Budget allocation design in the EU pre-commercial procurement for innovation

Publication Date29 Jan 2020
AuthorNicola Dimitri
SubjectPublic policy & environmental management,Politics,Public adminstration & management,Government,Economics,Public finance/economics,Taxation/public revenue
Budget allocation design in the EU
pre-commercial procurement
for innovation
Nicola Dimitri
Department of Political Economy and Statistics, Universita degli Studi di Siena
Dipartimento di Economia Politica e Statistica, Siena, Italy
Purpose Pre-commercialprocurement (PCP), introduced by the EuropeanCommission in 2007, is the most
important purchasingprocedure available to the European Union public sector to solicitinnovative solutions
from the business sector. As such solutions are not yet in the market, they rst require research and
development (R&D) activities.PCP is concerned with procuring R&D services only, and typically consists of
three phases. This paper aims to discusshow the budget available to the contracting authority (CA) may be
optimallyallocated along such three phases.
Design/methodology/approach The paper is mostly theoreticaland the CA is assumed to maximise
the overall probability of success in the PCP, that is the probability of receiving at least one successful
proposalat the end of the procedure.
Findings The main nding of the paper suggeststhat, for a CA, the optimal budget allocation across the
three phases of the PCP depends on how likely it is to receive successfulproposals in various stages of the
procedure,as well as on the rewards paid to the invited companies.
Practical implications In this paper, the author proposes a methodology for the optimal budget allocation
of a CA and discusses how the approach could be practically implemented, pointingo utits potential difculties.
Social implications The main social implication of the ndings is represented by the best use of the
availablebudget, hence taxpayersmoney.
Originality/value To the best of the authors knowledge, no existing paper has discussed the optimal
budget allocationin a PCP as in this work.
Keywords EU Pre-commercial procurement, R&D budget allocation
Paper type Research paper
1. Introduction
Over the past few years, the European Union (EU) has endowed the public sector with
legislativetools to foster procurementof innovative solutions. Suchdecision can be explained
by more than one reason. Firstly, the policy is consistent with the Lisbon Strategy,
emphasising the idea of the EU as a dynamic and innovative economic area. Moreover,
because of its sizeand impact, about 16-18 per cent of the EU GDP,public procurement could
representan important driver to promoteinnovation (Nilsson,2003;Geroski, 2006;Georghiou
et al.,2014;Edquist and Zabala-Iturriagagoitia,2015;Rigby, 2016). A remarkable example in
this sense is represented by the USA (Mazzucato, 2015) where the publi c sector, notabl y the
defence sector, has acted as a main engine in promoting innovative solutions which then
became globallysuccessful, such as the internet.
In particular, quoting from the European Commission (EC) Digital Single Market
website, the EU envisages two broad categoriesof innovation procurement.
The rst is the so called, Pre-Commercial Procurement (PCP)of Innovation,(EC
Communication,2007) which:
Received12 July 2019
Revised19 November 2019
Accepted16 December 2019
Journalof Public Procurement
Vol.20 No. 1, 2020
pp. 88-96
© Emerald Publishing Limited
DOI 10.1108/JOPP-07-2019-0036
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