EOS Fair Udine, 17th May 2013 1Pre-commercial procurement andprocurement for innovation:driving innovation to ensure energy efficient buildingsin the MED areaThe pathway of PCP strategy:Italy under the spotlightsSara BedinExpert on innovation public procurementThe European House-Ambrosetti - Head of Public Administration Practice
EOS Fair Udine, 17th May 2013 2The innovation policy mixDIRECT FINANCIALSUPPORT FOR R&DFACILITIESSUPPLY-SIDE GRANTSFOR INDUSTRIAL R&DACTIVITIESDEMAND SIDEMEASURES FOR R&DPROCUREMENT
EOS Fair Udine, 17th May 2013 3Direct financing of innovation has some distortions«disorient/replace, to a certain extent, private investment»do not allow the public sector to guide R&D to meet the realneeds of innovationdo not ensure economic finalization of innovation
EOS Fair Udine, 17th May 2013 4Traditional public procurement show rigidityDo not enable innovationSingle supplier lock-in and closes off the market
EOS Fair Udine, 17th May 2013 5WHY PCP has a central role in promoting innovation?create and strengthen new markets, reducing time-to-marketcreate additional and spontaneous incentives to innovateenable competition during the execution
EOS Fair Udine, 17th May 2013 6WHAT is PCP? it is a procurement of R&D services
EOS Fair Udine, 17th May 2013 7 it isn’t a supply contract to procure product/services nor a work contract doesn’t include commercial development activities such as industrialization,quantity production, supply, doesn’t include activities like integration, customisation, incrementaladaptations and improvement to existing product or processes.WHAT is not PCP?
EOS Fair Udine, 17th May 2013 8WHO can undertake a PCP initiative?Contracting authorities at all levels (local,regional, national and supra-national)representing the real demand side,• that are responsible for the acquisitionstrategy of the new solutions that couldbe developed as a result of the PCPor• that participate in public servicedelivery chainand/or• that can mobilise, besides publicprocurement, the most importantdemand side instruments to speed upmarket introduction of solutions.
EOS Fair Udine, 17th May 2013 9HOW shoud be formulated the object of the tender?described in terms of(minimun)functional/performancerequirement and target?PROBLEM TO BE SOLVEDwithout prescribing aspecific solutionapproach
EOS Fair Udine, 17th May 2013 10WHEN PCP implementation is viable and effective? (1/2)When there is a technologically demanding problem/challenge• with no commercially stable solution onthe market or exhibiting shortcomingswhich require new R&D,• suitable to multiple technologies, alsoalternatives.
EOS Fair Udine, 17th May 2013 11• with industrial applicability and subjectto repeated applications (wider market),• potentially amenable to patentprotection or IPRs management.When there is a technologically demanding problem/challengeWHEN PCP implementation is viable and effective? (2/2)
EOS Fair Udine, 17th May 2013 12creative thinking andinnovative capacity90% 10%production, delivery &manufacturing capacity and resourcesWHAT is relevant in PCP?
EOS Fair Udine, 17th May 2013 13Company SIZECompany AGE...doesn’t matterWHAT does not matter in PCP?All potential bidders must have equal chance to bid(no discrimination against any potential supplier)
EOS Fair Udine, 17th May 2013 14Selection/qualification criteria : changing the practice ofrequiring stringent requirementsNo discrimination againstany potential supplierNo financial qualificationrequirements and financialguarantees proofNo stringent customerreferenceForward-looking criteriaNo reasons for exclusion as set out in article38 Legislative Decree no.163/2006(No provisional deposit for the initialphases)Have the ability (and technical equipment)to perform all R&D services and contractdescribed in the lex specialisHave accounting and organizationalstructures to ensure the management,exploitation and / or transfer of IPRs arisingfrom the R&D activities.
