PPI in Practice
Course Date:28th November
Speaker: Saskia Ploeg
Location:The Hague, Ministry of Economic Affairs
www.innovationprocurement.org
The Procurement of Innovation Platform is
supported by the European Commission
Associate partners
The Procurement of Innovation Platform is
supported by the European Commission
Aim of the training
Introduce means and tools to ensure innovation in procurement policies
of contracting authorities
Enable participants to procure innovations
Peer review between participants and their procurements
Achieve understanding of risks related to innovation in procurement
Enable participants to think about their needs and drive them to
innovations
The Procurement of Innovation Platform is
supported by the European Commission
Contents
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What is PPI
PPI in relation to Pre-Commercial Procurements
Philosophy of PPI
History of PPI
The Need for PPI
PPI in Practice
Advantages
Challenges
Example projects
Toolbox
What is PPI?
Public Procurement of Innovation
Public Procurement
The EU definition:
The purchase of goods and services and the ordering of works by a public
authority such as a national government, a local authority or their dependent
bodies, are public contracts.
These purchases can consist of all the
things authorities need; from army
uniforms to highways and schools,
from medical equipment to cleaning
contracts and professional services.
What is PPI?
Public Procurement of Innovation
Innovation is about finding
of doing things.
NEW
A better-designed product or building can
Increase productivity , sustainability
Enhance efficiency of administration
Comfort the public
Reduce environmental impact.
Save costs
Facilitate deliveries
Improve life
and
better ways
What is PPI?
There is confusion about the term PPI. Procurement of Innovation
is used for:
Procuring innovatively
• Using new techniques or methods to procure
Such as TenderNed, Tender Electronic Daily, microprocurement
Procuring focused on innovation
• Procuring such that it stimulates market parties to invest in
innovation and R&D
• E.g. Functional specifications , D&C or DBFMO,
Procuring innovations
• Procuring the innovation itself, one or more public authorities
act as a launch customer for innovative goods or services.
(subject of today)
PPI in relation to Pre-Commercial Procurement
B
Courtesy of J. Rigby, Review of pre-commercial procurement approaches and effect on innovation, 2013
Philosophy of PPI
Innovation is for procurement services not a goal in itself, it is just a
means to a quantitative and qualitative end.
Individual level
• Less specified demand leads to better products
• The offers made are immediately fit for purpose
• Solutions are more creative, because of supplier
freedom
• The core business of suppliers is product and
method development
International level:
• Quality of companies is used more efficiently
• It stimulates international competition, suppliers
can redistribute research costs so that they have an
incentive to invest
• Innovative solutions improve the world we live in
www.innovation-procurement.org
Philosophy of PPI
The total value of public procurement in the EU is estimated
at €2 .000.000.000.000 per year – or about
19% of European GDP.
The way in which this money is spent
has clear implications for the economy,
as well as for the organisations
spending it and the citizens who
ultimately use their services.
History of PPI
Procurement of Innovation is not new
The Duomo of Florence
• 1368: design idea, no one to finish tower after original
architect died of the plague
• 1418: the Arte della Lana guild of wool merchants
announced a design competition for erecting the dome
• 1419: Brunelleschi wins the competition with an
intelligent design of rigid octagons
• 1420 - 1436:the building is designed with a great
number of innovations
The need for PPI (1)
There is a tension between fairness and transparency on one hand and flexibility on the other.
In order to compare biddings, most demands are specified in detail,
alledgedly for the sake of fairness and transparency .
If an authority specifies in great detail all the elements of the
requirement, it loses the flexibility of adjusting the contract to particularly
innovative or technically superior submissions.
It is difficult if not impossible to ask for what is yet unknown.
Henry Ford: “If I had asked people what they
wanted, they would have said faster horses.”
The need for PPI (2)
Innovation would normally point to the use of procedures such as negotiated
procedure or competitive dialogue where the full specification of the
requirements may not be precisely completed beforehand. However, statistics
show that these procedures are rare and most used in complex procurements.
Note: competitive dialogue is too small for this graph, viz. next slide
Source: Public procurement in Europe Cost and effectiveness, PWC Ecorys (Report for the EU Commission) 2011
The need for PPI (3)
This is all the more so for the competitive dialogue.
Statistics suggest that the
procedure that facilitates
innovation best, is rare and is
most used for high-value
projects.
There is a need to
ensure innovation in
smaller and/or less
complex projects
Source: Public procurement in Europe Cost and effectiveness, PWC Ecorys (Report for the EU Commission) 2011
The need for PPI (4)
Public procurement of innovation (PPI) occurs when
public authorities act as a launch customer for
innovative goods or services.
