Public Procurement of Innovative solutions
(PPI)
Lieve Bos
(lieve.bos AT ec.europa.eu)
European Commission
DG CONNECT F2 unit (“Innovation”)
Rationale
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Health care
Climate Change
Sustainability
Security
Efficiency of public services
…
 Public sector is faced with important challenges. Often public sector
transformations require innovative solutions, and forward looking
public procurement strategies are needed
 Sometimes solutions are near to the market and commercial endsolution can be procured (PPI), sometimes no commercial solution
near to the market and still new R&D needed (PCP)
 However, public procurement as driver for innovation from demand
side is underutilised in EU versus other parts of the world
Underutilisation
RTD expenditure as % of GDP
3,5
3
2,5
2
1,5
1
0,5
0
demand driven
innovation
Normally functioning market:
2,5% of ‘innovator’ type customers (PCP)
Who invest in R&D with suppliers
16% of ‘early adopters’ (PPI)
Market Share %
100%
ICT public procurement market in EU:
0,5% of ‘innovator’ clients (PCP)
5% of ‘early adopters’ of
new tech in e-gov (PPI)
EU
US
R&D Procurement
Basic +applied R&D funding
PPI
PCP
SF, H2020
SF, H2020
75%
PPI
CEF
Innovators Early
Early
Late
2,5%
Adopters Majority Majority
13,5%
34%
34%
50%
25%
Laggards
16%

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 innovations after

Possibilities to apply PCP and PPI using Structural Funds, H2020,
3
Connecting Europe Facility and national procurement resources
PCP and PPI
complementary
 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
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
Supplier A
Phase 3
Original development
and testing of ltd volume
of first products
(COM/2007/799 &
SEC/2007/1668)
Supplier B
Supplier B
Supplier C
Supplier C
Supplier D
Supplier D
Supplier B
Supplier D
Phase 4
Deployment of commercial
end-products
Diffusion of newly developed
products / services
Supplier(s)
A,B,C,D
and/or X
Also normally multiple sourcing
here to keep competition going
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
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.
PPI Examples
Low carbon healthcare PPI started 2006
Introducing more energy efficient LEDs in
over 20 hospitals in 8 EU countries:
• 30% energy consumption saving
• 88% maintenance savings
Result: Total cost savings enable hospitals to
take in 10% more patients
For more info: http://lowcarbon-healthcare.eu/
UK brand name for PPI = FCP=Forward Commitment Procurement
Swedish environmental/energy efficiency PPIs
NUTEK/STEM facilitating establishment of buyers
groups for market introduction of innovations e.g.:
• heating-ventilation-cooling-lighting of buildings
• public transportation (hydrogen busses)
• white appliances (washing machines, fridges)
• wind energy
Result: Reduced the SE dependency on nuclear energy with 15% through PPIs in
combination with product certification/labeling, take-up subsidies & tax incentives
SE brand name for PPI = teknikupphandling = Technology procurement
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
Wp2013 calls in FP7/CIP
Cross-border PCPs & PPIs
EC co-financing for
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)
Call deadlines: call 10 (15 Jan 2013), call 11 (16 April 2013)
€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 opens January 2013: Call deadline May 2013 (tbc)
How to use EC
PPI support?
Example PPI
pilot grant
 Example: up to €5M PPI pilot grant (example €1,5 & 3M grant)
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Max 30% up to €1 Mio for coordination costs - 100% funded (€500K-1M in example)
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Remaining €1-2 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 = €5-10 Mio
One Joint or several
coordinated (jointly
defined tender specs)
PPI call for tenders
P1
P10
…
Preparation
Joint or
coordinated
PPIs
P4
P2
Public Procurement of Innovative Solutions (PPI)
Phase 4
Deployment of commercial end-products
Early adoption of new to the market products / services
Procurer 1 buying e.g. €2 Mio solutions from supplier A
Procurer 2 buying e.g. €1,5 Mio solutions from supplier B
P3
Consortia of public
procurers
e.g. P1->P10 (min 3)
Procurer 3 buying e.g. €5 Mio solutions from supplier D
Procurer 4 buying e.g. €0,5 Mio solutions from supplier E
…
…
Procurer 10 buying e.g. €1 Mio solutions from supplier X
PPI modalities
CIP PSP WP2013
EC proposal
 Buyers group of min 3 procurers (min 2 public bodies) from 3 #
countries + other stakeholders (except potential suppliers)
 Preparation phase
 Definition joint requirements, open market consultation
 Early announcement PPI procurement (OJEU)
 Optional: verification of market readiness of solutions via testing /
certification / labelling of solutions
 Implementation phase
 Buyers group executes 1 Joint procurement or several separate but
coordinated procurements of innovative solutions
 Tender publication in OJEU, best value for money (not just lowest price)
 Evaluation of procured solutions (after min 6 months deployment/operation)
 Funding regime
 100% of coordination costs for preparation, management & evaluation of PPI
(max 30% of total grant, max 1 €M)
 20% of total joint or coordinated PPI procurement price
 PPI cannot cover procurement of R&D (complementarity with PCP)
Piloting/testing in PPI
Versus in pilot As/Bs
 Testing is optional in PPI (as it could be, that testing has already
happened before in other R&D project etc.), but if it happens:
 Testing in PPI is done for a group of first buyers that is
committed to deploy when testing proves market is able to
deliver solutions at predefined performance/price requirements
 Compared to testing in grants, testing in PPIs avoids conflict of
interest situations at deployment / procurement stage
•
•
•
According to public procurement rules, public procurers can only dialogue/engage with
industry in open, transparent, non-discriminatory way (giving all suppliers on Internal
Market equal chance to interact with the procurer in preparation of a procurement)
In collaborative pilot grants that group industry and public procurer participants,
procurers engage only with a 'preferred' set of suppliers that is not selected in objective
non-discriminatory way, based on best value for money criteria…
Suppliers that were in FP7 or CIP R&D/piloting grants together with procurers report
being excluded from follow-up procurements for deployment (e.g. Phillips position on
H2020), and ask for public sector related piloting / testing in H2020 to be carried out in
a procurement iso grant context. Procurers confirm low interest in current CIP pilots
because of same conflict of interest situation (Feb 2012 European Parliament PPI event).
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
Info about link with PPI:
PCP website provides also info on PPI and link with PCP (see e.g. FAQs,
MS initiatives, link to CNECT PPI calls as soon as CIP PSP WP2013 is
published in January 2013)
Info about PCP/PPI initiatives in MS and AC
http://cordis.europa.eu/fp7/ict/pcp/msinitiatives_en.html