Public Procurement of Innovation How can public organisations be stimulated to buy more innovative solutions?

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1 Public Procurement of Innovation How can public organisations be stimulated to buy more innovative solutions? Kenny Willems, Sep 2014

2 2 Contradiction Government expenditure for R&D Governments buying innovative solutions OR Government expenditure for R&D Governments buying from starters

3 3 Agenda About iminds From R&D to Public Procurement of Innovation How to stimulate public procurement of innovation?

4 4 iminds wants to create a lasting and positive impact on society through ICT innovation

5 5 4 Strategic Research Centers in Flanders NanoTech 1984, 1800 people 50 mio funding 300 mio total revenue CleanTechnology 1991, 800 people 36 mio funding 90 mio total revenue Life sciences 1996, 1200 people 46 mio funding 68 mio total revenue ICT 2004, 1000 people 27 mio funding FL.Gov. 45 mio total revenue

6 PROJECTS with the industry START-UPS from the iminds incubation programs 1, PARTNERS in the iminds ecosystem RESEARCHERS 40 mio TOTAL REVENUE 1,000+ PUBLICATIONS on a yearly basis

7 iminds focus: ICT and five vertical markets Societal challenges 7 Employment Urbanization Ageing Society Globalization Public health for all and well-being Environment Markets Technologies Leveraging our research assets in multiple markets Cloud computing Internet of Things Big Data Connectivity & Sensor systems Security & Privacy Social & context based IT

8 Combined strength of 5 universities! 8

9 iminds Research Departments 9 ICT Media Health Energy Smart Cities Manufacturing Future Internet Department Future Media & Imaging Department Security Department Future Health Department Digital Society Department

10 10 Startups portfolio overview ICT Smart Cities Energy Health & Care TokenPKI Benchtop SPECT Media Manufacturing Other domains

11 11 Agenda About iminds From R&D to Public Procurement of Innovation How to stimulate public procurement of innovation?

12 12 From R&D to Public procurement of Innovation Fundamental R&D Applied R&D Pre- Commercial Procurement Public Procurement of Innovation R&D Procurement Government subsidies up to 100% Government subsidies up to 100% Government subsidies up to 70% Government subsidies up to 30% EC ERC FP7 PCP PPI Flanders FWO IWT Innovatief Aanbesteden (IWT)?

13 13 From R&D to Public procurement of Innovation When it comes to R&D, Governments have been (and still are) playing an extremely important role in financing breakthrough innovations (so-called GPT s (General Purpose Technologies)). In fact, some argue that Governments have acted as natural born entrepreneurs by taking (extremely) high financial risks. (1) Contradiction However, when it comes to actually buying innovative solutions (after the R&D-phase), public organisations - more specifically in Europe - are typically very riskaverse and laggards in terms of adopting innovative solutions!! Public organisations should be stimulated to become early adopters of innovative solutions, thereby increasingly playing the role of reference customer. (2) (1): Prof. Mariana Mazzucato, The Entrepreneurial State: Debunking Public vs. Private Myths in Risk and Innovation, 2013 (2): Mazzucato, 2013: rather than giving handouts to small companies in the hope that they will grow, it is better to give contracts to young companies that have already demonstrated ambition.

14 14 Agenda About iminds From R&D to Public Procurement of Innovation How to stimulate public procurement of innovation?

15 15 How to stimulate public procurement of innovation? 1. Awareness building 2. Risk Reduction Innovative solutions 4. Target-setting 3. Process simplification

16 Stimulating public procurement of innovation : 1. Awareness building 16 Often, public organisation are not aware of the (technological) innovative possibilities available on the market There is a strong need to bridge the knowledge gap between technology providers and public buyers 2 hands-on recommendations Regular technology-discovery markets (such as Meet-your-buyer event) should be organised Set-up a central Supplier Accreditation platform (cfr. Singapore) 3rd party domain experts - such as iminds for ICT - can be facilitators in these initiatives 1. Awareness building 4. Targetsetting Innovative solutions 2. Risk Reduction 3. Process simplificatio n 1. Awareness building 2. Risk Reduction Innov ative soluti ons 4. Targetsetting 3. Process simplificat ion

17 Stimulating public procurement of innovation : 1. Awareness building 17 Objectives of the Singapore Accredition@IDA initiative: Accredit promising and innovative Singapore-based technology product start-ups to establish credentials and position them as qualified contenders to government and large enterprise buyers; Provide potential buyers assurance on the accredited companies' product core functionalities and ability to deliver; and Build an innovative technopreneur ecosystem to drive economic growth, inspire the younger generation, and build more innovative products and technology companies that can scale overseas