These are typically not yet available on a large-scale
commercial basis
Hydrogen buses
Heat-resistant
uniforms
Energy efficient
green houses
The need for PPI (5)
PPI in Practice
8 new networks of European Public Procurers of
innovation covering the following fields
1/ Combating climate change: Innobuild (Lyngdal Kommune (NO))
2/ Improving care for senior citizens/active aging: EcoQuip
(Business Innovation and Skills (UK)), Happi
(Réseau achats hospitaliers d’Ile de France (Paris, FR))
3/ Fostering energy efficiency: Prolight (Transport for London, UK),
Fired-up (London Fire Brigade, UK), Spea (Barcelona city, SP)
4/ Supplying better mobility infrastructure: Syncro (Conseil Général
de l’Isère (Grenoble, FR))
5/ Creating more healthy working conditions: Innobooster
(Austrian central purchasing authority AT))
Advantages in PPI
Contracting authorities
•Better Risk Management
•It saves costs in the long run when the process is thought through
in advance
Market
•The reward for design is strongly appreciated by the market
•A Bonus/Malus arrangement is a great incentive for innovators
General
•The amount of time that the procedure needs is shorter than
other procedures
Challenges in PPI
•Dealing with output-performance, instead of detailed
descriptions: fear to let go
•Preparing the procurement, specifying the demand costs
time
•It requires a clear distribution of responsibilities concerning
e.g. permits , intellectual property rights
•Remain objective if offers differ strongly
•Know what you want
•Know what you know
Example projects
“Carwash” for hospital beds
• Competitive dialogue: Purchasing
department of EMC Hospital Rotterdam
• PR, for both hospital and supplier
• Market dialogue fostering consortia
• Innovative solution will be implemented
Overview of PPI Tools
PPI TOOLS
Needs Assessment
PPI Guide
Risk Management Guide
LCC Tool
IP Rights Guide
Innovative Tender Notices
Space for Innovations during PPI
Innovative gains
www.innovationprocurement.org
The Tools in the (a) Buying Cycle
NA
NA
Needs/
Wants
LCC
IPR
RMT
Information
search
Evaluation of
the purchase
RMT
PPI
Guidance
ITN
IPR
www.innovationprocurement.org
LCC
RMT
Purchase
Evaluation
of
alternatives
NA
LCC
IPR
Needs Assessment
•All needs assessments are want assessments
•We may know what we want but do we know what we need?
•Help them help you! Tell you want so they’ll know what you needwhat
Who within the
organisation needs
this
What does this
specific person
want
Why does the
organisation need
this
When does the
specific person
need it
www.innovationprocurement.org
Who within society needs this
Who needs this to
need this
What does the
organisation need
Why does the
organisation want
this
When do the
stakeholders
want it
What do
the stakeholders
want
What do the
stakeholders
need
Why does the tax
payer want this
Who actually wants
this
Who knows what I
need ?
Why does the organisation
need this
When do we want it
Why?
Needs Assessment
Lessons from the Low Carbon Buildings (LCB) Health Care project
How do you recognise unmet needs? Think about……..
•Problems that need solving
•Strategic pains
•Targets missed / unable to deliver
•Costs escalating / or unpredictable
•Policies you cannot deliver or risk not delivering
•Opportunities that are not being unmet taken
•Compromised ambitions
How do you anticipate future needs? Think about……..
•Large projects that will be coming on stream
•Development plans
•Procurement / contract timeframes:
when are large or strategically important contract up for re-tender ?
•Changes taking place e.g. in the climate, economics, society, regulations
•New policies and priorities that will emerge
•New regulations coming into force in the future
www.innovationprocurement.org
Life Cycle Cost Calculation Tool
An environmental LCC methodology takes into account the above four main cost
categories plus external environmental costs. The latter may come from LCA
analyses on environmental impacts, which measure for example the external
costs of global warming contribution associated with emissions of different
greenhouse gases. Environmental costs can be calculated also in respect of
acidification (grams of SO2, NOX and NH3), eutrophication (grams of NOX and
NH3), land use (m2*year) or other measurable impacts.
