1. Pre-Commercial Procurement (PCP) and Public Procurement of Innovative Solutions (PPI) Lieve Bos European Commission DG CONNECT F2 unit (“Innovation”)

2. Rationale Health care Climate Change Energy Efficiency Transport
Security …
Public sector is faced with important societal challenges.
Addressing these, often requires public sector transformations so technologically demanding, that no commercially stable solutions exists on the market yet, and forward looking public procurement strategies are needed
However, public procurement driving innovation from demand side is underutilised in EU versus other parts of the world
Health
Inclusion
Government
Security
eInfrastructure

3. Underutilisation demand driven innovation
RTD expenditure as % of GDP
0,5 1
1,5 2
2,5 3
3,5 EU US
R&D Procurement
Basic +applied
R&D funding
Public expenditure is 47% of EU-25 GDP, but 20 times less is spent on R&D procurement in EU (~2,5 Bn€) versus US (~50Bn€)
Lack of procurers driving R&D to their needs and getting familiar with emerging innovations, also slows down uptake of innovative solutions in public sector afterwards
More demand to develop new innovative solutions for public sector challenges for which there are no products on the market yet (R&D procurement) can fill half of the EU-US R&D investment gap 3 3

4. Overcoming the barriers
Lack of awareness of how to optimise risk-benefit balance for procurer and supplier
Unclear how within the legal framework for R&D procurement
Fragmentation of demand
Phased approach, separate procurement of R&D from procurement of end-solutions, IPR sharing
Commission PCP communication COM(2007)799 & SEC(2007)1668
Cooperation among procurers (share PCP/PPI experience/cost), EU support for cross-border PCPs/PPIs 4

5. PCP Pre-Commercial Procurement
When
Challenge requires R&D to get new solutions developed. Problem clear, but pros / cons of several potential competing solutions not compared / validated yet. No commitment to deploy (PPI) yet.
What
Public sector buys R&D to steer development of solutions to its needs, gather knowledge about pros / cons of alternative solutions, to avoid supplier lock-in later (create competitive supply base)
How
Public sector buys R&D from several suppliers in parallel (comparing alternative solution approaches), in form of competition evaluating progress after critical milestones (design, prototyping, test phase), risks & benefits of R&D (e.g. IPRs) shared with suppliers to maximise incentives for wide commercialisation
Health
Inclusion
Government
Security
eInfrastructure

6. PPI – Public Procurement of Innovative Solutions
When
Challenge requires solution which is almost on the market or already on the market in small quantity but not meeting public sector requirements for large scale deployment yet. No R&D involved (R&D already done, or no R&D needed to solve problem)
What
Public sector acts as launching customer / early adopter / first buyer for innovative products and services that are newly arriving on the market (not widely commercially available yet)
How
Public sector acts as facilitator establishing a buyers group with critical mass that triggers industry to scale up its production chain to bring products on the market with desired quality / price ratio within a specific time. After potentially a test and/or certification, the buyers group purchases a significant volume of products.
Health
Inclusion
Government
Security
eInfrastructure

7. How does it work
Smart PCP/PPI combination enabling:
Price/quality products that better fit public sector needs
Earlier customer feedback for companies developing solutions
Better take-up/Wider commercialisation of R&D results
Public Procurement of
Innovative Solutions (PPI)
R&D / Pre-commercial Procurement (PCP)
Phase 0
Curiosity
Driven
Research
Phase 1
Solution design
Phase 2
Prototype
development
Phase 3
Original development
of limited volume
of first test products /
services
Phase 4
Deployment of commercial end-products
Diffusion of newly developed
products / services
Supplier A
Supplier B
Group of European procurers
Pool public demand and specify needs
Manage procurement process
Share risks and benefits together and with suppliers
Cost shared, IPR shared, knowledge shared
Compatible with procurement directives and state aid
Exception to procurement directives
Legally defined as procurement of ‘R&D Services’
Possibility to restrict to ‘European wide offers’
Possibility to apply at European and Member States level
Need for incentive to support the framework
Supplier B
Supplier B
Supplier(s)
A,B,C,D
and/or X
Supplier C
Supplier C
Supplier D
(COM/2007/799 & SEC/2007/1668)
Supplier D
Supplier D
Also normally multiple sourcing here to keep competition going
… in line with WTO proc. rules, EU Treaty, State aid free

