Regulatory

New approaches for the procurement of R&D, innovative products & services

The proposals for Public Procurement Directives are expected to increase the uptake of PPI by providing several instruments allowing the strategic use of public procurement to spur innovation.

Pre-Commercial and innovation friendly procurement

Impor­tance of pub­lic pro­cure­ment for R&D activ­i­ties and inno­va­tion 

Pub­lic pro­cure­ment accounts for some 19% of GDP in the Euro­pean Union and offers an enor­mous poten­tial mar­ket for inno­v­a­tive prod­ucts and ser­vices. Pub­lic pro­cure­ment prac­tices can help fos­ter mar­ket uptake of inno­v­a­tive prod­ucts and ser­vices, whilst improv­ing the qual­i­ty of pub­lic ser­vices in mar­kets where the pub­lic sec­tor is a sig­nif­i­cant pur­chas­er. With this in view, the report on “Cre­at­ing an Inno­v­a­tive Europe” in 2006 sug­gest­ed that if Europe can­not offer inno­va­tion-friend­ly mar­kets for the cre­ative out­puts of its busi­ness, then these will go else­where. It called upon gov­ern­ments to “use pub­lic pro­cure­ment to dri­ve demand for inno­v­a­tive goods, while at the same time improv­ing the lev­el of pub­lic ser­vices.“1 Tak­ing this into account, research and inno­va­tion, includ­ing eco-inno­va­tion and social inno­va­tion, have been iden­ti­fied as the main dri­vers of future growth and have also been put at the cen­tre of the Europe 2020 strat­e­gy for smart, sus­tain­able, and inclu­sive growth.

The cur­rent legal frame­work for inno­v­a­tive pro­cure­ments 

Pub­lic pro­cure­ment in Europe is sub­ject to a legal frame­work cur­rent­ly defined by two EU Direc­tives (2004/17/EC & 2004/18/EC). One looks at pro­cure­ment in the water, ener­gy, trans­port, and postal ser­vices sec­tors, while the oth­er focus­es on pub­lic works, sup­ply, and ser­vice con­tracts. The cur­rent EU Direc­tives pro­vide a num­ber of oppor­tu­ni­ties for includ­ing inno­va­tion and R&D con­sid­er­a­tions with­in pub­lic pro­cure­ment pro­ce­dures, such as the exclu­sion of the appli­ca­tion of the Direc­tives for the co-financ­ing of cer­tain R&D con­tracts (in order to encour­age the co-financ­ing of R&D pro­grams by indus­try sources) or the intro­duc­tion of the com­pet­i­tive dia­logue enabling con­tract­ing author­i­ties to devel­op and nego­ti­ate tai­lored solu­tions in the course of a for­mal pro­cure­ment pro­ce­dure. Fur­ther­more, a series of pro­cure­ment mod­els have been out­lined in the Commission’s com­mu­ni­ca­tion of 14 Decem­ber 2007 on pre-com­mer­cial pro­cure­ment, such as procur­ing R&D ser­vices involv­ing risk-ben­e­fit shar­ing at mar­ket con­di­tions.2

Upcoming changes encouraging innovation friendly procurement

The Euro­pean Commission’s pro­pos­als

In Decem­ber 2011, the Euro­pean Com­mis­sion pub­lished pro­pos­als for the revi­sion of the above Direc­tives (“Pro­pos­als”) with the aim of improv­ing the effi­cien­cy of pro­ce­dures, and to allow for greater strate­gic use of pub­lic pro­cure­ment to fur­ther envi­ron­men­tal, social, and industrial/innovation poli­cies. The Pro­pos­als are expect­ed to pass the Euro­pean par­lia­ment by the end of 2013 and imple­ment sig­nif­i­cant changes to the cur­rent pro­cure­ment regime, with the goal of increas­ing and facil­i­tat­ing pre-com­mer­cial pro­cure­ment and pub­lic pro­cure­ment of inno­va­tion.

The inno­va­tion part­ner­ship 

First and fore­most, the Com­mis­sion intro­duced a new pro­cure­ment pro­ce­dure aim­ing to cov­er sit­u­a­tions where a need for the devel­op­ment of an inno­v­a­tive prod­uct and the sub­se­quent pur­chase of the result­ing work can­not be met by solu­tions already avail­able on the mar­ket. The so-called inno­va­tion part­ner­ship allows con­tract­ing author­i­ties to estab­lish a long-term inno­va­tion part­ner­ship with a sup­pli­er for the devel­op­ment and sub­se­quent pur­chase of a new, inno­v­a­tive prod­uct, pro­vid­ed that such inno­v­a­tive prod­uct can be deliv­ered to agreed per­for­mance lev­els and costs, with­out the need for a sep­a­rate pro­cure­ment pro­ce­dure for the pur­chase. Being based on the pro­ce­dur­al rules for the nego­ti­at­ed pro­ce­dure, con­tracts should be award­ed on the sole basis of the best price/quality ratio, which is most suit­able for com­par­ing ten­ders for inno­v­a­tive solu­tions.

New tools for inno­va­tion-ori­ent­ed ten­der­ing

Con­sid­er­ing the impor­tant role of joint pro­cure­ments in con­nec­tion with inno­v­a­tive projects, the Pro­pos­als also intro­duce clear con­di­tions and rules for joint pro­cure­ments by con­tract­ing author­i­ties (also from dif­fer­ent Mem­ber States), enabling con­tract­ing author­i­ties through bulk pur­chas­ing to pro­vide the nec­es­sary demand and pur­chas­ing pow­er to launch new solu­tions and inno­v­a­tive projects. More­over, the Pro­pos­als sig­nif­i­cant­ly strength­en the use of life cycle cost­ing, which describes all the phas­es through which a prod­uct pass­es from its design to its mar­ket­ing and the dis­con­tin­u­a­tion of its pro­duc­tion, also tak­ing into con­sid­er­a­tion research and devel­op­ment costs. Because of the impor­tance of inno­va­tion, the Pro­pos­al fur­ther encour­ages con­tract­ing author­i­ties to allow vari­ants as often as pos­si­ble.

Fur­ther mea­sures fos­ter­ing pre-com­mer­cial pro­cure­ment and pro­cure­ment of inno­v­a­tive prod­ucts include (but are not lim­it­ed to) more flex­i­bil­i­ty and sim­pli­fi­ca­tion in rela­tion to the pro­ce­dures to fol­low, to nega­tions and time lim­its or the facil­i­ta­tion of SMEs.

The European Commission’s proposals on new Procurement Directives offer great opportunities and provide useful tools for government purchasers to use innovation-oriented tendering, such as the newly introduced innovation partnership. However, practical experience and expertise continue to be the essential factors for the success of innovation-stimulating public procurement.

1
See http://ec.europa.eu/invest-in-research/action/2006_ahogroup_en.htm
2
See COM(2007) 799 final.