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EIPA, 1/10/2018 - WWW.EIPA.EU © learning and development - consultancy - research
European Institute of Public Administration - Institut européen d’administration publique
© EIPA, 1/10/2018
Innovative procurement
Gracia Vara Arribas, Expert EIPA Barcelona
EIPA, 1/10/2018 - WWW.EIPA.EU ©
AGENDA
Background
Conceptualisation of PCP and PPI – the phases
The take aways for the public and the private sector
The Innovation Partnership
Case study – The “BCN Open Challenge” competition
EIPA, 1/10/2018 - WWW.EIPA.EU ©
Background
EIPA, 1/10/2018 - WWW.EIPA.EU ©
Background
Source:
http://www.innobuild.eu/sites/innobuild/files/Implementention%20Guide_Methodology%20Step%20by%20Step_Jan%
202013_5.pdf
EIPA, 1/10/2018 - WWW.EIPA.EU ©
The what and the why of PPI
Facilitates wide diffusion of innovative solutions on the
market.
Provides a large enough demand to incentivise industry to invest
in wide commercialisation to bring innovative solutions to the market with the quality and price
needed for mass market deployment.
This enables the public sector to modernize public services with
better value for money solutions and provides growth
opportunities for companies.
EIPA, 1/10/2018 - WWW.EIPA.EU ©
What is Public Procurement of Innovative Solutions?
(or innovation Procurement)
Public Procurement of Innovative solutions (PPI) happens when
the public sector uses its purchasing power to act as early
adopter of innovative solutions which are not yet available on
large scale commercial basis
EIPA, 1/10/2018 - WWW.EIPA.EU ©
What is Innovation Procurement?
Two types:
a) Procurement of R&D services to tackle specific public needs when solutions are not yet
on the market (PCP)
b) Procurement of solutions new to the market where the public sector acts as first
customer (PPI)
EIPA, 1/10/2018 - WWW.EIPA.EU ©
Pre Commercial Procurement (PCP)
Phase 0 - Challenge needs radical innovation, no solution 'on' or 'close to' market yet
Phase 1 - Public sector buys R&D from several suppliers in parallel (comparing alternative solution
approaches)
Phase 2 – Public sector in form of competition evaluates progress after critical milestones (design,
prototyping)
Phase 3 – Testing, risks & benefits of R&D (in particular related to IPRs) shared with limited number of
suppliers to maximise incentives for wide commercialisation
EIPA, 1/10/2018 - WWW.EIPA.EU ©
Pre Commercial Procurement (PCP)
• It may end (or not ) in PPI (phase 4)
• And not all PPI needs to be preceded by a PCP
EIPA, 1/10/2018 - WWW.EIPA.EU ©
State Aid for RDI = PCP is state aid free
Page 16 Article 33 of the Framework for state aid for R&D&I/ C(2014) 3282
PCP is a state aid free case if implemented according to COM(2007) 799
In particular:
- the price paid for the relevant services fully reflects the market value of the benefits received by the public purchaser
and the risks taken by the participating providers.
- the selection procedure is open, transparent and non-discriminatory, and is based
on objective selection and award criteria specified in advance of the bidding procedure
- the envisaged contractual arrangements describing all rights and obligations of the parties, including with regard to
IPR, are made available to all interested bidders
in advance of the bidding procedure
- the procurement does not give any of the participant providers any preferential
treatment in the supply of commercial volumes of the final products or services to
a public purchaser in the Member State concerned
- any service provider to which results giving rise to IPR are allocated is required to grant the public purchaser unlimited
access to those results free of charge, and to grant access to third parties, for example by way of nonexclusive licenses,
under market conditions.
EIPA, 1/10/2018 - WWW.EIPA.EU ©
A challenge requires solution which is almost or already on the market in small quantity
but not meeting requirements for large scale deployment yet.
Desired solutions would be provided if clear
requirements/sufficient demand would be expressed
by the market.
