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1ThisprojecthasbeenfundedwithsupportfromtheEuropeanCommissionunderSeventhFrameworkProgramme(FP7)APRACTICALGUIDETOPCPImplem...
DisclaimerThis paper is published by the Progr-EASTproject. Neither the European Commission norany person acting on their ...
Table of ContentsPART I. ABOUT PCP ..........................................................................................
part I.ABOUT PCPpart I. ABOUT PCP4“ApracticalguidetoPCPImplementationforPROGR-EASTpilots”PROGR-EASTFP7-ICT-2009-4
GlossaryCSA: Coordination and Support ActionCTT: Call to TenderEC: European CommissionEEA: Economic European AreaERA: Euro...
Pre-Commercial Procurement - PCPPre-Commercial Procurement (hereafter PCP)essentially refers to the purchase of researchan...
Over the last couple of years PCP has receiveda great deal of attention and has been welco-med with enthusiasm by the majo...
This PCP guide is mainly targeted at policymakers and public procurers in PROGR-EASTtarget countries that are looking for ...
How is the guide organised?To be a helpful tool, capable to throw light onthe PCP procedure and render it functional andea...
part IIINTRODUCTORYSECTIONpart II. INTRODUCTORY SECTION10“ApracticalguidetoPCPImplementationforPROGR-EASTpilots”PROGR-EAST...
Already in 2006 Viviane Reding, the EU Commissioner for Infor-mation Society and Media, declared “Europe must create a com...
These issues may be grouped around five bro-ad themes namely: simplifying the rules; mo-dernising procedures and redefinin...
A FOCUS ON PRE-COMMERCIAL PROCUREMENT OF INNOVATIONIn many ways the Communications from theEuropean Commission have served...
EU initiatives to boost Pre-Commercial ProcurementThe European Commission is recentlyconcentrating more and more atten-tio...
7 with deadline on January 2011allocated 6M euro for joint PCPprojects in specific domains (servicesfor mobile access to p...
The experience arising from these initiativeshave revealed significant early developmentin fostering PCP across the EU and...
What is Pre-Commercial Procurement?Pre-Commercial Procurement (PCP) is an ap-proach for contracting authorities to acquire...
LEGAL FRAMEWORK FOR PCPThe main signatories of the WTO GPA haveexempted public procurement of R&D servicesfrom both the WT...
BENEFITS OF PCPThe major benefits of the PCP approach can besummarised in the following points12:•	 PCP is a mutual learni...
part II. INTRODUCTORY SECTION•	 Last but not least, PCP can contribute tosupport Europe 2020 objectives of growthand job c...
The important aspect of PCP is that the pur-chase of R&D services through public demandaims not only at improving the perf...
part II. INTRODUCTORY SECTIONHOW DOES PCP DIFFER FROM CONVENTIONAL OFF-THE-SHELF PROCUREMENT?IS PCP SUBJECT TO THE PROCURE...
BE AWARE THATPre-commercial procurement essentially refers to the procurement of research and deve-lopment (R&D) services ...
part II. INTRODUCTORY SECTIONBE AWARE THATAs a general rule, advertisement of public contracts should be done as widely as...
c. The tender processIssues that would need to be addressed in de-vising a tender process, and which should bedisclosed to...
part IIIPRACTICALAPPROACHpart III. PRATICAL APPROACH26“ApracticalguidetoPCPImplementationforPROGR-EASTpilots”PROGR-EASTFP7...
This section provides hands-on information and guidance onhow to set up and run a PCP process in practice. An example ofa ...
BE AWARE THATEverything starts with a ‘need’. If a need can be met with products and/or services on the openmarket, then t...
Figure2PCPindetail29ThisprojecthasbeenfundedwithsupportfromtheEuropeanCommissionunderSeventhFrameworkProgramme(FP7)
Resource planning for the PCPTo ensure that a PCP is properly resourced, a Contracting Authority should know in advance of...
BE AWARE THATThe aim of a PCP exercise is to work fully within EU Competition Law to enable the rapid deve-lopment of inno...
EXAMPLESupposing that the Procurer has concluded from the above business case analysis that he hasa total budget of 600K€ ...
EXAMPLEAn interesting example on how to define needs comes from the English National Health Servi-ce. This process is info...
Step 2: Concept ViabilityThe purpose of this step is to assess whetherit is technically possible to create a solutionto me...
USEFUL RESOURCESFor more information about the Concept Viability Methodology visit: http://www.ogc.gov.uk/documents/sd006....
In July 2008, the Flemish go-vernment approved an Action Planon Procurement of Innovation (PoI).In this plan the governmen...
policy domains and describes thefuture desired outcome and existingstate-of-the-art knowledge. Themaster plan serves as ba...
The Hungarian region Észak-Alföld isrunning a PCP pilot with the supportof its Regional Development Agency(INNOVA). Thanks...
Beneficiary/IntermdiateBodyPhase1ProjectGeneraƟonPhase2Phase3SelecƟonProductDevelopment•Assessingresearchanddevelopmentneed...
PRACTICAL CASEPractical case from Norway: “Heating systems in schools”The following is an example of a concrete public sec...
Step 3: CompetitionEach competition must be run via open, fair and transparentprocesses. When running the PCP competition,...
PRACTICAL CASEPractical case from SBRI (UK): “Developing sensitive biosensors”This example comes from the UK where the Sma...
mework contract shall contain an agreementon the future procedure for implementing thedifferent phases (through specific c...
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The scope of this publication is to introduce innovative procurement strategies (in particular Pre-Commercial Procurement) to public authorities and stakeholders in Eastern European countries, illustrating and transferring interesting experiences implemented in other countries.

The PCP Manual is mainly targeted at policy makers and public procurers looking for practical guidelines before setting up a PCP process in their respective countries. With this Manual, the procurer will be “accompanied” throughout the PCP process and provided with suggested solutions, practical examples, templates and useful documentation/material in order to render the process as simple as possible and to reduce (or eliminate) the perceived risks and uncertainty regarding the design and the practical implementation of a PCP process.

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  1. 1. 1ThisprojecthasbeenfundedwithsupportfromtheEuropeanCommissionunderSeventhFrameworkProgramme(FP7)APRACTICALGUIDETOPCPImplementationforPROGR-EASTpilotsInnovative PROcurementtechniques to support theGRowth of competitivenessfor public services inEASTern EuropeThis project has been funded by theEuropean Commission under the SeventhFramework Programme (FP7-ICT-2009-4)
  2. 2. DisclaimerThis paper is published by the Progr-EASTproject. Neither the European Commission norany person acting on their behalf may be heldresponsible for the content and the use of thispaper or for any errors which, despite carefulpreparation and checking, may appear.This publication has been redacted by:Via della Scrofa, 117Rome Italy+39 06 40040358www.innova-eu.netAuthors:Rebeca Lucas (r.lucas@innova-eu.net)Antonella Vulcano (a.vulcano@innova-eu.net)Borinka Jacobsen (b.jacobsen@innova-eu.net)AcknowledgementThe project members would like to thank allexperts who have contributed with their timeand experiences to build valuable backgroundknowledge necessary for the development ofthis publication.We would like to make a special recognition toBrian Winn and Michael Wilkinson from BAXI-PARTNERSHIP, London (UK), who provided uswith their expert advice and support for thecompletion of this publication.Progr-EAST: Innovative PROcurement tech-niques to support the GRowth of competiti-veness for public services in EASTern Europe.Contract Nº 248352Progr-EAST is a project funded under the 7thFramework Programme of the European Com-mission ICT-Call 4-2009.Edited in December 2012Published in March 2013PRACTICALGUIDETOPCPImplementationforPROGR-EASTpilots2“ApracticalguidetoPCPImplementationforPROGR-EASTpilots”PROGR-EASTFP7-ICT-2009-4
  3. 3. Table of ContentsPART I. ABOUT PCP ..........................................................................................................................................................................................................................................Pre-Commercial Procurement - PCP............................................................................................................................................................Why a practical guide on PCP? .................................................................................................................................................................................Who is this PCP guide for? .................................................................................................................................................................................................How is the guide organised? ........................................................................................................................................................................................PART II. INTRODUCTORY SECTION ...................................................................................................................................................................................1 Background ....................................................................................................................................................................................................................................................Fostering Innovation via Public Procurement .........................................................................................................A Focus on Pre-Commercial Procurement of Innovation ..............................................................2 What is Pre-Commercial Procurement? ............................................................................................................................Legal framework for PCP .........................................................................................................................................................................................Benefits of PCP ...............................................................................................................................................................................................................................PCP as a novel policy instrument to address societal challenges ...........................How does PCP differ from conventional off-the-shelf procurement? ...........Is PCP subject to the procurement rules? .........................................................................................................................What are the basic principles of a compliant PCP process? ...................................................PART III. PRACTICAL APPROACH ...........................................................................................................................................................................................3 How to Implement PCP ...................................................................................................................................................................................................The pathway of PCP: a step-by-step process ............................................................................................................Step 1: Needs Identification ...........................................................................................................................................................................................Step 2: Concept Viability .....................................................................................................................................................................................................Step 3: Competition ....................................................................................................................................................................................................................Step 4: Contract Management......................................................................................................................................................................................Step 5: Commercial Procurement ...........................................................................................................................................................................Evaluation