Consider Pre-Commercial Procurement

What is it?

Pre-commercial procurement (PCP) is a means to stimulate the market to deliver the innovation and solutions you want. Through PCP, you can commission R&D services from multiple suppliers, who develop alternative solutions in parallel for your service needs. You are then able to test these prototypes and MVPs to determine which best meets your service needs and offers the best value for money.

<aside> <img src="https://s3-us-west-2.amazonaws.com/secure.notion-static.com/842393a5-1ca2-419c-9ac7-0c3f71447fc6/Ellipse_2_(3).svg" alt="https://s3-us-west-2.amazonaws.com/secure.notion-static.com/842393a5-1ca2-419c-9ac7-0c3f71447fc6/Ellipse_2_(3).svg" width="40px" /> In PCP, public procurers share the benefits and risks related to the IPRs resulting from the research and development (R&D) with suppliers at market price. Suppliers retain IPR ownership rights, while procurers keep some usage and licensing rights.

</aside>

The PCP process consists of multiple phases, with suppliers being eliminated at each phase. The budget per bidder increases every round to reflect the resources needed for further development. The phases of PCP include, open market consultation, call for tender, solution design, prototype development, testing of a limited volume of products/services. PCP covers the development of products up to the prototyping and testing phase, but not beyond.

<aside> <img src="https://s3-us-west-2.amazonaws.com/secure.notion-static.com/6a228f67-10aa-4cf6-b4fa-f8f15bcb549b/Ellipse_2_(3).svg" alt="https://s3-us-west-2.amazonaws.com/secure.notion-static.com/6a228f67-10aa-4cf6-b4fa-f8f15bcb549b/Ellipse_2_(3).svg" width="40px" /> R&D does not include commercial development activities such as quantity production, supply to establish commercial viability or to recover R&D costs, integration, customisation, incremental adaptations and improvements to existing products or processes.

</aside>

There are limits on the quantity of the prototypes that can be purchased for the purposes of testing and piloting.

<aside> <img src="https://s3-us-west-2.amazonaws.com/secure.notion-static.com/d1438c46-498c-4273-be82-abadaf2c7b0e/Ellipse_2_(3).svg" alt="https://s3-us-west-2.amazonaws.com/secure.notion-static.com/d1438c46-498c-4273-be82-abadaf2c7b0e/Ellipse_2_(3).svg" width="40px" /> The total value of supplies purchased needs to remain below 50% of the total PCP contract value.

</aside>

After the PCP process, you need to go to tender for commercial volumes of your preferred solution. This tender process must be competitive and must not disadvantage suppliers who were not involved in the PCP process.

<aside> <img src="https://s3-us-west-2.amazonaws.com/secure.notion-static.com/9f47e247-cc94-445c-b9ce-7fb34ea87fdb/Ellipse_2_(3).svg" alt="https://s3-us-west-2.amazonaws.com/secure.notion-static.com/9f47e247-cc94-445c-b9ce-7fb34ea87fdb/Ellipse_2_(3).svg" width="40px" /> Actions that are taken in pre-commercial procurement cannot preclude competition in the commercialisation phase - the fact that a company has done the R&D and developed a working test series can in itself be no guarantee to win a follow-up contract for mass delivery.

</aside>

Why does it matter?

PCP is an important mechanism for encouraging suppliers to innovate, understanding what the market is able to produce, and getting technology products that truly meet your needs.
By inviting multiple suppliers to simultaneously develop solutions you stimulate competition within the market, which in turn leads to higher quality prototypes and products.
Through PCP you can steer the development of solutions towards your needs, whilst comparing/validating alternative solution approaches from different vendors. PCP gives you the opportunity to evaluate prototypes and real products in practice, exploring and comparing pros and cons of alternative solutions. This process fosters strong partnerships between boroughs and innovative suppliers.
Innovation inherently involves uncertainty. Having a flexible, phased procedure with implementation freedom allows you to navigate the uncertainty of R&D and innovation activities and mitigates some of the risks of making large upfront commitments.
PCP is a cost-effective way of commissioning R&D. By allowing companies to retain the IPR, the cost of R&D services to the public purchaser is decreased, because the company is able to generate additional revenue from the IPR - the lower price point also enables you to invest in the competitive development of multiple solutions
PCP is an opportunity to jointly commission but separately procure innovation with other boroughs. The R&D costs and risks can be reduced through bundling of demand with other public purchasers, whilst each buyer retains autonomy over the procurement of solutions.