EOS Fair Udine, 17th May 2013 15Based on the most economically advantageoustender (not on lowest price)Incorporating life-cycle cost and performance in theevaluation of proposalsIncluding the soundness of the commercializationplan of the bidder.Evaluation/Award criteria : objective and relevant in view ofthe commercialization
EOS Fair Udine, 17th May 2013 16Evaluation/award criteriaAbility to address the problem and satisfy the requirementNovelty/innovativeness (progress beyond the state-of-the-art)Technical feasibility/reproducibility with an industrial processValue for money throughout the whole life-cycleSoundness of the commercialization plan of the bidderQuality and effectiveness of the organization and resources
EOS Fair Udine, 17th May 2013 17HOW PCP process enable a competition during theexecution?PCP is a competitive procurement designed to exclude State Aid
EOS Fair Udine, 17th May 2013 18WHICH is the outcome of PCP?Procurementof innovativesolution (PPI)WHICH (optimumtechnology)WHAT/HOW (technicalspecification )Pre-commercialprocurement(PCP)
EOS Fair Udine, 17th May 2013 19HOW MUCH is it paid with PCP?100%of price offeredfor R&D services providedunder market conditionsany R&D benefit shared bythe public purchaser with acompany should becompensated at market price
EOS Fair Udine, 17th May 2013 20HOW PCP involve risk-benefit sharing? IPRs are assigned to supplier Agreed return of benefit /financial compensation(i.e. % of sales to the contracting authority) Sharing by contractual provisions IPRs are different from rights of usage! Free licence to use R&D result (on a non-exclusivebasis) Call-back provision Technological uncertainty Obligation of means and not of result Companies are responsible to cover at theirown expense any additional unforseen coststhat they may incur above the fixed pricethey have committed to in their bid.
EOS Fair Udine, 17th May 2013 21Risk and benefit are sharedbetween public purchaser andcompanies such that bothparties have an incentive topursue widecommercialization andtake up of the newsolutionsHOW PCP involve risk-benefit sharing?
EOS Fair Udine, 17th May 2013 22DEMAND-DRIVENINDUSTRIAL POLICYWHY: Raising industry’s innovative performance,broadening SMEs participation in R&Dprojects and creating opportunities forcompanies to take international leadershipin new marketsWHY: Increasing long-term effectiveness andefficiency of public expenditure, as well asimproving the quality and sustainability ofpublic services, filtering out technologicalriskINNOVATION ORIENTEDPROCUREMENT STRATEGYCONDICIOSINEQUANONEFFECTPCP: a unique procedurePCP: a twin relevance, both as policy and strategy
EOS Fair Udine, 17th May 2013 23The public sector role in promotion of R&D&I via PCPFinancial support to implementinnovative procurement actionand to pool demandScope of the EU State Aid rules for R&DFrameworkpayment of full cost atmarket pricePUBLICPURCHASERSUPPLIER21PCPMutuallybinding andrisk-benefitsharingcontractprovision of R&Dservicesfinancial compensationPOLICYMAKERcontribution, fundingWITHOUT LEADING TO UNILATERAL STATE AID TO INDUSTRY
EOS Fair Udine, 17th May 2013 24PCP should not constitute State Aid (COM (2007) 799)Any aid which distorts or threatens to distort competitionis incompatible with the common market.Companies participating in the procurement shouldn’treceive any advantage.State Aid element should be excluded through theappropriate design of the contract.
EOS Fair Udine, 17th May 2013 25Create a common commitment and agreement at all levels (politicaland administrative).Created a widespread participation and an alignment of thepersonnel incentive systems with the objectives of the project.Establish the instrument of pre-commercial procurement asprocurement strategy and innovation process (not only asinnovation policy).Spend time to involve user and market in order to evaluate theinnovation need in-depth and market gap.Maintain a dialogue with potential suppliers long before the publicprocurement procedure is launchedAssign intellectual property rights to the party who has done R&Dand is best able to exploit it (businesses).Do not use disproportionate qualification or financial guaranteerequirements (as there are no solutions and no customer referenceon the market yet)A win-win policy to promote innovation through public expenditureLessons learned & recommendation
EOS Fair Udine, 17th May 2013 26Thank you for your kind attentionSara Bedinmail: firstname.lastname@example.org: email@example.com
