Vasileios TsanidisEuropean Commission DG CNECT Digital Single Market Start-Ups and Innovation Unit (F3)

POLICY FRAMEWORK ON INNOVATION PROCUREMENT

Definition of Innovation Procurement. Commission notice - Guidance on Innovation Procurement

https://ec.europa.eu/docsroom/documents/29261

“Innovation procurement” refers to any procurement that has one or both of the following aspects:q buying the process of innovation – research and development

services – with (partial) outcomes;q buying the outcomes of innovation created by others.

- In the first instance, the public buyer buys the research and development services of products, services or processes, which do not exist yet. The public buyer describes its need, prompting businesses and researchers to develop innovative products, services or processes to meet the need.

- In the second instance, the public buyer, instead of buying off-the-shelf, acts as an early adopter and buys a product, service or process that is new to the market and contains substantially novel characteristics.

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THE POWER OF THE PUBLIC PURSUE

Ø At the level of the EU, the purchasing power of public buyers accounts for around 14% of the GDP

Ø In many parts of Europe, it represents a considerable share of local economies.

Ø Public buyers can encourage innovation among established market players, but also provide vital opportunities to SMEs and new innovative companies who may have solutions to unmet needs but face difficulties in bringing them to the market.

Ø By acting as a lead customer, public buyers can provide innovative companies with an opportunity to test their new solutions

Ø By becoming their customer and thus increasing their turnover, contracting authorities might encourage other investors – both public and private – to invest in innovators activities.

Barriers that hamper the deployment of disruptive innovation

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- slow certification, legislation or standardisation that are holding up deployment of new breakthrough solutions

- fear/risk-averseness among procurers about dealing with new unknown technologies

- public procurers lock themselves into classical solutions still for many years to come and even if they want to, they can't stop their ongoing procurement contracts to switch to vendors /technologies with newer and better performing solutions.

Reasons that hamper the access of SMEs to IP

Ø risk aversion to act as first buyer for new innovative solutions,especially from SMEs

Ø fear of additional complexity and cost of innovation procurement inthe short term due to lack of awareness about the simplification andcost savings it delivers in the long term

Ø temptation to continue with long term contracts that deepen the lock-in to large vendors with costly proprietary products.

Ø selection criteria based on disproportionate qualification andfinancial guarantee requirements (e.g. with regards to priorcustomer references and minimum turnover).

Intellectual Property Rights in Public Procurement Ø The 2014 EU public procurement directives leave the choice to allocate intellectual

property rights to the procurer or to transfer intellectual property rights to participating economic operators.

Ø In cases where there is no overriding public interest in the public buyers’ retaining all or some of the intellectual property rights, these may be left with the suppliers.

Ø Leaving intellectual property rights ownership with suppliers can fuel industrial commercialisation of innovative solutions and reduces the procurement cost for the public buyer

Ø Europe’s major trading partners assign the intellectual property rights linked to public procurements, by default, to the participating economic operators, unless there are exceptional overriding public interests at stake.http://ec.europa.eu/newsroom/dae/redirection.cfm?item_id=56812

Why Innovation Procurement?

WIN-WIN FOR THE PUBLIC SECTOR

- Modernization of public services – improving the quality and efficiency of public services and tackling societal challenges with innovative / breakthrough solutions for the benefit of the citizens

- 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

- 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

- Benefits to the local economy- support to the economic activity in sectors related to the innovative solutions purchased or developed

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WHY INNOVATION PROCUREMENT

WIN-WIN FOR THE PRIVATE SECTOR IN EUROPE

- Open up market/sales opportunities for innovative companies in Europe- Demand driven Innovation (through Procurement) helps shortening

time-to-market for innovative products/services

SCALE – UP EUROPE MANIFESTO (8.000+ Start ups)

- Open public procurement by supporting more Innovation- Allocate % of annual procurement budget: 3% to PCP & 20% to PPI

