Innovation procurement in Italy

Thessaloniki, 29th April 2014 Innovationprocurement in Italy Mobilizing R&D budget, currentexpenditure and Structural Funds EU High levelevent «Digital Innovation for RegionalGrowth» • Sara Bedin • Independentexpert on innovationprocurement • for MIUR-MISE and LombardyRegion

Innovation policy mix and «market failure» Fundraising 2.0 P2P Social lending I n n o v a t i o n p a r t n e r s h i p equity Crowd-funding St a t e A i d N e g o t i a t e d p r o c e d u r e L I V I N G - L A B Technological F o r e s i g h t PPI - Procurement of innovative solution P r e - c o m m e r c i a l Public procurement INNOVATION VOUCHER P e e r – t o – p e e r f i n a n c i n g T e c h n i c a l d i a l o g u e P r o j e c t -f i n a n c i n g D e s i g n c o n t e s t Policy maker perspective: ideological adoption of instruments to promote innovation More than 70% of “successful” R&D funded project don’t have a commercial success (exploitation) Crowd-sourcing competitive/collaborative C o n t e s t of i d e a s P u b l i c P r i v a t e P a r t n e r s h i p Explorative survey Competitive Dialogue technology transfer T a x c r e d i t Innovation REUSE 2.0

Working on the Innovation Policy Portfolio ...enabling an earlier reality check of industry R&D against concrete needs and challenges, ...maximizing the effectiveness of the R&D process/effort, ...optimizing the value for money and impact of public R&D spending / investments, ...increasing the percentage of successful commercialization of R&D results, ...avoiding to distort the competition on innovation, ...enabling exploitation of innovation by supplier to scale-up business to other clients and markets, ...allowing SMEs to growth and compete in global market, ...creating optimun conditions for take-up of R&D&I through standardization.

Procurement instrument mix and «market failure» I n n o v a t i o n p a r t n e r s h i p Competitive Dialogue N e g o t i a t e d p r o c e d u r e Green procurement Public procurement R&D public procurement T e c h n i c a l d i a l o g u e D e s i g n c o n t e s t Public procurer perspective: uncritical modus operandi repetition More than 50% of public procurements for deployments of commercial solutions do not achieve the expected results (in terms of quality, time, cost). Public C O N C E S S I O N S C o n t e s t of i d e a s P u b l i c P r i v a t e P a r t n e r s h i p Explorative survey

Working on the Procurement Procedure Portfolio .... aligning the objectives of the public and private parties for the widespread exploitation of innovation, ...fostering competition during execution and innovation and extending the realization of efficiency and effectiveness gains also over longer the contract period, ...avoiding to lock-in to one/few suppliers, ...enabling a better understanding of demand and allowing businesses to reduce market entry times, ....sharing risk and benefit, obtaining the best whole life-cycle value for money, without assuming (all) the technological risks, ...increasing spontaneous innovation investment levels within the firm (input additionally), ...pooling the efforts of several procurers.

The importance of changingmind-sets POL CY M ND SK LLs SUPPLY-SIDE POLICY DEMAND-SIDE POLICY Shft

PCP has a twin relevance, both as strategy and policy WHY:Increasing long-term effectiveness and efficiency of public expenditure, as well as improving the quality and sustainability of public services, filtering out technological risk INNOVATION ORIENTED PROCUREMENT STRATEGY CONDICIO SINE QUA NON WHY:Raising industry’s innovative performance and creating opportunities for companies to take international leadership in new markets EFFECT DEMAND-DRIVEN INNOVATION/INDUSTRIAL POLICY the cause-effect relation must not be swapped!

The public sectorshould assume a double role in promotion of R&D&I via PCP (and PPI) (1/2) provision of R&D services + financial compensation contribution, funding 1 Financial support to implement innovative procurement action and to pool demand 2 e.g. PCP Mutually binding and risk-benefit sharing (service) contract PUBLIC PURCHASER POLICY MAKER SUPPLIER payment of full cost at market price PCP work fully within EU competition law Scope of the EU State Aidrules for R&D Framework

The public sectorshould assume a double role in promotion of R&D&I via PCP (and PPI) (2/2) Improveproductivity of public services YY Reduce risk of mistakes in follow-up for large scale deployment foster and encourage the participation of SMEs cross-organizational coordination to the public demand and R&D budgets PPI JOINT PCP create awareness of the new policy tools Improve long-termqualityof public services XX POLICY MAKER activate a positive climate for innovation Reduce the LCC of solution WW and improve the sustainability of public services KK reduce barriers to a wider private adoption of new solutions stimulate the “intelligent customer“ modus operandi PPI PCP

