If a man does not know to which port he is steering, no wind is favorable

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1 Cracow, 14th November 2013 If a man does not know to which port he is steering, no wind is favorable The economic rational of PCP in practice: Lombardy Region implementation under the spotlights EU workshop on Innovation Procurement for the benefit of industries, SMEs & stronger public services Polish Aviation Museum, Cracow (Poland) November 2013 Dr. Sara Bedin TEH-Ambrosetti, Head of Public Administration Practice TEH-Ambrosetti, Head of Competence Center on Innovation Procurement EUROCLOUD Italy, Executive Board Member 2013 Author: Sara Bedin (The European House - Ambrosetti S.p.A). ALL RIGHTS RESERVED. This document is exclusive property of Sara Bedin and TEH-A. It may not be reproduced, memorized for storage in an electronic data base or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or other), in whole or in part, without the express written consent of the author 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 ensure sustainable ab high to public services management (zero budget policy) quality public services pre-commercial public procurement To filter technological risk before e a To buy Research & Development services To develop new markets and help commercialization for innovative solutions To re-establish establish private spontaneous large scale commercial procurement incentives to innovate To address public needs and social challenges through concrete innovation To benefit from a more flexible regulation of To activate virtuous mechanisms of the implementation procedure competitive procurement 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 projects and create opportunities for companies to take international leadership in new markets To de-risk a large budget PPI 2

Sara Bedin TEH-Ambrosetti, Head of Public Administration Practice TEH-Ambrosetti, Head of Competence Center on Innovation Procurement EUROCLOUD Italy, Executive Board Member 2013 Author: Sara Bedin

2 KEY ISSUE #1... alignment with expenditure optimization objectives 3 3 WHY undertaking a PCP initiative? iti to solve a real technological demanding problem that impact negatively on the quality and/or cost of public services offered; to filter out technological risk (de-risk PPI); to increase long-term effectiveness and efficiency of public expenditure (best value for money); to improve the quality and sustainability of public services. If NOT, PCP could be result in a stimulating but too expensive exercize 4

offered; to filter out technological risk (de-risk PPI); to increase long-term effectiveness and efficiency of public

3 PCP has a twin relevance, both as strategy and policy... INNOVATION ORIENTED PROCUREMENT STRATEGY NON SINE QUA CONDICIO 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 DEMAND-DRIVEN INNOVATION/INDUSTRIAL POLICY ECT EFF WHY: Raising industry s innovative performance, broadening SMEs participation in R&D projects and creating opportunities for companies to take international leadership in new markets but PCP has a unique procedure and the cause-effect relation mustn t be swapped! 5 The public sector could assume a double role in promotion of R&D&I via PCP contribution, funding provision of R&D services financial compensation 1 POLICY MAKER Financial support to implement innovative procurement action and to pool demand 2 PUBLIC PROCURER PCP Mutually binding and risk-benefit sharing contract SUPPLIER payment of price (at market conditions) PCP work fully within EU competition law Scope of the EU State Aid rules for R&D Framework If not, the consequence for the procurer is loss of opportunities and resources and value. 6

public services, filtering out technological risk DEMAND-DRIVEN INNOVATION/INDUSTRIAL POLICY ECT EFF WHY: Raising industry s innovative performance, broadening SMEs participation in R&D projects and

4 Common commitment t and agreement at all levels l and mix of skills in Lombardy Region Mid-to-long term political priorities for heathcare services transformation and optimization Policy making PCP funding PCP process design & coordination (need assessment + SoA assessment) Direction for University and Research Lombardy region General Direction for Healthcare ARCA Regional Purchasing Agency Public Hospital Niguarda Problem definition in terms of performance and functional requirements Test, comparison and evaluation of performance and functionality in reallife operational conditions Adjudicating authority Administrative procedure definition PCP PPI transition Agreement ex art.15 L KEY ISSUE #2...PCP as problem solving methodology, risk management instrument and learning process 8 8

Public Hospital Niguarda Problem definition in terms of performance and functional requirements Test, comparison and evaluation of performance and functionality in reallife operational conditions

5 Key process #1: Innovation needs identification and assessment User involvement User-centric User-driven 9 Key process #2: SoA assessment via (open) technical dialogue Available solution on the market Function and performance evaluation Significant innovation gap with respect to actual need No Yes = GO 10

(open) technical dialogue Available solution on the market Function and

6 KEY ISSUE #3...putting into practice the PCP s economic rational HOW PCP process enable acompetion during the execution? Open technical dialogue PCP PPI 12

7 WHAT is PCP? 13 What is relevant in PCP? 99% 1% creative thinking and innovative capacity production, delivery & manufacturing capacity and resources 14

8 What does not matter in PCP? Company SIZE Company AGE...doesn t matter 15 How to design a win-win i procedure? COM MERC CIALI IZATI ION PP objective alignment Demand-side Contracting authorities Offer-side Supplier Involved officials COMM MERC CIALI IZATI ION Incentive allocation 16

COM MERC CIALI IZATI ION PP objective alignment Demand-side

9 The Inserire Italian titolo progressing del documento framework The PCP incentive design (methodology) COMPETITIVE DEVELOPMENT IN PHASES INCENTIVES FOR THE GENERATION OF INNOVATIVE IDEAS AVOIDING SINGLE SUPPLIER LOCK-in Phase #1 1. Phase #2 2. Phase # 3 Feasibility study Solution Design Prototyping & field testing A B C D E F Ranking on technical quality and minimun i pass score A B Fixed compensation (that reflects mkt conditions) Functional & performance requirement E E F Ranking on most economically advantageous offer and minumun technical pass score Price payment (that reflects the market value of benefits and risks assumed) Innovation and ability to significantly improve the operational context (award criteria) Reduction of overall cost (award criteria) Reducing information asymmetries Retaining at least two participating companies (via technical dialogue) No revision of prices permitted Ability to carry out all contractual activities Negotiation phase (no additional cost for CA) A INCENTIVES TO PURSUE WIDE COMMECIALIZATION Sharing of benefits (IPRs ownership right left to companies in return for royalties on future sales) Call back provision Reproducibility with an industrial process and soundness of the commercialization plan (award criteria) INCENTIVES FOR No stringent financial and qualification requirements SMEs PARTECIPATION Forward-looking criteria Prices not subject to renegotiation Prototype validation activity Competitive development in phases 17 LESSONS LEARNED...5 minute more? 18 18

Phase # 3 Feasibility study Solution Design Prototyping & field testing A B C D E F Ranking on technical quality and minimun i pass score A B Fixed compensation (that reflects mkt conditions)

10 Let s compete on innovation! d u r i n g t h e e x e c u t i o n THANK YOU Dr Sara Bedin The European House-Ambrosetti osetti mail: sara.bedin@ambrosetti.eu mail: sara.bedin@appaltoprecommerciale.it it mobile: website: 19

E. Specific requirements for innovation procurement (PCP/PPI) supported by Horizon 2020 grants

E. Specific requirements for innovation procurement (PCP/PPI) supported by Horizon 2020 grants This annex applies to PCPs and PPIs for which the tender preparation and/or the call for tender implementation