State of Play PCP & PPI piloting in FP7 and CIP

Horizon 2020 perspectives

Lieve Bos European Commission

DG CONNECT (Communication Networks)

F2 unit (“Innovation”)

Health care

Climate Change

Energy Efficiency

Transport

Security

Public sector efficiency…

Why? To get best value for money solutions developed for public sector challenges

• Public sector is faced with important challenges.

• Addressing these, often requires public sector transformations for which no commercially stable solutions exist yet. • In many cases, solutions are near the market and would be provided if clear

requirements/sufficient demand expressed by the market (PPI)

• In other cases, still R&D required to de-risk technology, still different competing solution approaches to compare before committing to deploy (PCP)

• Public procurement is 'the tool' that enables the buyers to steer industrial R&I to its needs. However, public procurement driving R&I from demand side is underutilised in EU.

Why? To shorten time to market & provide first customer reference for innovations Market Share %

Innovators

2,5% Early

Adopters

13,5%

Early

Majority

34%

25%

50%

75%

100%

Late

Majority

34%

Laggards

16%

PCP

H2020, SF

PPI

H2020, SF

PPI

CEF, SF

Normally functioning procurement market (e.g. in US, Asia):

2,5% of ‘innovator’ type customers (PCP)

Who invest in R&D with suppliers ($50Bn/Y in US <-> €2,5Bn/Y in EU)

16% of ‘early adopters’ (PPI)

ICT public procurement market in Europe:

0,5% of ‘innovator’ customers (PCP)

5% of ‘early adopters’ of

new tech in e-gov (PPI) CEF = Connecting Europe Facility

SF = Structural/Cohesion Funds

H2020 = Horizon 2020

Supplier B

Supplier C

Supplier D

Phase 1 Solution design

Phase 2

Prototype

development

Phase 3 Original development

of limited volume of first test products /

services Supplier A

Supplier B

Supplier C

Supplier D

Supplier B

Phase 0 Curiosity

Driven Research

Applied R&D / Pre-commercial Procurement (PCP)

Phase 4 Deployment of commercial

end-products Diffusion of newly developed

products / services

Supplier D

Public Procurement of

Innovative Solutions (PPI)

• PCP to steer the development of solutions towards concrete public

sector needs, whilst comparing/validating alternative solution approaches from various vendors

• PPI to act as launching customer / early adopter / first buyer of innovative commercial end-solutions newly arriving on the market

Supplier(s)

A,B,C,D

and/or X

Also normally multiple sourcing here to keep competition going

Why? To create growth and jobs 'in Europe' How? PCP-PPI combo

Because of split between PCP and PPI: • PCP falls outside WTO rules & proc directives (can encourage job creation 'in Europe'), even if the large scale PPI that may come afterwards would not be exempted

PCP based on good practice

• Procure R&D in steps (solutions, prototypes, test series) to reduce risk and give large and small companies a chance

Grow size of tasks gradually, make bridge from ideas to first test product, procurer = first customer reference

• IPR sharing as form of risk/benefit sharing with suppliers

Less risk for procurer, faster time to market + increased commercialisation opportunity for suppliers

• Separate PCP – PPI, competition also in R&D phase

Better value for money: Competition after PCP for PPI + competition during R&D -> higher quality products + reduces first unit acquisition cost with 20-30%*

• Sharing R&D costs with other procurers

Cooperation across borders can help develop a European market, common standards etc

* 'Competitive Dual Sourcing', Jacques Gansler, 7/10/2007. Based on analysis from Annex G, 'International

Armaments Cooperation in a era of coalition security', report US Defence Science Board, August 1996

EC support to PCP & PPI

• Why EC support needed? – PCP /PPI in some EU countries but not spread across rest of Europe – Defragmenting demand side for challenges of common European

interest (common requirements setting, de facto standard creation)

• 2008-2009: EU calls for proposals for European networks of public

procurers on PPI (e.g LMI in CIP) and on PCP (ICT theme in FP7)

• 2011-2013: EC support for PCP via FP7 and for PPI via CIP – DG CNECT and ENTR are piloting support to PCPs by procurers

(FP7 grant: co-financing up to 75% of the price of procured R&D) – DG ENTR, ENV and CNECT are piloting support to PPIs by public

procurers (via CIP grant: co-financing up to 20% of the price of the innovative solutions procured/deployed)

– DG RTD, ENER, MOVE supporting networking of procurers

• 2014-2020: Horizon 2020 (similar possibilities as before) – EC can co-finance PCPs/PPIs carried out by grant beneficiaries – EC or EU funding bodies (e.g. agencies) can carry out PCPs/PPIs on

their own behalf or jointly with Member States

Why separate PCP-PPI in FP7/CIP & H2020 iso long term partnership contract incl. R&D+deployment

Sequence of separate PCP + PPI procurement

• PPI also usable for 'non-R&D' innovations • More open to radical/breakthrough R&D, (no commitment to deploy before R&D over, specs for PPI can be fully changed based on PCP learning)

