transition to the circular economy focuses on public funds employed to that effect, omitting the fact that this represents only a fraction of the funds needed for a true systemic change. The study has been seen as an accelerator for the deployment of the circular economy, discussed in the framework of new circular business models and in the framework of waste management (id at 10). While the need for extensive financing has been repeatedly highlighted (eg in this 2017 report’s estimate of EUR 320 billion by 2025) for a systemic transition to circular economy (with estimated combined benefits of such shift of EUR 500 billion), the focus of the report has been on providing such finance in the current ‘business as usual’ framework, advocating for higher investment in such transition by the EU, without a comparative assessment of the current private financial market frameworks and its indispensable role in such transition (cfr this call for integrating externalities in the existing risk assessment frameworks).

Arguing for a systemic approach and a stronger focus on private finance offerings, especially with regards to small and medium-size enterprises (see here and here), points to the insufficiency of public funds for the transition to a more circular economy. To boost the private finance offerings, there is a need for a systemic change of financial systems to account for the inherent risks of the current linear business models, thereby eliminating persistent unfair competitive advantage for linear business models in the access-to-finance scenario. Not incorporating the change of linear risk assessment practices in greater detail into the EU action plan is a pitfall that needs to be remedied, qualifying change that needs to occur regarding the traditional access-to-funding setting in order to accommodate circular business and the changes it entails for ‘business-as-usual’ also in terms of the access-to-finance.

The structural flaw of underestimating the risks of linear projects and overestimating the risks of circular economy projects will not be remedied simply by taxonomy and EU funds: the financial systems on their own need to ‘circularise’ their finance offerings: the world as we know it, business as usual, is about to change and it could cost them more than just their reputation. Asset backed loans will need to change into ‘relationship’ backed loans, which presupposes also changes and ameliorations to contract laws to ensure monetised value to relationships as steering wheels of the new circular economy.

The lack of circularity in finance influences the offerings of the private market and the innovation necessary for circular solutions, which will in turn influence also the success of circular public procurement: the public funds and practices in innovation procurement cannot produce a sufficient amount of circular procurement to create a strong movement on the private market.

What are the impediments to a higher uptake of circular practices and what are their implications?

Aside from these two broader policy concerns, there are some specific impediments to circularity in public procurement: the first is the low uptake of green public procurement (GPP) across the EU,[1] impeding the insertion of circularity as the next step of GPP and the second the lack of regional, national and supranational best practices to that effect.

The integration between public procurement and circular economy itself is at its early stages at the EU level, where the incorporation of social, environmental and economic specifications into public procurement is not at a sufficiently high level to produce an indirect effect on products and consumers themselves and thereby stimulating circular economy. Furthermore, as majority of circular innovation stems from small and medium sized enterprises, it is crucial to further facilitate their access to public procurement systems, aside from general efforts to support the implementation of sustainable public procurement.

While the Eco-design Directive 2009/125/EC incentivises Member States to implement waste-preventing public procurement strategies according to information about the products’ technical durability, simultaneously suggesting the recycling requirements to be designed accounting for corresponding requirements for waste treatment in the waste legislation related to product, significantly supporting the circular flow of substances and materials, it is still strongly focused on waste management. Once again, here the notion of circularity supports more the linear production models than it does true circularity: while waste management and preservation of materials is important, determining the initial need for production and the potential for lease, reuse and upcycle is more important in terms of circularity.

The second supporting tool for circular public procurement, the Environmental Footprint Initiative of the European Commission, aims at providing a harmonisation process for the development of a scientific and consensus-based method, trying to inform and direct consumer choices with clear and comparable environmental information. Again, while reliable information is an indispensable steppingstone for determining sustainability hotspots, it is a truly preliminary and indirect step towards circular procurement. It does not provide for a true move from linearity to circularity.

Aside from the general concerns introduced above, the private sector further encounters impediments to circularity in current legislation on plastics recycling, competition law and the general corporate law favouring and prioritising linear business practices, lacking clear guidance on circularity. These are all examples of policy incoherence, some representing a direct example of incoherence (the silence of corporate legal frameworks on the social norm of shareholder primacy,[2] the plastic packaging requirements preventing the use of recycled plastics), others an indirect example (competition law).

Coupled with the abovementioned issues of financial law, these impediments are sufficient to significantly reduce the development of new circular solutions beyond pure recycling efforts. Additionally, the indirect policy incoherence in terms of competition policy as it stands, needs to be revised simultaneously to other sustainable changes to EU legal frameworks, and we have not accounted yet for those changes to a significant extent. If circularity is to be a tool towards achieving true sustainability, the traditional notions of ‘separating’ competitors and keeping them from cooperating will need to be revised. Circular systems have a need to be interconnected, cooperating and sharing, especially as reuse, repair and upcycling are the building blocks of circular economy. This calls for a systemic change of competition laws in themselves.

Furthermore, to aid the financing of this transition, traditional property and contract law will need to develop additional institutions to account for a different economy, one not based on assets as in material assets but rather relationships as assets. The road towards true circularity is still long, but these policy spill over considerations need to be resolved simultaneously with other sustainable changes to areas directly connected with sustainability in order to achieve a timely change towards truly sustainable circularity.

Where to now?

To conclude, a systemic change requires efforts of policymakers, private and public market actors as well as consumers. The above presented reflections represent just a fraction of what we will have to deal with in terms of transition towards sustainability and I would love to hear about any additional concerns and/or solutions to the policy issue that you have encountered in your professional field. I would gratefully any feedback or suggestions at lela.melon@upf.edu.

Dr Lela Mélon

Lela Mélon is a lawyer and an economist, specialised in sustainable corporate law. Lela started her sustainability career in 2014 with her research on shareholder primacy in corporate law. She is currently charge of the Marie Curie Sklodowska funded project ‘Sustainable Company’ at the Pompeu Fabra University in Barcelona. She has co-authored and authored monographs, published several scientific articles in the field of sustainable corporate lawand sustainable public procurement and presented her work at conferences across Europe, as well as introduced sustainable corporate law curricula in several universities in Europe.

[1] Mélon, L. ‘More than a nudge? Arguments and tools for mandating green public procurement in the EU.’ Working Paper, Conference Corporate Sustainability Reforms Oslo 2019.

[2] Mélon, L. Shareholder Primacy and Global Business (Routledge 2018); Sjafjell, B. (2015) Shareholder Primacy: The Main Barrier to Sustainable Companies, University of Oslo Faculty of Law Research Paper No. 2015-37.