A Pre-Commercial Procurement (PCP) Notice and Award Notice
A pre-commercial procurement allows you to:
- contract for research and development (R&D) services in a competitive way
- engage with innovative suppliers
- identify the best offer(s) the market can deliver to meet your organisation’s needs
PCP contracts are exempt from the Scottish public procurement regulations as defined in The Public Contracts (Scotland) Regulations 2015.
When to Use a PCP Notice?
PCP is a research and development services exemption. The exemption only applies to the award of public service contracts for research and development if:
- specific CPV codes are used in Public Contracts Scotland and
- one of two conditions can be met
Quickfire Guide
PCP Notice Exemption Requirements
The CPV codes are:
73000000-2 to 73120000-9
73300000-5
74320000-2
73430000-5
and one of these conditions must apply:
(a) any benefits received from the R&D are not just for the benefit of your own (buying) organisation. Any R&D benefits are shared with the market. An example of this could be publishing the outcomes from the R&D undertaken i.e. openly sharing any findings/results with the market.
or
(b) the R&D service provided is NOT totally paid for by your (buying) organisation. Examples of this could include sharing the cost of the R&D with the supplier and/or others such as other public sector organisations or charities.
What does the exemption mean?
PCP is exempted from the World Trade Organisation (WTO) Government Procurement Agreement (GPA). There is therefore no requirement to follow Procurement Regulations.
Although PCP Notices are exempt from the Public Contracts (Scotland) Regulations 2015 you are strongly recommended to:
- follow the principles of procurement
- encourage competition
- treat suppliers equally and without discrimination and
- act in a transparent and proportionate manner
Commercial volumes of products and/or services should not be purchased via a PCP Notice. If you progress to procuring commercial volumes you will need to undertake a separate procurement exercise.
Where there is likely to be a future procurement, you should carefully consider how to use the rights obtained through the PCP/R&D service. For example, you may consider making the rights obtained available to other suppliers to create a level playing field for the future procurement.
Pre Commercial Procurement Award Notice
To ensure transparency and clarity it is good practice to describe how the PCP competition will be awarded within the contract notice or documentation.
When awarding your PCP you should advertise this by using the new PCP Award Notice in PCS. Doing so will allow the tracking of “innovation” contracts within your organisation which can then be included in your annual procurement report.
Benefit Sharing Approach
With PCP any risks and benefits must be shared with bidders under market conditions in line with the Subsidy Control Act 2022.
This means that under this benefit sharing approach:
- You may leave any new intellectual property rights resulting from the PCP’s R&D activities with the participating bidders but
- You (the public sector buyer) retain the right to:
- use the R&D results and/or
- require the bidders to licence the R&D results to third parties under fair and reasonable market terms/rates
For more information on subsidies, and when they apply, please refer to the Subsidy Control document below.
Any documents you need are listed below
Subsidy Controls
(file type: docx)
Benefits of PCP
- Can stimulate innovation in the market and support the development of innovative companies, by providing a lead customer, funding and credibility for fund raising
- Can provide organisations with a faster route to commercialisation as they are working in partnership with the public sector
- Organisations can potentially commercialise the solutions to other public buyers or in other markets
- Buyers can have the right to use and licence the solution in a follow-up public procurement
- Buyers may save costly registration and/or maintenance that result from the ownership of intellectual property rights
- Can bring buyers and organisations closer together to quickly establish R&D projects
- Can obtain input/specifications for future procurements while allowing for the termination of the R&D project at any point of time (if the results do not meet expected targets)
- R&D contracts are likely to be of limited duration and may include the development of prototypes/limited volumes in the form of a test series
- This procedure may be attractive to organisations to help develop a solution that the current market has not addressed
Limitations of PCP
- PCPs cannot be used for the purchase of commercial volumes of products or services
- R&D contracts are only used in those areas where existing market solutions do not meet a public buyer's needs. Otherwise existing procurement processes should be used
PCP - Selection Process
As the PCP process uses public funds, buyers are encouraged to check that bidders have the capacity and capability to deliver prior to awarding a PCP contract. The Single Procurement Document (SPD) may be used for this purpose, as it allows bidders to self-declare that they meet any minimum requirements relating to suitability, financial standing, and technical and professional ability, without the need to provide evidence ‘up-front’. Only ‘winning’ bidders are required to submit evidence, which should be done prior to contract award. It is best practice to use Part II (information concerning the bidder and Part III (exclusion criteria) for all PCP Notices.