European Commission Communication COM(2016) 733- Encourages the MS to Set ambitious innovation buying targets

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Pre-Commercial Procurement(PCP) to steer the development of solutions towards concrete public sector needs, whilst comparing/validating alternative solution approaches from various vendors. Opening the market to SMEs while keeping the innovation risk for the procurer acceptable by using small consecutive contracts with gradually growing contract sizes

Public Procurement of Innovative Solutions(PPI) to act as launching customer / early adopter / first buyer of innovative commercial end-solutions newly arriving on the market

PCP + PPI

Purchase R&D / non-com volumes end-product (e.g. PCP)

Purchase commercial volumes end-product (PPI)

Purchase R&D +commercial volumes (e.g. innovation partnership procedure)

Commission notice - Guidance on Innovation Procurement

Purchase R&D +commercial volumes (e.g. innovation partnership procedure)

the presumption of absence of State aid only holds in situations where a public purchaser procures products or services that are so unique or specialised that the

public buyer is the only potential buyer and there are no other potential providers on the market outside of the innovation partnership that could be disadvantaged.

LESSONS LEARNED FROM EU FUNDED PROJECTS

• FINANCIAL INSTRUMENTS

v Coord & Support Actions (FP7/H2020) / Thematic Networks (CIP): § Support only coordination activities e.g. preparation of a PCP or PPI by a

group of procurers (investigating feasibility to start PCP/PPI, open market consultation with industry before initiating a concrete PCP or PPI etc)

§ CSAs do not provide EU co-financing for an actual PCP or PPI procurement

v CP-CSA for PCP (FP7), PCP (Cofund) Actions (H2020): § Provide EU co-financing for an actual PCP procurement (one joint PCP

procurement per PCP action) + for related coordination and networking activities (e.g. to prepare, manage and follow-up the PCP procurement)

v PPI Pilots (CIP ICT), Actions: § Provide EU co-financing for the actual PPI procurement(s) (one joint

procurement or several separate but coordinated PPI procurements per PPI action) + for related coordination and networking activities (e.g. to prepare, manage and follow-up the PPI procurement(s))

v EIB/EIF equity, guarantees, loans: § Available to both public procurers and companies in PCPs and PPIs

EU Forms of support

Completed PCP procurements

• 19 PCPs are busy - or have completed - procuring by now- SILVER (Robotics for elderly care) - THALEA (Telemedicine for intensive care unit patients at increased risk)- SMART@FIRE (Smart protective equipment for fire fighters)- Human Brain Project (High Performance Computing for brain simulation)

- DECIPHER (Mobile health services)- V-CON (Virtual construction of road infrastructure)- CHARM (Traffic management)- PRACE 3IP (Energy efficient supercomputing)- Cloud for Europe (Cloud computing for governments)- PREFORMA (Long term digital preservation)- IMAILE (Personalised e-learning solutions)- NYMPHA-MD (Mental care for bipolar disorders)

HBP PCP doesn't result from a PCP call. HBP decided itself to implement a PCP in the HBP research project.

PCP

completed

Ongoing PCP procurements

- HNSciCloud (Science cloud platform for research community)

- QUACO (Quadrupole magnets for large hadron collider)

- MAGIC (Post stroke recovery)- SELECT4Cities (Internet of Everything platform for

Cities) - -RELIEF (Pain self-management) - -EMPATTICS (Chronic disease self-management) - -NIGHTINGALE (Wearable sensors for safer patient

monitoring/care)

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Achieved market engagement

• Open Market Consultations- Involving between 70 to 300 companies and researchers per PCP- Broaching the views of companies and researchers from all over Europe and

beyond in preparation of the upcoming PCP procurement

• Call for Tenders- Tender docs downloaded typically between 50 to 300 times- Nr of offers received typically between 10-48 (4-7 for specialised/low budget PCPs)- Offers received from all over Europe and beyond