The SMART/SPP tool has been developed to
help you calculate the life cycle costs (LCC) and
CO2 emissions of different products and
services (referred to only as “products” from
now on) to assist in procurement decisionmaking. It is specifically targeted at evaluating
innovative products, which are still in the phase
of development and market introduction.
www.innovationprocurement.org
Life Cycle Cost Calculation Tool
The tool can be downloaded or completed at http://www.smart-spp.eu/
http://www.youtube.com/watch?v=bYbvCbCeNj4#action=share
www.innovationprocurement.org
SMART-SPP LCC Tool
www.innovationprocurement.org
Risk Management and PPI
Project related
Chances are
Delay, planning fallacies
Unsuccesful prototype
Unforeseen expenses
Incompetent suppliers
Governmental risks
Political turmoil, strikes, delay in permits
Administrative resigns, protests
Cognitive Biases
Unability to live up to high expectations
Illusion of control of the project
Financial Crises
Inflation Risks, Loss of subsidies, bailouts
Dollar collapse, corrupt project participants
Unforeseen taxes, bankrupcies
Natural Disasters
Floods
Earth Quakes
Meteorites
www.innovationprocurement.org
also risks
Risk Management
Negligible
Certain
Marginal
Small costs
exceedings
Critical
Catastrophic
Crew changes
Likely
Project delays
Big cost
exceedings
Possible
Claims for
damages
Product failure
Fire in the Town
House
Unlikely
Sudden inflation
Rare
Aircraft crash
Major Flooding
Architects die
bubonic plague
Terrorist Attack
Unforeseen
www.innovationprocurement.org
Prototype
defects
Risk Management Tool
Risks
Governmental Causes
Risk Category
Strategy and
planning
www.innovationprocurement.org
Solution
does not
match
strategy
of the
procurement
agency
Understanding
of
the market does
not
match reality
Planning not
met
Planning
not realisic
Company
causes
Risk chances
Impact
Demand insufficiently defined
Risk Bearers
Contracting
Authorities
Big, because
of
insecurities in
time planning
Dependent
of interest
of
the project
strategy
Contracting
Authorities
Risk Management Tool (2)
Risks
Risk Category
Governmental
Causes
Solution technically
unfeasible
Solutions unfeasible
with regards to changes
in the market
Solutions unfeasible
due to disagreement
concerning networks
and standards of
practice
Users test
Company
causes
Risk chances
Impact
Prototype
technically not
working
Risk
Bearers
Companies
Project took too long
Solutions
unreflected
unmatched
with market
demand
Adaptive
capacities of
solutions are
insufficient
Chances depend
strongly to the
type of market
that the solution
is meant for
Big, may
lead to an
unusable
project
Big, may
lead to an
unusable
project
Government
Companies
Government
Companies
Intellectual Property AND Innovation
When procuring innovation new findings and insights are part of
the deal. Whoever owns these Intellectual Property Rights
(IPR) can become an important issue, both beforehand and
afterwards.
Default Rule: Whoever pays, owns the rights
•Copyright
•Trademark/ Brand Rights
•Patent
•Industrial Design Rights
•Compagny secrets
•Related Rights
•Plant breeders rights /Plant Variety Protection
Intellectual Property AND Innovation
Before/during the procurement:
If a public authority retains too much IPR
the incentive for involved companies is
small. The public authority ends up
paying for IPR it does not (and cannot)
exploit.
After the procurement:
If a public authority retains to little IPR
vendor-lock-in looms. The authority is
tied to the vendor for a specific service or
product it helped develop itself.
Saskia Ploeg,
Pianoo, 9-10-2013
IPR: Keep it all?
Decide on the approach to take
The following options are open in procurement when it comes to
IPR:
The following options are open in procurement when it comes to IPR:
•
Keep everything
•
Keep nothing
•
Division of IPR between Public Authority and company.
Based on your needs and risks a choice will be made for one of the options above. In general:
•
The more innovation and investment you expect from the market the more IPR you may
(need to) leave them.
•
The more you expect a company to continue developing the innovation after you
purchase it, the more inclined you would be to leave IPR to the company. In software for
instance you may well appreciate regular updates and improvements that are developed
for a group of customers and not solely at your expense.
•
The bigger the risks are of vendor lock the more likely you would be to retain all or most
of the IPR.
•
The less certain you are of the future use of the IPR the more you will wish to retain.
IPR in procurement
The problem of IPR pops up:
• Incentives – Lock in balance
• joint procurements
• coordinate procurements
• partly pre-patented technology
www.innovationprocurement.org
IPR in Standard Clauses
Use of ‘standard clauses’
• If you decided to keep the IPR yourself, you may be able to
use your national standard procurement terms and
conditions. Most countries will have such standard terms.
(EG Arvodi)
• If you would decide to leave the IPR partly/entirely with the
contractor, you need to look whether you excluded his
rights in your general terms.
• Challenges are in deviding IPR: who gets what?
IPR in Standard Clauses
Use of ‘standard clauses’
• If you decided to keep the IPR yourself, you may be able to
use your national standard procurement terms and
conditions. Most countries will have such standard terms.
(EG Arvodi)
• If you would decide to leave the IPR partly/entirely with the
contractor, you need to look whether you excluded his
rights in your general terms.