Part II and Part III of the SPD
Part II. Information concerning the bidder
A: Information about the bidder.
B: Information about representatives of the bidder
C: Information about reliance on the capacities of other entities
D: Information concerning subcontractors on whose capacity the bidder does not rely
Part III. Exclusion criteria
A: Grounds relating to criminal convictions.
B: Grounds relating to the payment of taxes or social security contributions.
C: Blacklisting.
D: Grounds relating to insolvency, conflicts of interests or professional misconduct.
The SPD module within PCS or PCS-Tender can be used to create and issue SPD requests.
However, it should also be recognised that the SPD was designed to be used in a wide variety of public procurement procedures and that bidders for PCP contracts may be small and at a very early stage in their development. As a result you must take extra care to ensure that any minimum requirements for participation are not disproportionately high, and that only criteria relevant to the contract are included.
With many lower value PCP contracts, it is often the case that payment is not made until specific milestones are reached therefore the risk to the public sector buyer may be low. Setting too high a barrier for participation risks excluding the very bidders that innovation is seeking to encourage.
Information on the New PCS Innovation Questions in Existing Contract Notices can be found on the next page.
A Preliminary Market Consultation Notice
New Notices have been developed in Public Contracts Scotland (PCS) to:
- assess what the market could provide
- stimulate innovation
- procure research and development
- procure a limited number/test run /prototypes of innovative solutions
A Preliminary Market Consultation Notice
Before starting any procurement activity it may be appropriate to conduct some market consultation. Regarding innovation, it may be helpful to seek or accept advice from:
- independent experts
- authorities or
- market participants
to help assess the development of the market and to plan subsequent procurement processes.
Previously you may have published a Prior Information Notice (PIN) to advertise your planned procurements. However you may not know whether to pursue a public procurement and you want to find out whether the goods and/or services:
- exist in the market or
- could exist in future
- could exist with the resources available to you
A Preliminary Market Consultation Notice (PMC Notice) has therefore been added to Public Contracts Scotland (PCS) that can help you investigate the above and prepare for possible future procurement exercises.
The PMC Notice lets you seek information from market participants and you can:
- post specific open challenges and/or specifications
- post outcome based requirements
- ask questions of the supply market
- add documents to the notice
- seek notes of interest
- allow organisations to give information through the PCS postbox
- allow suppliers to network/collaborate with one another via the Supplier Collaboration Tool
A PMC Notice is not a regulated procurement notice and is not an intention to procure goods or services. Therefore a contract cannot result from a PMC notice alone.
A PMC Notice is exempt from The Public Contracts (Scotland) Regulations 2015.
When consulting the market, you must not distort competition or violate the principles of non-discrimination and transparency.
When using the PMC notice you must:
- give suppliers appropriate time to respond
- ensure an appropriate range of PCS CPV codes are chosen to enable the issue of PCS alerts across the right range of suppliers for your consultation. This is very likely to be a much broader range of codes than you would normally use for regulated procurements
- use the information obtained from the market in a way that doesn’t discriminate against future competition
- ensure you do not disclose information forwarded by suppliers, which they have designated as confidential, under normal circumstances e.g. technical or trade secrets / commercial data etc.
You can add a market consultation document to a PMC Notice to gather information on specific projects. A blank example template is included below.
Any documents you need are listed below
Innovation Preliminary Market Consultation - Blank Template
(file type: docx)
Supplier Collaboration Tool
Sometimes a solution to a public sector issue does not exist. Innovative solutions therefore need completely new supply chains or input from several suppliers with differing specialisms e.g. in situations where one supplier does not have all of the core competencies needed.
Encouraging the formation of new supply chains can be highly desirable, particularly if SMEs can play an active role in the creation of innovative goods and services.
To help form supply chains for innovation projects, functionality has been added to Public Contracts Scotland to allow suppliers to seek collaborative partners. This is called the Supplier Collaboration Tool.
Within the PCS postbox of the new Preliminary Market Consultation notice organisations can choose to seek a partner(s) to potentially work together for an innovative procurement that may occur in the future.
When using the Supplier Collaboration Tool organisations will be asked to provide information on:
- their core competencies and
- what competencies they are looking to obtain through working with an external partner
Organisations wishing to use this functionality are asked to sign a disclaimer and a non-collusion agreement before their details are entered into the pool of suppliers for a particular PMC Notice.
When more suppliers request to join the pool, existing pool suppliers will be sent an email alerting them to new suppliers joining.