and Dissemination as constant activities along the PCP process......PCP check-list ......................................................................................................................................................................................................................................PART IV. LEGAL ISSUES .............................................................................................................................................................................................................................4 Dealing with Intellectual Property .................................................................................................................................................Dealing with intellectual property rights under the competition route..........Foreground intellectual property rights ..............................................................................................................................Background intellectual property rights ............................................................................................................................PART V. CONCLUSIONS ............................................................................................................................................................................................................................5 Conclusions ...................................................................................................................................................................................................................................................APPENDICES ...................................................................................................................................................................................................................................................................APPENDIX 1– Example PCP Call for Tender ..............................................................................................................................APPENDIX 2 – Contracting Authority’s Simulation Scenario Template for PCP....References ...........................................................................................................................................................................................................................................................4678910111113171819212222232627273334414546464750515253545657626369743ThisprojecthasbeenfundedwithsupportfromtheEuropeanCommissionunderSeventhFrameworkProgramme(FP7)
  4. 4. part I.ABOUT PCPpart I. ABOUT PCP4“ApracticalguidetoPCPImplementationforPROGR-EASTpilots”PROGR-EASTFP7-ICT-2009-4
  5. 5. GlossaryCSA: Coordination and Support ActionCTT: Call to TenderEC: European CommissionEEA: Economic European AreaERA: European Research AreaERAB: European Research Area BoardEU: European UnionFP: Framework ProgrammeGPA: Government Procurement AgreementICT: Information and Communication TechnologiesIP: Intellectual PropertyIPR: Intellectual Property RightsNHS English National Health ServiceNMS: New Member StatesPCP: Pre-Commercial ProcurementPP: Public ProcurementR&D: Research and DevelopmentRFEC: Regions for Economic ChangeRTD: Research Technology and DevelopmentSME: Small and Medium size EnterpriseTED: Tenders Electronic DailyUS: United StatesWIBGI: Wouldn’t It Be Great IfWTO: World Trade Organization5ThisprojecthasbeenfundedwithsupportfromtheEuropeanCommissionunderSeventhFrameworkProgramme(FP7)
  6. 6. Pre-Commercial Procurement - PCPPre-Commercial Procurement (hereafter PCP)essentially refers to the purchase of researchand development (R&D) services by the publicsector. It is triggered by procurers identifyingthe need to solve a socio-economic problemor challenge of public interest for which thereis no solution available on the market yet. Ac-cordingly, PCP is not concerned with the procu-rement of existing products or services on themarket but with the R&D phase, which involvessolution exploration and design, prototyping,up to the original development of a limited vo-lume of first products or services.The PCP instrument enables the commissio-ning of R&D services, under a staged compe-titive process, to allow the development ofinnovative solutions that meet the needs of aContracting Authority. This approach is basedon1:1. Risk-benefit sharing according to marketconditions;2. Competitive development in phases; and3. Separation of the R&D phase from de-ployment of commercial volumes of end-products.1 EC communication COM (2007)799 and associa-ted staff working document, SEC (2007)1668How does PCP work in practice?In PCP a Contracting Authority issues an openCall for Tenders to compete to win a PCP Fra-mework Contract. The Contracting Authorityevaluates the received responses and awardscontracts to several suppliers who will startaddressing the given socio-economic problemposed by the Contracting Authority. Each win-ning supplier will start designing and explo-ring the feasibility of their innovative ideas inthe first phase. On completion of this phase,a cohort of selected suppliers participates ina “mini-competition” to advance to the nextphase. Each winning supplier develops theirprototype in the second phase. Likewise, oncompletion of the prototype development, thecohort participates in another “mini-compe-tition” to advance to the third and last phasewhere each winning supplier develops theirsmall-batch production of products/services.It is worth bearing in mind that PCP is focused“on the development of new technologies andnot on the development of incremental or transi-tional technologies. (...) In PCP the public sectoris taking the initiative in order to get access to in-novation to improve its operations and to solvemajor socio-economic problems for the benefitof society”.22 From: “Exploring public procurement as a strate-gic innovation policy mix instrument”. OMC PTP EUProject (2009)part I. ABOUT PCP6“ApracticalguidetoPCPImplementationforPROGR-EASTpilots”PROGR-EASTFP7-ICT-2009-4
  7. 7. Over the last couple of years PCP has receiveda great deal of attention and has been welco-med with enthusiasm by the majority of policymakers as a tool to further promote R&D andInnovation across Europe.Results from the surveys summarised in thePROGR-EAST country reports3reveal that thePCP concept is still new to most public pro-curers in PROGR-EAST target countries (CzechRepublic, Slovakia, Poland, Hungary and Slove-nia) and its practical implementation is oftenperceived as an unfamiliar procedure. In par-ticular:• the PCP process is still perceived as a riskypractice by public procurers;• there is a lack of experience on practicalPCP implementation;• there is a clear request from PCP stakehol-ders, especially from NMS, to be provi-ded with more knowledge and practicalexamples on the PCP scheme and its ap-plication.In recent years, the European Commission isconcentrating more and more attention and in-terest on PCP issues and it has been investingconsiderable resources to encourage the use ofPCP in Europe developing a policy frameworkand directly supporting several surveys, pro-grammes, projects and awareness building anddissemination events.3 “Country reports and cross analyses: assessmentof literature review and interviews at national le-vel” (Deliverable 1.1 Progr-EAST Project); “Compi-lation of results of the EC survey on the status ofimplementation of PCP across Europe (April 2011),EC DG INFSO”; “Feasibility study on future EU sup-port to public procurement of innovative solutions”(Draft Interim Report produced by MBS, TechnopolisGroup, ICLEI, Covers Consulting. March 2011).In this context, the EU-supported Progr-EASTawareness-building initiative aims at introdu-cing PCP to public authorities and stakehol-ders, specifically addressing targeted EasternEuropean countries: Czech Republic, Slovakia,Poland, Hungary and Slovenia.The scope of this publication is to provide asupporting “hands-on” tool for policy makersand public procurers who want to start testingPCP in their respective countries and need a re-ference framework with practical guidance onhow to establish and conduct a call for PCP. Inparticular, the publication aims at simplifyingthe efforts needed to set up a PCP process inthese countries by:• designing a structured PCP process floworganised in a step-wise manner, cove-ring all the phases of the process from theidentification of needs to the eventualcommercial procurement;• giving practical tips, examples and provi-ding useful material and documentationfor each phase of the PCP process;• shedding light on some critical issues (e.g.IPR) that need to be well understood be-fore starting any PCP process.By decomposing the process into differentsteps and by detailing the specificities of eachphase, the PCP procedure becomes less com-plex, less uncertain and easier to set up andimplement and therefore more accessible topublic procurers.Why a practical guide on PCP?7ThisprojecthasbeenfundedwithsupportfromtheEuropeanCommissionunderSeventhFrameworkProgramme(FP7)
  8. 8. This PCP guide is mainly targeted at policymakers and public procurers in PROGR-EASTtarget countries that are looking for practicalguidelines before setting up a PCP process intheir respective countries, which was the pur-pose of the piloting phase in PROGR-EAST.With this guide, the procurer/contractingauthority will be “accompanied” throughoutthe PCP process and provided with suggestedsolutions, practical examples, templates anduseful documentation/material in order torender the process as simple as possible andto reduce (or eliminate) the perceived risksand uncertainty regarding the design and thepractical implementation of a PCP process.The publication is intended as a practical gui-dance that brings knowledge to all stakehol-ders – including policy-makers, industrialrepresentatives, technology suppliers - inte-rested in PCP. Although it does not providespecific legal advice or a comprehensive tre-atment of legal issues when awarding a par-ticular contract, it introduces the PCP legalframework and presents key issues relevantto PCP.WhoisthisPCPguidefor?part I. ABOUT PCP8“ApracticalguidetoPCPImplementationforPROGR-EASTpilots”PROGR-EASTFP7-ICT-2009-4
  9. 9. How is the guide organised?To be a helpful tool, capable to throw light onthe PCP procedure and render it functional andeasy-to-use, the publication has been structu-red into three major building blocks:• Introductory section• Practical approach• Legal issuesIn the Introductory section the reader is:• introduced to the PCP concept, its role asa powerful demand-driven policy instru-ment to address societal challenges, itsbenefits and the differences with respectto traditional procurement. It is importantto understand whether PCP is the right in-strument to use, given the fact that it isan exceptional procedure and that mostneeds can be met through traditional pro-curement procedures;• provided with knowledge on the basicTreaty principles and competition rulesas explained in the EC Communicationand Staff Working Document on PCP (al-though the procurement of R&D servicesare exempted from the EC public procure-ment directives4, the European Commis-sion has issued the above Communicationand Staff Working Document to providean example implementation in line withthe EC legal framework);4 We refer here to the procurement of R&D servi-ces that meet conditions of the exemption underarticle 16f of Directive 2004/18/EC, article 24e of2004/17/EC or article 13j of Directive 2009/81/EC.The second section describes, in a very prac-tical way, the step-by-step activities that aContracting Authority can follow to enable thedelivery of high-quality and cost-effective PCPactivities to procure R&D services accordingto the EC recommendations. In the model pro-posed, the PCP process is organised in a step-wise manner, structured in 5 major steps, co-vering from needs assessment (prior to PCP) tocommercial procurement (post PCP). In order tomake procurers familiar with the PCP procedu-re and ease the path of testing PCP, the speci-fic steps and activities within each phase aredescribed in detail and practical tips, examplesand useful material are provided.The legal issues are presented in the last sec-tion; this section attempts to inform the readerabout the legal aspects related to procurementand intellectual property that are critical in anyPCP process (most of the uncertainty related tothe PCP procedure is related to legal and IPR is-sues, so it is important to have these concernsclear and well settled before getting involvedin a PCP initiative).DISCLAIMER: Please note that the recentdevelopments of the EU Procurement Directives(revision of the legal framework) have not beenconsidered in this publication.9ThisprojecthasbeenfundedwithsupportfromtheEuropeanCommissionunderSeventhFrameworkProgramme(FP7)
