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Pre-commercial procurement process can help public bodies to innovate, says expert

Out-Law Analysis | 09 Mar 2016 | 9:55 am | 3 min. read

FOCUS: Public bodies are not using pre-commercial procurements as much as they should as a route to innovation.

The light touch procurement framework, developed by the European Commission, is underutilised and not as widely understood as it might be. However, it supports research and development into new and unforeseen ways of operating and can lead to better public service delivery at a lower cost.

Public bodies that take advantage of pre-commercial procurements (PCPs) must be prepared to embrace an open approach to innovation and accept that any intellectual property (IP) that is created in the project will be shared and not exclusively reserved to the procuring organisation. Would-be users of pre-commercial procurements should not be put off by the fact that they will not exclusively own the IP created.

Pre-commercial procurements

The PCP model is a competitive process of R&D that supports the design, development and testing of new products or services to meet the specific needs of public bodies.

For suppliers, PCPs are a survival of the fittest. R&D is commissioned in stages, from initial design through prototyping, and final testing and validation– piloting – of created products or services. At each stage the number of suppliers that participate is whittled down, with only the best ideas winning support.

PCPs are not subject to the full tranche of public procurement regulations that ordinarily apply, for example allowing bodies to go outside of existing frameworks. This helps encourage SMEs to participate since public procurement rules are often burdensome to comply with and serve as a barrier to SME participation in public projects. SMEs are often some of the most creative, innovative and flexible companies and so this model of procurement can help public bodies tap into the very best ideas.

Pre-commercial procurements, as the name suggests, are concerned with the development of ideas prior to the point that they crystallise into commercial-scale delivery of finished products. If PCPs progress that far it can lead to innovation partnerships being formed between public bodies and suppliers and further procurement under the Public Procurement of Innovative Solutions (PPI) framework.

The science cloud project

PCPs are generally an underutilised model of procurement, but there are some examples of it being used in practice.

One example is the 'science cloud' project (12-page / 969KB PDF) in which a number of leading scientific bodies, including The European Organisation for Nuclear Research, best known as CERN, have committed more than €5 million towards the development of "a joint science cloud platform for the European research community".

CERN, and the other public scientific research bodies behind the initiative, want to be able to use the power of cloud computing to process and store data. However, at the moment their view is that available cloud solutions on the market are not sufficiently tailored to their needs.

They want a cloud-based platform that is available to research data already held in different data centres and within other public electronic systems and hope cloud providers will compete with one another to develop it for them. A public consultation on the project is due to be hosted at CERN's headquarters in Geneva, Switzerland, on 17 March.

Looking beyond IP ownership

The benefits and risks involved in R&D work are recognised in the way the PCP model works.

The main risk suppliers face is that they can spend a lot of money, time and effort on developing ideas that are never embraced for little or no return. To counteract this, and incentivise their participation in R&D, public bodies are prohibited from commissioning research under the PCP regime under terms that give them exclusive rights to any IP that is created.

The trade off for this arrangement is that the commissioning authorities stand to benefit from the very best ideas that the market can offer and can still licence any IP created on fair market terms.

IP can be a valuable asset since it can provide organisations with monopoly rights of use over innovative new products and services and in turn help them obtain and retain a competitive or even leading position in a market.

There might therefore be a reluctance from commissioning authorities towards PCPs since doing so naturally involves them giving up ownership of any IP created in R&D work they fund.

However, too much emphasis is placed by many organisations on ownership of IP when what matters most is the right to use IP.

All organisations, including those in the public sector, are under pressure to embrace new digital technologies and do things better, faster and at less cost. Many organisations have adopted collaborative partnerships with others, from suppliers to new digital disruptors, that lets them pool resources, ideas, knowledge and expertise. The collaborative model recognises that no one organisation has a monopoly on the best ideas and way to develop them.

The PCPs model facilitates a similar approach to open innovation in the public sector. It opens the door to the most innovative ideas industry can come up with being harnessed for public benefit. At the same time it offers a useful testing ground for companies to try out ideas and how prospective customers react to them, helping inform them of whether there is potential for commercialisation.

Public bodies should look beyond their natural instincts to control IP that derives from public funds and realise that the bigger prize is in identifying innovative ways to improve public services.

Louise Fullwood is an intellectual property law expert at Pinsent Masons, the law firm behind Out-Law.com.