PROGR-EAST project Draft PCP Manual

1. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe PROGR-EAST project Draft PCP Manual A practical guide to PCP implementation for Progr-EAST WP 4 PilotsLjubljana, 13 April 2012 Rebeca LUCAS – INNOVA SpA

2. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe • Draft PCP Manual: • A practical guide to PCP implementation for PROGR-EAST WP 4 pilots • One of the main deliverables of PROGR-EAST Project • Developed to provide a supporting “hands-on” tool to policy makers and public procurers in PROGR-EAST countries (PL, CZ, SK, SL, HU) looking for practical guidelines to set-up PCP processes • Aims at simplifying the PCP procedure by: • designing a structured PCP process-flow organised in a step-wise manner, covering all the phases of the process from the identification of needs to commercial procurement; • giving practical tips, examples and providing useful material and documentation for each phase of the PCP process; • shedding light on some critical issues (e.g. IPR)

3. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe Draft PCP Manual: A practical guide to PCP implementation for PROGR-EAST WP 4 pilots • Developed with the expert advice and support of UK PCP Experts: B. Winn & M. Wilkinson • Work-in progress, to be enriched with feedback from workshops and pilot experiences

4. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe How is the Manual organized? • Structure: 3 major building blocks: • Introduction • Practical approach • Legal issues

5. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe • PCP is an approach for procuring R&D services • R&D cover activities such as: • solution exploration & design • prototyping • development of a limited volume of first products or services • PCP is triggered by procurers who want to find a solution to a societal challenge/problem of public interest for which they cannot find solutions on the market. • It has to do with step-change innovations, not incremental innovations/adaptations • PCP involves: • Risk-benefit sharing • Competitive development in phases

6. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe • Risk-benefit sharing • PP often opts for exclusive development contract conditions. Implications: • The PP reserves all the results and benefits (incl. IPR) for its own use • Companies that have developed the product/service cannot sell it other potential customers. • This implies a higher price for the PP which makes R&D procurement a risky, non-attractive activity for procurers. • In PCP, IPR ownership rights are left to the companies in return for a cheaper development price compared to exclusive development. • Such risk-benefit sharing agreements make R&D procurement more attractive for both PP and companies by: • reducing the R&D risk (development cost) for the procurer and • increasing the benefits (market potential) for companies

7. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe Competitive development in phases PCP is organized as a step-wise R&D process, with intermediate evaluations after each R&D phase, in order to select progressively the best solutions

8. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe Practical approach The Manual presents an example of a PCP process that is practical, achievable and compliant with EC’s legal framework • PCP process streamlined in 5 major steps: • (covering from needs assessment (prior to PCP) to eventual commercial procurement (post- PCP)) • Needs identification • Concept Viability • Competition • Contract Management • Commercial Procurement • … Plus 2 horizontal activities: Evaluation & Dissemination

9. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe Overview of the Procurement Pathway

10. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe The PCP process in detail

11. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe STEPS of the PCP process • Prior to PCP: NEEDS ASSESSMENT • Needs Identification • Everything starts with a clearly defined need. CA can use different approaches: • Literature review of scientific, technical and policy publications • Expert Opinion • Focus Group Research • Key Informants interviews, including service end-users • Supporting example: • Wouldn't it be great if (WIBGI)...? Workshops (UK-NHS) where teams of NHS & industry + expert facilitator work together to identify, validate and rank needs and the possible technology solutions. • “Wouldn’t it be Great If …we could access patient records across Europe?” • “Wouldn’t it be Great If… we did less damage when handling patients with broken femurs?“

12. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe STEPS of the PCP process • Prior to PCP: NEEDS ASSESSMENT • 2. Concept Viability • Assess whether it is technically possible to create a solution to meet the needs identified. • Cross-check the C.A.’s identified needs with the state-of-the art of industrial development by: • performing a market/patent search, and/or • sharing the identified needs with industry with the purpose of conducting a concept viability exercise.

13. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe STEPS of the PCP process • Prior to PCP: NEEDS ASSESSMENT • For each identified need the concept viability exercise may result in 3 possible alternatives: • (a) Technology available in the market Traditional procurement • (b) No Technology available yet, but CA ‘s horizon scanning activities generates evidence that there could be soon if industry were aware of this requirement and aware of the substantial public sector customer base that is interested to start procuring those products • C.A. publicizes the need to enable the current market to respond with commercial offers • (c) No Technology available yet, C.A.’s horizon scanning activities do not generate any evidence to indicate that there will be soon even if industry were aware of this requirement, but indicate that there is still R&D needed to define/experiment with the technological and financial viability of various solution approaches • C.A. may choose to engage in a PCP competition

14. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe STEPS of the PCP process • Prior to PCP: NEEDS ASSESSMENT • Supporting examples: • Flanders & Hungarian Eszak-Alfold‘s approaches to identify, assess, select needs and challenges that can be addressed through PCP • Flanders’ Innovation Platforms: • For market consultation and technical dialogue bet. government, knowledge centres & companies. Allow maximal exchange of info between D-S. • Assess the available policy instruments (subsidies, procurement) • Benchmark & comparison to check whether procurement is the best instrument to provide the innovative solution. • Positioning in the Innovation trajectory (PCP, CP, other complementary instruments) • Eszakalfold region PCP pilot project

15. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe STEPS of the PCP process The BUSINESS CASE for PCP Before starting a PCP the C.A. should create a Business Case to answer the question: "What percentage of the estimated economic value that the innovation can bring to the public authority – in terms of cost saving and/or public service quality improvement - can the public purchaser afford to spend on the development of solutions that are needed to realize this innovation, given the R&D risk of that particular project and the time it takes for the R&D trajectory ? “ EC Staff Working Document(SEC(2007)1668 Thanks to the Business Case, the CA can check in advance whether the PCP is an affordable, viable, value-for-money initiative. It will also have an overview of the potential risks the PCP project might incur on and how these will be managed. • Supporting material: • Contracting Authority’s Business Case Template for PCP

16. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe STEPS of the PCP process PCP: COMPETITION • PCP competition: open, fair, transparent. • 4 main activities to be designed & monitored when running the PCP competition: • Preparing the ITT • Advertising the PCP • Selecting suppliers • Drafting the PCP contract

17. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe STEPS of the PCP process PCP: COMPETITION • 1. Preparing the ITT • Functional specifications • As a problem to be solved w/o prescribing a specific solution/approach • Example: UK – NHS (SBRI): Development of a device to test for the presence of bacteria on hospital surfaces. • (…) Given that hospital cleaning costs a significant amount of money, the NHS needs to know how effective the cleaning regimes are and the impact that this has on infection control. (…) • The ideal test would be a test that gives rapid results to facilitate immediate corrective action, and is simple enough to be performed on the ward without the need for a laboratory. • The ideal kit would be: • Inexpensive • Give immediate results, providing feedback to the cleaners as they work • Able to distinguish between live and dead organisms. • Avoid the need to apply a liquid or a gel to the surface being tested, • Must be very simple so domestic supervisors are comfortable using it

18. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe • Share of risks and benefits • R&D risks and benefits shared between the procurer and the supplier in such a way that both parties have an incentive to pursue wide commercialization and take up of the new solutions. • In PCP, the public purchaser does not reserve the R&D results exclusively for its own use. Ownership rights of IPRs are assigned to the company. • The public purchaser is assigned a free license to use the R&D results for internal use as well as the right to license or require participating companies to license IPRs to third parties under fair and reasonable market conditions.

19. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe • Excluding the presence of State Aid • Under competition rules, C.A. must pay no more than the market price for the R&D services. • A financial compensation for leaving IPR ownership rights compared to exclusive development price that is too low or non-existent would contravene State Aid law. • 3 options available : • i. a discount on the R&D price (compared to exclusive development price) for doing the PCP work, and/or • ii. a share of equity stake with the Contracting Authority and/or • a royalty payment to the Contracting Authority. • In the ITT the C.A. indicates which of the above options it accepts.

20. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe STEPS of the PCP process PCP: COMPETITION • 2. Advertising the PCP • Via TED: official on line version of the Supplement to the Official Journal of the EU dedicated to European public procurement • At least in English • As a general rule, as wide as possible • Depending on the topic of the contract and on the country’s specific rules C.A. decide on a case-by-case basis the width of the publication • Content: • All relevant info that a third party would reasonably require to determine whether the advertised opportunity is of interest • (Up to) How many contracts will be awarded • Info on the tender process • Reference to the estimated potential size of the market (market opportunities clear, attractive to participate)

21. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe STEPS of the PCP process PCP: COMPETITION • 3. Selecting Suppliers- Award of PCP contracts • Objective and relevant award criteria in view of the subject-matter of the contract • Not only price, award criteria take into account other dimensions, e.g. : • • Quality: ability to address the problem; novelty/innovativeness(progress beyond the state-of-the-art) of the proposed solution; the technological soundness of the concept • • Implementation: quality and effectiveness / appropriateness of the proposed R&D work- plan and allocation of resources • • Impact: added value for society/economy, the soundness of the commercialization plan of the bidder • Procurer decides beforehand the max. number of offers he wishes to award PCP contracts to. Generally, a minimum of 4 should be sufficient to start PCP phase 1 to ensure adequate competition along the 3 PCP phases. • Creation of an Evaluation Panel (made up of internal & external experts) to assess tenders received.

22. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe STEPS of the PCP process PCP: COMPETITION • 4. Issuing the PCP contract • Successful bidders are awarded a Framework Contract from the C.A. to deliver R&D services to develop a new innovation • Within the framework contract, specific contracts will be issued for each phase of the PCP process. • The contract should state Service Terms and Conditions, including: • PCP Call for Tender • Supplier’s submission, including the deliverables, milestones, cost and delivery dates • Agreed return of benefit (e.g. royalties) to the Contracting Authority

23. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe STEPS of the PCP process PCP: CONTRACT MANAGEMENT • Biggest risk for C.A. to go over-budget, over-time & not able to meet technical challenges • Need good project management • Advice on how the C.A. can manage risk and ensure good project management when the PCP competition is running • Supporting resources: • Project Management Dashboard • ICONIC Web-based innovation management tool • Agile Design and Development Techniques

24. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe STEPS of the PCP process Evaluation & Dissemination as constant activities along the PCP process • Evaluation • Assess whether the PCP • is on course to meet the objectives set by the C.A. or • a change is required. • Also evaluation to enable continuous improvement of the PCP process • List of questions to check the status of the PCP and to enable improvements Dissemination Need to prepare a Dissemination Plan at the start of the PCP initiative Share information with stakeholders but be aware that IP needs to be protected At the end of phase 1 & 2 limited amount of info released (NDA C.A.-supplier) • Key elements of a sound Dissemination Plan

25. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe STEPS of the PCP process Post PCP: Commercial Procurement • Separation of the R&D phase from the deployment of commercial volumes of end-products. • PCP process stops after the developed solution has been tested and before commercialisation. • After the PCP is finished, if the purpose of the C. A. is to procure the developed products/services, a separate new tender will need to be published for the subsequent procurement on a commercial basis. • To make sure that public procurement rules are not infringed and the Treaty principles are respected, fair competition and equal treatment of all potential bidders must be ensured. • The C.A. must ensure that all suppliers (both those who participated to the PCP as well as any other supplier) compete in an open, fair and transparent way.

26. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe Check-list for public procurers running PCP competitions

27. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe Tool-box of instruments for PCP

28. Innovative PROcurement techniques to support the GRowth of competitiveness for public services in EASTern Europe Available at: Progr-EAST’s web-site (www.progreast.eu) Thankyou for yourattention! www.innova-eu.net Rebeca Lucas (r.lucas@innova-eu.net)