  10. 10. part IIINTRODUCTORYSECTIONpart II. INTRODUCTORY SECTION10“ApracticalguidetoPCPImplementationforPROGR-EASTpilots”PROGR-EASTFP7-ICT-2009-4
  11. 11. Already in 2006 Viviane Reding, the EU Commissioner for Infor-mation Society and Media, declared “Europe must create a com-mercial environment that encourages more rapid innovation andtake up of research results. The public sector has massive buyingpower, but it needs the right incentives to share the risks as wellas the benefits of investing in new technologies and services1.”In December 2007, beside the classic approach to public pro-curement, an EC Communication2, introduced the concept andpotential benefits of Pre-Commercial Procurement, which ena-bles buyers to come together to share the risks and the bene-fits of pursuing novel services and products with the providersthemselves. It is considered that such an approach could greatlycontribute to stimulate innovation, increase investment levelsand encourage the take-up of related R&D. The intention of theEuropean Commission was to draw the attention of Member Sta-tes to the underutilised opportunity of pre-commercial procure-ment and provide for possible implementation in line with theexisting legal framework.More recently, on 27 January 2011, the European Commissionpublished a Green Paper on the modernisation of EU publicprocurement policy3. The publication represented the first for-mal step in a public consultation process which is intended toinform the Commission’s drafting of legislative proposals for therevision of the current procurement Directives4. The Green Paperputs forward for consideration issues which the Commission hasidentified as the likely focus of a future reform of the legislation.1 http://europa.eu/rapid/pressReleasesAction.do?reference=IP/06/373&format=HTML&aged=0&language=EN&guiLanguage=en2 Pre-Commercial Procurement: Driving innovation to ensure sustaina-ble high-quality public service in Europe [COM (2007) 799 final]; SEC(2007) 16683 Green Paper on the modernisation of EU public procurement policy:Towards a more efficient European Procurement Market COM(2011) 15/final.4 Directive 2004/17/EC coordinating the procurement procedures ofentities operating in the water, energy, transport and postal servicessectors [2004] OJ L134/1. Directive 2004/18/EC on the coordinationof procedures for the award of public works contracts, public supplycontracts and public service contracts [2004] OJ L134/114.BackgroundFOSTERING INNOVATION VIA PUBLIC PROCUREMENT11ThisprojecthasbeenfundedwithsupportfromtheEuropeanCommissionunderSeventhFrameworkProgramme(FP7)
  12. 12. These issues may be grouped around five bro-ad themes namely: simplifying the rules; mo-dernising procedures and redefining the scopeof the rules; improving access to the procure-ment market; using public procurement as aninstrument for other EU policy objectives; andtackling favouritism and corruption. A recentrevieew5of the Green Paper has identified anumber of significant opportunities and risksassociated with the proposals. In particular,the Green Paper envisages the possibility ofusing public procurement as an instrument toachieve other EU policy objectives, and speci-5 Review of the “Green Paper on the Modernisationof EU Public Procurement Policy: Towards a MoreEfficient European Procurement Market” by Kotso-nis, T (July 2011) available at www.nortonrose.com/knowledge/publicationsfically the “Europe 2020”6goals, including theobjective of fostering innovation. It should benoted that the use of public procurement tofoster innovation is not a new concept. In fact,the current procurement legislation and rela-ted treaties are designed to promote such EUpolicy goals. And, it should be noted that underthe current system, European Member Stateshave made significant progress7in fosteringinnovation via public procurement.6 Communication from the Commission of 3 March2010 COM(1010) 2020.7 This progress is illustrated in the document : Com-pilation of results of the EC survey on the status ofimplementation of pre-commercial procurementacross Europe. April 2011. http://cordis.europa.eu/fp7/ict/pcp/pcp-survey.pdfpart II. INTRODUCTORY SECTION12“ApracticalguidetoPCPImplementationforPROGR-EASTpilots”PROGR-EASTFP7-ICT-2009-4
  13. 13. A FOCUS ON PRE-COMMERCIAL PROCUREMENT OF INNOVATIONIn many ways the Communications from theEuropean Commission have served as an im-portant catalyst in which PCP is positioned as“(…) an approach for procuring R&D serviceswhich enables public procurers to:• share the risks and benefits of designing,prototyping and testing new productsand services with the suppliers, withoutinvolving state aid;• create the optimum conditions for widecommercialisation and take-up of R&Dresults through standardisation and/orpublication;• pool the efforts of several procurers.By acting as technologically demanding firstbuyers of new R&D, public procurers can driveinnovation from the demand side. This enablesEuropean public authorities to innovate theprovision of public services faster and createsopportunities for companies in Europe to takeinternational leadership in new markets. Re-ducing time to market by developing a strongEuropean home market for innovative productsand services is key for Europe to create growthand jobs in quickly evolving markets such asICT”. 88 COM (2011) 810 final. Proposal for a regulation ofthe European Parliament and of the Council layingdown the rules for the participation and dissemina-tion in “Horizon 2020- the Framework Programmefor Research and Innovation (2014-2020).13ThisprojecthasbeenfundedwithsupportfromtheEuropeanCommissionunderSeventhFrameworkProgramme(FP7)
  14. 14. EU initiatives to boost Pre-Commercial ProcurementThe European Commission is recentlyconcentrating more and more atten-tion, interest and resources on PCPissues. Since 2009 open calls for pro-posals have been launched (in RFECand FP7 programmes) to support theestablishment of networks of publicauthorities on pre-commercial procu-rement. These actions were intendedto promote awareness-raising andexperience-sharing on PCP, as wellas encourage cooperation amongpublic procurers from different Mem-ber States in specific public sectordomains that could lead to jointlyimplemented pre-commercial pro-curements. With Call 4/2009 of theICT FP7 Work Programme the Euro-pean Commission started supportingCoordination and Support Actions(CSAs) on Pre-Commercial Procure-ment (PCP) in areas of public interestrelated to ICT. Progr-EAST is one ofthese initiatives, mainly respondingto the aim of creating public aware-ness on PCP approaches and stimu-lating the design and formulation ofpilot actions following a PCP processin five New Member States (CzechRepublic, Slovakia, Poland, Hungaryand Slovenia).In mid June 2010, the EuropeanResearch Area Board (ERAB) held aconference in Seville where, amongthe recommendations led down toimprove the European Research Area(ERA), it was clearly mentioned: (i)a fast track timeline for a full andwidespread implementation of pre-commercial procurement of Researchand Development (R&D), as a shortterm objective; (ii) the implementa-tion of pre-commercial procurementof R&D around a few commonlyagreed big projects, as a mid-termhorizon (3-5 years); and finally, makeresults and risk-oriented funding ofresearch and innovation projects thedominant criterion for R&I EC fun-ding, on a long term perspective (5+years), by reducing the fiscal burdenon Research Technology and Deve-lopment (RTD) labour throughoutEurope to a level comparable or evenbetter than the main competitors(that is a full implementation of PCPprinciples).1In 2010 & 2011 Calls for Propo-sals under FP7/ICT, FP7/capacitiesand FP7/security have been aimedto support public authorities inplanning joint implementation ofpre-commercial procurements. Call1 http://ec.europa.eu/research/erab/pdf/john-wood_en.pdfpart II. INTRODUCTORY SECTION14“ApracticalguidetoPCPImplementationforPROGR-EASTpilots”PROGR-EASTFP7-ICT-2009-4
  15. 15. 7 with deadline on January 2011allocated 6M euro for joint PCPprojects in specific domains (servicesfor mobile access to patient healthinfo and robotics solutions for ageingwell). The call 8, with deadline inJanuary 2012, reserved 3M eurofor joint PCP projects in specificdomains such as photonics based so-lutions to improve quality/efficiencyof public services plus 5M euro foran open call for Networking and jointPCP in any domain of public interest(e.g. e-government, transport, energy,environment, security, health, etc.).The 2012 FP7 Capacities - ResearchInfrastructures work programme(INFRA-2012-2.3.1) on the thirdimplementation phase of the Euro-pean High Performance Computing(HPC) service PRACE called for a jointpre-commercial procurement with aview to develop, test and evaluatethe required mechanisms for PRACE,increase the financial resources de-dicated to HPC R&D in Europe, andensure that European HPC procure-ment benefits the development ofsystems and software in Europe (calldeadline: 23 November 2011).The 2012 FP7 Security Researchwork programme (FP7-SEC-2012-1)called for CP-CSA proposals to en-hance the use of innovative techno-logy for border surveillance. Thecall targeted solutions for the pre-operational validation of “CommonApplication of Surveillance Toolsat EU level” in order to provide theEU with an operational and techni-cal framework that would increasesituational awareness and improvethe reaction capability of authoritiessurveying the external borders ofthe EU (call deadline: 23 November2011).Last but not least, the EC communi-cation (COM(2011) 810 final) whichpresented a set of proposals layingdown the rules for the participa-tion and dissemination in Horizon2020- the Framework Programmefor Research and Innovation (2014-2020), dedicates several sections topre-commercial procurement (article35;article 39) as a new form of Unionfunding to address specific chal-lenges in the area of research andinnovation. 22 COM (2011) 810 final. Proposal for a regu-lation of the European Parliament and of theCouncil laying down the rules for the participa-tion and dissemination in “Horizon 2020- theFramework Programme for Research and Inno-vation (2014-2020).15ThisprojecthasbeenfundedwithsupportfromtheEuropeanCommissionunderSeventhFrameworkProgramme(FP7)
  16. 16. The experience arising from these initiativeshave revealed significant early developmentin fostering PCP across the EU and ContractingAuthorities across Europe have - over the pastfew years - accepted the challenge to innovateas procurers. Informed from this rich experien-ce, this publication seeks to provide Contrac-ting Authorities with a practical guide on howto design, deploy and evaluate their PCP ini-tiatives.part II. INTRODUCTORY SECTION16“ApracticalguidetoPCPImplementationforPROGR-EASTpilots”PROGR-EASTFP7-ICT-2009-4
  17. 17. What is Pre-Commercial Procurement?Pre-Commercial Procurement (PCP) is an ap-proach for contracting authorities to acquireresearch and development services (and rela-ted R&D results), with the purpose of steeringthe development of new innovations towardspublic sector needs, without committing to en-gage in a follow-up Public Procurement of theInnovative solutions (PPI) emerging from thePCP. This separation of a PCP from a follow-upPPI procurement is done on purpose, to de-riskcostly large volume PPI procurements.Public Procurement of Innovative solutions(PPI) has been recently defined as “the pur-chase of new or significantly improved goodsand / or services, processes, etc. that are newto the public procurer and new in the InternalMarket”.9In a PPI procurement the contractingauthority acts as “launching customer”, thatis the first customer to acquire newly develo-ped commercially viable end-products for de-ployment.9 DG ENTR 2011 CIP/EIP call for proposals on PPIThe definitions in the World Trade OrganizationGovernment Procurement Agreement (WTOGPA) consider that as long as solutions are stillin the phase of solution design, prototyping orfirst test series product development, they arenot commercially ready as they are still underpre-commercial R&D. As a result, PCP “(…) is aprocess by which public authorities can steer thedevelopment of new technologically innovativesolutions from the early R&D stages to test seriesin order to best fit their needs”10. In PCP, publicprocurers, as technologically demanding firstbuyers, share with suppliers the risks and bene-fits of valorising exploratory research up to thestage where it is ready for commercial take-up.10 Pre-Commercial Procurement COM (2007)799BE AWARE THATPCP is essentially an “approach to procuring R&D services”. It is triggered by procurers iden-tifying the need to find a solution to a specification problem of public interest for which theycannot yet find “commercially ready or nearly-ready” solutions on the market and whichrequires significant amount of R&D investment (step-change innovations, not incrementaladaptations) to get the solution developed. PCP projects are typically projects that relate tomid -to long-term public sector needs that would not be addressed by the private sector byitself without financial support from the public sector.PPI is related to short- to mid-term needs, related to more incremental type innovations. In PPItypically significant public sector demand for deploying the products can trigger the supplyside to invest itself in modernizing its production chain to deliver the required innovations.17ThisprojecthasbeenfundedwithsupportfromtheEuropeanCommissionunderSeventhFrameworkProgramme(FP7)
