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EU level activities onPublic Procurement of Innovation &Pre Commercial ProcurementWorkshop on Public Procurement for InnovationDr. Bertrand WertDG Enterprise and Industry – Innovation For Growth UnitPolicy Development for Industrial Innovation25 June 2014Enterpriseand Industry

Innovation ProcurementA huge potential or simply a must !? Health careClimate ChangeEnergy EfficiencyTransport(Cyber) SecurityPublic sector efficiencyWaste management (reuse) . Public sector faces important societal challenges! Addressing these, often requires solutions for which nocommercially stable version exist yet. In many cases, solutions are almost there (PPI)In other cases, still R&D is to be performed (PCP)Innovation Procurement (PCP & PPI) can improve public sectorefficiency & quality create business opportunities for industryEnterpriseand Industry

Why innovation procurement?Win-win for all stakeholdersPoliticiansSuppliers- Better products- Economies of scale- Wider market size- Shorter Time to market- New lead markets- Increase export- Global competitiveness-Shared risks & benefitsInnovationProcurementPCP PPIProcurers- Reduce procurement cost at the ‘Lowest Price/Risk’Get the ‘Best Products’ - Shape industry R&D to public needs- Gain technology knowledge- De-risk large deployment tender- Encourage supplier competitionavoiding supplier lock-in- Improve quality andefficiency of public services- Focus innovationon political priorities- Increase employment- Stimulate local innovationecosystem- 20% lower cost first products- ‘First time right’ product (interoperabilityfrom start, reduced customisation cost)- Attract VCs to help make innovativeSMEs more reliable to buy from- Good practice example PCP/PPIcontract documents availableEnterpriseand Industry

Innovation Procurement potential still underutilisedInnovation procurement is 'the tool' that enables potential buyers tosteer industry R&I to its needs. However, it is under-used in EU.PCP:PPI:US50 Bn15%EU2,5 Bn5%of R&D public procurement/yearof e-gov solutions procured are 'innovative' Also large differences within Europe Mio 14000(2011) 12000100008000Public Procurement of ICTPublic Procurement of R&DFrontrunner Member Statesinvest 5 times higher % of totalpublic procurement budget thanfollowers on ICT and R&D 0Enterpriseand IndustryICT procurement13,5% in UK - 2,5% in GRR&D procurement0,5% in UK - 0,1% in GR

Evidence on impact from successful examples Shortening of time-to-market: UK National Health service PCPexamples achieve reduction from several years to 18 months Attracting venture capital: Companies in UK NHS PCPs attractsignificant VC investment, enabling them to grow faster Creating lead markets: Companies in UK ministry of defence PCPs areselling now also to US department of defence Retaining lead market position: possible through sustained PCPprocurements (e.g. 60 ys of supercomputing PCPs - IBM, Cray, HP) 20% cheaper products and higher product quality: evidence fromUS defense multi competitor, multi phase PCP-PPI procurements Removal of supplier lock-in - 20% cost reduction: outcome ofbenchmarking of NL Rijkswaterstaat PCP on new traffic managementcentres thanks to move towards open architecture via PCP Benefits on local economy: Estonia buying Mitsubishi electric vehiclesincreased local Estonian economic activity in related sectorsEnterpriseand Industry

Why/rational supporting demand ofinnovation & innovation procurement?1. Potential lever for action: 18%-19% of EU GDP – 2400Billion (2010)2. Delivering better pubic services/ facing Societalchallenges3. Foster & accelerate access to market for innovative solutions(i.e. lead customers, first client)4. Foster EU Internal Market to benefit of EU businesses(SMEs)5. Policy mix and international rising field of innovation supportpolicies6Enterpriseand Industry

Main difficulties for procurers to purchaseinnovative solutions?1. Wrong incentives2. Lack of knowledge and capabilities on technologies,innovations, market developments3. No strategy that aligns public procurements with publicpolicy objectives (e.g. health, environment, transport), andwith R&D&I support programmes4. Fragmentation in demand5. Difficulties for innovative SMEs to be involved in publicprocurement as direct beneficiary/ client of a purchasingauthority7Enterpriseand Industry

What can countries/regions do?Political encouragementImplementation- Modernising public sector 'a priority'Quality-efficiency improvement targetse.g. Lombardia/IT, UK, Flanders/BE-- Target % proc budgets to innovationMonitoring frameworke.g. UK, NL, ES, Nordics, FR- Innov Proc financial support program(e.g. SE, FI, ES, Flanders/BE, DE)Encourage demand side tomeet supply sideInnov Proc Competence centerTraining / assisting procurers(e.g. SE, FI, ES, Flanders/BE, DE)Leverage EU funding-Early notification innov proc needs-Open market consultationsMeet the buyers eventsEnterpriseand Industry-Horizon 2020Increased-(syn) ESIFsupport for-EIB loansinnov proc

Growing impact at Member State levelPCP and PPI in ESIF: PL, FR, EE, LV develop innov. proc. strategyDE, PL put innov. proc. in R&D&I strategyIT ( 150M), ES ( 250M) to PCP/PPI struct fundsBaltics (LT, LV, EE) join Norden agreementFR sets 2% target for innov proc.NO, FI, SE, DK, IS min. agreement on cross border innov.proc. collaboration (including 2,5% target)AT, NO, DK, IS, IT include innov. proc. in R&D&I strategyES (3%), NL and UK (2,5%) set target for innov. proc.FI, SE, ES, BE launch support program & competence center for procurersFI, SE, ES, BE include innov. Proc. in R&D&I strategyUK NHS and MOD PCPs and PPIs, NL launching customer (PPI)20082009201020112012Enterpriseand Industry20132014-15