• Contract award- 86 procurers cooperating in the 19 buyers groups- 126 contracts awarded in total - Winning bidders involving 193 companies and 26 universities/research centra- Total value of the PCP procurements: between € 450.000 and € 9.000.000

- Contract values for phase 1: between € 15.000 and € 180.000 (per contractor)- Contract values for phase 2: between € 20.000 and € 900.000 (per contractor)- Contract values for phase 3: between € 65.000 and € 2.700.000 (per contractor)

Info about impacts of the procurements itself

• Opening a route-to-market for new players/SMEs

- 56,2% of total value of contracts directly won by SMEs - Compared to 29% average in public procurements across EuropeMostly small young SMEs: 30% below 10 people, 54% below 50 people, 53% less than 10 years old

• Helping also larger market players bring products to the market- 18% of contracts won by large companies as single bidder- 10% of contracts won by consortia of larger companies plus SMEs- 73% of contracts won by SMEs (SMEs alone, or as lead bidder)

• Relevance to universities & bringing scientific results to market- 25% of winning contracts have university/R&D center partner in consortium- Winning SMEs are also often university start-ups

• Stimulating cross-border company growth- 36,5% of contracts won by bidders that are not from a country of any of the

procurers in the buyers group (e.g. DE company working for UK+NL procurers)- Compared to 1,7% average in public procurements across Europe

• Creating growth and jobs in Europe– 99,7% of bidders do 100% of R&D in Europe

(2 have committed to do minimum 68% resp. 85% of R&D in Europe)

• Budget efficiency / Reducing the R&D risk for procurers Encouraging commercialisation of results by vendors– Leaving IPR ownership rights with contractors reduced the R&D cost for procurers

on average with 50% as vendors see wider commercialisation opportunities -> PCPs can get twice as much R&D done for same budget as R&I action

• Improving the quality and efficiency of public services– All completed PCPs have delivered innovative solutions that achieve the expected

quality and efficiency requirements set out initially by the procurers – 60% of procurers use PCP to obtain more open, interoperable solutions– Procurers from 50% of PCPs that completed second half of 2016 have already

deployed the small test series developed during the PCP and are preparing wider commercial deployment with an enlarged buyers' group (preparation involving e.g. certifying solutions in preparation of a follow-up PPI)

Info about impacts of the procurements itself

• Separating PCP (R&D) from PPI (commercial deployment) and using a phased PCP approach- Opens the market for small players/SMEs (smaller gradually growing contract sizes)- Enables procurers to steer industry R&D to meet their needs, achieve desired

quality and efficiency improvements in public services and reduce vendor lock-in- Stimulates cooperation with universities and larger companies

• Joint cross-border PCP procurement– Stimulates cross-border company growth– Facilitates the creation of more open standards based interoperable solutions

• Leaving IPR ownership rights with contractors– Reduces the cost / risk of going for an innovative solution for procurers – Encourages wider commercialisation of solutions by vendors

Lessons learned

2018 (41,2 M€)• PCP actions

• CSA actions

2018-2020 calls in support of PCP and PPI

2019 (83 M€)• PCP actions

• PPI actions

PCP actions: co-finance (max 90%) actual procurement cost for joint PCPs + coordination costsNote: Lower max funding rates are used for the security PCPs (70%) and wave energy PCPs (50%) !!!

PPI actions: co-finance (max 35%) actual procurement cost for joint or coordinated PPIs + coordination costsCSA actions: co-finance (max 100%) only coord/netw costs e.g. procurer networks preparing future PCP/PPIsNote: WP2020 info is still indicative. WP2020 will only be finalised next year.