• Facilitates access to market of new players incl SMEs, avoids supplier lock-in (short term/ small value contracts phase per phase, typically no selection criteria on financial guarantees/customer references in PCP, only at PPI stage)

• Better value for money (higher quality & 20-30% cheaper products)

• Exempt from WTO: can encourage job creation 'in Europe'

• Choice of most suitable procedure for PPI (comp dialogue, open/neg procedure etc)

• Complements other R&D policy support: Allows also companies that funded R&D through other means to compete for PPI

• No State aid (open competition for R&D and commercial phase)

Long term partnership contract incl. R&D + purchase end-products

• Usable only for innovations resulting from R&D

• Tendency to attract close-to-market '0' risk commercial development, less real R&D (commitment on what/how much to deploy needed before R&D starts, tender specs cannot be significantly changed based on learning from R&D)

• Tends to favour large established suppliers over SMEs, higher risk of long term supplier lock-in (long term / large value contract, selection criteria for financial guarantees/customer references used from start of contract, incl. for R&D phase)

• Normally not exempted from WTO (because can include purchase of large commercial volumes)

• Restricts choice of procedure (neg. procedure)

• Blocks road to market for main R&D policy support: Does not allow companies that financed their R&D through other means (e.g. R&D grants) to compete for the deployment phase any more

• How to 'guarantee' up front there will be no State aid/no foreclosing of competition? (when restricting choice of suppliers for commercial purchase before proof exists that R&D will deliver better value for money than other competitors on the market)

Status of PCP implementation across Europe Update March 2013 status

More info about EU funded cross border PCP projects: http://cordis.europa.eu/fp7/ict/pcp/projects_en.html

More Info about national PCP initiatives in Member States: http://cordis.europa.eu/fp7/ict/pcp/msinitiatives_en.html

Pilots started

Framework identified and/or Pilots in preparation

Hungary

Belgium

Netherlands

Awareness Raising Exploring possibilities

Denmark

Austria

Finland

Sweden

Poland

Working on framework

Germany

France

Luxembourg

Ireland

Cyprus

Romania

Slovenia

Slovakia

Bulgaria

Czech Republic

Estonia

Greece

Latvia

Lithuania

Malta

Portugal

Spain

Norway

Switzerland

Italy

Projects in dotted-line are cross-border EC funded PCP projects that have started:

SILVER: started January 2012 (Supporting Independent Living of Elderly through Robotics)

CHARM: started September 2012 (Common Highways Agency / Rijkswaterstaat Model for traffic management of the future)

V-CON: started October 2012 (Virtual Construction / Modelling of Roads)

SMART@FIRE: started Nov 2012 (Integrated ICTs for Smart Personal Protective Equipment for Fire Fighters and First Responders)

DECIPHER: started February 2013 (new applications based on Distributed EC Individual Personal Health Records)

PRACE 3IP: started July 2012 (PRACE 3rd phase on high energy efficient high performance computing)

SILVER

UK

Iceland

CHARM

V-CON

SMART@FIRE

DECIPHER

PRACE 3IP

PCP

2009 2011-12 2013

DG INFSO (CSAs)

FP7-ICT-2009

€1,5M 3 €500K networking

actions for procurers

(ICT for health,

transport,

egov for NMS)

DG INFSO (CP-CSAs)

FP7-ICT-2011/12 €24M

FP7-INFRA-2012 €4,5M Co-financing 6 cross border

PCPs:

(in robotics for ageing well,

mobile health services,

traffic management,

embedded ICT for fire

fighter garments, energy

efficient supercomputing)

DG CNECT(CP-CSAs)

FP7-ICT-2013 €32,5M

FP7-INFRA-2013 max €19,5M Co-financing 7-8 cross border PCPs:

(€8M health/active ageing,

€5,5M elearning, €4M open call

€5M digital preservation,

€10M cloud computing,

Up to €x19,5M DANTE, GEANT)

DG ENTR (CP-CSAs)

FP7-SEC-2012 €10M Co-financing 1 joint PCP:

(maritime border

surveillance)

DG ENTR (CP-CSAs)

FP7-SEC-2013 €18M Co-financing 2 bottom-up

cross border joint PCPs on land

and maritime border

surveillance)

PCP related calls so far

PCP-PPI related calls so far

PPI

DG ENTR

CIP-EIP-2009

Lead Markets

Networks €3M) 3 €1M networks of

Procurers (healthcare,

embedded textiles

firefighters, sustainable

construction)

DG RTD

FP7-ENV-WATER-INNO-DEMO CSA for PCP in EIP on water mgt

FP7 2013 FOOD/AGRI WP CP (€6M) on opening market for

bio-based products via procurement

DG ENTR & ENV

(PPI Pilot)

CIP-EIP-2011/12 €17M Co-financing cross border PPIs:

