Demand driven innovation through public procurement Lieve Bos European Commission DG CONNECT...
-
Upload
baldric-andrews -
Category
Documents
-
view
216 -
download
1
Transcript of Demand driven innovation through public procurement Lieve Bos European Commission DG CONNECT...
Demand driven innovation through public procurement
Lieve BosEuropean Commission
DG CONNECT (Communication Networks) F2 unit (“Innovation”)
Policy debate that lead to EC activity on public Policy debate that lead to EC activity on public procurement driving research & innovationprocurement driving research & innovation
• 2006: Aho report recommended EC actions driving demand for innovations through public procurement
• 2007: Lead Markets Initiative and PCP communication
• 2008-today: Council conclusions and EP resolutions asking EC to support public procurement of research and innovative solutions
• 2010: Digital Agenda for Europe, Innovation Union and Regional EU2020 flagships calling also Member States for more PCP & PPI
• DAE: PCP key to double annual public ICT R&D spending from 5,5 to 11 €Bn• Innovation Union: from 2011, MS dedicate €10Bn per year on PCP and PPI• Regional flagship: calls on regions to do PCP & PPI also via structural funds
• 2011: Revised industrial policy communication calling for innovation procurement in support of European industrial policy
Health care Climate Change Energy Efficiency Transport Security Public sector efficiency…
Why? To get best value for money solutions Why? To get best value for money solutions developed for public sector challengesdeveloped for public sector challenges
• Public sector is faced with important challenges.• Addressing these, often requires public sector transformations for
which no commercially stable solutions exist yet.• In many cases, solutions are near the market and would be provided if clear
requirements/sufficient demand expressed by the market (PPI) • In other cases, still R&D required to de-risk technology, still different competing
solution approaches to compare before committing to deploy (PCP)
• Public procurement is 'the tool' that enables the buyers to steer industrial R&I to its needs. However, public procurement driving R&I from demand side is underutilised in EU.
Why? To shorten time to market & provide first Why? To shorten time to market & provide first customer reference for innovationscustomer reference for innovations
Market Share %
Innovators2,5%
Early Adopters13,5%
Early Majority34%
25%
50%
75%
100%
Late Majority34%
Laggards 16%
PCPH2020, SF
PPIH2020, SF
PPICEF, SF
Normally functioning procurement market (e.g. in US, Asia): 2,5% of ‘innovator’ type customers (PCP) Who invest in R&D with suppliers ($50Bn/Y in US <-> €2,5Bn/Y in EU)
16% of ‘early adopters’ (PPI)
ICT public procurement market in Europe:0,5% of ‘innovator’ customers (PCP)5% of ‘early adopters’ of new tech in e-gov (PPI)
CEF = Connecting Europe FacilitySF = Structural/Cohesion FundsH2020 = Horizon 2020
Lack of awareness of how to optimise risk-benefit balance for procurer and supplier
Unclear how within the legal framework for R&D procurement
Fragmentation of demand
5
Overcoming Overcoming the barriersthe barriers
Phased approach, separate procurement of R&D from procurement of commercial vollumes of end-solutions, IPR sharing at market price
Commission PCP communication COM(2007)799 & SEC(2007)1668
Cooperation among procurers (share PCP/PPI experience/cost), EU support for cross-border PCPs/PPIs
Supplier B
Supplier C
Supplier D
Phase 1 Solution design
Phase 2 Prototype
development
Phase 3 Original development
of limited volumeof first test products /
servicesSupplier A
Supplier B
Supplier C
Supplier D
Supplier B
Phase 0 Curiosity
DrivenResearch
Applied R&D / Pre-commercial Procurement (PCP)
Phase 4 Deployment of commercial
end-productsDiffusion of newly developed
products / services
Supplier D
Public Procurement of Innovative Solutions (PPI)
