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Pre-Commercial Procurement (PCP) From FP7 WP2013 into H2020 Lieve Bos (lieve.bos AT ec.europa.eu) European Commission DG CONNECT F2 unit (“Innovation”)

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Presentation on theme: "Pre-Commercial Procurement (PCP) From FP7 WP2013 into H2020 Lieve Bos (lieve.bos AT ec.europa.eu) European Commission DG CONNECT F2 unit (“Innovation”)"— Presentation transcript:

1 Pre-Commercial Procurement (PCP) From FP7 WP2013 into H2020 Lieve Bos (lieve.bos AT ec.europa.eu) European Commission DG CONNECT F2 unit (“Innovation”)

2 Rationale  Public sector is faced with important challenges. Often public sector transformations require innovative solutions, and forward looking public procurement strategies  However, public procurement of R&D is underutilised in EU versus other parts of the world RTD expenditure as % of GDP 0 0,5 1 1,5 2 2,5 3 3,5 EUUS R&D Procurement Basic +applied R&D funding  Public expenditure in Europe is higher than in other parts of the world (47% of EU-25 GDP)  But 20 times less is spent on preparing the public sector for future challenges: R&D procurement in EU (~2,5 Bn€) versus US (~50Bn€)

3 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

4 PCP and PPI complementary Supplier B Supplier C Supplier D Phase 1 Solution design Phase 2 Prototype development Phase 3 Original development and testing of ltd volume of first products Supplier A Supplier B Supplier C Supplier D Supplier B Phase 0 Curiosity Driven Research R&D / Pre-commercial Procurement (PCP) Phase 4 Deployment of commercial end-products Diffusion of newly developed products / services Supplier D Public Procurement of Innovative Solutions (PPI) Supplier(s) A,B,C,D and/or X Also normally multiple sourcing here to keep competition going  Smart PCP/PPI combination enabling: –Price/quality products that better fit public sector needs –Better take-up/Wider commercialisation of R&D results –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 (COM/2007/799 & SEC/2007/1668)

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

6 6 Potential £160m p.a. saving Potential £30m p.a. saving £4,000 per HCAI avoided Potential £17m p.a. saving Potential £19m p.a. saving www.nic.nhs.uk Example PCP-like project in Healthcare 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).

7  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) PCP example on CO2 emissions Carbon capture – Norway Statoil/Gassanova

8 Status of PCP implementation across Europe Update November 2012 status More info about EU funded cross border PCP projects: http://cordis.europa.eu/fp7/ict/pcp/projects_en.htmlhttp://cordis.europa.eu/fp7/ict/pcp/projects_en.html More Info about national PCP initiatives in Member States: http://cordis.europa.eu/fp7/ict/pcp/msinitiatives_en.htmlhttp://cordis.europa.eu/fp7/ict/pcp/msinitiatives_en.html Pilots started Framework identified and/or pilots in preparation Hungary Belgium Netherlands Awareness Raising Exploring possibilities Denmark Austria Finland Sweden Poland Working on framework Germany France Luxembourg Ireland Cyprus Romania Slovenia Slovakia Bulgaria Czech Republic Estonia Greece Latvia Lithuania Malta Portugal Spain Norway Switzerland Italy Projects in dotted-line are cross-border EC funded PCPs: SILVER: EC co-funded PCP pilot started January 2012 (Supporting Independent Living of Elderly through Robotics) CHARM: EC co-funded PCP pilot started September 2012 (Common Highways Agency Rijkswaterstaat Model) V-CON: EC co-funded PCP pilot started October 2012 (Virtual Construction of Roads) SMART@FIRE: EC co-funded PCP pilot started November 2012 (Integrated ICT solutions for Smart Personal Protective Equipment for Fire Fighters and First Responders) SILVER UK Iceland CHARM V-CON SMART@FIRE

