Wednesday, 27 March 2013

The (less) mysterious SME instrument

Following our last blog, the EC contacted us with up to date information on their ideas for this instrument to be introduced in Horizon 2020. This funding scheme involves an optional first stage, a feasibility study, and a second stage which is a project.

For the first stage, EC funding is likely to be limited to €50k, because this ceiling allows simplifications regarding checks on the company. The funding would be paid as a lump sum, meaning that the payment is made if the work is completed, without reference to the actual cost of the work, so simplifying financial administration.
For the second stage, the EC will contribute €1-3m. The EC is currently exploring how this can also be paid as a series of lump sums against deliverables. It is not clear whether each lump sum will be below €50k, which would imply 20-60 payments per project: hardly administration-lite. But the use of lump sums will not only avoid accounting for actual costs incurred. It also avoids the EC’s rules on subcontracting. So SMEs could involve, for example, research and technology organisations in their projects without obtaining alternative quotes.

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Work under the SME instrument would be close to market: technology readiness levels (TRL) five and six and above. TRL is used by some national defence departments and the European Space Agency. Level 5 means a “component and/or breadboard validation in a relevant environment”; level 6 means “system/subsystem model or prototype demonstration in a relevant environment”. It is not clear whether research itself would be funded, even though it is allowed by the proposed legislation.

The EC’s ideas are just that: they still have to be agreed by the legislators.

Friday, 1 March 2013

The mysterious SME instrument

In Horizon 2020, SMEs will be able to participate in all parts of the programme, just as they can in FP7. In addition, there will be an “instrument” specifically for them, just as there is R4SMEs in FP7. The instrument – a set of rules defining who can participate and how – allows a minimum of one company to make a proposal, on any topic in the H2020 areas Societal Challenges and Enabling & Industrial Technologies. Only SMEs can apply. An optional first stage would be a feasibility study, the second stage a project.

It looks likely that EU funding for stage one will be in the form of a lump sum, up to either 75k€ or 100 k€, depending on which rumour you prefer. Lump sum means the payment is made if the work is completed, without reference to the actual cost of the work.

Funding for stage 2 projects, costing €1-3m, would be based on the traditional “actual costs” approach. The projects might involve subcontracting tasks to research providers such as universities and research organisations. Under the EC’s proposals, the SMEs would choose the research provider by competitive tender. However, this removes the incentive for research providers to stimulate SME participation, which played a large role in encouraging SME participation in R4SMEs. The European Parliament has proposed an exemption to the competitive tendering rule: whether this can be agreed with the Council of Ministers remains to be seen.

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