8. Win-win for all stakeholders
Politicians
Suppliers
Quality of public services
Focus on political priorities
Improve innovation climate
Attract foreign investment
Increase employment
Better products
Economies of scale
Wider market size
Shorter Time to market
- New lead markets
Increase export
Global competitiveness
First buyer in early R&D
Pre-commercial
Procurement
Reduce cost of procurement
Shared risks & benefits
- Reduce risk of innovation
… at the ‘Lowest Price’
Get the ‘Best Product’…
Pooling of resources
- Economies of scale
No licensing costs
‘First time right’ product
‘EU interoperable’
Attractive to venture capitalists
- Reduce unforeseen expenditure
Address ‘public market innovation failure’
Shape product development to public needs
Increase technology knowledge
Reduce risk in commercial tendering
Favour supplier competition
Procurers

9. Status of PCP implementation across Europe Update June 2012 status
Awareness Raising
Exploring possibilities
Working on
framework
Framework
identified
Pilots
started
Slovenia
SILVER
Latvia
Denmark
Malta
Portugal
Germany
Romania
Sweden
Greece
Spain
Ireland
Cyprus
Finland
France
Luxembourg UK
Bulgaria
Netherlands
Lithuania
Hungary
(Eszak-Alfold)
Austria
Italy
Slovakia
Estonia
Poland
Czech Republic
Norway
BE (Flanders)
Switzerland
More Info about national PCP initiatives in Member States:
More info about EU funded cross border PCP projects:
- SILVER: First project from FP7-ICT-2011 calls, started January 2012 (Supporting Independent Living of Elderly through Robotics)
- Six more cross-border PCPs about to start from WP calls (services for mobile access to patient health data, embedded ICT for fire fighter suits, cooperative traffic management centres, sustainable road infrastructure modelling, mobile ehealth services, energy efficient high performance computing) 9

10. Example PCP-like pilot Water management, Netherlands
Dike burstz in Netherlands ( ) caused by dry period or broken water pipe inside the dike along canals
PCP (2006): Developing/comparing possible solutions for real time dike inspection & early warning of dikes and dams
Satellite based solution
approach
Chip technology
based solution
Optics/sensor
based solution
Camera
based solution
Helicopter
based solution

11. Example PCP-like project in Healthcare
Potential £160m p.a. saving
Potential £19m p.a. saving
£4,000 per HCAI avoided
Potential £17m p.a. saving
Potential £30m p.a. saving
Potential Value to NHS:
The NIC has supported the development of innovations to improve the quality of the patient experience and generate significant cost savings to the NHS (£236m).
Value to the economy:
With the support of the NHS National Innovation Center (NIC), a number of innovations have been able to attract significant funding (£290m). 11 11

12. PCP example on CO2 emissions Carbon capture – Norway Statoil/Gassanova
Regulatory requirement to seriously reduce CO2 emissions by 2016 without negative effects on health/environment, beyond what market is able to offer
PCP started in 2011, currently comparing solution approaches of 5 vendors, time-to-market shortened
Follow-up procurement for deployment foreseen for 2014 (open to whole market again)

13. Rotherham Ultra Efficient Lighting FCP
PPI Example
Low Carbon Healthcare
Ultra Efficient Lighting
Rotherham Ultra Efficient Lighting FCP
LCB-HEALTHCARE network: Department for Business Innovation and Skills, Rotherham hospital (UK) (lead), Norwegian Directorate for Health Affaires(NO), Rawicz Hospital(PL), Department of Health DH (UK), Nottingham univ hospital (UK), European Health Property Network EuHPN (NL), Rotterdam Erasmus MC (NL), Organisation for Applied Scientific Research TNO (NL)
Discuss
Pan European collaboration of designers, engineers, manufacturers & researchers.
Discuss research and the realisation of research into product design.
Requires multi-discipline teams to truly create / deliver innovation,
Brings curiosity driven research and market needs / product development together.
Results (project started back in 2006,):
LED project refurbishment: energy consumption saving of 30% or €5,200 for 40 beds over 10 years, and Maintenance Saving of 88% or €15,400 for 40 beds over 10 years.
For more info:
UK brand name for PPI = FCP = Forward Commitment Procurement
New SME created through the FCP process. 13

