Europaabgeordneter: Innovation durch öffentliche Anschaffungen fördern[en] 

Malcolm Harbour is a UK Conservative MEP and the European Parliament's rapporteur on a report on pre-commercial procurement, drawn up in the EU assembly's internal market committee.

To read a shortened version of this interview, please click here.

You have spoken of a need to help small businesses access funds available through public procurement processes. What are the barriers to SMEs in bidding for publicly-funded tenders? 

It varies from country to country, but there are problems in relation to SMEs being able to bid for major contracts. There are many SMEs that find the way contracts are handled puts them at a disadvantage. Some of the pre-qualifications for getting onto the public procurement tender lists are quite onerous in terms of having to submit several years of accounts. 

However, there are some local authorities that are actively encouraging SMEs by facilitating groups of smaller enterprises wishing to bid for part of a larger contract. But I think it's an area that needs much more attention, and certainly there have been moves like the Small Business Act, which specifically mentioned the need to make public procurement more SME-friendly. 

You were rapporteur for an own-initiative report on pre-commercial procurement drawn up by the European Parliament’s internal market committee. How can public authorities use the procurement process to help R&D? 

We invest hundreds of billions of euro in publicly procured projects. Not many public authorities really think about how they can use just a small part of that funding to leverage innovative products, but it can be done. Authorities should encourage and fund research and development before they award a contract – this is at the pre-commercial stage. 

In other words, public bodies can actually procure R&D as part of a package to give them an outcome for which the technology does not yet exist. It's almost like setting a challenge. They can say 'We want an entirely new type of electric refuse collector that will operate in city centres,' even if the design doesn't yet exist and there may be new technologies involved in the product that eventually wins the contract. 

So they actually fund a number of competing businesses to come up with concept proposals on how they will meet the requirement, and then choose the one that's the most promising and fund it for a second stage. 

So authorities would fund the development of the proposal by several operators?   

Exactly. This is why it's a win-win situation. What we are saying is public authorities have an increasing remit to face up to societal challenges, whether that's looking after older people at home, running health services in hospitals, or tackling the problems of climate change. 

We had mayors in Brussels last week signing up to a convention on climate change, so you see public authorities are absolutely engaged in that. Improving the energy performance of public buildings, running public transport systems, collecting waste – just think of the number of areas in which they can be looking for new innovative solutions to global problems. 

So, basically we are challenging the public authorities not just to go out and put out a contract for the traditional way of doing things, but actually saying here is a requirement. Are there any examples of how this has worked in practice? In the Netherlands, they wanted to improve the way they inspect the dykes that protect citizens from flooding. These have to be monitored all the time and currently the authorities send people to physically check them. 

The question they asked was 'Can we employ technology to do that?' They put it out as a concept and had four or five competing suggestions using totally different types of technologies', including aerial mapping and sensors. Then they chose a couple of proposals to go to the next stage and finally selected one. But they put funding into that pre-commercial process. 

What's also interesting is that there were a number of SMEs involved and some of them, having had that work funded – even if they didn't win the contract – were able to take the technology, develop it and sell it to somebody else. Funding an innovative company in that way helps an invention to move forward, even though it may not result in an end product that the public authority wants to use itself. 

Will new legislation be required to cover this kind of pre-commercial aid for product development? 

No. The really interesting thing about this idea is that it doesn't need any new European legislation. It's all allowable under existing rules. It's actually an attitude of mind. It's a matter of encouraging people to change the way they do things. The Commission can facilitate this, because it does have funding for encouraging public procurement, for best practice, for sharing information, for training, and for dissemination of information. All of that can be used to help us move forward. 

The Commission is also proposing a series of lead market technologies for public markets on things like climate change and intelligent textiles. What they are saying is these are areas where public markets are crucial in pulling that technology through. One of the crucial instruments of doing that is to use public money to procure solutions. 

Do you expect the proportion of investment from the public side to grow compared to private credit? 

In times of depression or recession – depending on which leader you listen to – it's quite clear that in terms of the economic recovery programme, sustaining investment in public markets is going to form a higher proportion and will be a crucial instrument. If we manage to sustain public investment in innovation, it will help the economy in the longer term. 

Therefore, this is the time to step this up a gear because there's a real opportunity to help drive innovation. Keeping innovative companies going by investing in development stimulates their work. The SME sector often complains of the cost, time and administrative burdens involved in securing public contracts. 

Are these issues addressed in your report on pre-commercial procurement? 

I think this is covered. What we propose in the report would help companies with a promising idea to take it forward. The biggest investment for any company is to take that idea and convert it into a production reality or a market offering. That's the most difficult time for SMEs, because it's a time of maximum cash outflow and no cash inflow. 

What we're saying is if they go to a bank and can show they have part-funding and a potential end customer, it becomes a more attractive proposition to a financial provider. It reduces the risk. 

Having an investment from a public authority might also help them in leveraging other public sources of money – innovation funds, FP7 funding and so on. 

Are there barriers to accessing major funding programmes for smaller companies? 

A significant amount of funding is set aside to encourage SMEs to engage. It's all about small companies collaborating with larger partners, because let's be clear, the big framework programmes are quite complex and difficult to manage, so they are not necessarily things SMEs want to lead on. But bigger universities can take on that responsibility. 