Progress PCP implementationLearn from first moversAwareness RaisingExploring possibilitiesMaltaFramework identifiedand/or pilotsin preparationWorking onframework2007DenmarkLithuania IrelandLatviaNorwayEstoniaBulgariaRomaniaSlovenia ryUKBelgium2014PCPs projects ness RaisingWorking on Framework identifiedExploring possibilities framework and/or pilots yFranceGermanyPortugalAustriaFirst pioneer projects are there now. Still major effort needed to mainstream them.SlovakiaEnterpriseand Industry

Innovation Procurement – What is the EU doing? 2007: Commission Communication on pre-commercial procurement Since 2009: FP7 and CIP financial support to innovation procurement Networks of procurers PCP-PPI Co-financing for procurers to jointly implement innovation procurement "buyers' groups"PCP-PPI 2010: Innovation Union flagship promoting innovation procurement and committing toprovide guidance, sharing of best practice and financial support to help procurers 2012: Horizon 2020 and Revised European industrial policy proposed with support to"buyers' groups" for preparing and co-financing innovation procurement – so far EUR94M engaged (CIP-FP7) innovation procurement platform and European Award 2013-14: Public Procurement Directives revision proposed and adopted Innovationpartnership procedure, cross-border joint procurements, innovative character ascontract award criteria 2013-14: First Horizon2020 calls supporting PCP&PPI launched for a total of 94M 2013-14: Launching of the PPI Award and of the PPI platform https://www.innovationprocurement.org/ 2014-2015: Horizon 2020: 130-140MEnterpriseand Industry

European"Buyers' groups"examples ofPPI & PCPEnterpriseand Industry

Example EU funded cross-border PPI (DG ENTR)CO2 less hospitalsRotherham Ultra Efficient Lighting FCP ( 2M)Rotherham Ultra Efficient Lighting FCPSwedenFagerhult – LuminairesEcophon – Acoustic TilesSwedenLundUniversity,United KingdomCundall – Lighting DesignersAustin Smith Lord – InteriorDesignersWandsworth – Nurse Call SystemsEX-OR – Lighting ControlUKKingsCollegeLondon,De MontfortUniversity,GermanyOSRAM – LED’s, Lamps, Control GearRotherhamHospital is a 500bed acute unit inthe North East ofEnglandNew SME created through the FCP process.13Enterpriseand Industry

Example EU funded cross-border PPI (DG ENTR)CO2 less hospitals14Enterpriseand Industry

Example EU funded cross-border PPI (DG ENTR)CO2 less hospitals Rawicz Hospital, Poland Hospital Uniforms “user friendly,sustainable, lowcarbon uniforms’. “The innovation procurementapproaches we used in ourpilot project were arevelation. I would nowencourage my colleagues inthe healthcare sector to bemore ambitious. Be clearwhat you need to deliver andask for it - you have nothingto lose”Janusz Atłachowicz, FormerCEO, Rawicz County Hospital.Enterpriseand Industry

Example EU funded cross-border PCP (DG CNECT)Elderly Carewww.silverpcp.eu7 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 andOulu (Finland), city of Stockport (UK), city of Eindhoven (Netherlands). Other 5 authorities preferredpartners to the PCP.SILVER contracting authorities procure R&D services via the PCP to get robotics solutions developed andtested in the 5 participating countries that will allow by 2020 to care for 10% more elderly people livingindependently 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-AprilEnterpriseand to make offers by 12 June (see SILVER websiteand tender publication in OJEU) !and Industry

Example EU funded cross-border PCP (DG CNECT)Traffic Managementwww.rws.nl/charm3 road authorities from 3 EU Member States carrying out this PCP jointly:Highways Agency (UK), Rijkswaterstaat (NL), Ministry Public Works/Traffic Management Center Flanders (BE)Sounding board of other road authorities around Europe preferred partners to the PCP,CHARM contracting authorities procure R&D services via the PCP targeting at an open modular architecturefor traffic management, prediction and cooperative systems modules. PCP linked to PPI of new underlyinginfrastructure that is already announced/planned,CHARM call for tender planned to be published mid June !Enterpriseand Industry

Example EU funded cross-border PCP (DG CNECT)Virtual road constructionwww.rws.nl/v-con3 EU Member States carrying out this PCP jointly: Rijkswaterstaat (NL), Centre Scientifique et Technique duBatiment (FR), Trafikverket/Trafic Agency Sweden (SE)V-CON contracting authorities procure R&D services via the PCP to improve the efficiency and effectivenessof National Road Authorities by improving data exchange in the civil infrastructure sector using BuildingInformation Modelling (BIM) approach. Defining a standard for use of BIM type approach in road sector procuring R&D to develop the software for it, to be deployed in SE and NL at start.V-CON call for tender planned for beginning next year !Enterpriseand Industry

National PCP example - NL –Digital inspection dikes Dike bursts in Netherlands (2003-2004) PCP (2006): Developing/comparing possible solutions forreal time dike inspection & early warning of dikes and damsSatellite based solutionapproachSensor / chipbased solutionOpticsbased solutionCamerabased solutionHelicopterbased solution 2 complementary products (satellite, sensor)brought tomarket by PCP. Optics solution found financing itself as well.Enterpriseand Industry