The boundaries of what R&D may cover under PCPs are set by the following two legal frameworks:
- the 2014 EU State aid framework for research, development and innovation (R&D&I)[1]; and
- the WTO Government Procurement Agreement (GPA).
According to the 2014 EU State aid framework for research, development and innovation (R&D&I), in order for PCP to exclude State aid, the object of a PCP contract must fall within one or several categories of research and development defined in this framework and must be of limited duration. Additionally, it may include the development of prototypes or limited volumes of first products or services in the form of test series, but the purchase of commercial volumes of products or services must not be an object of the same contract. The R&D categories defined in the State aid framework that may be covered by PCP are:
- ‘fundamental research‘ means experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundations of phenomena and observable facts, without any direct commercial application or use in view;
- ‘industrial research‘ means the planned research or critical investigation aimed at the acquisition of new knowledge and skills for developing new products, processes or services or for bringing about a significant improvement in existing products, processes or services. It comprises the creation of components parts of complex systems, and may include the construction of prototypes in a laboratory environment or in an environment with simulated interfaces to existing systems as well as of pilot lines, when necessary for the industrial research and notably for generic technology validation;
- ‘experimental development‘ means acquiring, combining, shaping and using existing scientific, technological, business and other relevant knowledge and skills with the aim of developing new or improved products, processes or services. This may also include, for example, activities aiming at the conceptual definition, planning and documentation of new products, processes or services. Experimental development may comprise prototyping, demonstrating, piloting, testing and validation of new or improved products, processes or services in environments representative of real life operating conditions where the primary objective is to make further technical improvements on products, processes or services that are not substantially set. This may include the development of a commercially usable prototype or pilot which is necessarily the final commercial product and which is too expensive to produce for it to be used only for demonstration and validation purposes. Experimental development does not include routine or periodic changes made to existing products, production lines, manufacturing processes, services and other operations in progress, even if those changes may represent improvements;
As explained in the R&D&I State aid framework[2], the different R&D categories can also be considered to correspond to Technology Readiness Levels 1 (fundamental research), 2-4 (industrial research) and 5-8 (experimental development). As PCP is driven by a specific procurement need (with a concrete use case in mind), fundamental research is not the aim of a PCP. However it is possible that in order to complete the industrial R&D needed for the PCP, some fundamental research aspects need to be further elaborated as well. Thus, PCPs typically cover activities such as solution exploration and design, prototyping, up to the original development of a limited volume of first products or services in the form of a test series. According to Article XV (1)(e) of WTO GPA 1994 and Article XIII(1)(f) of the revised WTO GPA 2014 that defines original development as the boundary of where R&D stops, original development of a first product or service may include limited production or supply in order to incorporate the results of field testing and to demonstrate that the product or service is suitable for production or supply in quantity to acceptable quality standards, but does not include quantity production or supply to establish commercial viability or to recover R&D costs
[1] Commission, ‘Framework for state aid for research and development and innovation’ C(2014) 3282. [2] See footnote 1