Suppliers’ contact details are supplied in PCS and it is the responsibility of the suppliers to contact one another via the information provided here. All subsequent communication between suppliers will happen out with PCS and the buyer will not be involved in the process.
Please note that suppliers' contact information is deleted when the PMC Notice is closed.
More information on new innovation PCS notices can be found on the next page Pre Commercial Procurement Notice and Award.
Research, Pilot and Innovation Register
Public sector organisations looking to innovate can sometimes carry out trials and pilots that may not have been subject to a formal procurement.
You are encouraged to add information on any research and development (R&D) work or innovative projects being undertaken in the Research, Pilot and Innovation Register in Public Contracts Scotland (PCS).
This will provide visibility of innovation projects to:
- understand projects that are underway or being planned. This information could potentially give public sector bodies a more effective route to market if something is already being developed
- provide improved governance on what projects are underway, what their status is and support smarter decision making on these activities
- reduce possible duplication and overlap of innovation activities
- provide collaborative opportunities with other public sector buyers
- provide additional reports on innovation activity
You are asked to update the register at regular intervals, under guidance from your public sector organisation’s local governance arrangements.
This register is not linked to public procurement notices and is not published externally on PCS. Access to the register is a separate permission on PCS and can be requested from your organisation’s PCS Controller.
New PCS Innovation Questions in Existing Contract Notices
When creating a Contract Notice in Public Contracts Scotland (PCS) for a regulated procurement you will now need to answer two new questions which are:
Quickfire Guide
New PCS Innovation Questions
- With reference to ensuring this procurement meets the sustainable procurement duty, before carrying out this regulated procurement, have you considered how in conducting the procurement process it could promote innovation?
- Are “innovative” works, supplies or services being bought?
Both of these questions are checkbox answers where you will respond with a Yes or No.
Highlighting innovation within public sector contracts is important for a number of reasons:
- it allows organisations to report on the creation of innovative goods and services
- by reporting on innovation, it provides the potential to commercially scale opportunities
- by understanding contracts for innovative goods and services it will allow other organisations to learn and benefit from the work of others
- it highlights the Sustainable Procurement Duty to promote innovation before a regulated procurement is carried out
The next page includes information on the Research, Pilot and Innovation Register.
Innovation Life Cycle
When looking to create a new or significantly improved product and/or service it is important that users recognise the importance of understanding the problem they are trying to solve before implementing a solution.
The Innovation Life Cycle model is based on the Scottish Approach to Service Design and the methodology of the British Design Council Double Diamond.
The above diagram shows
the three stages of the innovation life cycle model of problem, solution and then transformed services.
Problem is the first stage where you start by looking at the issues through a discovery phase. Then you define the area to focus on.
Stage two is Solution. Here you look to develop potential solutions, then deliver working solutions.
At the third stage of transformed services you adopt the solution in the organisation or sector and realise the benefits. Ultimately you will decommission the innovation at its end of life.
During the Discovery phase of the Innovation Cycle, innovation work will typically use challenges or outcome-based specifications. This is often referred to as “Open Innovation”.
Open innovation is where an organisation does not rely on just its own internal knowledge, sources and resources (such as their own staff or R&D) but uses multiple external sources such as private or third sector suppliers to drive innovation.
When looking to procure innovative goods or services, it is vital that you understand that the goods and services may not exist in the market yet, or may require work to adapt them for a specific application in the public sector.
Understanding both what the market can deliver and what work/effort may be required is crucial, particularly before making a decision on whether to pursue innovation activity. This includes what type of procurement process may be applicable.
Public sector buyers should work together with other stakeholders to define the problems (engaging fully with users) before moving to create solutions.
New innovation notices have been added to Public Contracts Scotland (PCS). You can find out more at Preliminary Market Consultation Notice and Pre Commercial Procurement Notice and Award.
Prompt Payment Frequently Asked Questions
A short video is available which explains:
- What is Prompt Payment?
- Pre-existing prompt payment policy and why it was updated
- The changes driven by SPPN 02/2022
- How to evidence payment performance and monitor prompt payment
Has the SPD (Single Procurement Document) question 4C.4 been updated to include Prompt Payment?
No, no new questions have been added to the SPD for Prompt Payment.
However the Standardised Statements have been updated with more information on Prompt Payment to help you add further information to existing SPD question 4C.4 (to further detail what your minimum requirements are).