9 Wp2013 calls in FP7/CIP EC co-financing for Cross-border PCPs & PPIs in ICT sector €32,5 M of EC support for cross-border PCPs in FP7-ICT-2013 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 can relate to for example public sector needs for new ICT solutions in healthcare, inclusion, e-government, transport, energy efficiency, environment, security, education etc (€4M: 1 project) Targeted calls for joint PCPs in specific areas of public interest (CP-CSA for PCP grants) Objective 5.1.(d), Call 10 - Personalised Health - Active Ageing (€8M) up to 1 on personalised care for co-morbid patients up to 2 on mobile ehealth services Objective 11.3, Call 10 - High quality cloud computing for public sector needs (€10M: 1 project) Objective 11.2, Call 11 - More efficient, affordable digital preservation (€5M: up to 2 projects) Objective 8.2, Call 11 - Technology enhanced learning (min €5,5M) €10 M of EC support for cross-border PPIs in CIP-ICT PSP-2013 (EC proposal) Targeted calls for cross border PPIs in specific areas of public interest (PPI pilot grant) Objective 3.2 – ICT for health and active ageing €5M for one or more projects in ehealth, €5M for one or more projects in ICT for active ageing Call deadlines: call 10 (15 Jan 2013), call 11 (16 April 2013) Call opens January 2013: Call deadline May 2013 (tbc)

10 10  Support for consortia of public purchasers planning joint cross-border PCP on topics of common European interest - Bring radical improvements to the quality and efficiency of public services with breakthrough solutions Typical duration PCP project 3-4 years, projects WP2013 start end 2013 -> target solutions to be deployed 2017 at earliest - Reduce fragmentation public sector demand and create opportunities for leadership in new markets for industry  EU contribution (CP-CSA): combination of –CSA (max 30% of total grant): Reimbursement of eligible costs for preparation, management and coordination of the joint PCP call for tender (100% funded) –CP: Reimbursement of max 75% of the eligible costs for the development of the new ICT solutions procured through the joint PCP (for financing the R&D to be performed by the bidders selected via the joint PCP) * CP-CSA = combination of CP and CSA funding within the same EC grant agreement CP-CSA for PCP grant FP7-ICT-2013 CP-CSA for PCP grant FP7-ICT-2013

11 11  Min 3 mutually independent contracting authorities from 3 # countries + other stakeholders (except potential suppliers)  CSA part grant –Defining joint specs + setting up/managing joint PCP procurement process –Awareness Raising, experience sharing (incl. training for public purchasers), dissemination of results, contribution to standards/regulation to remove obstacles for introducing PCP innovations in the market  CP part grant –Execution of 1 joint cross-border PCP tender (addressing 1 jointly agreed challenge, all procurers in consortium sharing the costs to finance R&D together, one entity in consortium executing the PCP procurement) –To explore possible alternative solution paths for the targeted improvements in public sector services + testing of the solutions against a set of jointly defined performance criteria.  Funding regime  CSA part: max 100% of coordination costs (max 30% of total grant)  CP part: Max 75% of price for joint PCP procurement  PCP only covers R&D, not deployment of commercial volumes of solutions Conditions PCP calls FP7-ICT-2013

12 12  Private entities that are potential suppliers of solutions for the PCP in the CP part cannot participate as beneficiaries  Private entities that are not potential suppliers, but buyers - contracting authorities (CAs) under procurement directives - can participate as beneficiaries  Type 1 beneficiaries: CAs eligible for 75% rate in CP part –Non profit ‘public’ bodies (e.g. local/regional/national authorities considered contracting authorities under proc. Dir. 2004/18/EC) –Secondary and higher education establishments and research orgs (in their capacity as potential buyers, not suppliers of new solutions) –SMEs (not potential suppliers but buyers of solutions, e.g. SMEs owned/controlled by the public sector to provide public services that are subject to public procurement directives)  Type 2 beneficiaries: CAs eligible for 50% rate in CP part –Other type of beneficiaries (e.g. ‘private’ larger-than-SME entities that are not potential suppliers but buyers of solutions for the PCP and are considered contracting authorities under procurement Directives: e.g. large utilities subject to 2004/17/EC) Funding rate for CP part Funding rate for CP part

13 13  If all project partners that are contributing financially to the cost of the joint PCP are type 1 beneficiaries –Then max reimbursement rate for costs under CP part = 75%  If all project partners that are contributing financially to the cost of the joint PCP are type 2 beneficiaries –Then max reimbursement rate for costs under CP part = 50%  If there is a mix of type 1 and type 2 beneficiaries that are contributing financially to the cost of the joint PCP, the maximum reimbursement rate for the PCP procurement cost under the CP part will lie in between 50% and 75% –and will be calculated taking into account that the maximum reimbursement rates for the financial contribution of type 1 versus type 2 beneficiaries towards the total PCP procurement budget is 75% versus 50% respectively. Funding rate for CP part Funding rate for CP part

