www.koinno-bmwi.de

Innovation Procurement in EU Procurement Law

andEU-Funding Instruments

for Procurement of Innovation

Doris Scheffler

EU Contact Point for Public Procurement of Innovation

c/o ZENIT GmbH

Agenda

EU Procurement Directive – Background

Procurement of Innovation in EU Procurement Law

EU Funding Instruments for Procurement of Innovation

2

Innovation potential through public procurement

3

• In the EU public institutions spent more than a trillion Euro in order topurchase goods and services per year

• Thats about 14% of the GDP in the EU

• Results of different funding schemes by the EU show that publicprocurement of innovation is already highly important in the US, China andJapan:

• The US spent ca. 2.5 billion Euro per year for R&D with supplier (PCP)

• That‘s about 2.5% of their total purchase volume

• Additionally public institutions spent 16% of investments as earlyadopters (PPI)

4

New Procurement Concept in the EU

• Solutions for societal challenges

• Development of strategies for thepublic sectors, like:• Health care

• Climate change

• Energy consumption

• Transport

• Security

• etc.

innovative

protecting

environment

social

New procurement concept in the EU

• Simpler, more flexible and equal procedures

• Better access (SMEs, transborder)

• Strategic procurement

• E-procurement: digitial processing

of the complete procurement process

Modernising EU procurement law

New procurement concept in the EU

Three new Procurement Directives of the EU since 2014

(replaces Directives 2004/18/EG, 2004/17/EG)

• Implementing e-procurement

• Strategic procurement

• Facilitation of transnational actions …

New Directives

2014/24/EU 2014/25/EU 2014/23/EU

Public

Contracts

Sector

ContractsConsessions

Agenda

EU Procurement Directive – Background

Procurement of Innovation in EU Procurement Law

EU Funding Instruments for Procurement of Innovation

7

New types of selection procedures enabling morechoice, easier access and better results

8

The new Directives give contracting authorities more flexibility, greater options and new ways to procure goods and services

Contracting authorities will have much greater freedom to choose the type and design of the procedure best suited to their needs

In particular, they can utilise negotiation procedures, which are often used for complex contracts such as large infrastructure projects (where the technical specifications cannot be defined at the outset) and which have been broadened and made more flexible:

Source: https://ec.europa.eu/growth/content/simplifying-rules-contracting-authorities-ensure-better-quality-and-value-money-0_en

Possibilities to integrate innovative aspects into theprocurement process

9

In the tender specifications / technical specifications

In the eligibility; definition of qualification criteria (but only limited possible)

In the award of contract; definition of award criteria

In the definition of execution terms

Award Procedures for Procurement of Innovation

Admission of side offerswhere innovative services can be placed as proposed changes

Side offers allow the bidder to deviate from the specifications of theterms of reference

Side offers have to comply the minimum requirements by the buyer

The buyer indicates in advance whether and to what extent sideoffers are permitted. If no information is provided, no side offers areallowed

If the buyer allows side offers, offers may deviate in particular from a technical point of view from the specifications in the tenderdescription (technical side offer)

10

Award Procedures for Procurement of Innovation

Functional specification

no specification of a detailed service catalog, but definition of theservices to be provided according to the goals to be achieved

Bidder are only required to comply the framework conditions thatmust be observed when submitting tenders

This is followed by a concept competition between the bidders, whichcomes next to pure price competition

11

The new competitive procedure with negotiation (inviting at least 3 candidates to a dialogue) replaces the current negotiated procedure with prior publication of a contract notice on the condition that the authorities can justify its use on one of the following grounds:

when a product or service cannot be purchased ready-made from off the shelf

where the requirements include design or innovative solutions

where the contract cannot be awarded without prior negotiation

specific circumstances relating to the nature, the complexity or the legal and financial make-up, or because of the risks attached to them or to technical standards

where only irregular or unacceptable tenders have been received

12

New types of selection procedures

Source: https://ec.europa.eu/growth/content/simplifying-rules-contracting-authorities-ensure-better-quality-and-value-money-0_en

This new procedure provides contracting authorities with effective instruments to obtain the best possible procurement outcome in the negotiations to ensure fairness, transparency and efficiency.

The competitive dialogue can also be used in the same cases as the new competitive procedure with negotiation.

The new innovation partnerships are meant to address societal challenges and allow contracting authorities to procure highly innovative solutions by offering a smart combination of research activities and purchase elements.