No procurement of R&D involved : Incremental innovation (production adaptation, scaling up of production)
or non-R&D innovation (e.g. organisational/process innovation) can deliver required quality/price
PPI – Public Procurement of Innovative Solutions
EIPA, 1/10/2018 - WWW.EIPA.EU ©
PPI for the Public Sector
• in PCPs, suppliers can be required to do the majority of R&D in Europe
It can create growth and jobs in Europe
• support to the economic activity in sectors related to the innovative solutions purchased or developed
Benefits to the local economy
• In times of economic distress innovation procurement can boost innovation in a country/region without extra funds – only by shifting existing procurement budget towards R&D and Innovation
Boost innovation in a country/region without extra funds
• Smart use of the procurement budget to remove supplier lock-in and obtain more open, standardized and better value for money solutions in a cost effective manner
Cost effective
• improving the quality and efficiency of public services and tackling societal challenges with innovative / breakthrough solutions for the benefit of the citizens
Modernization of public services
EIPA, 1/10/2018 - WWW.EIPA.EU ©
PPI for the private sector
The power of the public purse can open up
market/sales opportunities for innovative companies
in Europe
Public sector can act as launch customer to help start-ups in Europe scale
up and finally go to market
Demand driven Innovation (through Procurement)
helps shortening time-to-market for innovative
products/services
EIPA, 1/10/2018 - WWW.EIPA.EU ©
Setting targets in the EU
“Tell me what I need to do to help startups to scale up in Europe and together we will do it.”
Commissioner Günther Oettinger
SCALE – UP EUROPE MANIFESTO http://scaleupeuropemanifesto.eu/
Calls on the Member States :
-to open public procurement by supporting more Innovation
-to allocate of their annual procurement budget 3% to Pre-Commercial Procurements and 20% to Public
Procurements of Innovative Solutions
EIPA, 1/10/2018 - WWW.EIPA.EU ©
Growing impact at European level
EIPA, 1/10/2018 - WWW.EIPA.EU ©
Growing impact at Member State level
EIPA, 1/10/2018 - WWW.EIPA.EU ©
What can countries/regions do?
EIPA, 1/10/2018 - WWW.EIPA.EU ©
The new procedure:
INNOVATION PARTNERSHIPS
EIPA, 1/10/2018 - WWW.EIPA.EU ©
INNOVATION PARTNERSHIPS Article 31 Directive 2014/24 -Article 49 Directive 2014/25
- - Content: Combination of the purchase of R&D and the subsequent
purchase of the resulting supplies, services or works in one
procedure
- - Set up: The procurer may decide to set up the innovation
partnership with one or several suppliers
- - Execution : Innovation partnerships are structured in successive
phases following the sequence of steps in the R&I
- - Termination: procurer may decide after each phase to terminate the
innovation partnership or, in the case of an innovation partnership
with several partners, to reduce the number of partners by
terminating individual contracts, provided that the contracting
authority has indicated in the procurement documents such
possibilities / conditions.
EIPA, 1/10/2018 - WWW.EIPA.EU ©
INNOVATION PARTNERSHIPS
VS
PCP/PPI
EIPA, 1/10/2018 - WWW.EIPA.EU ©
MAIN DIFFERENCES BETWEEN PCP/PPI – INNOVATION PARTNERSHIPS .1
- PCP/PPI : Legal separation between R&D and purchase /deployment of
the innovative solution
- Innovation Partnerships – combination of R&D and
purchase/deployment of the innovative solution in one procedure
(Commitment to purchase the outcome of R&D – Procurer may decide
to terminate earlier the contact . The procurer must evidence the reason
for the early termination of the contract / not satisfied with the R&D
outcome)
- PPI cannot be implemented through Innovation Partnerships
MAIN DIFFERENCES BETWEEN PCP/PPI – INNOVATION PARTNERSHIPS 1
EIPA, 1/10/2018 - WWW.EIPA.EU ©
MAIN DIFFERENCES BETWEEN PCP/PPI – INNOVATION PARTNERSHIPS .2
PCP = multi phased / multi sourced procurement –
competition is kept at the execution stage (MUST)
Single sourced PCPs are not possible
Innovation Partnerships=The procurer decides
whether an innovation partnership with one or
more suppliers will be executed
Single sourced innovation partnerships are
possible
MAIN DIFFERENCES BETWEEN PCP/PPI – INNOVATION PARTNERSHIPS 2
EIPA, 1/10/2018 - WWW.EIPA.EU ©
MAIN DIFFERENCES BETWEEN PCP/PPI – INNOVATION PARTNERSHIPS 3
- PCP doesn’t fall under the scope of the EU Procurement
Directives / WTO Rules – R&D can be done in Europe
- Only PPI falls under the scope of the EU Procurement
Directives / WTO Rules but PPI does not contain R&D and is
only about deployment of innovative solution
- Innovation Partnerships fall under the scope of the EU
Procurement Directives / WTO Rules – R&D cannot be limited
in Europe
BARCELONA OPEN CHALLENGE CASE STUDY BARCELONA OPEN CHALLENGE CASE STUDY
EIPA Barcelona Authors: Gracia Vara Arribas & Anthony de Bondt Study delivered in March 2015
http://bcnopenchallenge.org/
Barcelona Innovative city
• Barcelona is renowned for its efforts to boost innovation
• Barcelona as a people city
• Barcelona UrbanLab (pilots)
• BCN Open Challenge (BOC) = ONE STEP BEYOND :
Purchase of innovation
What and why BCN Open Challenge?