14. PPI example Environmental/energy efficiency field
Sweden NUTEK / STEM
Technology procurements
PPI example Environmental/energy efficiency field
Swedish experience with PPI since 70s
creating buyers group also with private sector, further market uptake encouraged through certification and (eco) labelling
Significant cost and energy/environmental efficiency improvements were achieved in:
Heating-cooling-ventilation of buildings
White appliances (ovens, washing
machines, fridges) and components (motors)
Office blocks (sun shading, lighting,
control/monitoring)
Public transportation (hydrogen busses)
For more info (Swedish brand name for PPI = technology procurement):

15. EC support to PCP & PPI Today Horizon 2020 proposal (2014…)
DG CNECT and ENTR (security) are piloting EC support to joint cross-border PCPs done by min 3 public procurers from 3# MS/AC
FP7 CP-CSA grant, co-financing up to 75% of the cost of the procured R&D + up to 100% of the costs for preparing/coordinating/evaluating joint PCP
DG ENTR and ENV are piloting EC support to joint/coordinated cross-border PPIs. DG CNECT proposes similar in CIP PSP WP2013 (€10 Mio for PPIs in ICT for health/active ageing, done by min 3 public procurers from 3# MS/AC)
CIP grant, co-financing up to 20% of the cost of the innovative solutions procured / deployed + up to 100% of the costs for preparing/coordinating/ evaluating PPI
Horizon 2020 proposal (2014…)
PCP & PPI new funding instruments available across entire H2020
EC can co-finance PCPs/PPIs carried out by grant beneficiaries
EC or EU funding bodies (e.g. agencies) can carry out PCPs/PPIs on their own behalf or jointly with Member States
can also be used in context of e.g. EIPs
Health
Inclusion
Government
Security
eInfrastructure

16. EU PCP/PPI support today… … and tomorrow
FP7 and CIP Horizon 2020
Fundamental
Research
Industrial research and (FP7)
Experimental Development
Commercialisation (CIP)
Commercial Development
Phase 0
Curiosity
Driven
Research
Phase 1
Solution Design
Phase 2
Prototype
development
Phase 3
Original development
up to limited volume
of first test series
Phase 4
Production / early adoption
of commercial
volumes
Phase 5
Sales of
off-the-shelf
products
Demand driven
PCP
“FP7 CP-CSA
grants to procurers
for joint PCPs”
Demand
Driven
Fostering
wider
diffusion
Supply driven
“FP7 grants to
univs & suppliers”
CIP grants to
procurers
for cross-border PPIs
VC & other financers
Input to standardisation & regulation 16

17. (in complementarity to PCPs called for under objective 5.1(d))
Health/active ageing
related PCP/PPI calls
FP7-ICT-2013 (Call deadline 15 January 2013)
Targeted calls for joint PCPs in specific areas of public interest (CP-CSA for PCP grants)
Objective 5.1.(d), Call 10 – ICT for Personalised Health - Active Ageing (€8M)
up to 1 on personalised care for co-morbid patients, up to 2 on mobile ehealth services
An open call for joint PCPs addressing any area of public interest (CP-CSA for PCP grants)
Objective 11.1, Call 10: Proposals for joint PCPs relating to public sector needs for new ICT
solutions in e.g. healthcare, inclusion, e-government, transport, energy efficiency,
environment, security, education etc (€4M: 1 project)
(in complementarity to PCPs called for under objective 5.1(d))
Targeted calls for networking on PCP (CSA grants)
Objective 5.1.(e)(1), Call 10 - Community building public procurers
in ehealth, active ageing and independent living (€ )
Health
Inclusion
Government
Security
eInfrastructure
CIP-PSP-2013 (Call expected to open January 2013)
Targeted calls for joint or coordinated cross-border PPIs in ICT for health – active ageing
€10M for support to PPIs (€5M for up to 2 in active ageing, similar for health) EC proposal currently under discussion with Member States