  18. 18. LEGAL FRAMEWORK FOR PCPThe main signatories of the WTO GPA haveexempted public procurement of R&D servicesfrom both the WTO national treatment and non-discrimination obligations11. Pre-commercialprocurement is an approach to procure R&Dservices that is, due to the application of risk-benefit sharing, also exempted from the publicprocurement Directives under the circumstan-ces laid down by article 16 (f) of the publicprocurement Directive for public authorities(2004/18/EC) and article 24 (e) of the publicprocurement Directive for utilities (2004/17/EC): “This Directive shall not apply to public ser-vice contracts for research and development ser-vices other than those where the benefits accrueexclusively to the contracting authority for its usein the conduct of its own affairs, on condition thatthe service provided is wholly remunerated by thecontracting authority”.It should be noted, however, that the singlemarket rules and the fundamental principles ofthe EU Treaty are still applicable; in order notto distort competition, while sharing R&D be-nefits the contracting authority would have torespect the fundamental principles of the Tre-aty, treating suppliers equally in a non-discri-minatory and transparent manner. Accordingto the Community Framework for State Aid forResearch, Development and Innovation, publicprocurement normally does not involve StateAid when conducted in a competitive and tran-sparent way according to market conditions/at market price. In order to ensure that therisk-benefit sharing in PCP is done accordingto market conditions, any R&D benefit sharedby the public purchaser with a participatingcompany should be compensated by the com-pany to the public purchaser at market price.This can be done through, for example, a pricereduction that reflects the market value of thebenefits received (e.g. IPR ownership) and therisks assumed (e.g. cost for filing and maintai-ning the IPRs) by the company.11 WTO GPA article XVAs PCP concerns the procurement of R&D ser-vices and these services are excluded from theWTO Government Procurement Agreement,restriction of the tender to bidders from EEAcountries or countries having signed a Stabili-sation or Association agreement with the EU isin principle allowed. However, the fundamen-tal Treaty principles do NOT allow restrictionto bidders from a specific country or a speci-fic region within the EEA or group of countri-es having signed a Stabilisation or Associationagreement with the EU. Public purchasers candecide on a case by case basis on the degreeof openness to worldwide offers and on the re-levant conditions, taking into account the fullpotential of the European Research Area. Al-lowing companies from anywhere in the worldto make offers regardless of the geographiclocation of company head offices or their go-vernance structure would be an open and ef-fective way for Member States to promote thecreation of growth and jobs in Europe withoutexcluding non-European firms. The procure-ment process could be organised so as to sti-mulate companies to locate a relevant portionof the R&D and operational activities relatedto the pre-commercial development contract inthe European Economic Area or a country ha-ving concluded a Stabilisation and AssociationAgreement. However, the fundamental Treatyprinciples do NOT allow the contracting autho-rity to require companies to locate activitiesrelated to the PCP contract in a specific countryor a specific region within the EEA or group ofcountries having signed a Stabilisation or Asso-ciation agreement with the EU.part II. INTRODUCTORY SECTION18“ApracticalguidetoPCPImplementationforPROGR-EASTpilots”PROGR-EASTFP7-ICT-2009-4
  19. 19. BENEFITS OF PCPThe major benefits of the PCP approach can besummarised in the following points12:• PCP is a mutual learning process for procu-rers, users and suppliers to get firm con-firmation both about the functional needson the demand side and the capabilitiesand limitations of new technological deve-lopments on the supply side when it comesto tackling a concrete public sector problem.This co-evolution of demand and supply iscrucial for innovation projects which arestrongly R&D intensive in domains with veryshort life-time cycle, such as for example ICT.• PCP encourages the development of pro-ducts that better meet procurers’ needs. Bybetter steering the core feature set accor-ding to customer priorities, by assessing theperformance of working prototypes and pre-product field tests in a real operational cu-stomer environment, procurers can preventtoday’s problems of buying off-the-shelfproducts which often include an array ofcostly features which are not really needed,while at the same time missing some criti-cal capabilities. While the costs of adaptingdesign at early stage R&D are limited, modi-fications at commercialisation stage that im-pact core product features can dramaticallyincrease the overall risk of failure and costof deployment of the final product as well asthe time to market for suppliers.• By offering procurers a deeper understan-ding of the technological capabilities andlimitations of competing solution approa-ches from different suppliers, PCP reducesthe risk of miss-specified tender for thecommercial roll-out as well as the risk thatbig commercial roll-outs do not deliver onexpectations.12 Source: Pre-Commercial Procurement: Publicsector needs as a driver of innovation (2006) http://ec.europa.eu/information_society/activities/esafe-ty/doc/esafety_2007/pre_comm_proc/june5/pre_com_proc_sept_2006.pdf• PCP, through a more open process of co-evolution, shortens the time-to-marketfor the suppliers that can better anticipatedemand for new solutions and better aligntheir product developments to fulfil con-crete customer needs. Active involvementof interested public buyers from the earlyproduct development stages also enablespublic authorities to detect potential po-licy and regulatory barriers that need to betimely eliminated to ensure short time-to-market for innovating public services.• Putting several suppliers in competitionwhen developing solutions at the pre-com-mercial stage also contributes to ultimatelyachieving the best product at the lowestprice by preventing some of the drawbacksof the costly projects with single suppliersthat were sometimes supported by old sta-te monopolies. By being better informed,procurers become less dependent on indi-vidual suppliers.• Risk-benefit sharing between procurersand suppliers in PCP also means that pro-curers obtain a lower cost (and less risk)deal compared to exclusive developmentcontracts, due to lower development pricesand licensing rights for the use of the de-veloped solution in compensation of givingthe IPR ownership rights of the R&D to thesuppliers.• The risk-management techniques appliedin the PCP process can also attract ventu-re capitalists looking for promising oppor-tunities offered by SMEs involved in PCPprojects. At the same time, support from theventure capital market makes it “safer” forthe procurers that will buy from such SMEs.Finally, venture capital funding would giveSMEs, which get a “first buyer” order, the fi-nancial stability to deliver on it.19ThisprojecthasbeenfundedwithsupportfromtheEuropeanCommissionunderSeventhFrameworkProgramme(FP7)
  20. 20. part II. INTRODUCTORY SECTION• Last but not least, PCP can contribute tosupport Europe 2020 objectives of growthand job creation since public procurers canorganise the procurement process in a waythat a relevant portion of the R&D activi-ties related to the PCP contract is to be car-ried out in Europe (EEA or in a country witha Stabilisation and Association Agreementwith the EU)1313 Commission Staff Working Document SEC(2007)1668 and “Info & Networking Day. PCP Ac-tions in FP7-ICT-2011-8”. October 24th, 2011. Pre-sentation by L.Bos20“ApracticalguidetoPCPImplementationforPROGR-EASTpilots”PROGR-EASTFP7-ICT-2009-4
  21. 21. The important aspect of PCP is that the pur-chase of R&D services through public demandaims not only at improving the performanceand functionality of public services but also atsolving important socio-economic challenges.The public sector in Europe has traditionallysupported innovation mainly through supply-side instruments such as research grants andother public support programmes rather thanthrough procurement. It has been noted thatin the European Union “… the main area of ne-glect in recent years in R&D and innovation po-licy spheres has been demand-side policies”14.Europe also suffers from a structural lowerperformance when it comes to transformingits publicly funded research outcomes intosuccess stories of innovative products and ser-vices deployed in the public sector. R&D sub-sidy schemes are dedicated to academic andindustrial research communities. In some ca-ses, they may remain somehow disconnectedfrom public needs and suffer from intrinsical-ly lack of direct commitment of future publicmarket buyers and lack of involvement of finalusers. In this context, characterised by the realneed for the European public sector to inno-vate the way public services are operated andto provide new added-value services, PCP is anovel demand-driven policy instrument thatattempts to bring companies and governmenttogether to cooperate on innovative solutionsfor major societal challenges such as ageing,mobility, health care, transport, environmentand the like.14 European Commission (2003) Raising the EUR&D Intensity – Improving the Effectiveness of theMix of Public Support Mechanisms for Private Sec-tor Research and DevelopmentBE AWARE THATIn order to address the above mentionedchallenges, the EU public sector must“transform” a number of key sectors. Inmost cases, these transformations rely onthe successful development and de-ployment of new technologically innova-tive solutions that can enable improvedpublic service delivery at reasonablecosts.15EU Governments have therefore a fundamen-tal role to play: on the one hand (at a “regula-tory” level) they must ensure fair competitionand transparency; on the other hand, they muststimulate innovation allowing public organiza-tions in their purchasing role to exploit corecompetences of European firms, boost theirinnovation strengths and build up capacity torespond to the new socio-economic challen-ges resulting in efficient service provisions. Inother words, the goal for public procurers inEurope is to become technology demandingfirst buyers and support EU innovative compa-nies in developing new solutions and new mar-ket opportunities.15 Adapted from: Pre-Commercial Procurement: Pu-blic sector needs as a driver of innovation (2006)http://ec.europa.eu/information_society/activities/esafety/doc/esafety_2007/pre_comm_proc/june5/pre_com_proc_sept_2006.pdfPCP AS A NOVEL POLICY INSTRUMENT TO ADDRESS SOCIETAL CHALLENGES21ThisprojecthasbeenfundedwithsupportfromtheEuropeanCommissionunderSeventhFrameworkProgramme(FP7)
