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Existing power installations to undergo innovative overhaul

The National Centre for Research and Development (NCBiR) is testing pre-commercial procurement on the energy market. More such projects will soon be launched in other sectors. What is PCP and who can benefit from it?

The National Centre for Research and Development plans to distribute PLN 190 million among contractors who find a solution for use of class 200 MWe power installations in the future. This is the total value of the three-phase project. A dozen or more entities may be involved in the research.

Procurement of innovation does not require public procurement procedures to be followed if the public sector acquires research and development services that do not solely benefit the contracting authority. But under the pre-commercial model, or “PCP” as it is known, the principles of non-discrimination, equal treatment, transparency and competitiveness appropriate for procurement procedures have to be followed. The more competitors, the greater the likelihood that innovation will be produced.

In PCP, the contracting authority and the contractor share the risk. The contractor accepts that it has to finance the portion of R&D not covered by the financing provided by the public entity. In exchange, the contractor retains the rights to the work product.

Another common feature of PCP is the phases, usually three, in which contractors are shortlisted, the innovative concepts become increasingly concrete, and the work progresses sufficiently for an operational prototype to be created. PCP does not include the public procurement phase, but ends when the contracting authority has formed a clear idea of what it wishes to order.

At each phase of PCP, work to solve the same research problem is conducted independently by a number of contractors. The rules for the ongoing NCBiR proceedings envisage that the conceptual plan for the new solution during phase one can be developed by as many as twelve independent teams. A maximum of six of them will proceed to the second phase. They are required to demonstrate that there is a real possibility of achieving the expected results. Among other things, work during this phase will take the form of experiments conducted at the true scale of the functioning energy facility. Only the two best contractors devising a method that can be commercialised will take part in phase three. Any entity interested in realising this method will be able to obtain a licence and modernise the operational energy facility according to the method. The solution is supposed to be innovative and low-budget.

PCP works according to the principle that only entities that take part in a completed phase can proceed to the next phase. Entities that do not manage to continue are free to develop the innovation they created in the course of the procedure on their own. Depending on the progress made, the organiser of the procedure can opt to end work before the prototype phase. But if an innovation is created that meets a need that truly exists on the market, then any interested entities capable of delivering the solution can participate in the public tender held after the PCP is concluded, including contractors not involved in the research work at the PCP phase.

The first PCP procedure will reveal whether there is a return on the funds spent on R&D. In the summer of 2021, the owners of 200 MWe class energy facilities may have an innovative and low-budget method ensuring a high level of availability of those facilities at varying levels of demand while maintaining compliance with environmental norms. If the adopted formula turns out to be effective, then more procedures of this kind can be expected, as PCP enables R&D to be funded with public money but without the effect of state aid. Forty-eight installations with parameters meeting the ground rules of the procedure underway at NCBiR are currently operating in Poland.

Anna Prigan, Infrastructure, Transport, Public Procurement & PPP practice, Wardyński & Partners