2020 (100+ M€)• PCP actions

• PPI actions

• ICT based solutions for any area of public interest: 6 M€ (ICT-34)

• Digital health & care: 22 M€ (DTH-10)

• Security: 8,2 M€ (SU-GM03)

• Integrated healthcare / diagnosis: 2M€ (HCO-12)

• Digital health & care: 3M€ (HCC-04)

• ICT based solutions for any area of public interest: 6 M€ (ICT-34)

• Next generationsequencing for routine diagnosis: 40 M€ (BHC-10)

• Wave energy: 20 M€(LC-SC3-JA-3-2019)

• Security: 7 M€ (SU-GM03)

• Digital health & care solutions for an ageingsociety: 10 M€ (DTH-05)

• Infection & integrated care: (BHC-20)

• Climate Change resilience (LC-CLA-13-2020)

• 100% renewable energy: (LC-SC3-RES-10-2020)

• Security (SU-GM03)

• Infection & integrated care: (BHC-20)

• Innovative HPC systems(INFRAEDI-04)

• ICT Work Program • ICT-34: Open to ICT based solutions in any area of public interest (€ 6M; 17 Apr 2018)• ICT-34: Open to ICT based solutions in any area of public interest (€ 6M; 28 Mar 2019)

• Health Work program • DTH-10: Digital health and care (€ 22M; 14 Nov 2018)• BHC-10: Next generation sequencing for routine diagnosis (€ 40M; 16 April 2019)• BHC-20: Infection and integrated care (budget / deadline tbc)

• Climate Work program• LC-CLA-13-2020: Solutions for climate change resilience (budget/deadline tbc)

• Energy Work program• LC-SC3-JA-3-2019: Wave energy (€ 20M; 27 Aug 2019) • LC-SC3-RES-10-2020: 100% renewable energy (budget/ deadline tbc)

• Security Work Program• SU-GM03: Innovative solutions to enhance security (€ 8,2M; 23 Aug 2018)• SU-GM03: Innovative solutions to enhance security (€ 7M; 22 Aug 2019)• SU-GM03: Innovative solutions to enhance security (budget / deadline tbc)

Call deadlines in red

Calls for PCP actionsClick on a topic identifier (e.g. ICT-34) for more detailed information

PPI actions• Health Work Program

• DTH-05: Digital health and care solutions for an ageing society (€ 10M; 24 Apr 2019)• BHC-20: Infection and integrated care (budget/deadline tbc)

• Research infrastructure Work Program• INFRAEDI-04: Innovative High Performance Computing (budget/deadline tbc)

CSA actions• Health Work Program

• HCO-12: Integrated healthcare / diagnosis (€ 3M; 18 Apr 2018)• HCC-04: Digital health and care (€ 3M; 24 Apr 2018)

Calls for PPI and CSA actionsClick on a topic identifier (e.g. DTH-05) for more detailed information

Call deadlines in red

Examples PCPs EU funded Health Non-EU funded Health

5 buyers: Univ, hospitals of Aachen(DE), Maastricht(NL), Parc Tauli Sabadell (ES), East Limburg (BE), Oulu (FI).

PCP (June 2015 - Oct 2016) developed, tested and deployed in small scale a highly interoperable platform for tele-detection and tele-care of ICU patients at increased risk. PCP started with 5 vendors: 3 delivered a system that meets the needs (PCP opened market for SMEs). Self-learning and prediction algorithms enable earlier diagnosis and higher efficiency in ICU

-> Cost savings (buyers group), 25% reduction in sepsis mortality and 20-50% in length of hospital stay #

Enlarged buyers group now starts THALEA II PPI to deploy certified solutions at wider scale across EU

THALEA (I & II)

http://eafip.eu/wp-content/uploads/2015/12/7_G.MARX_.pdf

Entities involved: Lombardy region, Niguarda hospital, ARCA regional purchasing body

PCP (2014-2016) developed and tested: easy-to-use automated universal system for moving hospital beds, with anti-collision and safety systems, not needing guide lines or tracks even on non rectilinear routes. PCP opened market to 6 SMEs.