  22. 22. part II. INTRODUCTORY SECTIONHOW DOES PCP DIFFER FROM CONVENTIONAL OFF-THE-SHELF PROCUREMENT?IS PCP SUBJECT TO THE PROCUREMENT RULES?In both cases, open, fair and transparent com-petition is used to obtain a best-value-for-money commodity and/or service that meetsa Contracting Authority’s clearly defined need.Conventional off-the-shelf procurement de-als with obtaining a supply of a commodity orservice from a supplier’s catalogue which isalready available on the market. Because thecommodity or service is available, conven-tional procurement is mainly concerned withshort-term tactical purchasing considerationssuch as low cost, short-term quality and valueaspects. In contrast, PCP is a method to makeavailable a service and/or commodity that doesnot exist in the market. PCP will most often beused strategically by forward-looking centralor local government agencies as a mechanismto develop new, step-change innovations thatmeet important mid-to-long term service deli-very (service quality and/or efficiency) require-ments.As a general rule, public authorities must com-ply with the procedural rules set out in the ECpublic procurement Directive 2004/18/EC16which apply to nearly all public purchases. Ho-wever, there are exceptions to these rules andPCP is one of them according to article 16f ofDirective 2004/18/EC, article 24e of 2004/17/EC or article 13j of Directive 2009/81/ECwhich states that the EC public procurementdirectives do not apply to “research and deve-lopment services other than those where thebenefits accrue exclusively to the contractingauthority/entity for its use in the conduct of itsown affairs, on condition that the service provi-ded is wholly remunerated by the contractingauthority/entity.”17PCP falls under the above exemption since it isan approach for procuring R&D services whe-re the contracting authority does not acquireexclusive IPR rights to the development and asa consequence pays a market price for the R&Dwhich is below exclusive development cost. Ac-cordingly, the Contracting Authority is not obli-16 Directive 2004/18/EC of the European Parlia-ment and of the Council of 31 March 2004 on thecoordination of procedures for the award of publicworks contracts, public supply contracts and publicservice contracts.17 Ibidemged to comply with the strict requirements ofthe public procurement rules in commissioninginnovation. This means in practice that the con-tracting authority can use a customised, light,fast procurement procedure that can be tunedto the innovative needs of the project (e.g. interms of defining award criteria etc.)However, unless the value of a particular con-tract is very modest, contracts for the PCPshould nonetheless be awarded by means ofa competitive tender process, in line with theprinciples which emanate from the Europe-an Community (EC) Treaty, including those oftransparency, non-discrimination and equaltreatment. Undertaking such a process shouldgenerally also ensure that the contract is awar-ded on market conditions and that in principle,therefore, it is unlikely to involve State aid,such as an over-payment or some other form ofselective benefit not normally available undermarket conditions.If the award of the contract involves State aid,it would be necessary to ensure that such aidis compatible with EU State aid rules beforegranting such aid. This would normally requireprior notification to the European Commissionfor authorisation.22“ApracticalguidetoPCPImplementationforPROGR-EASTpilots”PROGR-EASTFP7-ICT-2009-4
  23. 23. BE AWARE THATPre-commercial procurement essentially refers to the procurement of research and deve-lopment (R&D) services that seek to explore, test and develop new solutions to specificneeds that may ultimately lead to the development of new products or services. By using PCP,Member States support innovation, improve public services and address socio-economic chal-lenges. However, this approach is not the only one to promote the procurement of R&D andinnovation. Other procurement procedures that Member States can use to support innovationare, for example, the forward commitment procurement or the competitive dialogue. Compa-red to PCP, the FCP procedure or competitive dialogue involve shorter term more incrementaltype innovation, as they do not include paid R&D work (R&D work is not procured/paid by thecontracting authority as in PCP).11 Forward Commitment Procurement is a procurement model which looks at purchasing from the outcome based specification needinstead of purchasing for the immediate perceived need. It addresses the common stalemate where organisations require productsor services that are either not available or are at excessive cost. By using this model it alerts the market to the procurement need andoffers to purchase the solution, if the needs are met, once they are available, at an agreed price and specification. This provides themarket pull to create the conditions needed to deliver innovative, cost effective products and services and unlocks investment todeliver the requirement.Source: http://www.bis.gov.uk/policies/innovation/procurement/forward-commitment.Competitive dialogue is a procedure for “particularly complex” projects where the contracting authority is not capable of formulatingthe technical means or which of several possible solutions would best satisfy their needs. The use of Competitive Dialogue can alsobe justified when they are not able to specify the legal and/or financial make-up of a project.Source: Exploring Public Procurement as a Strategic Innovation Policy Mix Instrument. EU Project OMC-PTP (2009).WHAT ARE THE BASIC PRINCIPLES OF A COMPLIANT PCP PROCESS?There are no specific rules on how to achie-ve the commissioning of research and deve-lopment services that meet the conditionsof the exemption to article 16f of Directive2004/18/EC, article 24e of 2004/17/EC or arti-cle 13j of Directive 2009/81/EC. However, theEuropean Commission has issued a communi-cation and staff working document18in whichit provides an example implementation to helpContracting Authorities devise PCP procure-ment processes compliant with EC Treaty prin-ciples, competition rules and the internationalWTO government procurement agreement.The following guidelines would generally as-sist Contracting authorities in ensuring that thePCP is in line with the EC Treaty principles.18 The purpose of COM/2007/799 andSEC/2007/1668 is to inform contracting authoritiesabout underutilised possibilities in the existing le-gal framework (not new legislation)a. Advertising the contractIt is in the interest of the Contracting Authori-ties and suppliers alike to ensure that Invita-tions to Tender (which in the case of PCP couldbe called “PCP Call for Tender”, in short “PCPCT”) are advertised in a manner that attracts si-gnificant interest from suppliers in the market,as this will help to ensure compelling submis-sions. Enhancing accessibility of contract ad-vertisements would clearly enhance furtherthe transparency of the advertising process; tothis end, procurers should seek to post theirPCP Call for Tender via TED (Tenders ElectronicDaily), which is the official online version of the‘Supplement to the Official Journal of the Eu-ropean Union’, dedicated to European publicprocurement.23ThisprojecthasbeenfundedwithsupportfromtheEuropeanCommissionunderSeventhFrameworkProgramme(FP7)
  24. 24. part II. INTRODUCTORY SECTIONBE AWARE THATAs a general rule, advertisement of public contracts should be done as widely as potential-ly interested suppliers can be expected to be located across the EEA. For public contractsexempted from the public procurement directives, depending on the topic of the contractand on the country’s specific rules, contracting authorities decide on a case-by-case basis thewidth of the publication. PCP, by definition, does not target local public sector needs specificto a limited local customer base, but public sector needs of common interest to other publicprocurers around the EEA (the wide commercialisation potential is exactly the reason whysuppliers accept to give the contracting authority in PCP a financial compensation for keepingthe IPR ownership rights and why PCP falls under the exemption of the Directives). Therefore,potentially interested suppliers for PCP can be expected to be located all across the EEA andpublication of PCP tenders should target suppliers EEA-wide in order to attract as many goodquality bidders as possible and to have a broad outreach to ensure that the largest number ofinteresting solutions to solve the problem is envisaged.The advertisement of PCP contract opportuni-ties through the Official Journal of the Europe-an Union using the TED website in at least En-glish would be therefore an adequate means ofpublicising such opportunities for the purposeof complying with the EC Treaty principles.With regard to the content of an advertisement,this should describe the contract and provideall relevant information that a party would (re-asonably) require in order to be able to deter-mine whether the advertised opportunity (e.g.in terms of its nature, scope or value) is likelyto be of interest to them. The Contracting Au-thority should also inform interested partieshow many, or up to how many, contracts it in-tends to award with regard to the requirementin question. The advertisement should alsoinclude information about the tender processwhich the Contracting Authority will follow inawarding the contract. Alternatively, this infor-mation may be made available subsequentlyto all parties which express an interest in thecontract, in response to the advertisement.b. Devising an evaluation mechanism forparticipating in the competitionThe award of PCP contracts must be based onaward criteria which are objective and relevantin view of the subject-matter of the contract. Inother words, the award criteria must relate tothe Procurer’s contract requirements. In addi-tion to price, the award criteria, may, for exam-ple, take into account three dimensions19: Qua-lity, Implementation and Impact.In particular:• Quality refers to the ability to address theproblem posed in the tender; the novel-ty/innovativeness (progress beyond thestate-of-the-art) of the proposed solutionapproach; the technological soundness ofthe concept;• Implementation refers to the quality andeffectiveness / appropriateness of theproposed R&D work plan and allocationof resources;• Impact refers for example to the added va-lue for society/economy, the soundnessof the commercialisation plan of the bid-der.The Procurer must also decide beforehand themaximum number of offers it wishes to awardPCP contracts to (e.g. a minimum of five and amaximum of eight parties which achieve thehighest “pass” mark). Generally, a minimum offour (if available) should be sufficient to startPCP phase 1 to ensure adequate competitionalong the three PCP phases.19 Adapted from: Info and Networking Day. PCP ac-tions in FP7-ICT-2011-8. October 24th 2011. Pre-sentation by L.Bos24“ApracticalguidetoPCPImplementationforPROGR-EASTpilots”PROGR-EASTFP7-ICT-2009-4
  25. 25. c. The tender processIssues that would need to be addressed in de-vising a tender process, and which should bedisclosed to interested parties, include:I. use of appropriate time-limits for responsesII. the selection process (if the Procurer deci-des to have one)III. tender evaluationIV. contract awardAny selection (short-listing) process should bedistinct from the tender evaluation process.The former aims at determining the ability ofinterested parties in undertaking the contractwhereas the latter aims at examining the me-rits of an offer. Accordingly the two processesmust remain distinct.With regard to time-limits, a reasonable pe-riod of time should be permitted for the pur-pose of allowing parties to express an interestin the competition. Similarly, the time-limit forthe preparation of tenders must be reasonable,in view, for example, of the complexity of thecontract and type of information whichshort-listed bidders must provide.As discussed above, essential terms and condi-tions - for example, such as which intellectualproperty rights and licenses to use results ge-nerated during the project will be allocated tothe suppliers or the Procurer (or some other pu-blic entity) should have already been disclosedwhen advertising the contract, as these issuesare likely to be relevant in allowing interestedparties to determine whether they would wishto express an interest in the competition. Suchinformation would also be relevant during ten-BE AWARE THATIn inviting (short-listed) bidders to submittenders, the Procurer must make availa-ble to them relevant information, suchas the issues which they would need toaddress in their tenders, the terms andconditions on the basis of which the Con-tracting Authority would wish to contract,and the award criteria on the basis ofwhich tenders will be assessed.BE AWARE THATWhichever specific implementation routethe Procurer decides to take, it mustpublicise the award criteria and details ofthe evaluation process to interested par-ties accordingly so that they know howmany parties are expected to be awardeda PCP contract and on what basis partieswill be evaluated.der preparation, as it would have an impact onthe bidders’ formulation and pricing of theirtenders.With regard to the award criteria, these mustbe linked to the subject matter of the con-tract. Also, disclosure must extend to all factorswhich would be taken into consideration by theProcurer in evaluatingtenders and whose disclosure is likely to havean impact on bidders’ preparation of tenders.This is likely tomean that weightings of criteria as well as sub-criteria, if any, must be disclosed, unless theevaluation methodology to be employed con-sists only of certain criteria which cannot beaccorded weightings for objective reasons, inwhich case these may simply be disclosed indescending order of importance.The Procurer may allow interested parties orbidders to seek clarifications regarding the ten-der process or its requirements. The Procurermay specify a period within which such clarifi-cation requests may be made. Any clarificationsought by one party which is likely to be ofinterest to all other parties should be disclo-sed so as to ensure that a level-playing field ismaintained.The following section provides an overview ofhow to run PCP in practice. Public procurersmight be concerned about potential mistakesthey can make when procuring R&D servicesand this leads to reluctance in applying thenew procurement method. A practical exampleof a PCP process compliant with the EC legalframework is illustrated hereafter in detail inorder to “demystify” the procedure and make itaccessible to all procurers.25ThisprojecthasbeenfundedwithsupportfromtheEuropeanCommissionunderSeventhFrameworkProgramme(FP7)