13

New types of selection procedures

Source: https://ec.europa.eu/growth/content/simplifying-rules-contracting-authorities-ensure-better-quality-and-value-money-0_en

Competitive dialogue

is a two round procedure (similar to competitive procedure withnegotiation)

The public buyer describes its needs in descriptive document or contract notice, sets the minimum requirements for candidates and defines the contract award criteria based on Best Price Quality Ratio (BPQR)

After verification of the selection criteria of the candidates, the buyer initiates the competitive dialogue with the participants meeting the minimum requirements (at least three candidates)

The negotiations take place individually with each candidate, ensuring confidentiality of each solution

14

New types of selection procedures

Source: Commission notice C(2018) 3051 final, Guidance on Innovation Procurement, p. 41

Innovation Partnership

allows for the combination of research and procurement. The process takes place in three phases:

1. The competitive phase takes place at the very beginning of the procedure, when the most suitable partner(s) are selected on the basis of their skills and abilities. The contracts establishing the innovation partnership are awarded using the criteria of the best price-quality ratio proposed.

15Source: https://ec.europa.eu/growth/content/8699-innovation-partnerships-keep-public-services-date_en

New types of selection procedures

Innovation Partnership

1. In the next phase, the partner(s) will develop the new solution in collaboration with the contracting authority. This research and development phase can be divided into several stages during which the number of partners may be gradually reduced, depending on whether they meet predetermined criteria.

2. In the commercial phase, the partner(s) provide the final results.

16Source: https://ec.europa.eu/growth/content/8699-innovation-partnerships-keep-public-services-date_en

New types of selection procedures

Innovation Partnership

2. In the next phase, the partner(s) will develop the new solution in collaboration with the contracting authority. This research and development phase can be divided into several stages during which the number of partners may be gradually reduced, depending on whether they meet predetermined criteria.

3. In the commercial phase, the partner(s) provide the final results.

17Source: https://ec.europa.eu/growth/content/8699-innovation-partnerships-keep-public-services-date_en

New types of selection procedures

Innovation Partnership

This process should only be used in limited circumstances where:

the goods, works and services that are sought are innovative

there is an intention to include both the development and purchase elements in the procedure, provided they correspond to agreed performance levels and maximum costs.

18Source: https://ec.europa.eu/growth/content/8699-innovation-partnerships-keep-public-services-date_en

New types of selection procedures

Agenda

EU Procurement Directive – Background

Procurement of Innovation in EU Procurement Law

EU Funding Instruments for Procurement of Innovation

19

Horizon 2020 – Calls 2018-2020

20

2019 (66 M€)

PCP actions

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

• Next generation sequencing for routinediagnosis: 30 M€ (BHC-10)

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

PPI actions

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

2020 (100+ M€)

PCP actions

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

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

• Security:(SU-GM03)

• Advanced systems to support security: (SU-GM02) topic 2

PPI actions

• Infection & Integrated care: (BHC-20)

• Innovative HPC systems (INFRAEDI-04)

21

New Procurement Concept in the EU

FP 7 / HORIZON 2020

• Development of a joint EU strategy to foster research andinnovation, e.g. by developing strategies in the public sector

• New participation rules for innovative public procurement(Innovation Procurement)

• Introduction of two funding instruments:

– Pre-commercial procurement (PCP)

– Public procurement of innovative solutions (PPI)

∫

Stimulation of innovation through public procurement

EU Funding for Public Procurement of Innovation

22

Innovation potentialto mobilise

Phase 1Solution design

Phase 2Prototyp

development

Phase 3Original development and

testing of limited volume of 1st test products/services

Basic research Industrial research and experimental development

Commercial development

Market demandStimulate research

Phase 4Deployment of commercial

volumes of end-prductsWide diffusion of newly developed

solustions

Phase 0Curiosity

driven research

Draft ofsolutions

Prototyp Commercial end-products

Typical product innovation cycle

First testproducts

Product idea

PCP (pre-commercial procurement) PPI (public procuremnt ofinnovativ solustions)

23

Technology Readiness Levels (TRLs)

Basic Research,

i.e. FET

Demonstration Project

i.e. IA, PCP

Market Entry, i.e. PPI

TRL9: successful use

TRL8: qualification

TRL7: demonstration in

use

TRL5: technology

validation

TRL3: experimental proof

TRL1: monitoring

TRL6: demonstration in lab

TRL4: technology

validation

TRL2: description

24

Differentiation of InstrumentsResearch vs. Innovation, TRL, closeness to use

Basic Research

TRL 1-3

Technological

Demonstration

TRL 6-7

Market

TRL 8-9

Applied R&D

TRL 4-5

SME

Instrument

RIA

Eurostars

FTI

€€€

€

IAFET Open

PCP

PPI

25

Definition

• Pre-commercial Procurement (PCP) and Public Procurement of Innovative Solutions (PPI) are NOT new public procurement procedures.

• They are approaches to use existing public tendering mechanisms in such a way to optimise innovative outcome (best value for money for procurer) and to create optimal growth opportunities for suppliers.