The national “top down” approach for PCP /PPI Amount of resources allocated: 150Million EUR Source of funding: re-invested resources resulting from the reduction in the national co-financing quota (National revolving Fund), originally allocated for NOP R&C Intensity of funding: (100% PCP) – (~ 20% PPI) Procurer/Recipients of innovation: Body governed by public law engaged in public services and localized in(one or more of)the 4 (IT) Convergence Regions Policy maker: MIUR (Ministry for education, research and innovation) and MISE (Ministry for Economic Development) Adjudicating authority:(for PCP) MIUR (Ministry for education, research and innovation) and MISE (Ministry for Economic Development); (for subsequent PPI) local PAs. Implementing act: Public notice for the recognition of innovation needs in Convergence Region - DD 437 of 13 /03/2013). • The National PCP/PPI funding program through the Cohesion Action Plan

The Cohesion Action Plan reprogramming measure in Italy

The national “top down” funding program for PCP /PPI (submitted innovation needs) Admission criteria (submitted innovation needs) Award criteria 1. Social and economic relevance Adherence to the thematic priorities of Horizon 2020. Connection with a priority or urgent challenges emerging in urban areas, metropolitan and regional level. 2. Technical relevance Novelty and originality of knowledge needed, with reference to the state of the art – this eventually detected with a technical dialogue before expression of interest. Specification level of the need functional and performance requirements Adequacy of the real-life operating environment identified for the test and experimentation. 3. Industrial relevance and potential target market Relevance and coherence of the innovation need with respect to local industrial development objectives Level of demand aggregation/pooling, documented with the number of public bodies involved in the partnership (and not necessarly established in one of the Convergence Region) Target market potential dimension. • Commitment to identify and organize a real-life customer environment in order to assess the performance of working prototypes (or limitedvolume of first products or services in the form of a test series), to demonstrate that they are suitable for production or supply in quantity to acceptable quality standards. • Commitment to undertake the procurement of innovative solutions (PPI) resulting from R&D.

The national “top down” funding program for PCP /PPI 13 March 2013 Notice of Call for idea Candidate PCPs selection June 2014 Expression of interest evaluation Financial allocation to projects (100% PCP and ~20% PPI) NATIONAL LEVEL (Policy maker + Adjudicating authority) Candidate PCP ranking PCPs procedures design (Open technical dialogues) PCP call for tender and procedures management Needs assessment Sperimentation of different solutions in real-life operational conditions SoA analysis (technical dialogue) LOCAL LEVEL (Recipients of innovation) Expression of interest submission Co-funded PPI action (procuring commercial volumes of end-products) September 2013

Recognition of innovation needs in Convergence Region:preliminaryfigureson geographicdistribution(1/2) 199 projects submitted190 projects eligible

Recognition of innovation needs in Convergence Region:preliminaryfigureson thematicdistribution(2/2) HEALTH and SOCIAL SERVICES TOURISM TRANSPORT, INFOMOBILITY, SUSTAINABLE MOBILITY PUBLIC SERVICES MANAGEMENT and ORGANIZATION HISTORICAL AND CULTURAL HERITAGE

The local “bottom-up” approach for PCP /PPI • Amount of resourcesallocated: 750K EUR • Source of funding: LombardyRegionown R&D budget • Intensity of funding: (100% PCP) – (100% PPI) • Procurer/Recipients of innovation: LombardyRegion(General Direction for Healthcare) + Niguarda Hospital (and otherslocal hospitals) • Policy maker: LombardyRegion(Direction for research) • Adjudicating authority: ARCA (RegionalPurchasing Agency) • Implementingact: • Agreement ex art.15 L.241 • Public notice for open technical dialogue and public hearing • Public notice for explorativesurvey • Call for tender publicated in the Official Gazette of the EU + Official Gazette of the Republic of Italy + website + newspapers on 08/03/2013. • The Lombardy Region innovation procurement pilot