  26. 26. part IIIPRACTICALAPPROACHpart III. PRATICAL APPROACH26“ApracticalguidetoPCPImplementationforPROGR-EASTpilots”PROGR-EASTFP7-ICT-2009-4
  27. 27. This section provides hands-on information and guidance onhow to set up and run a PCP process in practice. An example ofa PCP process compliant with the Commission’s legal frameworkhas been streamlined in a process flow and structured in severalsteps. The proposed PCP process is illustrated in a very practicalway and describes step-by-step all the activities that a Contrac-ting Authority can follow to enable the delivery of high-qualityand cost-effective PCP activities to procure R&D services accor-ding to the EC legal framework.For the purposes of this guide, we have outlined a process forPCP that is practical, achievable and compliant with the EC legalframework. The proposed PCP process has been structured in 5major steps (Figure 1):1. Needs Identification2. Concept Viability3. Competition4. Contract Management5. Commercial ProcurementIn deploying the PCP process illustrated in figure 1 below, a Con-tracting Authority may run its own competition or it may decideto aggregate demand with other Contracting Authorities to runa single, collaborative competition. Within the flow-chart, the“core” steps of the PCP process are “Competition” and “ContractManagement”. “Needs Identification” and “Concept Viability” areessential “preparatory” steps to the PCP process.They deserve special attention since failure to:I. identify the need; orII. assess whether it is technically possible to create a solu-tion to meet that need; orIII. check whether the need can be met with products/servicesalready available in the market or so close to the marketthat no R&D but only incremental/ integration type deve-lopment is required,might compromise the success of the PCP initiative.The subsequent commercial procurement is included in the flowto have an overall picture of the whole process.How to Implement PCPTHEPATHWAYOFPCP:ASTEP-BY-STEPPROCESSPCPPROCESS27ThisprojecthasbeenfundedwithsupportfromtheEuropeanCommissionunderSeventhFrameworkProgramme(FP7)
  28. 28. BE AWARE THATEverything starts with a ‘need’. If a need can be met with products and/or services on the openmarket, then the procurer should opt for traditional procurement; however, if a product and/orservice is not available on the open market and R&D is required, then it might be possible touse PCP to develop a solution to meet the need. Successful outputs from PCP are then able toenter the open market and be bought via traditional procurement.part III. PRATICAL APPROACHFigure 2 here below provides a more detailedpicture of the PCP process, where main PCPphases of Design (phase 1), Prototype (phase2) and Small-Batch Production (phase 3) aremarked in green. Specific steps of activity areindicated for each phase, and throughout theentire pathway, evaluation and disseminationare represented as constant activities essentialto the process. These steps are discussed inmore detail below.Needs Assessment (now comprising the twosteps of Needs Identification and Concept Via-bility) and the subsequent commercial Procu-rement are illustrated as the starting and con-cluding steps of the procurement pathway, tohave an overall picture of the whole process.As the diagram hereafter shows, at the begin-ning of the PCP, a PCP Call for Tender (PCP CT)should be issued by the Contracting Authority.The PCP CT will result in a framework contractthat will enable a cohort of suppliers to advan-ce through all the three phases. Note that “mi-ni-competitions” are used to select which sup-pliers advance from phase 1 to phase 2, andthen from phase 2 to phase 3.The time allocated for each phase in Figure 2 isindicative. If it is possible to speed-up the pro-cess without putting at risk the developmentof solutions, then the procurer should plan forthis.Figure 1 Procurement pathway overview28“ApracticalguidetoPCPImplementationforPROGR-EASTpilots”PROGR-EASTFP7-ICT-2009-4
  29. 29. Figure2PCPindetail29ThisprojecthasbeenfundedwithsupportfromtheEuropeanCommissionunderSeventhFrameworkProgramme(FP7)
  30. 30. Resource planning for the PCPTo ensure that a PCP is properly resourced, a Contracting Authority should know in advance of eachPCP the likely: (i) duration; (ii) cost and iii) number of suppliers needed for each phase. The ConceptViability step should provide outputs to enable Contracting Authorities to calibrate a PCP appro-priately.The PCP process outlined herewith seeks to create a sense of competition between suppliers throu-ghout each of the three PCP phases. This is achieved by establishing a single cohort of suppliers inphase 1, and this cohort competes to advance to phase 2, and then the phase 2 cohort competes toadvance to phase 3. Only suppliers present in phase 1 can advance to phase 2, and only those pre-sent in phase 2 can advance to phase 3. Ultimately, the Contracting Authority should seek to haveat least two successful solutions able to enter the market. The exact number of suppliers needed forthe initial phase 1 cohort is context-specific. For example, if the technical challenge is very difficult,or the sector is very prone to low start-up innovation type success rates, then there is likely to be anumber of suppliers not able to progress due to failure. If it is likely that the need can be met rathereasily by suppliers, then the Contracting Authority may decide to reduce the allocated time for eachphase; and, they may also choose to reduce the number of suppliers contracted to deliver in eachphase. In contrast, if the need is very challenging and complex, then the challenge to suppliers maybe significant. In such circumstances, and in order to reduce risk, the Contracting Authority maychoose to lengthen the allocated time for each phase and also to increase the number of supplierscontracted to deliver in each phase.BE AWARE THATThe requirements and the functional specifications can get more detailed and complicatedwhen advancing from one phase to the next; and, at the same time that the complexity in-creases, the resources requirements - in terms of time and money - also increase. Therefore,the information requested in the PCP Call for Tender and award criteria must be sufficient toenable the evaluators and the Contracting Authority to make informed decisions as to whichsuppliers should advance to the next phase.In order to estimate the overall amount of resources that can reasonably be spent on the PCP, theContracting Authority should create a Business Case before starting a PCP to answer the question:“What percentage of the estimated economic value that the innovation can bring to the public authori-ty – in terms of cost saving and/or public service quality improvement - can the public purchaser affordto spend on the development of solutions that are needed to realize this innovation, given the R&D riskof that particular project and the time it takes for the R&D trajectory?“11 Commission Staff Working Document SEC(2007)1668 p.5part III. PRATICAL APPROACH30“ApracticalguidetoPCPImplementationforPROGR-EASTpilots”PROGR-EASTFP7-ICT-2009-4
  31. 31. BE AWARE THATThe aim of a PCP exercise is to work fully within EU Competition Law to enable the rapid deve-lopment of innovations likely to meet needs. Therefore, the time, budget and human resourcerequirement needed for each competition should be calibrated against the requirement.BE AWARE THATRisks represent the possibility that things will not go as expected. Such a possibility is inhe-rent in any project – whether PCP or not. The level of risk is exacerbated by factors such as thesize, the complexity, the novelty and the type of project, the cost and the length.Thanks to the Business Case, a Contracting Authority can check in advance whether the PCP is anaffordable, viable, value-for-money initiative. It will also have an overview of the potential risks thePCP project might incur on and how these will be managed.The following is a numerical example to show the distribution of resources among the three diffe-rent phases, according to the minimum number of competing suppliers required at each stage of thecompetition, taking into account that each phase becomes more complex and costly.USEFUL RESOURCESAn example of a preparatory template for a Business Case purposely developed for Progr-EAST PCP pilots called: “Contracting Authority’s Simulation Scenario Template for PCP” isprovided in Appendix 2.31ThisprojecthasbeenfundedwithsupportfromtheEuropeanCommissionunderSeventhFrameworkProgramme(FP7)
  32. 32. EXAMPLESupposing that the Procurer has concluded from the above business case analysis that he hasa total budget of 600K€ for financing the R&D work to be undertaken in the PCP, if the mini-mum number of suppliers at the end of phase 3 is 2 in order to ensure competition in follow-up commercial procurements after the PCP is finished, going backwards the minimum numberof competing suppliers for phase 2 will be 3; and, following the same reasoning, for phase1 the minimum number of suppliers will be 4. Similarly, as the assignment becomes morecomplicated and costly as the PCP progresses, the procurer might want to allocate 100K€ tophase 200K€ to phase 2 and 300K€ to phase 3. As a result, we obtain the maximum budgetthat each supplier might get in the different phases. The contracting authority should thencheck whether these maximum budgets per supplier, that result from the division of availablebudget over the number of phases/number of suppliers, are realistic in view of the complexi-ty and duration of the R&D work that is required in each phase to get the desired innovativesolutions developed. Such forward planning helps Contracting Authorities to ensure that PCPactivities are properly resourced from beginning to end.Figure 3Please note that the data shown in the figure are to be regarded as minimum budgets forfinancing a PCP. Typically, in the United States, phase 1 contracts amount to $200K per sup-plier, phase 2 contracts $500K per supplier, and phase 3 contracts $700K-1M per supplier.In the following pages, single steps of the procurement pathway and especially the ones associa-ted to each PCP phase are illustrated in more detail.part III. PRATICAL APPROACHDESIGN(PHASE 1)PROTOTYPE(PHASE 2)SMALL-BATCHPRODUCTION(PHASE 3)NEEDSASSESSMENT(PHASE 0)MARKETENTRY150 K€66.6 K€25 K€Max.Budget/supplier300 K€200 K€100 K€Budget (total)234Minimum number ofsuppliers to ensurecompetition32“ApracticalguidetoPCPImplementationforPROGR-EASTpilots”PROGR-EASTFP7-ICT-2009-4
