PPI2Innovate Day: Public Procurement to Strengthen Innovation

3rd PPI2Innovate Day / Public Procurement to strengthen innovation Szekesfehervar, 14thMay 2019 Prominent MED projects' approach to PPI in Croatia REA North, Croatia, Denis Premec & Ivan Simic

Prominent MED TOPIC Prominent MED project: Nov 2016 – Jan 2020 To use Public Procurement of Innovation (PPI) approach supported by the European Union (EU) to stimulate the development of innovative technology systems and solutions in the field of energy efficiency and their market uptake Small MED municipalities as a specific challenge, bigcultural and political challenge; Partners w/o any experience in PPI Implementation of PPI investment IN KINDERGARTEN in the amount of 200K+175K EUR, to extend the buildinglifespan Approach to project conceptualisation – Inclusion of numerous external experts in one single investment • Slovenia, UK, Croatia • procurement & technical & marketing consultants, architect specialised in childcare, project documentation developers…

The Process

How did we IDENTIFYunmet needs Iterativeprocessconsisting of useful and uselesssteps Local needs – general • Improve services to citizens, Reduce costs Local needs – specific • Refurbishment of the building stock Local needs – micro • Address user needs – beyond energy efficiency (focus group) • Address operational limitations (processes, usage pattern, occupancy, back-up capacities…) Constraint– implementation of any refurbishment measures possible only during the summer break (2 months) Scalability and replicability as a requirement to attract nationwide interest

User needs Focus groups and interviewscarried out (Employees, KG manager, technical staff, Parents) Preliminaryexperts and projectdesignervisits The meeting between architect and users to provoke some new ideas Stimulationtowardideaswhichuserscan'timagine Our ownobservations and analyses, a list of possible needs Analysis of energy management system and data Availableinformation on longterm plans for use of the building How did we IDENTIFY unmet needs

APPROACH TO MARKET ANALYSIS • Demand side • Weneed to beawareofoursize • How to make projectattractiveenough for supply side? • Determinemarketsize (whoelsecouldhavethe same issues as wehave?) • Scalabilityopportunity (canweask for thelargescalesolutions to drivethecostsdown?) • Whataboutsupply side? • How to reachinternationalsupplywhenyouhaveweakdomesticmarket? • How to show credibility? • Wheredoesthemarketgo (BAU, studytourAustria, businessconferences, research, …)? • Analysisof market potential regarding existing prefabricated buildings in Croatia

Prominent MED APPROACH TO MARKET ANALYSIS • Market demandchallenges • B2Bmeetings with technicalexperts (conferences) • possibleprefabricationsolutions and directions of development • Situation: No relevantfacts on successfulrefurbishment of prefabbuildings in Croatia and neighbouring countries • Plan A: acquire data frommanufacturer 3 monthslost • Plan B: calling127 citiesalloverCroatia • Result: 25 similarprefabbuildingsfound •  attractiveenough to suppliers? Population 4,2 mil

FROM OBR TO tendering specifications Output basedrequirementsbased on determinedneeds Enhance the learning and play environment, including safety and comfort; Introduce didactic and learning elements Increase the daylight illumination within interior spaces Energy performance requirements: nZEB standard Use natural, recycled and sustainable materials where possible Respect the principles of the circular economy in all aspects of the project Worksto be completed when the building is empty and ideally over the summer holidays (2 months) in order to minimise disruption and ensure safety of children and staff ItturnedoutlaterthatsuchOBR's are toodemandingcompared to market appetite and capacity

BUILDING THE CREDIBILITY Building details Energy audit + Specific data collection Building constructionanalysis Building construction and staticanalysis (study) Thermographyanalysis (report) Budget constructionchallenges Prominent MED (200 k€) Ownbudget (mayorpersuaded) Structuralfunds – meetingwiththeministry 60+ lettersofinterestcollected In process of signpostingwider market demand Prominent MED MARKET ENGAGEMENT TOOLS USED

EstablishedcooperationwithCroatia Green Building Council (externalcontractor), Croatian EconomicChamber professionalmarket engagementsupport, supply side communication and connection, public relations Preparedproject time plan Usefulrecommendationsfromour PPI mentor "Do not plan in details" Prominent MED Market engagementactivities

Publishingarticles and news in variuosmedia Presenting the planned investment on variousconferences and workshops Prominent MED Pre-market consultationactivities

Prior InformationNotice Croatian and English languageversion Quiteaneffort to create the document PublishedMarch 2018 PIN publication in National Official Journal and in EU Official Journal (TED, Tenders Electronic Daily) First PIN published in Croatia! No response to PIN – unprepared market (it's not a tender… what is it?) E-mail campaign launched to overcome the risk Prominent MED OPEN MARKET CONSULTATIONPROCESS

