Nordic PPI Net Legal Practices and Recommendations

Recommendations for how to work with innovative procurements Based on an analysis of legal practices in the Nordic countries The analysis consists of a questionnaire survey, desk research and interviews with procurers and other professionals in the Nordic countries Introduction to innovation in the new Procurement Directive (2014/24/EU) Presentation of the report: Legal Practices and Recommendations

A general need for knowledge, guidelines and best practice in the public procurement organizations A common understanding of “innovation” and “innovative procurements” in organizations is missing Several innovation projects and innovative processes “under the radar” Innovative elements are not used as part of a procurement strategy but depends on the individual procurer’s initiative Key findings: Legal practices in the Nordic countries

Overcoming legal barriers

Key findings from the survey: State aid Innovation projects in the Nordic countries receiving state aid are known to exist, however not to a great extent Examples show that both public administration and management are hesitant to involve private partners due to the complexity in legal matters Existing tools and guidelines used in the countries mainly appear to be facilitated by public organizations like Vinnova in Sweden

Legal issues raised by practitioners What do you see as the major limitations for state aid innovation projects? “I think that it is the lack of information. And I think that people think that it is not ok to make cooperation with companies because of public procurement law” “My contract part in such a contract felt that the contract would take away their possibility to commercialize the final product.”

Key findings from the survey: Intellectual Property Rights There is a need for more knowledge and guidance about IPR Advice on how this barrier can be overcome Hire public innovation organizations to manage the projects being that they are the ones with expertise and resources Outline accounting before the project begins and use a form of “open book” accounting during the project Shared public-private ownership of a company (49/51) The private partners are popular both as owners of the IPR of the service and the product in question The differences between the Nordic countries are minute

Legal issues raised by practitioners What do you see as the major limitation associated with intellectual property rights (IPR) in projects? “Very little knowledge of IPR in general - and some managers have unrealistic expectations.” “There is no focus on the potential value of IPR from neither the public nor the private company. Neither party sees it as a positive or is aware of it. Establishing IPR is costly and often takes to long.”

Legal issues raised by practitioners The public institutions should, free of charge, make organizations and resources available for private companies “Absolutely - if the public sector wants innovation they should open up their organizations and invite companies to visit, follow, investigate and question the work, the processes etc.”

Key findings from the survey: Transparency Contracting authorities are meticulous with documentation and most find it easy to secure Disagreement exists between the respondents’ perception of the suppliers’ knowledge of risk and the contracting authorities’ knowledge of risk This can be addressed by providing additional information for the suppliers

Legal issues raised by practitioners What was the insecurity according to transparency referring to?

Key findings from the survey: Equal treatment Equal treatment is causing the procurers more concern than the barrier regarding transparency Less than half of the respondents choose participants for innovative projects by a prior information notice published by the EU Commission Surprisingly, since the EU-approval is mandatory in order to adhere to the rules of ensuring equal treatment When asked about favoring the small and midsized enterprises, respondents are equally divided between yes and no “Because there are no SMEs in the field in question” “There are only SMEs” “They should not be favored due to the principle of equal treatment”

Legal issues raised by practitioners What is/are the reason(s) why you have not made specific efforts in order to favor small and midsized (SMEs) enterprises? “Small and midsized enterprises cannot deal with EU- directives”

Legal issues raised by practitioners Do you find it easy to comply with the principles of equal treatment in innovation projects?

Key findings from the survey: Form of tender The contracting authorities are not free to choose between the different forms of tender There are different tender rules in Finland, Norway, Sweden and Denmark Only few respondents vary between forms of tender in pursuit of a proactive strategy to support innovative elements in the process Two thirds of the respondents use the two most common forms of tender in public procurement for their innovative projects, although other forms like competitive dialogue or negotiated procedures are more suitable

Key findings from the survey: Form of tender The majority of respondents are satisfied with the choice they made for form of tender and believe that the suppliers were satisfied too To exploit possibilities further, room should be made for education and information of the contracting authorities on more suitable forms of tender to optimize the innovative process

Legal recommendations The recommendations are based on the process model of the step-by-step guide presented in the Nordic PPI Net project The model is described in the report Guide for Public Procurement of Innovation in the Health Sector

Step-by-step guide

General recommendations Lawyers need to be involved from the beginning Make sure that you are “speaking the same language” Consider how “normal procedures” can also be used innovatively Explore the opportunities within the different tender procedures – also in the new Procurement Directive (2014/24/EU) Share your experiences

Legal recommendations phase 1: Preparation and anchoring State aid and Intellectual Property Right (IPR) only need to be considered if Public-Private Innovation and cooperation are in play The state aid must be approved as a notified aid by the EC and the contract for the project should clearly state how the state aid is organized Two different approaches to IPR The private company develops the solution and the public partner buys the product/ service along with the property rights The private partner keeps the rights for the solution but can give the public partner a “discount” in exchange for the knowledge obtained in the project. This gives the public partner the right to use this knowledge in the following tender and procurement The organization of IPR should be stated clearly in the contract

Legal recommendations phase 1: Preparation and anchoring Transparency and equal treatment are the key factors to ensure that no relevant private companies are disqualified All material and dialogue must be documented and comprehensible to all Three elements can be used to overcome the legal barriers: Time – the tender period can be prolonged so all companies can accumulate the published project results Knowledge – publish all knowledge obtained in the project Contract – Use functional requirements so all companies can make their bids and no one are favored

Legal recommendations phase 1: Preparation and anchoring The first step in Form of tender is to establish if the tender requires publishing or not In Research & Development projects like PCP, the specific exclusion for tender can be used (Directive 2004/18/EC, Article 16,f) Competitive dialogue or negotiated procedures are suitable for innovative procurements But the two most common procedures: open - and restricted procedure can also be used During the process, alternating between different forms of tender is an option up until the tender is published

Legal recommendations phase 2: Pre Commercial Procurement (PCP) In phase 2 it is especially important to ensure that all dialogue and activities are documented and published in regard to transparency and equal treatment The specific exclusion for tender requires that the solution developed needs to involve a R&D product or service and that the public and private party must either share the entire cost or the results of the project

Legal recommendations phase 2: Pre Commercial Procurement (PCP) In the PCP process developed and recommended by the European Commission, a call for tender opens up the first phase of the R&D process for all interested parties to then excluding private partners during the process

Legal recommendations phase 3: Innovative Public Procurement (IPP) In the final phase it is important to be aware of possible reservations from the private companies concerning the sharing of knowledge and in some cases commercial secrets Innovative elements can be added to the form of tender and the process to support the procurement of innovative solutions e.g. by using functional requirements and/or TCO (Total Cost of Ownership)

Legal recommendations phase 3: Innovative Public Procurement (IPP) In the evaluation of the process and the delivery, recommendations are to involve the private parties (winner of the contract or not) This provides the procurers with relevant input for how to procure innovative solutions and develop the public- private dialogue even further

New form of tender - Directive 2014/24/EU Article 31: Innovative partnerships Identification of the need for an innovative product, service or works that cannot be met by purchasing products, service or works currently available on the market Possible to choose either one or several partners Will we see more innovative procurements in the future?

Other reports from Nordic PPI Net Best Practice and Key Learning Points Guide for Public Procurement of Innovation in the Health Sector Value Based Procurement Manual – a Roadmap to Radical Innovation All reports can be found at

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