18. How to use EC PCP support?
Example CP-CSA for PCP grant
Example: €4 Mio CP-CSA for PCP grant
Max 30% (€1,2 Mio) for coordination costs - 100% funded
Other €2,8 Mio = EC contribution to the ICT R&D procured through the joint PCP
Reimbursement rate 75% for public, 50% for private contracting authorities
If consortium of only public contracting authorities -> PCP of € 3,73 Mio (ex VAT)
If consortium of only private contracting authorities -> PCP of € 5,6 Mio (ex VAT)
Consortium brings €0,93-2,8 Mio (+VAT) for €3,73-5,6 Mio PCP Comparing various solution approaches from different vendors, defragmenting market to get in long run also cheaper large volume purchases, sharing R&D cost/experience with other procurers & EC: joint PCP cheaper/procurer than buying R&D from one supplier on your own
Example of €5,066-7,6 Mio PCP P1
Phase 1: Solution design
~10-15% PCP budget
~ K/supplier
~4-10 suppliers
Phase 2: Prototyping
~30-40% PCP budget
~ K/supplier
~3-6 suppliers
Phase 3: Original development –
operational testing
~50-60% PCP budget
~800K-2,3M/supplier
~2-4 suppliers P5
Group of European procurers
Pool public demand and specify needs
Manage procurement process
Share risks and benefits together and with suppliers
Cost shared, IPR shared, knowledge shared
Compatible with procurement directives and state aid
Exception to procurement directives
Legally defined as procurement of ‘R&D Services’
Possibility to restrict to ‘European wide offers’
Possibility to apply at European and Member States level
Need for incentive to support the framework P2
Preparation
Joint PCP
One Joint PCP call for tender
Supplier A P4 P3
Supplier B
Supplier B
Supplier B
Consortia of public procurers
P1->P5 (min 3)
Supplier C
Supplier C
Supplier D
Supplier D
Supplier D
Supplier E
Supplier E
Supplier E

19. How to use EC PPI support? Example PPI pilot grant
Example: €3 or 5 Mio PPI pilot grant
Max 30% up to max €1 Mio for coordination costs - 100% funded
Remaining €2-4 Mio = EC contribution to the ICT solutions procured / deployed through one joint or several coordinated PPIs based on jointly defined specs
Reimbursement rate 20% for public and private contracting authorities -> value total amount of PPI procurements by all procurers in consortium = €10-20 Mio
Public Procurement of Innovative Solutions (PPI)
One Joint or several coordinated (jointly defined tender specs)
PPI call for tenders
Phase 4
Deployment of commercial end-products
Early adoption of new to the market products / services P1
P10
Preparation
Joint or coordinated PPIs P2
Procurer 1 buying e.g. €2 Mio solutions from supplier A …
Group of European procurers
Pool public demand and specify needs
Manage procurement process
Share risks and benefits together and with suppliers
Cost shared, IPR shared, knowledge shared
Compatible with procurement directives and state aid
Exception to procurement directives
Legally defined as procurement of ‘R&D Services’
Possibility to restrict to ‘European wide offers’
Possibility to apply at European and Member States level
Need for incentive to support the framework
Procurer 2 buying e.g. €1,5 Mio solutions from supplier B P4 P3
Procurer 3 buying e.g. €5 Mio solutions from supplier D
Consortia of public procurers
P1->P10 (min 3)
Procurer 4 buying e.g. €2 Mio solutions from supplier E … …
Procurer 10 buying e.g. €2 Mio solutions from supplier X

20. Info about PCP/PPI initiatives in MS and AC
Background info
PCP website:
Info on calls, EU funded projects, background docs, FAQs, PCP initiatives in Member States and Associated Countries etc
Detailed info about PCP calls:
Calls page on PCP website links to all official call docs:
Info about PCP/PPI initiatives in MS and AC