Croatian and English languageversion Even more effort to create the document Published as anattachment to PIN and shortlyafter on the pilot project web page Prominent MED OMC - Market Sounding Prospectus

Prominent MED OMC - Pilot project web page

Text Prominent MED Text

Text Prominent MED Expressions of Interest

30 expressionsfilled and sent Some expressionswerebasic, some werequitedetailed 3 site visitsarranged All companiesreceivedunifiedfeedback and EOIcopy Prominent MED OMC - Expressionsof Interest

Text Prominent MED Text

Text Prominent MED OMC - Connectand Cooperatedocument

E-mail campaign launched cca 15.600 emailssent to overcome the risk to informabout the PIN, MSP, Web to promote and announce the workshop Veryintensecommunication A lot of time spent to properlycommunicate and to manage the workshop registrationprocess Prominent MED OMC - Email campaign

Prominent MED OMC - Market consultation workshop

Organised in cooperation with Croatian Chamber of Economy in Zagreb Total of 60 participants (with presenters and organising team; 47 attendees from various companies) Project designers, Educators, Contractors, Local authorities, Financial institutions (one bank), Consultants, Media,… Joint thematic workgroups at the end of workshop Latercommunicationwithinterestedparticipants Prominent MED OMC - Market consultation workshop

The main findings of our additional market research were: the market appetite for our project, and especially for innovation demand, was limited the expected intensity of innovation would be quite slim we wouldhave to rely mostly on standard energy retrofitting measures we must perform the investment project with simplified requirements, which will have innovative nature in spite of all these problems We weresure that there is at least a minimal market interest for our investment Prominent MED OMC - The findings

Disruptedsituation in Croatian construction building market has come to its peak in the middle of this year construction companies overloaded due to extremely increased demand in 2017 and especially in 2018 more than 200 million euros from EU funds placed on the market through public calls the market responded by increasing the prices for more than 30 % on average drainage of skilled workforce to Germany and other EU countriesresultedwithlimited supply capabilities of Croatian companies Prominent MED PROBLEMS AND RISKS WE HAVE FACED

By August 2018 we have become deeply aware of the market situation We have seen bidding cases where local authorities managed to get only one supplier's offer, far above estimated tender value, and in some cases no bidder has responded We realized that initiating our procurement process, without knowing what to expect from the market, would be a game of high risk That's why we postponed the tender and performed some additional market research and analysis of results of similar tendering procedures Prominent MED PROBLEMS AND RISKS WE HAVE FACED

INNOVATION CRITERIA AND PROCEDURE TYPE OUR INNOVATION CRITERIA COMPETITIVE PROCEDURE WITH NEGOTIATION

The thermal protection of building envelope Remediation of all inadequate water supply and drainage system of the building Increase of the daylight illumination of rooms by increasing the transparencythe canopy Didacticand learning elements as a part of newenvelope Damaged internalwalls remediation New final floor layer in children's rooms High-efficiency heat energy production system Ventilationsystem with recuperation Prominent MED OBR Requiredmeasures(PROCUREMENT SUBJECT)

Innovative selection criteria appliedfor first two measures (thermal building envelope, water supply and drainage system). Acceptable bidders had to prove they werecompetent of delivering the innovative solution. Due to restrictions and outcome based requirements,itwaspossible to implement measuresonly by offering innovative solutions. Innovative solutions to bespecified by each bidder in the bidding documentation (technical and implementation specifications). Prominent MED Innovation specification

Prominent MED Awarding (evaluation) criteria table

Competitiveprocedure with negotiation – TERMS OF USE if the needs of a public contractor can not be met without the adaptation of easily accessible solutions OR design or innovative solutionsisincluded OR the contract can not be awarded without prior negotiations due to specific circumstances relating to the nature, complexity or legal and financial conditions or the risks associated with them OR the contracting authority can not establish technical specifications with a sufficient degree of precision in terms of standards

Competitive procedure with negotiation – MAINSTEPS

First lessons learnt Attract the Market The low scale of investment imply the law interest of the market Scalability of the solution Only demonstrating the scalability of the proposed investment the market can be attracted

Denis Premec & Ivan Simic REA North Prominent MED https://prominent-med.interreg-med.eu info@rea-sjever.hr https://www.rea-sjever.hr https://www.facebook.com/ProminentMED/

PPI2Innovate Day: Public Procurement to Strengthen Innovation