• PCP to steer the development of solutions towards concrete public sector needs, whilst comparing/validating alternative solution approaches from various vendors
• PPI to act as launching customer / early adopter / first buyer of innovative commercial end-solutions newly arriving on the market
Supplier(s) A,B,C,Dand/or X
Also normally multiple sourcing here to keep competition going
Why? To create growth and jobs 'in Europe'Why? To create growth and jobs 'in Europe'How? PCP-PPI comboHow? PCP-PPI combo
Because of split between PCP and PPI:•PCP falls outside WTO rules & proc directives (can encourage job creation 'in Europe'), even if the large scale PPI that may come afterwards would not be exempted
PCP Pre-Commercial ProcurementPCP 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 (in casu IPRs) shared with suppliers to maximise incentives for wide commercialisation
Difference between PCPand PPI
PCP event, Budapest,
11-12 April 2011: slide
8
IPR valuation at market price IPR valuation at market price principle principle
Tangible results R&D
Service contract
Intangibles (all IPR rights)
Exclusive development contractsProcurer asks for all outcomes
of R&D service contract
Procurer pays supplier full R&D cost(incl. IPR ownership rights)
Procurer pays for filing/maintaining IPRs, litigation and acquiring background IPRs
Procurer has full control over IPRs, but also full cost, legal liability and exploitation responsibility of IPRs
Pre-commercial ProcurementProcurer does not ask all outcomes
(no IPR ownership rights)
Procurer pays supplier exclusive dev. price – financial compensation
for relinquishing IPR ownership rights
ownership rights
PRICE PAIDR&D service contract
FINANCIAL COMPENSATION
ownership rightsProcurer sells exploitation license
to suppliers ‘at market price’
(e.g. auction)
Tangible results R&D
Service contract
PRICE PAIDR&D service contract
Intangibles (all – IPR
ownership rights)
Supplier pays for filing/maintaining IPRs,
litigation, and acquiring background IPRs
Procurer keeps level of IPR 'control' to ensurecompetitive supply chain: rights to use, licensing
rights, call back option, rights to publish key results
PCP based on good practice
• Procure R&D in steps (solutions, prototypes, test series) to reduce risk and give also SMEs a chance
Grow size of tasks gradually, make bridge from ideas to first test product, procurer = first customer reference
• Risk-benefit/IPR sharing with suppliers Less risk procurer, commercialisation opportunity suppliers
• Competing development with multiple suppliers Better value for money. US reports: in-development
competition reduces first unit acquisition cost with 20-30%*
• Sharing R&D costs with other procurers Cooperation across borders can help develop a European
market, common standards etc
* 'Competitive Dual Sourcing', Jacques Gansler, 7/10/2007. Based on analysis from Annex G, 'International Armaments Cooperation in a era of coalition security', report US Defence Science Board, August 1996
PCP Win-win for all stakeholders
- New lead markets- Increase export
- Quality of public services- Focus on political priorities- Improve innovation climate- Attract foreign investment- Increase employment
- Reduce cost of procurement
Procurers
Pre-commercialProcurement
-Shared risks & benefits-First buyer in early R&D
- Global competitiveness
PoliticiansSuppliers
Get the ‘Best Product’… … at the ‘Lowest Price’
- Address ‘public market innovation failure’- Shape product development to public needs- Increase technology knowledge- Reduce risk in commercial tendering- Favour supplier competition
- Pooling of resources- Economies of scale- No licensing costs - ‘First time right’ product - ‘EU interoperable’- Attractive to venture capitalists - Reduce unforeseen expenditure
- Better products- Economies of scale- Wider market size- Shorter Time to market
- Reduce risk of innovation
PPI – Public Procurement of Innovative SolutionsPPI – 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.
