Item 6 on the agenda is a statement by the Minister for Skills and Science on the small business research initiative and I call on the Minister for Skills and Science, Julie James.

Thank you, Deputy Presiding Officer. I welcome this opportunity to update Members on Wales’s progress in developing our small business research initiative, more commonly known as SBRI. In 2013, our ‘Innovation Wales’ strategy, amongst other things, urged a more imaginative approach to innovation in public service delivery and Government procurement. In the same year, in partnership with InnovateUK, Welsh Government implemented a £3 million catalyst programme to inspire the Welsh public sector and businesses to engage in SBRI competitions. The UK model was based on a long-standing United States programme, the small business innovation research, or SBIR. Working with small and medium-sized enterprises, this spends around $2.5 billion each year, developing solutions for federal government needs, and uses procurement spend, not government grants. In the UK, SBRI contracts with companies have increased from under £15 million in 2010 to over £50 million this year. A wide range of innovative products and solutions have been developed, and the merits of the SBRI mechanism are now being widely recognised across government and industry. In Wales, SBRI is helping to make a transformative impact on practical public sector problems, as well as helping to solve some of society’s grand challenges, highlighted in ‘Innovation Wales’.

Each SBRI competition focuses on an area of public sector service where solutions either do not yet exist or where partial solutions might be improved. Our first round of competitions generated real interest across the Welsh public sector and challenges included Cardiff council’s problem of how to retrofit energy efficient solutions into its traditional and historic buildings, Abertawe Bro Morgannwg University Local Health Board’s drive to improve the health and well-being of our people through the better use of collective health data, Natural Resources Wales’s issues in controlling livestock movement to reduce the impact of agriculture on the water environment, and Betsi Cadwaladr University Local Health Board’s ambition to improve patient care by helping nurses and carers reduce administration duties, so spending more time with patients. The target for this last challenge was for nurses to spend 10 per cent more time with patients, and just think how valuable 10 per cent more patient time would mean to those patients, their relatives and hospital efficiency. After two years of practical collaboration between the hospital’s nurses and a small Bangor start-up company, a prototype software solution has been developed that promises to increase nurses’ time with patients not by the promised 10 per cent but, potentially, up to 23 per cent. The success of these first challenges showed us that the public sector can be an effective, intelligent, lead customer, helping to grow innovative Welsh companies and create jobs, growth and welfare for Wales.

I now want more SMEs to become involved in the public sector procurement process, to use research and development funding to develop new solutions to tough problems. And I want the challenges to be socially relevant, having real benefits for Welsh people. We learnt from the pilots that there was a growing willingness to innovate across the Welsh public sector and so, along with InnovateUK, we have run two further calls. These have a declining public intervention rate as the programme gains momentum and the benefits to all parties are recognised and appreciated. Although not limited to small businesses, the competitions have seen strong representation from our SMEs. Funding levels will vary, but projects typically span two or more years, with initial funding of up to £100,000 for each successful company. The best will then be able to compete for further contracts of up to £1 million and more to commercialise their ideas.

Under the programme, we have supported Natural Resources Wales to improve the regeneration of native species and soil health, which will fight the impacts of invasive non-native species like Japanese knotweed. We have supported the north Wales brain injury service to encourage patients’ independence in cooking tasks, to ease the pressure on social care and enhance people’s quality of life. We are helping South Wales Police develop innovative predictive analytic tools, which will make better use of their resources and deliver an improved service to the communities of south Wales.

The Welsh Government is also successfully using the programme. Our transport department held an SBRI competition to develop solutions to help reduce the number of motorcyclists killed or seriously injured on our roads. Two projects were chosen and the first one is now completed. Armourgel Ltd has developed a motorcycle helmet liner that will significantly reduce the impact to a rider’s head during a collision. This can make the difference between a serious brain injury and a minor one. The second project has developed a junction alert system, which will soon to be trialled on Welsh roads. This project will be able to test the system in the peak motorcycling season, and by September, the company will have fully tested the system in all weather conditions and will report on its market potential. Both of these projects have the potential to save the lives of motorcyclists, not just on Welsh roads but across the world.

This programme is not only promoting a culture change in the public sector; it has been showcased by Innovate UK as an example of best practice. Other devolved regions are learning from Wales’s example, and it’s also attracting attention from Ireland, Sweden and Australia. To date, 29 public sector contracts for research and development have been awarded to Welsh business, valued at over £1.8 million. And in total, 66 contracts valued at £4.9 million have been awarded by the Welsh public sector. Over 300 enterprises have been assisted, and over £2 million in match funding has been leveraged into Wales from Innovate UK and UK Government departments. Collaborations have been forged with local authorities, health boards, Natural Resources Wales, police forces and Welsh and UK Government departments. So far, three central Government departments have contributed financially to Wales-led challenges.

We will continue to work closely with Innovate UK as they seek to maximise the impact of SBRI. My aim now is for our SBRI programme to become a mainstream tool in the Welsh public sector, promoting innovation and driving forward our technological potential. SBRI can open up huge opportunities for Welsh businesses and help solve some of the grand challenges we will all face in the future. We plan to use it. I hope that you will support this aim. Diolch.

