Traditionally EU programmes have focused on a supply-side approach to research and innovation. Horizon 2020 increases the focus on policies that pull innovation forward by offering incentives or rewards for the results of research and innovation. These demand-side policies work in tandem with the supply-side policies, helping steer EU funded research into tangible results that benefit both EU citizens and businesses.
Public procurement is at the centre of the demand-side innovation policy initiatives. Government's large purchasing power allows them to pull demand for innovation, creating a signalling effect as lead user increasing the diffusion of innovations more broadly.
Support for innovative public procurement is an important demand side policy under Horizon 2020. Public procurement makes up an important share, around 15-20%, of GDP in developed economies, and public authorities are often the largest purchaser. Therefore awarding public contracts to new and innovative ideas is a powerful tool to stimulate innovation. This has two main benefits:
- European citizens benefit from improved public services, that make use of new and emerging technologies faster
- Innovative European companies benefit from investment in research and development (R&D) and large, stable contracts that help them bring their products to the mass market faster
Horizon 2020 supports innovative public procurement through two processes known as PPI and PCP.
What are PPI and PCP?
Procurement of innovative solutions (PPI)
The Public Procurement of Innovative solutions (PPI) involves public procurers acting as a launching customer or early adopter of a new product or service. This allows the public procurer to benefit from new products faster, while the innovative company has the incentive and means to commercialise the product on the mass market.
Pre-commercial procurement (PCP)
Pre-Commercial Procurement (PCP) is used when there is no solution available - or close to being available - on the market. It involves procuring solutions that still require further research and development before they are commercially available.
How do they work together?
PCP and PPI are seperate but complementary procedures. Implementing and using them together wherever possible, maximises European competitiveness. As R&D services procurement falls outside of WTO rules, PCPs can require suppliers to locate the majority of the R&D and first production activities in Europe. Starting PCPs on ground breaking topics followed directly by PPIs on the same issue, gives companies willing to locate R&D/PCP activities in Europe a first mover advantage, increasing the chances they will win the follow-up PPI contracts.
What are we are doing to help?
We support procurers piloting PCP and PPI through our research and innovation programs; with various EU funded projects currently ongoing.
Compared to other parts of the world, PCP and PPI are underutilised in Europe. Therefore, the Innovation Union and Digital Agenda for Europe propose specific targets for increasing the use of PCP and PPI by 2020. Several countries around Europe have already started national or regional PCP and PPI initiatives.
Horizon 2020 will reinforce the support available for public procurers around Europe that work together to address common challenges by jointly undertaking PCPs or PPIs.
If you would like to keep up to date on the latest Member States initiatives on PCP/PPI, and new upcoming EU funding opportunities, please subscribe to the PCP/PPI newsletter.