Difference between PCPand PPI
EC support to PCP & PPIEC support to PCP & PPI
• Why EC support needed?– PCP /PPI in some EU countries but not spread across rest of Europe– Defragmenting demand side for challenges of common European
interest (common requirements setting, de facto standard creation)
• 2009: First EU calls for proposals creating European networks of public procurers on PPI (LMI CIP) and on PCP (ICT theme FP7)
• 2011-2013: EC support for PCP via FP7 and for PPI via CIP– DG CNECT and ENTR are piloting support to PCPs by procurers
(FP7 grant: co-financing up to 75% of the price of procured R&D)– DG ENTR, ENV and CNECT are piloting support to PPIs done by
public procurers (via CIP grant: co-financing up to 20% of the price of the innovative solutions procured/deployed)
• 2014-2020: Horizon 2020 (+ possibilities in SF & CEF)– 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
PCP
2009 2011-12 2013
DG INFSO (CSAs)FP7-ICT-2009
€1,5M3 €500K networking actions for procurers
(ICT for health, transport,
egov for NMS)
DG INFSO (CP-CSAs)FP7-ICT-2011/12
€24MFP7-INFRA-2012
€4,5MCo-financing 6 cross
border PCPs:(in robotics for ageing
well, mobile health services, traffic
management, embedded ICT for fire fighter
garments, energy efficient supercomputing)
DG CNECT(CP-CSAs)FP7-ICT-2013 €32,5M
FP7-INFRA-2013 max €19,5MCo-financing 7-8 cross border PCPs:
(€8M health/active ageing,€5,5M elearning, €4M open call
€5M digital preservation,€10M cloud computing,
Up to €x19,5M DANTE, GEANT)
DG ENTR (CP-CSAs)FP7-SEC-2012 €10M
Co-financing 1 joint PCP:
(maritime border surveillance)
DG ENTR (CP-CSAs)FP7-SEC-2013 €18MCo-financing 2 bottom-upcross border joint PCPs on
landand maritime border
surveillance)
PCP related calls so farPCP related calls so far
PCP-PPI related calls so farPCP-PPI related calls so far
PPI
DG ENTRCIP-EIP-2009Lead Markets
Networks €3M)3 €1M networks of
Procurers (healthcare,embedded textiles
firefighters, sustainable construction)
DG RTD FP7-ENV-WATER-INNO-
DEMOCSA for PCP in EIP on water mgt
FP7 2013 FOOD/AGRI WP CP (€6M) on opening market for bio-based products via procurement
DG ENTR & ENV (PPI Pilot)
CIP-EIP-2011/12 €17MCo-financing cross border PPIs: 8 on areas of EIPs (climate change, active
ageing, energy efficiency, mobility, health working
conditions) & 1 on eco-innovation
DG ENTR (PPI Pilot)CIP-EIP-2013 €6,3M
(sustainable construction, recycling, clean vehicles)
DG CNECT (PPI pilot & TN)
CIP-PSP-2013 €12MPPIs in health/active ageing
Thematic networks preparing PPIs
in ICT for sustainable mobility, energy efficient servers for
cities
DG RTD (CSAs)FP7-COH-2012
€2MTransport & health procurer network
2009 2011-12 2013
FP7 2013 TRANSPORT WP CP to demonstrate electric buses should facilitate PCP
DG ENERCIP-IEE (2008…)
Networks of procurers on sustainable energy
procurement
Status of PCP implementation Status of PCP implementation across Europe across Europe Update April 2013 status Update April 2013 status
More info about EU funded cross border PCP projects: http://cordis.europa.eu/fp7/ict/pcp/projects_en.html
More Info about national PCP initiatives in Member States: http://cordis.europa.eu/fp7/ict/pcp/msinitiatives_en.html
Pilots started
Framework identified and/orPilots in preparation
Hungary
Belgium
Netherlands
Awareness RaisingExploring possibilities
Denmark
Austria
FinlandSweden
Poland
Working onframework
GermanyFrance
Luxembourg
IrelandCyprus
Romania
Slovenia
Slovakia
Bulgaria
Czech Republic
Estonia
Greece
Latvia LithuaniaMalta
Portugal
Spain
Norway
Switzerland
Italy
Projects in dotted-line are cross-border EC funded PCP projects that have started:SILVER: started January 2012 (Supporting Independent Living of Elderly through Robotics)CHARM: started September 2012 (Common Highways Agency / Rijkswaterstaat Model for traffic management of the future)V-CON: started October 2012 (Virtual Construction / Modelling of Roads)SMART@FIRE: started Nov 2012 (Integrated ICTs for Smart Personal Protective Equipment for Fire Fighters and First Responders)DECIPHER: started February 2013 (new applications based on Distributed EC Individual Personal Health Records) PRACE 3IP: started July 2012 (PRACE 3rd phase on high energy efficient high performance computing)
SILVER
UKIceland
CHARM
V-CON
SMART@FIRE
DECIPHER
PRACE 3IP
16
Potential £160m p.a. saving
Potential £30m p.a. saving
£4,000 per HCAI avoided
Potential £19m p.a. saving
Example projects in Example projects in HealthcareHealthcare
Potential Value PCP-like projects to NHS: Improve the quality of the patient experience and generate significant cost savings (£236m).Value to the economy: A number of innovations have been able to attract significant extra investment (£290m).