What is BOC?
An international call for businesses and entrepreneurs to propose their innovative solutions to six different challenges to transform public space and services in the city.
Why?
• To promote business growth and job creation by linking public procurement with innovation
• To improve public services and the quality of life in the city
• To attract investment to the city
What’s in it for companies?
BCN Offers:
• Winners = real contracts !
• A total budget of €1,000,000
• Services for growth and a landing space
• A certified reference by the City Council of Barcelona
What is Innovative Public Procurement?
BCN OPEN CHALLENGE
Benefits of PPI • Share risks and benefits of development of ideas,
in particular important for young companies
• Develop better products
• Use of economies of scale/ Increased competitiveness
• Through involvement of the entire market, PCP/PPI makes way for developing products or services that are better matching the needs of the public sector
Companies
• Improving public services
• Improving the quality of life
• Better prices due to increased competitiveness Citizens
Benefits of PPI (cont.)
• Public procurement as a tool to promote innovation (PPI)
• Innovation in processes, efficiency and transparency in public spending
• Cooperation between municipal departments
The administration
Politicians
• Increased quality of public services • PPI offers a lens to focus on political
priorities • Successful innovative projects can
attract investors • Increase employment
Why Open?
Non-prescriptive approach, interested in IDEAS, not in particular product/service Foster innovation
6 lots/challenges: Companies of all sizes can apply
Support for growing businesses
Opening up competition
Transparency! All info is accesible via website
What is so innovative?
For the administration internally • The mainstreaming of a new way of
working with public procurement • The promotion of interdepartmental
cooperation • The reinforcement of Barcelona’s
international position as an I-city • Setting new standards for accountability
and transparency in public procurement
For the outside world
• The offer of a real contract • The offer of a business package for
startups • Validated project references for the
winners with the Barcelona Brand
The six Challenges
Reducing bicycle thefts in the city
Empowering support systems to reduce social
isolation
Monitoring pedestrian flows
in the city
Tools for digitization of museum and
archive collections
Automatic detection and
alerts of damaged road surfaces
Empowering local retail through
technology
The participation rates
Reducing bicycle thefts in the city
Empowering support systems to
reduce social isolation
Monitoring pedestrian flows in
the city
Tools for digitization of museum and
archive collections
Automatic detection and
alerts of damaged road surfaces
Empowering local retail through
technology
23
6 10
17 13
50
119 proposals
Criteria
Winning solutions
Innovation
Capacity to execute
Sustainability & ecology
The process
Differences with other European examples European examples Barcelona Open Challenge
Usually Pre-Commercial procurement (PCP)
- There are always a number of applicants
that get funds to conduct a feasibility study
(phase 1).
- Thereafter, a smaller number gets a
contract to produce a prototype or to run a
pilot (phase 2).
- The government is not involved in
marketing the end product. After phase 2,
the innovative product of service can be
procured by the government or any other
potential entity.
Public procurement of innovative solutions
(PPI)
- Competition does not involve a feasibility
study
- Smaller number of candidates is invited to
the Contracting Committee
- The City Council purchases the end product
or service, provides free office space and
business support
The takeaways
• BCN Open Challenge offers public buyers solutions beyond what’s already known on the market, while fostering entrepreseurship
• It is in line with the new legislative package of EU legislation
• It is open to companies of all sizes
• It requires administrative effort and coordination among departments.
• It mainstreams the culture of public investment for innovation within the City Council
• It changes the working methods of public buyers, requiring a coordination strategy among departments that was not there before
• It has been a learning process with positive collateral impacts, ready to be replicated with a few adjustments
Suggestions for the future
• The selection of challenges would need a deeper market analysis.
• The amount of money per challenge should be higher .
• Electronic procurement should be implemented: this would also enhance transparency and efficiency in the process.
• The requirement of anonymity would need to ensure by technical means that companies are not disregarded because of breach of this requirement.
• The Public Procurement for Innovation triggers the need for a long term innovation Plan within the City Council.
• Barcelona Open Challenge has been a learning process and the momentum needs to be uphold through dissemination of the case study and preparation of a new edition, where
scalability of the project can be promoted.
41
Thank you very much for your attention
Gracia Vara Arribas