But SMEs often have the technology required and need funding to develop that technology and turn it into a patent. Groups of companies working in a common technology field are getting together and driving the overall research agenda, and in doing so, they are putting clusters together. This whole area has to be looked at further, because part of the problem with the framework money is that these networks can be very difficult to manage. 

Given that there is no new legislation, are you confident that what is recommended in your report will have a real impact at local authority level? 

Well I hope so. I'm meeting the chief executive of Birmingham, which is the largest local authority in the UK in terms of spending and is also my home city, and I'm very much hoping that we will be pioneers of this in a UK context. I have been promoting it because I'm absolutely convinced about the concept. I think it shows how the Parliament can work to position issues and promote them. 

Switching to another area where you have been active, what is your view of the automotive industry rescue packages currently on the table, and do you share concerns regarding protectionism? 

I started working in the auto industry forty years ago and this crisis is entirely unprecedented. There is a lot of talk about cars, but trucks and light commercial vehicles are equally badly affected. Europe has several leading global players in a crucial sector of the economy – all of whom are investing billions of euro in new technologies to reduce carbon emissions. 

We have to address the automotive industry given its importance for European jobs. What we need to do is stimulate demand. I think governments were slow off the mark in recognising the issue. Some cost absorption or subsides are good, but these may need to be done on a common basis. If one country gives a car company support and another doesn't, it's obviously a competitive distortion. 

Scrappage incentives help the whole market, but they clearly need to be linked to buying cleaner, greener vehicles. I think we need coordinated action on scrappage incentives, but the other thing to do is talk to the banks to get credit moving again. And we must find ways to incentivise companies to buy new trucks. That would have great environmental advantages, because if we can take some old polluting trucks off the roads it would help enormously. 

The aspect where we have agreement is to try and find funding support to help fund R&D programmes in the car industry. We need to ensure that they sustain research through this period for the long-term, not least because we are demanding that they meet carbon emission targets. 

Are you concerned by the pace with which funds are being released? 

Well, a European Investment Bank funding line was agreed for green vehicles before Christmas, but there has been a lot of concern that the EIB isn't geared up to handle those loans quickly enough. We have the Globalisation Adjustment Fund which has money in it but has not been used. 

I hope the automotive industry is high up the agenda for the March meeting of prime ministers and we can boost the industry quickly but in a unified way. We cannot have a subsidy race, and it is unacceptable for France to say it will only provide assistance for plants to stay open in France. 

Turning to the forthcoming elections, are you confident that you will be returned by your electorate? 

I was selected by the Conservative Party and am second on the list in a region where we currently have three MEPs. So I will be back here. There would have to be an astonishing reversal of the political fortunes of the Conservative Party for me not to be here. The important thing is to get bright new people into the Parliament. We'll also have more women on the list this time, which is absolutely right. 

There's often a Eurosceptic vote in UK elections, some of which gravitates towards the Conservatives. What kind of campaign will you run this time around? 

I think under David Cameron's leadership we'll fight a campaign that reflects the popular mood. We don't want to see more centralised powers in Brussels. People realise how important our engagement with Europe is in areas like climate change, the economy, and business opportunities. 

Britain has been pre-eminently an outward looking trading nation for so long, and we are now deeply embedded in the single market, which we are determined to make work better. Our relations in the developing world and how we can help them develop their own industries will also be one of our themes. 

This will be in contrast with the very negative campaigning of Eurospectic parties – effectively they don't have any answers to the problems that we're facing. Their only answer is to say we can do things better by doing things on our own, but I don't think people really believe that. It's an entirely negative message and the record of Eurosceptic parties in representing their electorate in Europe is dreadful. If you don't engage with the institution to which you're elected, people see through that. 

Are the Conservatives against the Lisbon Treaty? 

We have consistently argued against many aspects of the Lisbon Treaty. Indeed, it will be very interesting to see what happens in Ireland. My prediction is Ireland will reject the Treaty again – a contingency that the Commission and others are not even planning for. We expect the Commission to think more strategically than that.  

Do you think you'll still be sitting with the EPP after the elections? 

Well, David Cameron has made it clear that we'll form a new group and those talks are ongoing. Obviously there won't be any decision made until after the election, because we won't know what the pattern of the Parliament is. 

Areas where others would like to see more centralisation include defence, foreign policy, and the criminal and legal systems. These are areas that are very important to Conservatives and we want to be able to articulate our opposition to these very clearly. 

Is the UEN group a likely home? 

Nobody is convinced the UEN will necessarily move forward in the form that it's in either. I'm not so involved in those discussions. We'll have to wait and see. 

Has it been beneficial to be part of the biggest group in the Parliament in terms of becoming rapporteur on this procurement report, for example? 

Personally, I would say 'yes'. It has been a great opportunity in terms of developing my political skills. But I think those skills will be transferable to a new group. In this group, you have to work very intensively with other parties to get your business through, so the crucial thing is to use your political relationships. 

On the pre-commercial procurement report I worked closely with my socialist and liberal colleagues. But in many areas, like the Services Directive, it has been coalitions with the Liberals that have allowed us to deliver on business. So we have the skills to build coalitions and can still exploit that. 

The crucial thing is that we have a group of sufficient size and influence to be able to achieve that, and I'm sure David Cameron has that in mind. The question will be assembling parties with the credibility and the substance to move forward on that agenda. David will want to do that, because hopefully not long after the European election, he will be the one going to the summits. He's going to want strong political support from here.