14 How to use EC PCP support? Supplier B Supplier C Supplier D Phase 1: Solution design ~10-15% PCP budget ~100-250K/supplier ~4-10 suppliers Phase 2: Prototyping ~30-40% PCP budget ~500-750K/supplier ~3-6 suppliers Phase 3: Original development – operational testing ~50-60% PCP budget ~800K-2,3M/supplier ~2-4 suppliers Supplier A Supplier B Supplier C Supplier D Supplier B €1-2M per supplier to do the R&D work Supplier D  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 If type 1 consortium (75% rate) -> Total PCP value will be € 3,73 Mio (ex VAT) If type 2 consortium (50% rate) -> Total PCP value will be € 5,6 Mio (ex VAT) Example CP-CSA for PCP grant  Consortium brings €0,93-2,8 Mio (+VAT): divided over e.g. 5 procurers in e.g. 3 year PCP -> each procurer invests ~ €100K/Y 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 Supplier E Preparation Joint PCP P1 P2 P3 P4 P5 Consortia of contracting authorities (CAs) P1->P5 (min 3) One Joint PCP call for tender

15 15 Obj. 11.1 & App. 6: specific requirements for EC co-financed joint cross-border PCPs  Open dialogue with industry in preparation phase –Announced widely, well in advance, at least in English  EU wide publication PCP call for tender, at least in English  All offers evaluated based on same objective criteria –regardless of company size, geographic location of head office  Use functional/performance based specifications –not prescribing specific solution approach  PCP covers phase 1 to 3, multiple companies in competition –one framework contract/supplier with 3 specific contracts/phase  Tenders awarded based on best value for money (not just lowest price) and market price (no State aid)  IPRs shared: ownership rights with companies, license free usage rights, right to license, call back option, right to publish PCP results with procurers  Support Europe 2020 objectives of growth and job creation –Majority of R&D and operational activities related to PCP contract, including principle researchers working on PCP contract in Europe*  Avoid disproportionate qualification/financial guarantee requirements: alternative (commercialisation plan in evaluation criteria) * In EU Member States or Countries Associated to FP7

16 16  Work Programme FP7-ICT-2013, Call fiche –Every CP-CSA on PCP has to comply with requirements on the PCP procedure explained in Objective 11 & Appendix 6  Guide for Applicants for CP-CSAs for PCP ! –Guidance on how to prepare and evaluate proposals –This is a GfA “specifically tuned” to the needs of CP-CSAs for PCP !  COM/2007/799, SEC/2007/1668 and FAQs on PCP website –Contains the basics: why and how PCP Expression of interest form & online networking platform ICT proposers day –Can help to find partners beyond traditional FP participants Pre-proposal check –Provides feedback on draft pre-proposal Important docs CP-CSA for PCP proposal stage

17 EC support to PCP & PPI EC support to PCP & PPI  Today –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

18 PCP/PPI synergies PCP/PPI synergies for NCPs for NCPs  PCP and PPI similar target beneficiaries Identify contracting authorities with need/ambition to innovate (CO2 reduction, etc) and R&I budget Foresee also the links with other demand side instruments (regulation, certification, standardisation, user take-up subsidies/tax incentives, etc) Get their interest to network with colleagues across Europe (sharing costs with others to benchmark state-of-the art together, exploring potential and preparing for cross-border PCPs & PPIs)  Help explain benefits of PCP and PPI to procurers Quality/efficiency improvements public sector challenges Create opportunities for univs/ companies to work with first potential customers in developing, testing and selling first products

19 Background info PCP website: Info on calls, EU funded projects, background docs, FAQs, PCP initiatives in Member States and Associated Countries etc http://cordis.europa.eu/fp7/ict/pcp/home_en.html Detailed info about PCP calls: Calls page on PCP website links to all official call docs: http://cordis.europa.eu/fp7/ict/pcp/calls_en.html Info about PCP/PPI initiatives in MS and AC http://cordis.europa.eu/fp7/ict/pcp/msinitiatives_en.html

20 Extra slides currently open calls More detailed info currently open calls PCP


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