I have the pleasure to follow the Minister and to commend her on this statement, and indeed the approach that the Welsh Government has adopted in putting innovation right at the heart not only of public procurement but of public policy. We’ve heard, I think, so many times, the public sector, probably rightly, berated for adopting an approach that is often low cost over wider considerations of value and opportunity, and certainly one that is risk-averse. This programme is the opposite of that, and as she rightly said, it’s originally modelled on the American small business innovation research project, which I understand is about to be culled by President Trump. So, probably another reason to believe that we’re on the right lines in championing the approach that she has outlined.

It would be interesting to know, in that spirit of broad support, a little bit more about what the intentions are for the expansion of this project, both in terms of hard cash and in terms of the scale of the programme, but also, to what extent it could be more mainstreamed. We heard the Minister refer to a series of calls. Could we actually institutionalise it, in a more fundamental sense, so that it’s part and parcel, not as a fringe element within our public procurement practice, but right at the heart of procurement? We understand from the Royal Academy of Engineering’s review of the English initiative that there is some issue about how you measure impact. And, actually, I really commend her as well for bringing some life to some of those innovation stories. We often talk in public policy in broad generalities. It is great to drill down into the detail and hear that these are tangible impacts that are going to make a real difference in terms of the quality of life of the people of Wales.

But with every programme, it is important that we have some metrics. And while some of them will be qualitative, and by their very nature, some of them will have to be long term, I think it’s always good to have some numbers as well. And, so, I’d be interested to see—. I know that currently we don’t have, possibly, a detailed evaluation framework. In expanding the programme, I would urge her to look at the kind of innovation impact metrics in terms of return on innovation investment et cetera that could be put in place.

And finally, in the spirit of institutionalising this approach, which I think is very exciting, the opportunity is there for Wales to become a test bed nation where, actually, the world does come to our door, because we’re very good at identifying innovative solutions to the same public service and public policy challenges that the world is facing. Could we have, in that spirit, the creation of a national innovation body that will build on the excellent foundations that have been laid in this programme, but actually can drive forward on that basis and create a reputation for Wales as an innovation nation?

Thank you for that, Adam Price. I agree with you that it’s a really exciting initiative, and we have had quite a lot of interest, as I said, from elsewhere to see how we’re doing it here in Wales. And I also agree that we do need to develop some metrics as we go forward. A lot of this, however, has been specific responses to specific grand challenges or problems, and developing the metrics to allow the risk, if you like, whilst also measuring the output will be a task in itself, but we will be taking that forward. If the Member has any particular views on how that might be structured, I’d be very grateful to consider them.

What we’re looking to do is mainstream it a little bit in the way that we respond to challenges and drive some of the technological improvements using some of the Government data systems that we have. The Member may know that—separately to this at the moment, but we can integrate the two—we’ve also been running some data challenges and some hackathons, as they’re called, and unconferences—these are all terms relatively new to me, but that are understood by the small communities of people who support them—to identify challenges that can be solved through our data sets as well, as some of the social, environmental and mainstream core challenges.

In terms of the budgets, they are currently funded out of the core Welsh budget. The budget so far has been just over some £6 million. We’re just looking to see what else we can fund. We’re looking to see what our public sector partners might do, and what we can do with procurement spend, and so on. So, the idea is to drive it into mainstream procurement thinking with a view to solving problems, not just buying stuff.

So, I largely agree with most of the points you made, and we will be taking it forward in that spirit.

Thank you, Minister, for your statement. Like Plaid Cymru, we’re also pleased to see that there’s been some progress with helping to develop some solutions to some of the pressing problems that we have, particularly in our public services. But, of course, this initiative did originally stem from the ‘Innovation Wales’ document, and that identified four key areas—smart specialisation areas I think they were termed. They were: life sciences and health; low-carbon energy and environment; advanced engineering and materials; and ICT and the digital economy. I wonder what the balance of bids were in the first round. Did they actually meet the targets to find particular problems that could be resolved within each of those key specialist areas? If there weren’t sufficient numbers of bids coming forward in some of those particular areas that were previously identified, is there going to be any energy put into trying to find potential people to bid for addressing some of the solutions to those particular problems?

I’m also very pleased, obviously, that this is supposed to be a public and private partnership, but clearly, many of the projects that you identify—and you hinted at this in your statement—have really over-egged the benefit, I suppose, to the public sector of some of the things that have been worked on. And I heard what you said about trying to emphasise the wider benefits, if you like, particularly to the private sector as well in order to encourage some more investment in. I wonder what sort of areas you were thinking of when you made that particular statement. To me, it seems very much that things like ICT and the digital economy—we were talking about some of your other responsibilities earlier on in First Minister’s questions, such as the access to broadband, for example—there may be other solutions that could be developed with these sorts of research funds, and I wonder whether you could make a comment in respect of the desirability of that. Obviously, you do, I hope, advertise widely the opportunities to bid. Could you tell us what sort of platforms you do advertise on so that we can encourage people who may be watching today—small businesses et cetera, and other research hubs and facilities—to make themselves aware of these funds and to find out whether they might be able to draw any down?