  33. 33. EXAMPLEAn interesting example on how to define needs comes from the English National Health Servi-ce. This process is informed by structured ‘Wouldn’t it be Great If...(WIBGI)’ workshops invol-ving clinical teams from NHS healthcare settings. During a WIBGI workshop, an expert facili-tator works with the clinical team to identify, validate and rank-order their perceived clinicalneeds. The list of needs should be rank-ordered in terms of importance (e.g. in terms of thesize, scale and cost of the problem).Step 1: Needs IdentificationEverything starts with a clearly defined need. In order to define a need, a Contracting Authoritymay use a number of formal approaches, including:• Literature review of scientific, technical and policy publications• Expert Opinion• Focus Group Research• Key Informants interviews, including service end-usersPRACTICAL CASEPractical case from the NHS (UK): “Managing the blood donating service efficiently”The NHS Blood & Transplant - the body in the UK who manages the Blood Donating Service –had a problem in delivering this service efficiently: every day over 300 blood donors faintedduring the process, turning them from a donor into a patient. The treatment of these patientswas complex because the ideal position for blood donating is the exact opposite of thatfor treatment of fainted patients, and treating these patients impacts on the other waitingdonors. The NHS Blood & Transplant organised a Wouldn’t it be Great If...? seminar to capturethe true need. The outcome of the seminar was that the un-met need was therefore for a blo-od donating chair which could rapidly be converted to a recovery position bed. After 7 yearsof failed procurement using conventional procurement methods, the NHS Blood & Transplant- follows a methodology to identify and define the need and inviting proposals for conceptsolutions - got the solution within only 16 months of project commencement.Source: BaxiPartnership (UK). Contact person: Michael Wilkinson: Michael.wilkinson@baxi-partnership.co.ukUSEFUL RESOURCESMore information on ‘Wouldn’t it be Great If...(WIBGI)’ workshops. UK National Health Service(www.nhs.uk)33ThisprojecthasbeenfundedwithsupportfromtheEuropeanCommissionunderSeventhFrameworkProgramme(FP7)
  34. 34. Step 2: Concept ViabilityThe purpose of this step is to assess whetherit is technically possible to create a solutionto meet the needs identified in the first step.A way to do this is to cross-check the contrac-ting authority’s needs identified with the sta-te-of-the art of industrial development by (1)performing a market/patent search, and/or (2)sharing the identified needs with industry withthe purpose of conducting a concept viabilityexercise.For each identified need, the concept viabilityexercise might result in three possible alterna-tives:I. There is technology already available in themarket that can meet the need. In this casetraditional off-the-shelf procurement isused.II. There is no technology available yet in themarket that can meet the need, but the Con-tracting Authority’s horizon scanning activi-ties generates evidence that it is likely thatthere will be soon or that it could be soon ifindustry were aware of this requirement andaware that there is a substantial public sec-tor customer base that is interested to startprocuring those products. In this case, theContracting Authority may choose not enga-ge in a PCP competition, but rather publici-se the need to enable the current market torespond with commercial offers. In addition,the Contracting Authority may wish to fur-ther strengthen market pull by deploying aForward Commitment Procurement exerci-se. This type of procurement commits theContracting Authority to purchase innovati-ve solutions if the market can deliver a newinnovative solution against clearly definedrequirements in a specified time frame(typically 6 months to 1 year).III. There is no technology available yet in themarket that can meet the need, and theContracting Authority horizon scanning ac-tivities do not generate any evidence to in-dicate that there will be soon or that it couldbe soon if industry where aware of this re-quirement, but the horizon scanning activi-ties indicate that there is still R&D neededto define/experiment with the technologi-cal and financial viability of various solutionapproaches that could potentially be usedpart III. PRATICAL APPROACH34“ApracticalguidetoPCPImplementationforPROGR-EASTpilots”PROGR-EASTFP7-ICT-2009-4
  35. 35. USEFUL RESOURCESFor more information about the Concept Viability Methodology visit: http://www.ogc.gov.uk/documents/sd006.pdfEXAMPLEThe following boxes illustrate two interesting examples - one from the Flanders region inBelgium and the second from the Eszak-Alfold region in Hungary – which describe the appro-aches followed by these two regions in the preparatory phases, prior to PCP, in order to iden-tify, assess and select the needs and challenges that can be addressed by PCP.to address the need. In this case, where in-novations can only be expected in the mid-to-long term and experimentation is stillneeded to check in how far the ContractingAuthority’s functional/performance require-ments can realistically be met by solutionproviders, the Contracting Authority maychoose to engage in a PCP competition toprocure the R&D needed to get the desiredinnovative solutions developed and compa-re alternative solution approaches on theirmerits.35ThisprojecthasbeenfundedwithsupportfromtheEuropeanCommissionunderSeventhFrameworkProgramme(FP7)
  36. 36. In July 2008, the Flemish go-vernment approved an Action Planon Procurement of Innovation (PoI).In this plan the government focusedon procurement of innovation thatneeds a pre-commercial R&D phase.The innovation agency - IWT - hasbeen given the mandate to set up apilot scheme with projects runningfrom 2009 to 2014.In order to structure the process ofconcept viability check, innovationplatforms are established (for anindicative period of 6 months) formarket consultation and technicaldialogue between the procuringgovernment services, knowledgecentres and companies. These Inno-vation Platforms must allow a maxi-mal exchange of information betwe-en demand and supply side so thatcompanies are getting acquaintedwith know-how from the ministriesand the most optimal instrumentscan be used. They are importantinterfaces for alignment of strategiesbetween the public and the privatesector.In brief, the methodology developedby IWT is as follows: the input to theinnovation platforms is a masterplan that identifies challenges in theBox 1 Flanders’ Action Plan on Public Procurement of Innovationpart III. PRATICAL APPROACHPolitical ambitionsministerMasterplan InnovationplatformInnovationmatrixPrecommercialProcurementAppointmentof 1 contactpoint per policy domainProjekt leaders identify/quantify procurer needs forquality/eficencyimprovements in publicserviceInitiate MasterpalnsCommiercial ProcurementPreparation Procurement Contract/ExecutionOther Innovation policy instrumentsOpƟon 1OpƟon 2Figure 436“ApracticalguidetoPCPImplementationforPROGR-EASTpilots”PROGR-EASTFP7-ICT-2009-4
  37. 37. policy domains and describes thefuture desired outcome and existingstate-of-the-art knowledge. Themaster plan serves as basic input forthe innovation platform discussionbringing both public and private sta-keholder organisations together fordialogue as well as for defining thelimitations of the actual solutions.In a first stage, the innovationplatforms assess the available po-licy instruments (either subsidiesor procurement) on their effective-ness in view of reaching the desiredoutcome as expressed in the masterplan. Opportunities of using innova-tive procurement are benchmarkedagainst the possible use of otherinstruments. The platform confirmswhether the procurement is bestsuitable instrument to provide theinnovative solution. In this process,IWT supervises and facilitates theinnovation interest of the project.Afterwards, the innovation platformpositions the innovative proposal inits innovation trajectory and decideson whether the procurement formshould be either pre-commercial(when the project requires furtherR&D) or commercial and as well whe-ther other policy instruments mightbe complemented (e.g. need of stra-tegic basic research, R&D, additionaltax measures) in order to optimisethe payoff of the investment. Theinnovation trajectory consists of thesubsequent phases: concept, feasi-bility, prototype, pilot, integration/adaptation and diffusion. From theintegration phase on, the commercialprocurement procedure is applied.In case of PCP, risk benefit sharing isused between government and com-panies. Fair competition treatmentand good governance are key princi-ples taking into account the necessa-ry confidentiality among the partnersparticipating to the platform andthe focus on innovative character ofoffers as award criteria.Some of the current pilot projectsrunning (at different stages of deve-lopment) are: Digital book platform;Eye screener for young children;Leisure infrastructure and cultureinformation system; ICT in healthcare; Personal development plansfor citizens; Monitoring of buildingexcavations.Sources: Flanders Action Plan on Pu-blic Procurement of Innovation- OECDExpert Meeting April 2010;OMC-PTP Publication: “Exploring Pu-blic Procurement as a strategic inno-vation policy mix instrument”www.iwt.be ; http://www.innovatie-faanbesteden.be/lopende_projecten;www.procurementofinnovation.eu37ThisprojecthasbeenfundedwithsupportfromtheEuropeanCommissionunderSeventhFrameworkProgramme(FP7)
  38. 38. The Hungarian region Észak-Alföld isrunning a PCP pilot with the supportof its Regional Development Agency(INNOVA). Thanks to its participa-tion in the RAPIDE project, INNOVAinvestigated the feasibility of laun-ching PCP practises in their RegionalOperational Programme and theAgency will be in charge of calls forPCP proposals (the intention is thattwo Contracting Authorities over atwo-year period receive financialsupport of €300.000 for launching aPCP pilot).INNOVA will oversee the PCP processand will be responsible to informabout the challenges that the projectmight run into. The public procu-rer will be in charge of running anyfollow-up commercial procurementsafter the pre-commercial phase(this is done in order to secure thatprocurement will take place). Beforelaunching the pilot programme thepublic procurers will be identified.In order to be awarded the contract,contracting authorities will haveto define problems, which can besolved by technical development,and be willing to procure this deve-lopment through PCP.INNOVA, together with an evaluationcommittee, the public procurers, andexternal experts will be in charge ofselecting the participating compa-nies for the Preparatory Phase. Thisphase is further divided into twophases namely Project Generationand Selection.The first nine months (which includephases 1&2) will be concentratedon preparing the pre-commercialprocurement phase. During Phase I,Project Generation, potential R&Dneeds will be investigated in order toidentify potential procurers. The pro-curers could be companies engagedin public services, municipalities ororganisations. Phase II deals with Se-lection. During this phase an innova-tion platform (based on the Flandersmodel) is set up intended as a forumwhich will evaluate the innovativeprocurement processes for each ofthe participating projects. An Evalua-tion Committee will be establishedconsisting of a panel of externalevaluators, who together with INNO-VA, will select the two most fittingprojects. The Implementation Phase(Phase 3) will last fifteen months.Within this phase, each of the threestages: 1. Solution design; 2. Protot-ype building and 3.Development oftest products will end with an eva-luation of the participants’ work, andthose proceeding to the followingstage will receive a fixed compensa-tion. Although the different stagesare constructed individually, so itmight not be the same amount ofparticipants in each phase, there is aminimum requirement of participa-ting suppliers in the PCP process: 4for Solution design; 3 for Prototypebuilding and 2 for Development oftest products.For further information: www.eszakal-fold.hu & http://cordis.europa.eu/fp7/ict/pcp/hungary-case.pdfBox 2 The Eszak-alfold PCP Pilot ProgrammeThe Hungarian Észak-Alföld Region Pilot Programme on PCPpart III. PRATICAL APPROACH38“ApracticalguidetoPCPImplementationforPROGR-EASTpilots”PROGR-EASTFP7-ICT-2009-4
  39. 39. Beneficiary/IntermdiateBodyPhase1ProjectGeneraƟonPhase2Phase3SelecƟonProductDevelopment•Assessingresearchanddevelopmentneedsofcompaniesengagedinpublicservice,ofmunicipaliƟesandoforganizaƟons•RunninginnovaƟonplaƞormtoindenƟfygapsbetweenprocurerneedsandstateofindustrialdevelopments•SeƫngupEvaluaƟonCommiƩee•SelecƟonof2possibleprecommercialprocurementprojectsPreparaƟonphase:9monthsImplementaƟonphase:15monthsFigure539ThisprojecthasbeenfundedwithsupportfromtheEuropeanCommissionunderSeventhFrameworkProgramme(FP7)