18 18 Agenda About iminds From R&D to Public Procurement of Innovation How to stimulate public procurement of innovation? 1. Awareness building 2. Risk Reduction 3. Process Simplification 4. Target-setting

19 Stimulating public procurement of innovation : 2. Risk reduction (Peceived) problems: Public organisations often don t have enough knowledge about innovative technologies Lack of (large number) of reference implementations for innovative technologies Unclear end-user requirements or needs Risk!! Awareness building 4. Targetsetting Innovative solutions 2. Risk Reduction 3. Process simplificatio n PCP: Pre-Commercial Procurement EU-funded Consortia of European (public) buyers in search for similar innovative solutions Living-Lab testing + Technologyexploration, in preparation for actual procurement phase 1. Awareness building 2. Risk Reduction Innov ative soluti ons 4. Targetsetting 3. Process simplificat ion

20 20 PCP : Pre-Commercial Procurement PCP = public acquisition of R&D services (commercial end-product or service not yet existing) Typical duration of PCP-project = 2 years No clear idea of solution space, but clear idea of problem space that is in need of solutions 70% funding by European Commission of the procured amount + 100% funding of coordination Example: 5 M PCP cofund grant EU contribution: Max 1,5 M for coordination + 3,5 M for PCP (procurement of 5 M) Example: 3 M PCP cofund grant EU contribution: Max 0,9 M for coordination + 2,1 M for PCP (procurement of 3 M) IP remains with the providers, but cities have usage rights 1. Awareness building 2. Risk Reduction Innov ative soluti ons 4. Targetsetting 3. Process simplificat ion

21 21 PCP: Win-Win for all stakeholders Suppliers - Better products - Economies of scale - Wider market size - Shorter Time to market - New lead markets - Increase export - Global competitiveness Politicians - Quality of public services - Focus on political priorities - Improve innovation climate - Attract foreign investment - Increase employment - First buyer in early R&D - Shared risks & benefits Pre-commercial Procurement - Reduce cost of procurement - Reduce risk of innovation Get the Best Product - Address public market innovation failure - Shape product development to public needs - Increase technology knowledge - Reduce risk in commercial tendering - Favour supplier competition at the Lowest Price - Pooling of resources - Economies of scale - No licensing costs - First time right product - EU interoperable - Attractive to venture capitalists - Reduce unforeseen expenditure Procurers 1. Awareness building 2. Risk Reduction Innov ative soluti ons 4. Targetsetting 3. Process simplificat ion

22 22 Living-Lab testing + Technology Exploration Technology SoTA assessment Requirements analysis Public call for solutions Living Lab testing with selected providers Public call for Tender Recommendations Procurement decision 3-5 months Carried out - on behalf of the public organisation - by a 3rd party, independent domain expert (eg. iminds) Carried out by the Public Organisation

23 23 Agenda About iminds From R&D to Public Procurement of Innovation How to stimulate public procurement of innovation? 1. Awareness building 2. Risk Reduction 3. Process Simplification 4. Target-setting

24 Stimulating public procurement of innovation : 3. Process simplification Awareness building 4. Targetsetting Innovative solutions 2. Risk Reduction 3. Process simplification EU-regulation allows to define alternative evaluation criteria (next to price and quality) in call for tender, eg. degree of innovation Call for action: all public organisations to include these alternative criteria in their future call for tenders Public tendering is a complex process, with a lot of formal hurdles, often too high for small innovative companies some recommendations: Reduced security amounts: often 5-10% of total tender-amount Smaller tender-lots: more feasible for small innovative companies Payment-terms: not more than 30 business days IPR-agreements: openness within public organisations to discuss transfer of IPR 1. Awareness building 2. Risk Reduction Innov ative soluti ons 4. Targetsetting 3. Process simplificat ion

25 25 Agenda About iminds From R&D to Public Procurement of Innovation How to stimulate public procurement of innovation? 1. Awareness building 2. Risk Reduction 3. Process Simplification 4. Target-setting

26 Stimulating public procurement of innovation : 4. Target-setting 26 Public organisation should impose themselves targets for innovative procurement (cfr. SBIR in USA) Eg. 3% of total spent on procurement of externe products and services goes into direct procurement of innovative products and services technology exploration studies + living-lab tests joint PCP-projects This can be done without increasing existing budget and government spent, i.e. it is a mere re-allocation of existing budgets Strict follow-up of this target should be included in yearly strategic procurement evaluation exercise 1. Awareness building 4. Targetsetting Innovative solutions 2. Risk Reduction 3. Process simplificatio n 1. Awareness building 2. Risk Reduction Innov ative soluti ons 4. Targetsetting 3. Process simplificat ion

27 27 Stimulating public procurement of innovation Government expenditure for R&D Governments buying innovative solutions

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