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Case study - Joint pre-commercial procurement for better cloud adoption in the public sector

The Procurer

We are a project co-funded by the European Commission under the Framework Programme for Research and Innovation (FP7) that aims to support public sector cloud use as collaborationbetween public authorities and industry. Supported by
stakeholders from the public sector, industry and standardisationbodies, the main objectives of our project are to:
» Identify obstacles for cloud use in the public sector;
» Define services that overcome these obstacles;
» Procure research from industry to find innovative solutionsfor cloud services.
 
The project addresses the objectives of the European Cloud Partnership and helps partners to adopt a well-defined European Cloud Computing Strategy for the public sector. The project started in June 2013 and runs until November 2016.We use pre-commercial procurement as an instrument for public sector innovation. Pre-commercial procurement permits industry to develop R&D innovative cloud services that best fit public sector needs, but also provides public procurers the possibility to jointly discuss with industry the potential of cloud services.
 

Why the cloud?

Five public entities from five different countries in the EU came together to start a procurement action of cloud services.The objective was to research and demonstrate solutions to overcome obstacles for the adoption of cloud computing by the public sector. Their objective was to address issues that are encountered when trying to purchase cloud services as single customers.
The main driver behind these organizations wanting to procure cloud services was to lower the Total Cost of Ownership; to shorten the procurement and service provisioning process; and to purchase services that fit their needs.
 
The following issues in purchasing as a single customer were identified:
» Imbalanced negotiation power between cloud serviceproviders and customers (especially with big cloudproviders). Services cannot be customised according tocustomer needs and usually no price negotiation is allowed;
» The number of services available / offered is limited or theservices that customers want to buy are still immature;
» There is a lack of confidentiality assurance in IPRmanagement and a lack of service interoperability;
» SLAs are not clear, badly defined and cannot be compared;
» There are stringent legal and regulatory requirements.
 

How we procured cloud services

Joint pre-commercial procurement was considered as the best way to procure as the solutions available on the market did not fit the public sector needs. In pre-commercial procurement the dialogue with industry is a major task. This allows cloud
customers (the public procurers) to run a comprehensive market analysis which is helpful in obtaining an overview of the state of the art and of the available technologies.The PCP process itself is separated into three phases. Each phase is open for competitive solutions that are provided by bidders. The phases comprise solution exploration, prototyping and test implementation. After each phase bids are evaluated to find the best solutions.The main result of a pre-commercial procurement is a pilot to test the solution.
A second procurement action is then needed to purchase the product. This can be carried out as a commercial procurement or as a public procurement of innovation (PPI) action.The purpose of the tender that we published was to researchand demonstrate solutions to overcome obstacles for the adoption of cloud computing by the public sector. The PCP invited suppliers to bid for any or all of three services (lots),each of which provides a framework agreement for research
and development services.
 
Three lots were identified for a total budget available of 4 million:
 
» Federated certified service brokerage
» Secure legislation-aware storage
» Legislation execution.
 
The tender remained open for four months. A total of 29 service providers from 11 countries – Italy, Austria, Estonia, France, Germany, the Netherlands, Romania, Slovakia, Spain, Switzerland, and the United Kingdom - submitted their bids. A variety of economic operators were involved: 45% SMEs, 24% large companies and 31% public research bodies. Most of the offers, 13 in total, were submitted for lot 1 (federated certified service brokerage), followed by 7 offers for lot 2 (secure legislation-aware storage) and 4 offers for lot 3 (legislation execution). The evaluation committees are currently finalising the evaluation of the tenders. All three evaluation committees are composed of three experts from different countries. 
 

What we learned

What worked well:

» The approach of a pre commercial procurement action: The dialogue with the industry helped the public procurers to better understand what the cloud market has to offer and to identify where the gaps are.
» The joint procurement action: Different European ministries compared their needs and their desiderata and they realized that they have similar requirements. This can be seen as a harmonization of requirements. The mapping of these
requirements to available products helped to identify the challenges needed to request R&D services in Cloud Computing for the public sector.

What didn’t work well:

» Writing the tender was time consuming: As PCP is a relatively new instrument in procurement, the preparation of the contracts is different from commercial procurement and needs to be developed carefully which was time-consuming. However, the experience with PCP will be shared with other public sector procuring entities and can, as best practice, be shortened in the future.

Wish list:

» Currently, the public sector has a complex and long developed system landscape, where system components are integrated from different vendors. Based on that culture and in order to avoid vendor-lock-in, the procurement of cloud services will not change that behavior. Cloud services will be procured from different vendors. A pre-requisite for this is that these services are standardized and interoperable.
» The public sector needs to be in line with the procurement legislation, and thus, open competition is one of the key factors they are bound to.
» Regarding cloud marketplaces, the cloud services available via them need to be in a form which allows competitive selection of cloud services. They should also fulfill the procurers requirements, for example in terms of potential certification, openness for integration, comparison of SLAs.