State-funded research gets Commission green light

The Commission has cleared the way for member states to invest public money in high-risk technological research, in a new strategy that seeks to clarify possible conflicts with EU state aid rules and procurement regulations.

The Commission adopted, on 14 December 2007, a new strategy on investing public money in high-risk technological research. 

The aim of the Communication on Pre-commercial procurement: Driving innovation to ensure sustainable high quality public services in Europe is to give the green light to procurers of innovative new products and services that address the needs of tomorrow. It thus identifies some flexibility for the member states in this area.

The new strategy “gives a green light to drive new innovative solutions to meet the challenges of the future, to co-operate with suppliers in risk benefit sharing and to co-operate across borders […] without coming into conflict with state aid rules, procurement regulations or WTO obligations,” explained Ulf Dahlsten from the Commission.  

“In fact, member states have been waiting for this green light for legal reasons – to be sure that if they start doing more of this type of research procurement, the Commission will not attack them for violation of EU state aid rules,” he said, adding that at least France, the UK and the Netherlands have been keenly awaiting the green light.

The new strategy is also a pre-condition for the Commission’s lead markets initiative, set for adoption later this week. 

It is also expected to help reduce the research investment gap with the United States, as the European public sector has enormous purchasing power of €1,700 billion but currently only 0.15% (less than €3 billion) is used for procuring the research and development of new products and services.  

According to the Commission, the US spends some €35 billion (2.5% of their purchasing power), mostly on defence, but also on health and energy. If European procurers used 2.5% of their purchasing power to procure the R&D of new innovative products and services, it would amount to some €40 billion for that purpose.

“Now that the green light has been given, there are two ways to proceed,” said Dahlsten: 

• Bottom-up: projects receive national financial and political support. Within this approach, the Commission could introduce a new programme in FP7 (an instrument allowing procurers to come together) in the next revision of the framework programme.
• Top-down: looking at common challenges, such as climate change, energy, health, ageing populations and security as well as common opportunities, such as the creation of European lead markets and better and more efficient public services. Within this approach, the Commission could establish single, policy-specific research programmes in its different directorate generals to support particular objectives.

The current barriers to European pre-commercial procurement include the fact that “European procurers are predominantly local, regional or in utilities and this has led to market fragmentation. In addition, procurers are generally averse to risk and there are still legal barriers to co-operation across borders,” said Dahlsten.

The Commission therefore thinks that the best way forward is to procure in steps (solutions, prototypes and test series) to reduce risk, involve multiple suppliers and work together across borders to develop a European market and common standard, without forgetting SMEs in the process.

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