The local “bottom-up” approach for PCP /PPI (R&D services procurement) Admission criteria objective and relevant in view of the commercialization (R&D services procurement) Award criteria objective and relevant in view of the commercialization Based on the most economically advantageous offer (not on lowest price) Ability to address the problem and satisfy the requirements Novelty/innovativeness (progress beyond the state-of-the-art) Technical feasibility/reproducibility with an industrial process Quality and effectiveness of the organization and resources 2. Incorporating life-cycle cost and performance in the evaluation of proposals Measures taken to ensure the environmental sustainability of the solution throughout the life cycle Measures taken to ensure the cost reduction of the solution throughout the life cycle 3. Including the soundness of the commercialization plan of the bidders. • No reasons for exclusion as set out in article 38 (National Procurement Law) • (Declaration of) the ability to perform all R&D services and contractual activities described in lex specialis (Experimental Development and Intellectual Property rights management contracts) • (Declaration) to have accounting and organizational structures to ensure the management, exploitation and /or transfer of IPRs arising from R&D activities.

The local “bottom-up” approach for PCP /PPI January 2012 April 2013 Call for idea in health sector Candidate PCP selection Perform IPR contract Identifying (potential) PCP projects from innovation needs Financial allocation (Policy maker + Adjudicating authority) PCP procedure design Business case preparation cost-benefit analysis and investment definition PCP call for tender and procedure management PPI action (procuring commercial volumes of end-products) Candidate PCP (preliminary) ranking Experimentation of different solutions in real-life operational conditions Building awareness and objective alignment April 2012 Needs identification and baseline assessment Open technical dialogue Procurer and Recipients of innovation) «WIBGI» moderated focus group Comprehensive SoA analysis and patent search

To increase long-term effectiveness and efficiency of public expenditure To design a demand driven approach to innovation policy To support innovation through financial allocations already assigned to public services management (zero budget policy) To ensure sustainable high quality public services pre-commercial public procurement To buy Research & Development services To develop new markets and help commercialization for innovative solutions To re-establish private spontaneous incentives to innovate Tofilter technological risk before a large scale commercial procurement To address public needs and social challenges through concrete innovation To benefit from a more flexible regulation of the implementation procedure To activate virtuous mechanisms of competitive procurement WHAT KIND OF SUPPORT DO WE NEED?FINANCIAL INCENTIVATIONand/or CAPACITY BUILDING ? To stimulate innovation through public expenditure without beeing locked-in to any vendor To anchor innovation into reality To implement innovations rapidly, cooperating with the market To broaden SMEs participation in R&D projectsand create opportunities for companies to take international leadership in new markets

R&D procurement expenditure gap: it’s time to act 2,1% of GDP in R&D 0,1% of GDP in R&D procurement 3 % of GDP in R&D 0,5% of GDP in R&D procurement € 2,5 Bn/y versus $ 50 Bn/y in R&D procurement in R&D procurement (20 times more) Expenditure in R&D (%GDP) PUBLIC PROCUREMENT OF PRODUCTS AND SERVICES REPRESENTS AROUND 17% OF GDP IN EUROPE (ENORMOUS ECONOMIC LEVERAGE) ...If 2% (more) of public procurement spending was addressed to R&D, EU could achieve innovative procurement markets equivalent to those in the US... ...and could benefit from a greater economic leverage than Horizon 2020 Source: EuropeanCommission

R&D procurement expenditure gap: it’s time to act EU FUNDING PROGRAMS ARE AIMED TO BOOST THE ADOPTION OF PCP/PPI

Conclusions: the value of Horizon 2020 to speeding PCP/PPI • SIZING THE MARKET OPPORTUNITIES AT EU LEVEL • > co-funding the procurement value; • requiring cooperation between procurers across Europe through cross-border coordinated (or joint) procurement, whilst developing a strong European home market for innovative products and services; • mobilizing public and private purchasers and networks leveraging the complementarity between partners to bring together the demand in order to create a critical mass to acquire innovative (cost-effective and fit-to-purpose) solutions, whilst creating new jobs and opportunities for business growth in Europe, with particular reference to EU SMEs. • 2. ENHANCING INSTITUTIONAL CAPACITY AND STIMULATING THE PUBLIC ADMINISTRATION TO BE MORE INTELLIGENT • > co-funding the CSA part; • supporting the coordination, consortium building, networking and procurement preparation activities;

Let’s compete on innovation For furher info: ! d u r i n g t h e e x e c u t i o n Sara Bedin sara.bedin@appaltoprecommerciale.it tel: +39.(0)2.467535270 / +39.3470115010

Innovation procurement in Italy