Solving time-consuming, complex, and multi-sectoral issues with innovative solutions requires not only cooperation but also co-creation across societal sectors. Currently, taking up these approaches is difficult because the Swedish society is divided into sectors of public administration, private business, civil society, and innovative start-ups, and collaboration across these divides requires effort. Preventive, social projects currently face obstacles in the public sector, not only because profits are slow to materialize, but also because, when they do emerge, they often benefit a different department than the one responsible for the project. Furthermore, as a strong welfare state, Sweden lacks history with building private social financing infrastructure and utilizing instruments such as social investment funds, social loans, impact bonds, social credit guarantees, or cooperative banks with a clear social focus. In sum, there is need for financial support that is also more innovative and adaptive (Nachemson-Ekwall 2021; Vinnova 2018). 

Current issues that prevent social investment models from becoming established have to do with lack of practical knowledge and evaluation skills, lack of institutional funding, regulatory complications related to the newness of the model, and bureaucratic issues related to resistance towards change. Some of these issues may be solved by increasing the scale and number of projects involving social innovations. This would reduce transaction costs and help build a model that would work for all stakeholders. In addition, the Swedish welfare model is somewhat resistant to reforms in social investments. This is because Swedish municipalities are highly influential actors as welfare service providers with large financial capabilities of their own; therefore, they have a much more active role in the field than what the investors might assume. Developing meaningful and helpful metrics has also been a challenge in the Swedish case and has caused extra work for the municipalities, which often do not have the reporting capacity expected by private investors. According to interviews among Swedish stakeholders, a large, centralised operative unit would be needed to transcend barriers, facilitate projects, and connect different actors. The state and private banks could take more active roles, for example, by creating more incentives to reduce administrative work and decrease transaction costs, or by building new financial infrastructure based on social investment with outcome and credit guarantee funds (Balkfors et al. 2020; Good and Juhlin 2020). 

Currently, much of the reporting focuses on activities rather than outcomes, which does not favour long-term planning. Therefore, more focus on social outcomes is necessary (Balkfors et al. 2020). The current barriers all reinforce each other as the lack of competence and proper tools leads to a lack of time. To alleviate the problem, a representative from Sweden’s National Agency for Public Procurement, Tobias Jobring, has called for more integrated approaches to harmonise buying processes and align them across regional actors, thereby tapping into collective leverage (Nordregio 2022). Furthermore, educational institutions could help with long-term planning by developing programmes that focus on preventing complex social problems (Nachemson-Ekwall 2021). 

The potential for conducting direct innovation procurement is limited, and the opportunity to develop catalytic innovation procurement is greater if policy initiatives are taken. However, with the help of political action, there are opportunities to transform standard procurement into innovation-friendly, impact start-up procurement (Edquist 2014). 

There are several different governance logics in the Finnish administrative, all of which are active, to some extent, in municipal decision-making today. These layers—the traditional Public Administrative model (PA), the New Public Administration model (with goals of corporate-type leading and enhanced efficiency), and the New Public Governance model (introduced in the early 2000s and which relies on internal and external networks)—make the procurement process slower to adopt new and innovative models. As a result, the public procurement decision-making process is, in essence, a bureaucratic-legalistic affair with exact definitions of right practices, a risk averse mentality, and little communication. This combination is incompatible with the ideals of open communication, reciprocity, and common goals that could help boost innovative procurement. For example, municipal budgets are not flexible—they would not allow shifting funds from one cause to another in the middle of an election term. Currently, the municipalities have less time to improve the residents’ well-being by conducting preventive and anticipatory work, and they mainly focus on filling their obligations and fulfilling official goals without making mistakes (Kyösti  Airaksinen 2020 2021). 

Related to this, short-term benefits are favoured over long-term ones, making it more difficult for certain innovation schemes to break through. Some innovations generate savings to one city department but bring costs to the department in charge of developing the scheme, so they are likely to be abandoned. Furthermore, institutions tend to take a reactive stance towards innovations, often waiting for private entrepreneurs to make an initiative rather than proactively seeking them out. These traits underline the importance of cross-departmental work ; Moriggi 2020). Also, local city officials see the public procurement rules as cumbersome and inflexible but point out that the system becomes easier to work with if officials are experienced, thus enabling them to interpret the benefit for the innovation (Makkonen  2018). 

According to researchers in public administration, different sectors do not interact with each other enough, and there should be more practices that are able to cross boundaries between sectors. At the moment, services are usually categorised according to different sectors. This becomes a challenge because many impact start-ups that offer welfare solutions are cross-sectoral and fall between local departments. Furthermore, the language used in promoting innovative procurement is often too abstract, originating from the bureaucratic system instead of the lived reality of the client. Instead of dealing with specific social challenges, which is the situation now, Finnish society would benefit from more preventive work that is able to address a problem before it grows  (Kyösti  Airaksinen 2020).

One considerable problem in promoting social innovations based in results-based financing in public procurement is determining when the project has been successful, in other words, finding the right indicators, especially monetary and quantifiable ones, and creating specific models. Problems related to health and well-being are typically complex and long-lasting, which adds to the problem. Partially for this reason, creating new social impact investment models is a long process (Kyösti  Airaksinen 2021; Manninen 2020). These same difficulties in measuring impact and creating interactivity between public and private actors have prevented the introduction of more innovative elements to public procurement practices (Pelkonen  Valovirta 2015). 

Small municipalities find it difficult to allocate time away from their daily responsibilities for furthering social impact-related work. Major barriers are lack of data and know-how and lack of resources such as time and staff. When there is enough data, it may be outdated (due to delays in statistics), or people experience difficulties in combining different types of data and adapting it into local conditions. Without sufficient information, it is difficult for municipalities to initiate collaboration with impact start-ups, and deputies making political decisions of future procurements should have enough information about the municipal conditions well in advance. Furthermore, smaller municipalities must currently use external resources to make procurements because they do not have in-house resources e.g., an in-house lawyer (Manninen 2020). Municipalities believe they would have sufficient know-how to utilize data efficiently if the above-mentioned problems were solved (Kyösti and Airaksinen 2021; Manninen 2020). Current problems are emphasized by the fact that municipal budgets are planned only a few years in advance, which is not enough time for meaningful preventative and innovative work (Kyösti  and Airaksinen 2020). 

In addition, there are some issues that are specific to start-ups active in public procurement, in comparison to established players. These include a lack of expertise and resources (financial and human) in preparing the tender documents, lack of references, and lack of expertise in pricing their offering. Due to their position as newcomers in the market with less-tested solutions, they lack long-term relations with municipal experts and, as a result, are unfamiliar with authorities making the decisions. All these reasons hinder the prospects of social impact start-ups. 

Some of the current problems could be solved if more cooperation and information exchange existed between local city governments, for example, within the Finnish capital region of Helsinki, Espoo, and Vantaa (Makkonen et al. 2018).