Pre-Commercial Procurement (PCP)
and Public Procurement of Innovative
Solutions (PPI)
Lieve Bos
European Commission
DG CONNECT F2 unit (“Innovation”)
Rationale
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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
Underutilisation
demand driven
innovation
RTD expenditure as % of GDP
3,5
3
2,5
2
1,5
1
0,5
0
R&D Procurement
Basic +applied
R&D funding
EU
US

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
Overcoming
the barriers
 Lack of awareness of
how to optimise riskbenefit balance for
procurer and supplier
 Phased approach, separate
procurement of R&D from
procurement of end-solutions,
IPR sharing
 Unclear how within
the legal framework
for R&D procurement
 Commission PCP communication
COM(2007)799 &
SEC(2007)1668
 Fragmentation of
demand
 Cooperation among procurers
(share PCP/PPI experience/cost),
EU support for cross-border
PCPs/PPIs
4
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.
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
–
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)
(COM/2007/799 &
SEC/2007/1668)
Phase 0
Curiosity
Driven
Research
Phase 1
Solution design
Phase 2
Prototype
development
Supplier A
Supplier B
Supplier B
Supplier C
Supplier C
Supplier D
Supplier D
Phase 3
Original development
of limited volume
of first test products /
services
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
… in line with WTO proc. rules, EU Treaty, State aid free
Win-win for all stakeholders
Politicians
Suppliers
- Better products
- Economies of scale
- Wider market size
- Shorter Time to market
-First buyer in early R&D
-Shared risks & benefits
- Quality of public services
- Focus on political priorities
- New lead markets
- Improve innovation climate
- Increase export
- Global competitiveness - Attract foreign investment
- Increase employment
Pre-commercial
Procurement
Get the ‘Best Product’…
- Address ‘public market innovation failure’
- Shape product development to public needs
- Increase technology knowledge
- Reduce risk in commercial tendering
- Favour supplier competition
- Reduce cost of procurement
- Reduce risk of innovation
… at the ‘Lowest Price’
- Pooling of resources
- Economies of scale
- No licensing costs
- ‘First time right’ product
- ‘EU interoperable’
- Attractive to venture capitalists
- Reduce unforeseen expenditure
Procurers
Status of PCP implementation
across Europe
Update June 2012 status
Working on
framework
Awareness Raising
Exploring possibilities
Latvia
Slovenia
Greece
Bulgaria
Romania
Malta
Cyprus
Luxembourg
Slovakia
Estonia
Czech Republic
Switzerland
Portugal
Ireland
Framework
identified
Germany
Spain
France
Lithuania
Poland
Hungary
(EszakAlfold)
Pilots
started
SILVER
Denmark
Sweden
Finland
UK
Netherlands
Austria
Italy
Norway
BE (Flanders)
More Info about national PCP initiatives in Member States: http://cordis.europa.eu/fp7/ict/pcp/msinitiatives_en.html
More info about EU funded cross border PCP projects: http://cordis.europa.eu/fp7/ict/pcp/projects_en.html
- 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 WP2011-12 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)
Example PCP-like pilot
Water management,
Netherlands
 Dike burstz in Netherlands (2003-2004) 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
Example PCP-like project in
Healthcare
www.nic.nhs.uk
Potential £160m
p.a. saving
Potential £19m p.a. saving
Potential £30m p.a. saving
£4,000 per HCAI avoided
Potential £17m p.a. saving
11
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).
PCP example on CO2 emissions
Carbon capture – Norway
Statoil/Gassanova
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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)
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)
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.
New SME created through the FCP process.
• For more info: http://lowcarbon-healthcare.eu/
•UK brand name for PPI = FCP = Forward Commitment Procurement
PPI example
Environmental/energy
efficiency field
Sweden NUTEK / STEM
Technology procurements
 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):
http://ec.europa.eu/environment/enveco/innovation_technology/pdf/bridging_valley_report.pdf
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
– can also be used in context of e.g. EIPs
EU PCP/PPI support today…
Fundamental
Research
Phase 0
Curiosity
Driven
Research
… and tomorrow
Industrial research and (FP7)
Experimental Development
Phase 1
Solution Design
Phase 2
Phase 3
Prototype Original development
development up to limited volume
of first test series
Commercialisation (CIP)
Commercial Development
Phase 4
Production / early
adoption
of commercial
volumes
Phase 5
Sales of
off-the-shelf
products
Demand
Driven
Demand driven
PCP
“FP7 CP-CSA
grants to procurers
for joint PCPs”
CIP grants to
procurers
for crossborder PPIs
Fostering
wider
diffusion
VC & other financers
Input to standardisation & regulation
Supply driven
“FP7 grants to
univs & suppliers”
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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))
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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 (€500.000)
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
Example CP-CSA
for PCP grant
How to use EC
PCP support?
 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
Phase 1: Solution design
~10-15% PCP budget
~100-250K/supplier
~4-10 suppliers
P1
P5
P2
Preparation
Joint PCP
P4
P3
One Joint
PCP call for
tender
Consortia of
public procurers
P1->P5 (min 3)
Phase 2: Prototyping
~30-40% PCP budget
~500-750K/supplier
~3-6 suppliers
Supplier A
Phase 3: Original development –
operational testing
~50-60% PCP budget
~800K-2,3M/supplier
~2-4 suppliers
Supplier B
Supplier B
Supplier C
Supplier C
Supplier D
Supplier D
Supplier D
Supplier E
Supplier E
Supplier E
Supplier B
Example PPI
pilot grant
How to use EC
PPI support?
 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


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
P1->P10 (min 3)
Procurer 3 buying e.g. €5 Mio solutions from supplier D
Procurer 4 buying e.g. €2 Mio solutions from supplier E
…
…
Procurer 10 buying e.g. €2 Mio solutions from supplier X
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