All SPD questions are consistent whether you are using:
- the Word “paper” version of the SPD
- the SPD module in Public Contracts Scotland (PCS) or
- in PCS-Tender
However please note:
If you are using the SPD module in PCS: you will add your qualifying information e.g. standardised statements, into the specific SPD question in the PCS SPD module.
If you are using the word version of the SPD or the SPD within PCS-Tender: you will add your qualifying information e.g. standardised statements, in the PCS Contract Notice.
When will evidence of Prompt Payment be requested by the buyer during the bidding process?
As part of the tender process the SPD is used as a self-declaration form. This means that bidders are not required to produce supporting evidence to you upfront (unless there are clear reasons for doing so). Otherwise you may request evidence at the end of the first stage of a two stage procedure or prior to awarding the contract.
You should consider what Prompt Payment requirements you will have e.g. ongoing reporting requirements such as KPI’s, and include these in your tender specification.
Once the contract has been awarded, as part of the contract management process, you can track the specific Prompt Payment reporting requirements, targets and/or KPI’s that you requested from your supplier(s) on an ongoing basis.
How do I evaluate a bidder’s Improvement Plan?
When bidding for a tender if the bidder is unable to evidence at least 95% payment of invoices on time (more information can be found in the Prompt Payment in the Supply Chain station) you should request and receive an improvement plan.
Once this improvement plan is received, the bid can proceed to the next stage. You do not need to evaluate this improvement plan at this time – supplying this document is sufficient for the bid to proceed. Then, if this bid is successful, you will review and manage the improvement plan (and prompt payment performance) throughout the life of the contract as part of the normal contract and supplier management process.
How do I measure the payment performance of disputed invoices?
Only valid invoices should be used to measure payment performance i.e. disputed invoices should not be included in your payment performance measurements.
Does the Prompt Payment guidance (SPPN 02/2022) apply only to regulated procurements?
The Prompt Payment requirements (SPPN/02/2022) are relevant to all procurements where sub-contractors will be used to deliver the contract.
I am about to publish my Contract Notice but don’t yet know whether sub-contractors will be used. What do I do?
If a bidder indicates “No sub-contracting” in response to SPD question 4C.10 then no evaluation of Prompt Payment is required.
If the bidder indicates “Sub-contracting required” in response to question 4C.10 then their response to SPD question 4C.4 should be reviewed prior to contract award.
What if a bidder declines to adopt the Prompt Payment standard clause?
You should seek specific legal advice before proceeding with any decision.
Innovation
Innovation is
"the implementation of a new or significantly improved product, service or process .... with the purpose of helping to solve societal challenges or to support .... smart, sustainable and inclusive economic growth"
Quote derived from current regulations and approved by the Scottish Government Procurement Innovation Delivery Group
Examples of some current societal challenges are:
- an aging population
- the climate emergency
Buyers (and staff across the public sector) will often be required to investigate the market and procure innovative goods or services. This may be for a number of reasons such as:
- the goods and services required may not exist in the market
- your requirement involves upgrading or adapting what is currently available
- your procurement is trying to solve a unique/newly identified challenge or issue
- work is required to adapt existing goods or services specifically for the public sector
- buyers want to test the market to see what options are available before commencing a procurement exercise
The Procurement Reform (Scotland) Act 2014 contains the sustainable procurement duty which states it is the duty of the public sector organisation (when it is relevant and proportionate to do so): "before carrying out a regulated procurement, to consider how in conducting the procurement process it can, among other things, promote innovation”
The Impact and Value of the Sustainable Procurement Duty report received buyer feedback that more support for innovation was required, whilst responses to the Supplier Survey showed that considering innovation in procurement exercises could be improved.
What has Changed?
In response to this feedback, new Public Contract Scotland (PCS) notices as well as tools, guidance and reporting are now available to help you procure innovative goods/services.
Buyers are advised to use these new notices, as well as the additional resources, to support procurement of innovation, where applicable. The new developments are:
- a preliminary market consultation (PMC) notice. This includes a Supplier Collaboration Tool whose new functionality in PCS allows organisations to network and work together on an innovative project
- a pre commercial procurement (PCP) notice
- a pre commercial procurement (PCP) award notice
- new innovation questions added to the existing PCS Contract Notices
- the introduction of a new Research Pilot and Innovation Register
- Scotland Innovates, a new supplier-led innovation service which allows suppliers and individuals to submit innovative proposals to the entire public sector. Scotland Innovates contains: news; event details; useful resources and case studies
- new guidance in the Procurement Journey. Additional new guidance will be added here soon
Please note there has been no change to the Innovation Partnership procurement process.