Benchmarking: 40% expected cost savings (cheaper solution + less accidents and functional limitations)

PPI for deployment under preparationNew PCPs on other health topics starting

Niguarda PCP

URL: http://inspirecampus.eu/wp-content/uploads/2014/09/INSPIRE_case_study_

LOMBARDY_hospital_pcp3.pdf

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Examples PCPs EU funded Education Non-EU funded Transport

IMAILE

URL: www.imaile.eu

Procurers: schools and universities (SE, ES, DE, Fi)

Joint procurement of R&D services via the PCP that developed personalised learning solutions that help students study maths, science better.

Artificial intelligence adapts the subject to the interests and learning habits of the study. Gaming aspect makes the learning experience more interactive, interesting and rewarding for students.

1 SME in the PCP has already grown during the PCP from a 1 person to a +20 person company

Electrified Roads

https://www.trafikverket.se/contentassets/1571f0f4277449679a7cf8be8e98be12/elektriska_vagar_for_tung

a_fordon_anders_berndtsson.pdf?id=195744

Procurers: Traffikverket (SE)

Largest PCP in Europe to develop electric traction systems for heavy road transport vehicles.

Two suppliers in last phase demonstrate solutions that reduce energy cost and CO2 emissions so that this pays back the operational investments.

Examples PPIs EU funded Health Non-EU funded Health

6 purchasing groups from FR, UK, IT, BE and LU launched on 30 September 2014 the first 'joint' transnational PPI procurement in the healthcare domain in Europe: Resah-Idf (FR), SCR Piemonte (IT), NHS commercial solutions (UK), Centrale de Marchés Mercure (BE), Entente des hôpitaux (LU).

The French lead procurer setup a framework agreement with several vendors under French law on behalf of the whole group of procurers to buy 5 different lots of equipment. All 6 purchasing groups have then setup specific contracts under their own national legislation to buy products from any vendor selected under the framework agreement.

HAPPI

24Robotics based bed washing systemOne of the PPI procurements of www.ecoquip.euWon European PPI award 2014 (supplier = SME)

More efficient and sustainable healthcare solutionCost reduction: 35%CO2 footprint reduction: 65%

Erasmus University Medical Center PPI

URL: http://www.innovation-procurement.org/award/erasmus-mc/

URL: www.happi-project.eu

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ΜAINSTREAMING INNOVATION PROCUREMENT

IN EUROPE

NETWORK OF NATIONAL COMPETENCE CENTERS ON INNOVATION PROCUREMENT ACROSS EUROPE

• https://www.innovationprocurement.org/

projects/procure2innovate/

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The Procure2Innovate project establishes or expands competence centres for innovation procurement in 10 EU Member States.

The project foresees the expansion of, and improvement of services at, five existing competence centres in: Austria, Germany, the Netherlands, Spain and Sweden. During the course of the project, new competence centres will also be created in five additional countries: Estonia, Greece, Ireland, Italy and Portugal. © iStock

Ø build a permanent network of competence centres to facilitate networking, knowledge sharing, collaboration and best practice exchange on innovation procurement;

Ø support the five existing innovation procurement competence centres to enlarge their scope, further increase their impact and enhance their services offered to public procurers;

Ø establish five new innovation procurement competence centres and guide them in effectively addressing public procurers and increasing the efficient use of procurement of innovation;

Ø support the competence centres in developing expertise to facilitate cross-border cooperation and joint procurement;

Ø communicate and disseminate the tools, approaches and results developed by the competence centres at European level giving public procurers and other stakeholders in all EU Member States access to expertise and knowledge on innovation procurement.