NHS UKNHS UKLombardia ItalyLombardia Italy
PCP Niguarda Hospital – Lombardy region
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 call for tender open
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 in preparation for 2014 (open to whole market)More info on this case on: http://cordis.europa.eu/fp7/ict/pcp/docs/statoil-pcp-case-v2.pdf
PCP example on CO2 emissions Large projectPCP example on CO2 emissions Large projectCarbon capture – Norway attracting large firmsCarbon capture – Norway attracting large firmsStatoil/GassanovaStatoil/Gassanova
Example EU funded cross-border PCP Example EU funded cross-border PCP
7 Local and regional contracting authorities from 5 EU Member States carrying out this PCP jointly:
city of Odense and region of Southern Denmark (Denmark), city of Västerås (Sweden), city of Vantaa and
Oulu (Finland), city of Stockport (UK), city of Eindhoven (Netherlands).
SILVER contracting authorities procure R&D services via the PCP to get robotics solutions developed and
tested in the 5 participating countries that will allow by 2020 to care for 10% more elderly people living
independently at home with the same amount of care staff.
SILVER call for tender is 'OPEN NOW'. Potentially invited tenderers are invited to info meetings in March-April
and to make offers by 12 June (see SILVER website and tender publication in OJEU) !
www.silverpcp.eu
For more info: http://lowcarbon-healthcare.eu/ UK brand name for PPI = Forward Commitment Procurement (FCP)
Low carbon healthcare PPI started 2006Introducing more energy efficient LEDs innetwork of over 20 hospitals in 8 EU countries(cross border PPI cooperation funded by EC/DG ENTR)• 30% energy consumption saving• 88% maintenance savingsTotal cost savings enable take-in of +10% patients
Swedish environmental/energy efficiency PPIsdone by NUTEK/STEM agency:
• heating-ventilation-cooling of buildings• public transportation (hydrogen busses)• office blocks (sun shading, lighting)• white appliances (washing machines, fridges)• wind energy parks
Result: Reduced the SE dependency on nuclear energy with 15% through PPIs incombination with product certification/labeling, take-up subsidies & tax incentivesMore on UK & SE PPI cases: http://cordis.europa.eu/fp7/ict/pcp/msinitiatives_en.html
PPI examplesPPI examplesIn Europe In Europe
(PPI is called teknikupphandling in Sweden)
Example EU funded PPI procurers network (DG Example EU funded PPI procurers network (DG ENER)ENER)
5 local authorities have lead this project on early market engagement to encourage sustainable energy
Public procurement (low carbon emission technologies): Barcelona (ES), Kolding (DK), Cascais (PT), London
borough of Bromley and the Eastern Shires Purchasing Organisation (UK).
Result: successful PPI procurement deploying various innovative products such as LEDs (over 20.000 units),
indoor and street lighting, energy efficient vending machines and electric mobility (e.g. electric mini bus),
representing a total budget of around €80 million and involving over 200 municipal staff. The technical
solutions retained will reduce energy consumption and CO2 emissions by 30-90%, accounting for an
estimated reduction of 5.3 GWh/a.
www.smart-spp.eu
How does PCP-PPI support look like today PCP and PPI in the ICT part of
FP7 and CIP 2013 work program
22
CSA part grant– Defining joint specs + setting up/managing joint PCP procurement process– Awareness Raising, experience sharing (incl. training for public purchasers),
dissemination of results, contribution to standards/regulation to remove obstacles for introducing PCP innovations in the market
CP part grant– Execution of 1 joint cross-border PCP tender (addressing 1 jointly agreed
challenge, procurers in consortium sharing the costs to finance R&D together, one entity in consortium executing the PCP procurement)
– To explore possible alternative solution paths for the targeted improvements in public sector services + testing of the solutions against a set of jointly defined performance criteria.
