Forward Commitment Procurement

Forward commitment procurement is an approach to ‘market making’ in which potential buyers of solutions that are not currently available on the market commit that, should solutions be developed which meet defined standards in terms of performance and price, they will buy the solutions. As an example, the public sector can stimulate innovation in sustainable solutions by committing to purchase solutions that meet defined requirements. Suppliers who might otherwise be reluctant to invest in the absence of clear market demand may enter the market and meet the latent demand. See also Market Failure and Market Maker.