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Activities of the Network of National Competence Centers on Innovation Procurement

DG CNECT: Study on the strategic use of public procurement for innovation in the digital

economy — SMART 2016/0040

- - Measurement in real time how much PPI is procured in 28 MS (+ Norway and Switzerland)

- - Benchmarking Innovation Procurement support policies in 28 MS (+ Norway and Switzerland). Overall score per country based on indicators

• https://ec.europa.eu/digital-single-market/en/news/study-benchmarking-strategic-use-public-procurement-stimulating-innovation-digital-economy

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INDICATOR 1. DEFINITION OF INNOVATION PROCUREMENT

• Definition in the legal environment of:

• - Pre-Commercial Procurement • - Public Procurement of Innovative Solutions • - R&D Procurement • - Innovation Procurement

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INDICATOR 2. HORIZONTAL POLICIES TO SUPPORT INNOVATION PROCUREMENT

v Regional/Urban Policy v Financial Policy v Entrepreneurship Policy v Economic Policy v ICT/Digital Policy v Competition Policy v Public Procurement Policy v Innovation Policy v R&D Policy - 30

INDICATOR 3. SECTORIAL POLICIES IN SUPPORT OF INNOVATION PROCUREMENT

v Education, recreation, culture v Postal sectorv Public order, safety, security and defencev Water sectorv Environment sector v Energy sectorv Construction sector v General public services v Public transport v Health and social services

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INDICATOR 4. ACTION PLAN ON INNOVATION PROCUREMENT

vMeasures to pool demandv Definition of decision making structuresv Definition of actorsv Commitment of key procurersv Clear timelinev Definitions of resultsv Dedicated resourcesv Commit to concrete actionsv Coverage

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INDICATOR 5. SPENDING TARGET ON INNOVATION PROCUREMENT

INDICATOR 6. MONITORING SYSTEM ON INNOVATION PROCURMENT

- Evaluation system - Monitoring

INDICATOR 7. INCENTIVES TO INCREASE THE UPTAKE OF INNOVATION PROCUREMENT - Personal Incentives - Financial Incentives

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INDICATOR 8. CAPACITY BUILDING AND ASSISTANCE MEASURES

v One stop shopv Networking v Coordination v Template tender v Assistance to public procurersv Handbook or guidelines v Trainings and workshops v Good practises v Central website

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INDICATOR 9. INNOVATION PROCUREMENT FRIENDLY LEGAL FRAMEWORK

v Specific measures to foster innovation in public procurement

• - IPR default scheme • -Use of preliminary market consultation • -Frequency of variant offers • -Value for money

v Openness of the national procurement market • - Level of competition • - Level of transparency 35

eafip INITIATIVE

Toolkit and Help-desk

Free local assistance

Identification of keyprocurers in the ICT

sector

Workshops&Conferences

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EAFIP TOOLKIT The eafip Toolkit aims to provide support to policy makers in designing PCP and PPI strategies, and to procurers and their legal departments in implementing such procurements. It is consisted of three modules:

q Module 1: A strategic module addressed to policy makers, providing economic and case evidence about the impacts and benefits of PCP and PPI, together with concrete guidance on how to embed PCP and PPI into innovation strategies;

q Module 2: An operational module addressed to public procurers aimed at clarifying the pre-requisites and key steps to design and implement an innovation procurement process (PCP and PPI); and

q Module 3: A legal / operational module addressed to legal services aimed at clarifying legal issues and provide practical ‘how-to’ guidelines, supported by templates.

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More info on our DSM webpage on innovation procurementhttps://ec.europa.eu/digital-single-market/en/innovation-procurement

- Info & FAQs about what / why innovation procurement- Info on EU funding for PCP/PPI / overview calls- Overview EU funded innovation procurement projects- Overview MS initiatives on innovation procurement- Overview EU policy initiatives on innovation procurement- Events, news, newsletter

DSM webpage on innovation procurement

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• the brochure on the PCP/PPI projects that are currently EU Co-funded• http://ec.europa.eu/digital-agenda/en/news/innovation-procurement-power-public-purse

European Assistance for Innovation Procurement (Eafip):http://eafip.eu/

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Thank you very much for your attention

Vassilis Tsanidis Dr.JurStart-ups and Innovation Unit (F3)

DG CNECTEuropean Commission

Vasileios.Tsanidis@ec.europa.eu

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