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PRE-COMMERCIAL PROCUREMENT (PCP) Challenge requires R&D to get new solutions developed. Problem clear, but pros / cons of several potential competing solutions not compared / validated yet. No commitment to deploy (PPI) yet. Public sector buys R&D to steer development of solutions to its needs, gather knowledge about pros / cons of alternative solutions, to avoid supplier lock-in later (create competitive supply base). Public sector buys R&D from several suppliers in parallel (comparing alternative solution approaches), in form of competition evaluating progress after critical milestones (design, prototyping, test phase), risks & benefits of R&D (e.g. IPRs) shared with suppliers to maximise incentives for wide commercialisation.
PUBLIC PROCUREMENT OF INNOVATIVE SOLUTIONS (PPI) Challenge requires solution which is almost on the market or already on the market in small quantity but not meeting public sector requirements for large scale deployment yet. No R&D involved (R&D already done, or no R&D needed to solve problem). Public sector acts as launching customer / early adopter / first buyer for innovative products and services that are newly arriving on the market (not widely commercially available yet). Public sector acts as facilitator establishing a buyers group with critical mass that triggers industry to scale up its production chain to bring products on the market with desired quality / price ratio within a specific time. After potentially a test and/or certification, the buyers group purchases a significant volume of products.

By Lieve Bos (2012)