| Summary: | The purpose of this study is to examine the capacity of the Private Finance Initiative (PFI) project delivery model to support the implementation of Sustainable Energy Innovation (SEI) within the context of the UK government’s Building Schools for the Future (BSF) programme. The study attends to a significant gap in knowledge as there is a lack of conceptual and empirical work on managing innovative processes for sustainable energy in PFI projects. Adopting Complex Product Systems (CoPS) Innovation Management Theory, the BSF PFI project is conceptualised as a CoPS supply network where success in innovation largely depends on the interactive relationships among multiple project participants (Hobday, 1998, 2000; Hobday et al., 2000; Gann and Salter, 2000). A conceptual framework is developed based on three determinants of CoPS innovation, particularly: (1) clarity of the requirement, (2) communication and collaboration and (3) contractual incentives. Taking such a system‐oriented perspective is considered important for SEI due to the increasing levels of functional dependency and component complexity associated with environmental innovations. Thus, effective interaction among producers, clients and users is seen to be critical for their successful development (Rohracher, 2001; Intrachooto and Horayangkura, 2007). Following a four‐case qualitative research methodology, the empirical findings point to the significance of the three determinants of CoPS innovation in shaping the environment in which private sector producers operate and innovate in BSF PFI projects. However, while the qualitative nature of the chosen research methodology limits the ability to generalise, the case study findings provide empirical evidence to the limited capacity of the PFI delivery model to support SEI based on the key determinants postulated in CoPS Innovation Management Theory. The research establishes that the capacity of the BSF PFI project delivery model to support SEI is weakened by: the limited clarity of the sustainable energy requirement particularly in relation to its specificity and achievability; ineffective multidisciplinary communication and collaboration within the integrated ProjectCo due to restricting internal contractual relationships and the misalignment of Design‐ Construction‐Operation sustainability objectives; and ineffective Client/User‐Producer communication and collaboration brought in by the restricted nature of BSF engagement processes as well as the misalignment of Client/User‐Producer sustainability objectives. Contractual incentives were found to support SEI, albeit by fear of financial penalties through risk allocation, rather than pursuit of reward for innovation. The study concluded that the BSF PFI project delivery model, as a procurement policy, may not adequately appreciate the system dynamics needed for successful SEI. Indeed, the study underlined a number of problematic issues, or ‘hotspots’ (Hansen and Rush, 1998; Hobday and Rush, 1999), weakening the key determinants of CoPS innovation success in BSF PFI projects. Recommendations were developed to rectify the identified problematic issues. Future research directions were also suggested.
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