Activities Activities CP-CSA for PCP grants CP-CSA for PCP grants FP7-ICT-2013-11FP7-ICT-2013-11
Financial implicationsFinancial implicationsPCP for purchasersPCP for purchasers
Example: €5 Mio CP-CSA for PCP grant Max 25-30% (check call) (e.g. €1,5 Mio) for coordination costs - 100% funded Other €3,5 Mio = EC contribution to the ICT R&D procured through the joint PCP
• Funding rate 75% for some, 50% for other contracting authorities (CAs)
How to use CP-How to use CP-CSA for PCP CSA for PCP grantgrant
Consortium brings €1,16-3,5 Mio (+VAT) for €4,93-7 Mio PCP If consortium of CAs all eligible for 75% rate, and joint PCP e.g. under BE law then
• VAT = 21% (€ 0,98 Mio) -> consortium invests € 2,14 Mio If consortium of 5 CAs, and PCP phase 1-3 spread over 3 years
• Then each project partner/CA invests €143K on average/Y over 3 years in the PCP
Cross-border cooperation + EC funding reduces risk/cost for CAs Joint PCP cheaper than buying R&D from one supplier on your own as CA
• 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
Financial implicationsFinancial implicationsfor suppliersfor suppliers
Supplier B
Supplier C
Supplier D
Phase 1: Solution design ~10-15% PCP budget~100-250K/supplier
~4-10 suppliers
Phase 2: Prototyping~30-40% PCP budget~500-750K/supplier
~3-6 suppliers
Phase 3: Original development – operational testing
~50-60% PCP budget~800K-2,3M/supplier
~2-4 suppliersSupplier A
Supplier B
Supplier C
Supplier D
Supplier B
Example of €5-7 Mio PCP
Supplier D
Example CP-CSA Example CP-CSA for PCP grantfor PCP grant
Supplier ESupplier E
Supplier E
PreparationJoint PCP
P1
P2
P3P4
P5
Consortia of public procurersP1->P5 (min 3)
One Joint PCP call for tender
Example: €5-7 Mio for PCP spread over # suppliers & phases Consider how many suppliers needed at start to get competitive supply chain at end Typically cost increases with each phase, but less suppliers per phase Typically €5-7 Mio PCP can finance €1-3Mio of R&D per supplier (gradually increasing financing/phase also feasible for SMEs to bring product to market)
Example Example PPI pilotsPPI pilotsCIP-PSP-ICT-2013CIP-PSP-ICT-2013
Preparation phase
Defining common specs (functional/performance requirements).
Open market consultation, announcing intention to buy critical mass of innovative solutions if market able to meet solution requirements by pre-set date (published as PIN in OJEU).
Optional: test / certification / labelling by end of date pre-set in PIN before buying, to check whether market really meets solution requirements.
Implementation phase
Implementation during project of 1 joint or several separate but coordinated PPI procurements based on above common specs
Publication of call for tender(s) in OJEU Tenders as open as international agreements require Evaluation of tenders on best value for money (not just lowest price)
Deployment and operation of procured solutions (min 6 months)Evaluation & dissemination of results (pro-actively involving e.g. other procurers beyond project partners)
Phase 4 Deployment of commercial end-products
Early adoption of new to the market products / services
Public Procurement of Innovative Solutions (PPI)
Procurer 1 buying e.g. €2 Mio solutions from supplier A
Example PPI Example PPI pilot grantpilot grant
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
PreparationJoint or
coordinated PPIs
P1
P2
P3P4
P10
Consortia of procurers
e.g. P1->P10 (min 3)
One Joint or severalseparate but
coordinated PPI call for tenders (based on jointly
defined tender specs)
Procurer 2 buying e.g. €1,5 Mio solutions from supplier B
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
…
… …
CNECT website on PCP and PPI: Info on open calls, EU funded projects, background docs, FAQs, PCP/PPI cases around Europe: http://cordis.europa.eu/fp7/ict/pcp/home_en.html
For latest PPI call, see CIP PSP ICT 2013 Call 7 page: http://ec.europa.eu/research/participants/portal (search for callIdentifier=CIP-ICT-PSP-2013-7)Read section 4.1.5 in Work Program and Guide for applicants for PPI pilots!Make use of pre-proposal check possibilityhttp://ec.europa.eu/digital-agenda/en/news/cip-information-day-specific-workshop-health-ageing-well-and-inclusion-objectives-31-33-0On this site:online videostreaming + ppt slides explaining PPI pilot instrument
For latest PCP call, see FP7 ICT 2013 Call 11 page:http://ec.europa.eu/research/participants/portal/ (search for callIdentifier=FP7-ICT-2013-11)Read section 11.1 and appendix 6 in WP and Guide for applicants for CP-CSA for PCP grants!Make use of pre-proposal check possibility
Background Background InfoInfo