This research aims to overcome risk aversion by optimizing the allocation of risks in projects procured through an Innovation partnership. The research question answers: How can an Innovation Partnership stimulate innovation in the construction industry by dealing with uncertainties related to product innovation? The relevance of this research lies with the need for innovation in the construction industry to meet future sustainability and circularity goals and to renovate and replace existing infrastructure. However, due to the novelty of innovation, more uncertainty is introduced in a project where innovation is included. To stimulate innovation through an Innovation Partnership, the contractor and the contracting authority should manage the uncertainties related to product innovations following the level of uncertainties of the product innovation in the specific project stages. The level of uncertainty surrounding a product innovation reduces after the R&D phase of the Innovation Partnership. Therefore the contractor and the contracting authority should distinguish a difference between the R&D phase and the execution phase of an Innovation Partnership. It is recommended that when the contracting authority procures a project through an innovation partnership (1) they minimize the number of specifications and state the specification functionally to utilize the innovativeness of the market. (2) Stakeholders should be engaged in the project early on to overcome the resistance of stakeholders that are not ready for innovation. (3) The risks during the R&D phase should be managed by a design alliance. (4) The execution phase can be governed by an UAV-GC for the general project. In addition, an alliance module should be added for the risks related to the product innovation.