• Challenges are in deviding IPR: who gets what?
Innovative tender notices
www.innovationprocurement.org
http://www.innovation-procurement.org/resources/innovation-tenders/
Example innovative tender notices
•
•
•
•
•
•
•
•
•
•
•
•
23
Belgium-Brussels: Post and courier services
Document num.:
294007-2013
Pub. date:
31/08/2013 b
Deletion date:
28/09/2013
Type of doc.:
3 - Contract notice
Awarding auth.:
INTERNATIONAL POST CORPORATION SCRL (BE 0436.501.681)
•
Subject: Post and courier services
•
•
•
Type de proc.:
4 - Negotiated procedure
Texte: Contract notice – utilities Services
Directive 2004/17/EC
Section I: Contracting entity
•
IV.1.1) Type of procedure
Negotiated [ …]
The most economically advantageous tender in terms of the criteria stated
below
1. Fit with Requirements (meet needs of Posts and ease of integration).
Weighting 50
2. Commercial Considerations (cost/price). Weighting 30
3. Assurance of Supply (stability/reputation). Weighting 15
4. Innovation (capacity to provide new business opportunities). Weighting
4
5. Other (CSR). Weighting 1
IV.2.2) Information about electronic auction
An electronic auction will be used: no
IV.3) Administrative information
IV.3.2) Previous publication(s) concerning the same contract
no
www.innovationprocurement.org
Example innovative tender notices
Document num.:
279513-2013
Pub. date:
20/08/2013
Deletion date:
/
Type of doc.:
0 - Prior Information
Notice
Awarding auth.:
CITY OF YORK COUNCIL
Subject:
Networks
Wireless
telecommunications
system
Telecommunications
equipment and
supplies
Internet network
Date butoir specif.
(DD):
/
Type de proc.:
9 - Not applicable
Texte:
Prior information
notice
Services
Directive 2004/18/EC
www.innovationprocurement.org
II.4) Short description of nature and quantity or
value of supplies or services: The City of York
Council has been successful in gaining
SuperConnectedCity funding for a number of
initiatives. The council wants to establish a
Wireless Concession in the city.
The city centre receives over 7 million visitors a
year and has a strong retail and tourism based
economy. The city centre has a significant fibre
infrastructure and the council has over 25 city
centre CCTV locations that are fibre connected.
The council wishes for the concession to
provide a city centre Wi-Fi service that is
innovative and effective in increasing visitor
spend within the city as well as supporting the
provision of 3g/4g small cell services.
The council is holding a market engagement
day on Wednesday 11th September. The
objective is to present the council ambitions,
the offer available and the timetable for
agreement.
Innovative tender notices
procedure
• Use a creative procedure that does
not fix demands
criteria
• Set innovation as a MEAT-criterium
• Eg Belgium Post services
demand
• Ask for an innovative X
• Eg WIFI York,
www.innovationprocurement.org
Case: Bicycle parking innovation
Pilot projects were started in Eindhoven for both
Lock’n’Go and the Bikedispenser. Lock’n’Go is
an automated, secure bicycle parking system
working with a special pass.
The Eindhoven authorities gave cyclists the
opportunity for a free six month trial period
for Lock’n’Go, at two locations: the Eindhoven
train station and the Woensel shopping centre.
Source: https://www.lockngo.nl/34/watislockngo.html
Cyclists were immediately interested in Lock ‘n Go.
By now it is clear that this first trial is a real success.
www.innovationprocurement.org
Case: Bicycle parking innovation
That sounds like more
Eindhoven decides to buy
more and approves a large
order (above the threshold)
An external consultant
writes a schedule of
requirements, without
prior knowledge of
the pilot projects or
the situation at hand
The Bicyle Union
(Fietsersbond )warns that
the requirements aren’t
specific enough.
www.innovationprocurement.org
Another contestant
pops up, Velomove, a
bridge barrier
( parapet)
factory joins the
contest
The Bicyle Union agrees
to help evaluate but
disagrees with the
procedure. By bidding low
and unspecific, unfit
biddings may slip through
Thanks to the pilot,
fellow contestants
know all the deficits of
the lock ‘n go
Velomove won by an
unspecific bid for a
very low price
Other evaluators: How do you know
Velomoves prototype is unfit? It is a
prototype!
Case: Bicycle parking innovation
2010 ± the velomove bicycle parking lots are placed everywhere,
Alas… the prototype does not work
People cannot get
their bike out and
have to walk home.
Velomove offers
flowers and
excuses to the
locals
Eindhoven terminates the contract in 2011 and claims
damages for lack of performance.
www.innovationprocurement.org