8 on areas of EIPs (climate

change, active ageing, energy

efficiency, mobility, health

working conditions) &

1 on eco-innovation

DG ENTR (PPI Pilot)

CIP-EIP-2013 €6,3M (sustainable construction,

recycling, clean vehicles)

DG CNECT (PPI pilot & TN)

CIP-PSP-2013 €12M PPIs in health/active ageing

Thematic networks preparing PPIs

in ICT for sustainable mobility,

energy efficient servers for cities

DG RTD (CSAs)

FP7-COH-2012 €2M Transport & health

procurer network

2009 2011-12 2013

FP7 2013 TRANSPORT WP CP to demonstrate electric buses

should facilitate PCP

DG ENER

CIP-IEE (2008…) Series of networks of procurers

on sustainable energy

procurement

11

Potential £160m p.a. saving

Potential £30m p.a. saving

£4,000 per HCAI avoided

Potential £19m p.a. saving

Example projects in Healthcare

Potential Value PCP-like projects to NHS:

Improve the quality of the patient experience

and generate significant cost savings (£236m).

Value to the economy:

A number of innovations have been able to

attract significant extra investment (£290m).

NHS UK Lombardia Italy

PCP Niguarda Hospital – Lombardy region Easy-to-use automated universal system for moving hospital beds, with anti-collision and safety systems, not needing guide lines or tracks even on non rectilinear routes PCP call for tender open

Regulatory requirement to seriously reduce CO2 emissions by 2016 without negative effects on health/environment, beyond what market is able to offer

PCP started in 2011, currently comparing solution approaches of 5 vendors, time-to-market shortened

Follow-up procurement for deployment in preparation for 2014 (open to whole market)

More info on this case on: http://cordis.europa.eu/fp7/ict/pcp/docs/statoil-pcp-case-v2.pdf

PCP example on CO2 emissions Large project Carbon capture – Norway attracting large firms Statoil/Gassanova

Example EU funded cross-border PCP (DG CNECT)

7 Local and regional contracting authorities from 5 EU Member States carrying out this PCP jointly:

city of Odense and region of Southern Denmark (Denmark), city of Västerås (Sweden), city of Vantaa and

Oulu (Finland), city of Stockport (UK), city of Eindhoven (Netherlands).

SILVER contracting authorities procure R&D services via the PCP to get robotics solutions developed and

tested in the 5 participating countries that will allow by 2020 to care for 10% more elderly people living

independently at home with the same amount of care staff.

SILVER call for tender is 'OPEN NOW'.

Potentially invited tenderers are invited to info meetings in March-April

and to make offers by 12 June (see SILVER website and tender publication in OJEU) !

www.silverpcp.eu

For more info: http://lowcarbon-healthcare.eu/

UK brand name for PPI = Forward Commitment Procurement (FCP)

Low carbon healthcare PPI started 2006 Introducing more energy efficient LEDs in network of over 20 hospitals in 8 EU countries

(cross border PPI cooperation funded by EC/DG ENTR)

• 30% energy consumption saving • 88% maintenance savings Total cost savings enable take-in of +10% patients

Swedish environmental/energy efficiency PPIs done by NUTEK/STEM agency: • heating-ventilation-cooling of buildings • public transportation (hydrogen busses) • office blocks (sun shading, lighting) • white appliances (washing machines, fridges) • wind energy parks

Result: Reduced the SE dependency on nuclear energy with 15% through PPIs in combination with product certification/labeling, take-up subsidies & tax incentives More on UK & SE PPI cases: http://cordis.europa.eu/fp7/ict/pcp/msinitiatives_en.html

PPI examples In Europe

(PPI is called teknikupphandling in Sweden)

Example EU funded PPI network (DG ENER)

5 local authorities lead this project on early market engagement to encourage sustainable energy public

Procurement (low carbon emission technologies): Barcelona (ES), Kolding (DK), Cascais (PT), London

borough of Bromley and the Eastern Shires Purchasing Organisation (UK).

Result: successful PPI procurement deploying various innovative products such as LEDs (over 20.000 units),

indoor and street lighting, energy efficient vending machines and electric mobility (e.g. electric mini bus),

representing a total budget of around €80 million and involving over 200 municipal staff. The technical

solutions retained will reduce energy consumption and CO2 emissions by 30-90%, accounting for an

estimated reduction of 5.3 GWh/a.

www.smart-spp.eu

New innovation related points in revision of public Procurement directives

• Joint procurement • Clarifies legal base also for joint procurement between contracting authorities from

different Member States

• Intellectual Property Rights • Clarifies that IPR that contracting authority wants to acquire is part of the subject-

matter of the contract and shall be clearly specified in tender specifications

• Pre-commercial Procurement • Current provisions (Exemption for R&D services) maintained and clarified in the

directives

• Innovation Partnership • Identifies into a procedure already-used-today-practice of long term partnership

procurements combining purchase of R&D + subsequent purchase of end-products

(is not the same as PCP-PPI, different applicability)