  40. 40. PRACTICAL CASEPractical case from Norway: “Heating systems in schools”The following is an example of a concrete public sector need in Norway where the Contrac-ting Authority organized an open session with industry in order to test the market and enablethe supply side freely to share their insights regarding the range of possible solutions tomeet the need.In January 2008 the Oslo City Council decided to phase out the use of fossil fuels in schoolsby the end of 2011. The challenge of the public procurer (“Undervisningsbygg” - a municipalorganization in charge of schools management in Oslo) was to gain information about whatthe market could deliver in terms of innovative solutions, as experiences with existing pro-ducts/solutions were poor. The industry was invited to a open dialogue conference where theobjective was to present the challenge (i.e. finding renewable, optimal and innovative solu-tions for substituting fossil fuels in heat distribution) and to ask them how to find the bestalternatives. The conference resulted in a tender competition where the market was asked tosubmit their suggested solutions to the challenge presented. A great deal of information wasobtained from these dialogue-activities which was later on applied in the tender documents.Twelve (12) proposals were submitted and four (4) selected bidders (evaluation criteria wereamong others life cycle cost, management reliability, degree of innovation and the possibili-ty to copy the suggested solution to different schools) proposed solutions of very differentnature to the challenge (e.g. one suggestion was based on using biogas as the energy source,establishing a receiving station behind the school for the biogas and leading it to the boilerroom through pipes in the ground. Another solution was based on bio-fuels, using a patentpending vertical feeding system for the pellet. Another bidder introduced a combination ofheat pump/energy wells and solar collector which will be used to recharge the wells with so-lar heat during the summer and yet another one identified different potential customers forestablishing common energy plants). Two of the proposed solutions could be used directly inone or more of the schools and they were therefore used as a base for a commercial tender.The other two ideas were developed further into prototypes in cooperation between thesupplier and the procurer. Undervisningsbygg was very satisfied with the results of the com-petition. A lot of solutions appeared which were not available before the process started. Ingeneral, the whole process, including the different suppliers, has attracted a lot of attention,and several articles have been published in local newspapers and magazines. It has been re-cognised that the early presentation of the project to potential suppliers, the openness of theprocurer and the involvement of industry associations in these dialogue activities has beencrucial for the success of the endeavour.Source: DIFI- Agency for Public Management and egovernment. Contact person: Marit HolterSorensen (marit.holter-sorensen@difi.no)The Needs Assessment Phase, that groups together “Needs Identification” and “Concept Viability”,should result in a final decision regarding the need, how to address it (through a PCP approach orvia traditional procurement) and how to formulate the need for such a procurement (via so-calledfunctional/performance based specifications).part III. PRATICAL APPROACH40“ApracticalguidetoPCPImplementationforPROGR-EASTpilots”PROGR-EASTFP7-ICT-2009-4
  41. 41. Step 3: CompetitionEach competition must be run via open, fair and transparentprocesses. When running the PCP competition, 4 main activi-ties need to be carefully designed and monitored:• preparing the PCP Call for Tender (PCP CT)• advertising the PCP• selecting suppliers• drafting the contractPreparing the PCP Call for TenderIn a PCP Call for Tender, the Contracting Authority should makeclear the following points that are discussed in detail below:• Functional specifications• Award• Framework contract covering all the PCP phases• Share of risks and benefits• Excluding the presence of state aidFunctional specificationsFunctional specifications shall be used in order to formulatethe object of the PCP tender as a problem to be solved wi-thout prescribing a specific solution approach to be followed.BE AWARE THATThe way in which the specifications are drawn up is ofcrucial importance as this influences the variety and thequality of the offers. The Contracting Authority has to givesuppliers the necessary freedom to come up with innova-tive, original solutions so that they can serve the procu-rer’s needs in the best possible manner. Therefore, usinga high degree of technical details in the requirementswill likely prevent innovative companies from submittingoriginal proposals, since there is no room for them. At thesame time, however, the specifications must be preciseenough to permit the award of the contract in accordancewith the rules governing the procedures. Hence, the bestsolution to reconcile both aspects is not to prescribe thesolution, but instead to specify the procurer’s needs byreference to performance or functional requirements.41ThisprojecthasbeenfundedwithsupportfromtheEuropeanCommissionunderSeventhFrameworkProgramme(FP7)
  42. 42. PRACTICAL CASEPractical case from SBRI (UK): “Developing sensitive biosensors”This example comes from the UK where the Small Business Research Initiative (SBRI), admi-nistered by the Department of Health, funded the development of a portable, sensitive andinexpensive device to test for the presence of bacteria on hospital surfaces. The specifica-tions were very clear and comprehensive. An extract of the full specifications is shown below:(…) Given that hospital cleaning costs a significant amount of money, the NHS needs to knowhow effective the cleaning regimes are and the impact that this has on infection control. Mo-nitoring of cleaning efficacy is thus important. (…) The ideal test would be a test for productresidue itself that gives rapid results to facilitate immediate corrective action, and is simpleenough to be performed on the ward without the need for a laboratory. A number of me-thods have been developed over the past 20-30 years that approach these requirements. (…)There remains, however, a need for more rapid and specific identification of bacteria/viruseson patients and in the environment so that action can be taken immediately to reduce theinfection risk to the patient concerned and the risk to others within the healthcare setting.The ideal kit would be: Inexpensive; Cover a wide area (up to 50 cm 2 at a single test); Giveimmediate results, providing feedback to the cleaners as they work or providing informationto inform decisions to clear a room prior to occupation by a new patient; Avoid the need toapply a liquid or a gel to the surface being tested, as this will not be cleaned off a permanentcoating may be acceptable but would need to be tested for bacterial adherence properties;Must be very simple so domestic supervisors are comfortable using it Infection Control Nur-ses would only have time to use the test infrequently; Able to distinguish between live anddead organisms.These detailed specifications also include information about the “use case” or how such aproduct would be used. This information is highly valuable to suppliers and communicates tothe developer of the future product who the user is, how it is likely to be used and the per-formance required.Source: Aseptika Ltd. Contact person: Kevin Auton (kevin.auton@aseptika.co.uk)AwardThe award of offers shall not be based on lowestprice only. The PCP contracts shall be awardedto the tenders offering the most economicallyadvantageous tender, taking into account otherfactors than price (e.g. quality), while takingcare to avoid any conflict of interests.Framework contract covering all the PCPphasesOne single framework contract covering all thePCP phases in which the distribution of rightsand obligations of the parties is publishedupfront in the tender documents and whichdoes not involve contract renegotiations onrights and obligations taking place after thechoice of participating organisations. This fra-part III. PRATICAL APPROACH42“ApracticalguidetoPCPImplementationforPROGR-EASTpilots”PROGR-EASTFP7-ICT-2009-4
  43. 43. mework contract shall contain an agreementon the future procedure for implementing thedifferent phases (through specific contracts),including the format of the intermediate eva-luations after the solution design and protot-ype development stages that progressivelyselect organisations with the best competingsolutions.Share of risks and benefitsR&D risks and benefits are shared between theprocurer and the supplier in such a way thatboth parties have an incentive to pursue widecommercialisation and take up of the new so-lutions. In PCP, the public purchaser does notreserve the R&D results exclusively for its ownuse. Therefore, for PCP, ownership rights ofIPRs generated by a company during the PCPcontract are assigned to that company. The pu-blic purchaser is assigned a free licence to usethe R&D results for internal use as well as theright to license or require participating compa-nies to license IPRs to third parties under fairand reasonable market conditions. In addition,a call-back provision in the PCP contract canensure that IPRs allocated to companies thatdo not succeed to exploit the IPRs themselveswithin a specified period after the PCP projectis completed will return back to the Contrac-ting Authority.Excluding the presence of State AidUnder competition rules, Contracting Autho-rities must pay no more than the market pri-ce for the R&D services procured. A financialcompensation for leaving IPR ownership rightscompared to exclusive development price thatis either non-existent or too low would contra-vene State Aid law. There are at least three op-tions available and these include:I. a discount on the R&D price (compared toexclusive development price) for doingthe PCP work, and/orII. a share of equity stake with the Contrac-ting Authority and/orIII. a royalty payment to the Contracting Au-thority.The setting of the exact value for the abovethree options is best achieved through thecompetitive process; to explain, as part of thetendering process, bidders compete to wina contract to deliver R&D services. It is in thetender publication that the Contracting Au-thority indicates which of the above options itaccepts, and it is in their submission that thebidder states (in case of option 1) the amountof money they require to deliver the R&D (in-dicating the size of the offered reduction inthe R&D price) and/or the price for doing theR&D work in the case of a specific percentageof sales/profits as royalty payment and/or theequity stake back to the Contracting Authori-ty. On receipt and evaluation of the bids, theContracting Authority either accepts or rejectseach offer against criteria stated in the PCP Callfor Tender. In addition, in order to make surethat the presence of State Aid is excluded, pro-curers should observe the requirements of theEC as laid out in the Commission’s working pa-per SEC (2007) 1668:“Therefore, if the distribution of rights and obligations is published upfront in the tender documentsand the tender has been carried out in a competitive and transparent way in line with the Treatyprinciples which leads to a price according to market conditions, and does not involve any indicationof manipulation, then this should normally enable the state to establish the correct (best value formoney) price for the R&D service, in which case the presence of State aid can in principle be excludedaccording to the definition contained in Art.87 of the Treaty. The pre-commercial procurementapproach described is based on one single framework contract for the three phases, in which thedistribution of rights and obligations of the parties is published upfront in the tender documents andwhich does not involve contract renegotiations on rights and obligations, including the allocation ofIPRs, taking place after the choice of participating companies.”Source: Commission Staff working document, SEC (2007) 1668 (p. 9)43ThisprojecthasbeenfundedwithsupportfromtheEuropeanCommissionunderSeventhFrameworkProgramme(FP7)

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