26

Definition*

Pre-commercial Procurement (PCP)

• Open tendering• R&D service procurement• IPR sharing between supplier (keeps IPR ownership) and

procurer (right to use/license)• Multiple sourcing (multiple supplier in parallel)• Phases (Framework contract for the PCP and specific

contracts/phases)

Exempted from EU public procurement directives, WTO

* Source: Lieve Bos, DG CNECT „PCP and PPI in WP 2018-2020 update (https://ec.europa.eu/digital-single-market/en/news/calls-eu-funding-opportunities-pre-commercial-procurement-and-public-procurement-innovative )

27

Definition*

Public Procurement of Innovative Solutions (PPI)

• Early announcement (via PIN) of the “intention to buy a critical mass of solutions“ if market can deliver solutions matching specific requirements by a set date

• Conformance testing (optional) to verify if market can meet needs

• Tendering: e.g. open, negotiated procedure, competitive dialogue

Subject to applicable provisions EU public procurement directives, WTO

* Source: Lieve Bos, DG CNECT „PCP and PPI in WP 2018-2020 update (https://ec.europa.eu/digital-single-market/en/news/calls-eu-funding-opportunities-pre-commercial-procurement-and-public-procurement-innovative )

28

Definition of PCP from Project Teams

PCP involves different suppliers competing through different phases of development. The risks and benefits are shared between the procurers and the suppliers under market conditions.

PRE-COMMERCIAL PROCUREMENT (PCP) challenges industry from the demand side to develop innovative solutions for public sector needs and it provides a first customer reference that enables companies to create competitive advantage on the market. PCP enables public procurers to compare alternative potential solution approaches and filter out the best possible solutions that the market can deliver to address the public need.

29

The PCP process will start with an extensive preparation (phase zero) and is followed by three development phases:

30

Funding Rates in Horizon 2020

Pre-commercial Procurement (PCP)

• For the joint public procurement of R&D services the buyer

group will get an incentive up to 90% of the costs

• Max. 30% of the EU funding can be calculated for

coordination and network activities

31

Definition of PPI from Project Teams

PUBLIC PROCUREMENT OF INNOVATION (PPI) facilitateswide diffusion of innovative solutions on the market. PPI provides a large enough demand to incentivise industry toinvest in wide commercialisation to bring innovative solutions to the market with the quality and price neededfor mass market deployment. This enables the public sectorto modernize public services with better value for moneysolutions and provides growth opportunities for companies.

Public procurement of innovative solutions (PPI) shortens the route to market, sets free the potential of early adopters to implement an innovation and enables public procurers to efficiently answer market demands of innovative products.

Source: http://www.happi-project.eu/Project-plan/2/3 32

STEP 1: Mapping ofStakeholders & MarketSurvey

STEP 2: Market Analysis STEP 3: Joint Procurement

• Studies:• Innovative SMEs• Main procurer• Public grants for

SMEs• Deployment of HAPPY

webplatform• Infodays (London,

Paris, Turin, …)• Registration of

supplier and procureron webplatform

• Sorting out submission forms

• Expert Committeesand individual interviews

• Need assesment anddefinition of jointspecifications

• Call for tender• Tender analysis• Contract execution

The call for tender bringstogether 5 potential buyers, possibly joint byother contractingauthorities acrossEurope!

Oct. 2012 – Oct. 2013 Oct. 2013 – Feb. 2014 June 2014 – Dec. 2014

33

Funding Rates in Horizon 2020

Public Procurement of innovative solutions (PPI)

• For the joint public procurement of R&D services the buyer

group will get an incentive up to 35% of the costs

• Max. 50% of the EU funding can be calculated for

coordination and network activities

34

• Minimum: 3 independent participants from 3 different MS or AC

• Minimum: 2 public buyer from 2 different MS or AC

In addition, other entities can also participate

In buyers group: also private/NGO procurers providing services of public interest

In coordination/networking activities: any private/public type of entity (e.g. experts, end-users, certification bodies that assist procurers) that has no conflict of interest (no potential suppliers of solutions for the PCP/PPI)

Participation rules in HORIZON 2020

MS = Member States; AC = Associated Countries

∫35

Understanding the Rolesin the Project by the EC

Project ConsortiaLead Procurer :Procurer in the buyer group who coordinates the PCP/PPI procurement process and leads as coordinator in the sense of2004/18/EC und 2004/17/EC.

Buyers Group:Procurer who obligate oneself to a financial contribution in the PCP/PPI measure. Min. 2 public procurer from to different Member States of associated countries

ContractorSubcontractors

R&D service provider and supplier of innovative solutions who will be

contractor of the lead procurer/the buyer group selected and instructed

in the PCP or PPI procurement

www.koinno-bmwi.de

Contact

Doris Scheffler

Juan Carmona-Schneider

Leonora Yannakis

Hotline: +49 (0)208 – 30004-40

eMail: koinno@zenit.de

Internet: https://www.koinno-bmwi.de/en/eu-funding/