EOS Fair Udine, 17th May 2013 27Key issueReal problem/ concrete challenge that impact negativelyon the quality and/or cost of public services offered existWide potential market (public and private) for the newsolution developed >> repeated applicationsExploring pros and cons of alternative solutionsCost saving and/or public quality improvementEnsure a future competitive market
EOS Fair Udine, 17th May 2013 28General PCP frameworkLombardy Region first PCP
EOS Fair Udine, 17th May 2013 29The pathway of Lombardy PCP pilot (1/2)Step # 1: Identifying candidateprojects from innovation needs€Step -1: Innovation needs identification andassessmentPCP viabilityApril 2012 December 2012Step -2: Building awareness and objective alignmentApril 2011Step # 0: Verifying the pre-condition for PCP with an open and advertised technicaldialogue@advertising
EOS Fair Udine, 17th May 2013 30The pathway of Lombardy PCP pilot (2/2)Step #5: Performing IPRs contractDecember 2012 March 2013Step #6: FCP/PPI...Step # 3: Needs well-definition and fine-tuningStep #2: Governance model and PCP structure designFase 0Ricerca disoluzioniFase 1ElaborazionedellasoluzioneFase 3Sviluppo iniziale di quantitàlimitate di primi prodotti/servizi in forma di seriesperimentaliFase 4Commercializzazione deiprodotti/servizi (sviluppocommerciale)Idea diprodottoElaborazionedi soluzioniPrototipoPrimiprodotti testProdottifinalicommercialiFase 2Messa a punto diprototipiImpresa AImpresa CImpresa CImpresa EImpresaA,B,C,D,Eo XAppalti pubbliciper la produzionecommercialeValutazioneintermediaValutazioneintermediaAppalti pre-commercialiImpresa CImpresa BImpresa DImpresa EImpresa FImpresa CImpresa DImpresa EStep #4: Run PCP
EOS Fair Udine, 17th May 2013 31Assumption and pre-condition #1 for PCPDo we have a real problem/ concrete challenge thatimpact negatively on the quality and/or cost of publicservices offered?Is the need clearly identified and well-described?Do exist a wide potential market (public and private) forthe new solution developed?
EOS Fair Udine, 17th May 2013 32WHONiguarda Hospital• Clinical EngineeringDepartment• Medical DirectionDepartment• Quality and clinicalsafety Department• Direction of nursingPhase -1: Innovation needs identification and assessment
EOS Fair Udine, 17th May 2013 33Phase -1: Needs setting and pre-analysisWHOLombardy Region• General Directionfor Healthcare• Direction forUniversity andResearchNiguarda Hospital• Clinical EngineeringDepartment• Medical DirectionDepartment• Quality and clinicalsafety Department• Direction of nursing
EOS Fair Udine, 17th May 2013 34Assumption and pre-condition #2 for PCPDo “off-the-shelf” solutions already exist? If not, how longdoes it take?Is there a market gap (actual need versus solutioncurrently available on the market)?Is it clear the way to address the public sector need?Are radical improvements and new breakthroughsolutions needed (as opposed to incrementaladaptations)?
EOS Fair Udine, 17th May 2013 35Availablesolution onthe marketPublic noticePublic hearingForum on-lineExplorative callPatent analysis + info requestMarket gapwithrespect toactual need? ?Function andperformanceevaluationPhase 0: Open technical dialogue with the market
EOS Fair Udine, 17th May 2013 36Assumption and pre-condition #3 for PCPHave we formulated the object of the tender as aproblem to be solved in terms of functional/performancebased requirement without prescribing a specific solutionapproach?Have we allocated the right resources (in terms of time,budget and number suppliers) for each phase?Have we determined clear (and proportional) selectionand award criteria?
EOS Fair Udine, 17th May 2013 37Phase -1 & 0: Needs descriptionEasy-to-use automated universalsystem for moving hospital beds,with anti-collision and safetysystems, not needing guide linesor tracks even on non rectilinearroutesProblem description (AS-IS)Solution functionality and whole life-cycleperformance description (TO-BE)
EOS Fair Udine, 17th May 2013 38Phase 0: Procedure settingPhases number and typeOffers number per phaseStarting price for each phase/serviceSelection criteriaEvaluation/award criteria
EOS Fair Udine, 17th May 2013 39The step-wise PCP procedureSolution 1 Solution 1Solution 2Solution 3 Solution 3 Solution 3Solution 4 Solution 4Solution 5 Solution 5 Solution 5Solution ...Solution nPhase 1 Phase 2 Phase 3Feasibility study Technical design Prototyping,test, sperimentation10-15 % of budget (100K€)(fixed compensation according to mkt condition at the end of Phase 2 )85-90 % of budget (650K€)(price payment)IntermediateevaluationIntermediateevaluationRanking on “most economicallyadvantageous offer” and minumuntechnical “pass” scoreRanking on technical quality an minimun “pass” score
EOS Fair Udine, 17th May 2013 40Thank you for your kind attentionSara Bedinmail: firstname.lastname@example.org: email@example.com