Can you also tell me—? I know that our universities are obviously centres of excellence for research, but our further education colleges are getting more and more involved in this particular sphere. You mentioned some of the construction related issues, for example, with Cardiff council, and I wonder what level of engagement there is with this particular research and innovation fund from the further education college sector, if any, at the moment, and if there isn’t any, what action you might take as a Government in order to better engage them.

Just finally—this is on the wider procurement issue, and I appreciate that this is not completely your responsibility; it’s more with the Cabinet Secretary for finance—but obviously, on procurement, it’s really important that smaller businesses and local businesses are able to engage in some of the local solutions that they might have to offer, but as we’ve increasingly gone towards a more national procurement strategy, for understandable reasons, particularly with the economies of scale, many of those smaller businesses and smaller firms feel a bit squeezed out. So, I wonder what action has been taken with this fund and perhaps more widely, to ensure that those smaller businesses that might be regional, or even smaller, are actually being encouraged actively to participate in these sorts of exciting and innovative schemes.

Thank you. That’s quite a range of questions and I’ll do my best to answer them. In terms of ICT and broadband, for example, one of the things that the Member will know is that we’re looking at what we’re going to do for the end of the current project and for the remaining few per cent of the Welsh population and premises not covered. And this is certainly one of the things that we might well consider to do that and to drive innovative solutions in particular areas. Once we have a map of all the premises that are not included in the current contract, which we will have very shortly, then, we’ll be able to consider how we might structure such a competition. But it’s an excellent example of something that might be worth picking up with this. As I said to Adam Price, there are other data-driven ICT solutions that might happily sit inside this initiative as well.

In terms of what we’ve done so far, we’ve awarded 44 contracts at phase 1 stage. There were a further five small contracts awarded under a slight predecessor to it, which are not included, but are really part of it. And there are 22 at phase 2 so far. Thirty-eight per cent of that was won by Welsh organisations and 44 per cent of all contract awards were made to Welsh organisations. We had five Welsh businesses that were successful in non-Welsh SBRI competitions, so we’ve supported our businesses to apply outside of Wales. We had four public bodies running more than one challenge at the same time and we’ve now got two Welsh businesses that won our challenges, potentially inward investing. Because what we do is, when we get somebody interested in taking up one of the challenges, we also support them with our business support programmes to persuade them to come to Wales, effectively, and we use that concept to get there. So, it’s been very successful on a number of fronts.

We’re very keen on running it into standard procurement practice and we encourage SMEs to apply for it. It’s not confined to SMEs—anybody can apply—but actually, we’ve had quite a lot of interest from SMEs and I’m very happy to look at any way of encouraging even more SMEs to apply for it in future. The idea is obviously to reward the good idea and then help the company commercialise it, so there’s no scale necessary to start that process off.

Thank you very much. Finally, Hefin David.

Diolch. I think Darren Millar asked so many questions he was bound to hit one of mine, and his last question did. It wasn’t exactly the question I was going to ask, but it kind of nicely follows on.

One of the things that the Minister said was that funding levels will vary, but projects typically span two or more years, with initial funding of up to £100,000 leading on to further competition for contracts of £1 million. It’s my view that, arguably, small firms don’t necessarily, particularly in the microfirm and slightly larger sector, compete with each other but tend to build networks of mutual support and trust. I wonder whether it may be possible for firms to apply in clusters to develop clustered projects—organised projects that are connected with each other—in order to achieve that, and how would the Government make that happen, and is there a further opportunity then to develop communities of practice and, kind of, social learning networks that might grow from some of these competitions?

I think that’s a really interesting idea. So, there’s nothing to stop collections of small businesses, community interest groups—it’s not closed in any way, so anyone can apply for it. I’m more than happy to explore the idea of assisting collections of businesses to apply as well; although we haven’t done that yet, it’s a good idea well worth taking forward. There’s nothing to prevent it, but nor have we encouraged it so far, but I’d be happy to look at that. There are probably some legal bits to get over, like you’d have to have a lead contract entity and so on, but I’m sure we could smooth out some of the difficulties around that, and I’m very interested in the communities of practice idea, the clustering arrangement, and generating more solutions to the challenge out of that clustering and, sort of, communities of practice-type arrangement.

What we could do is we could look to see if we can involve public or communal assets, which would be particularly suited to that kind of thing. So, just off the top of my head, if we were looking at more community-based projects—footpath preservations, and opening up the countryside, access, that sort of stuff—we might encourage solutions to some of the challenges we have in Wales to get our communities more connected to their landscape, and get groups of small SMEs, community-interest companies, involved and engaged in that. So, it’s certainly something well worth looking at. And as I said to Darren Millar, this scheme is particularly beneficial for early stage small or medium-sized enterprises because we’re happy to help them commercialise their idea and to help them develop it. So, it’s specifically good for small companies in that way. We’re also happy for them to retain all of the intellectual property rights and so on, because it’s their solution to our problem, so you could get some good communities of practice and some social capital developing out of some of the IP and so on. So, I think it’s an excellent idea worth exploring, and we’ll certainly take it up in the next round.

Thank you very much, Minister.