Which objective(s) does the Commission pursue?

• Continue simplification. Horizon 2020 has made great progress in terms of simplification compared to the seventh framework programme for research and innovation covering the period 2007-2013 (FP7), but simplification is an ever continuing undertaking, requiring constant improvements. Further simplification should be pursued to support faster innovation cycles and lower administrative burden. Simplification remains a continuing endeavour in Horizon Europe (covering the period 2021-2027), building on the achievements of Horizon 2020 (covering the period 2014-2020), which reduced the administrative burden and costs for applicants, and made it more attractive for newcomers and small and medium-sized enterprises (SMEs) through new elements like its funding model (single reimbursement rate and a flat rate for indirect costs), the Participant Portal, and e-signatures. Beneficiaries and stakeholders have reacted very positively¹.

• Improved coherence and impact for European partnerships. A clear rationale for the use of research and innovation (R&I) partnerships will be established, based on distinct and clear intervention logics that are tied to policy objectives. A new set of criteria for establishing future European partnership, based on impact and openness, will be applied along their full life cycle (including their phasing-out). Overall, this will result in a more rationalised and coherent set of partnerships and will improve the overall coherence of the European research and innovation ecosystem.

• Strategic planning: In addition, a simpler governance structure with ad-hoc and flexible advisory mechanisms and programme committee configurations will improve the rationalisation and simplification of the planning process, hence delivering results more efficiently and transparently.

• Simplification and more flexibility in the funding model: The benefits of the current funding model have already largely materialised²: simple financial management of projects; reduced complexity of the financial rules; reduced financial error rate; acceleration of the granting processe and more synergies between audits.

Building on the achievements of Horizon 2020, simplification remains a continuing endeavour also in the new programme. Several improvements have been made to streamline delivery for impact. The programme will aim at further simplification within the present real cost reimbursement system with its simplified funding model. Increased use will be made of project funding against fulfilment of activities (i.e. lump sum) and other simplified forms of funding allowed by the new Financial Regulation. Cross-reliance on audits across EU programmes and acceptance of usual cost accounting practices will be developed. To increase flexibility, the programme will support the intersection of disciplines and sectors and allow allocation of funds between and within pillars to react swiftly to emerging issues or challenges. Further improvements to the proposal submission and evaluation process will be envisaged by continuously trying to reduce the 'time to grant' and by improving feedback to applicants. The evaluation criteria, process and involvement of independent experts will underscore the programme's excellence and impact. Innovation support schemes will be streamlined under the European Innovation Council, while the complementarity between grants and financial instruments could be reinforced through blended finance.

Estimated savings and benefits:

Economic costs and benefits of the Framework Programme Horizon Europe (as listed in the Impact Assessment)

1 European Commission (2016), Report on the Horizon 2020 Simplification Survey.

2 European Commission (2017), Interim Evaluation of Horizon 2020, SWD(2017) 220, book, p. 79.

Outcome of Legislative Procedure:

Overall, the integrity of the Commission proposal has been widely preserved. Co-legislators agreed on the main intervention logic linking Programme level objectives to impact pathways; the three-pillar structure; the missions as novelty; the new approach to European R&I partnerships; the European Innovation Council as one stop shop of innovation; and the proposed continuity in the Rules for Participation.

Main changes compared to the Commission proposal concerned:

• Widening participation and spreading excellence. New definition of “widening countries” introduced (i.e. with a fixed list of EU Member States including a reference to outermost regions), and a budget cap (i.e. at least 3.3% of the overall Horizon Europe budget).

• Budget: the co-legislators distributed the main part of the budget as a “pro-rata haircut”, allocated contributions from associated countries, indicated in the basic act the distribution of the additional NextGenerationEU allocation.

Throughout the Programme, administrative simplification is sought, in particular the reduction of the administrative burden for beneficiaries.

The Commission has issued guidance to beneficiaries, detailed guidance on the structure, budget and details on how to prepare proposals, avoiding technical vocabulary, legal references and jargon. The guide is periodically updated, based on practical experience and on-going developments. It is available online (https://ec.europa.eu/info/funding-tenders/opportunities/docs/2021-2027/horizon/guidance/programme-guide_horizon_en.pdf).

The Commission is committed to using more lump sums and unit costs in Horizon Europe, with the double aim to further simplify the programme and reduce the financial error rate. These simplified cost options (SCOs) have an important potential to reduce administrative burden and make Horizon Europe more accessible by removing the need to report real costs. Especially SMEs and newcomers stand to benefit from lump sums and unit costs because they often lack the experience and administrative capacity to handle real costs. Once signed, a lump sum grant is paid out following a pre-agreed payment schedule against fulfilment of the activities in the work plan. Neither financial records nor timesheets are required, which beneficiaries generally consider a cumbersome burden. A positive side effect is the greater focus on content and achievements to ensure proper implementation of lump sum grants.

The Commission expects significant efficiency gains from SCOs in the medium term, both for participants and inside the Commission services that implement Horizon Europe. These savings relate to the fact that there is no reporting of costs and resources and, consequently, no checks and audits of these elements. This implies less administration for beneficiaries and a reduced need for financial staff in the funding bodies. Beyond these qualitative pointers, savings cannot be quantified yet. Initially, the transition to lump sum funding and the necessary change management require an upfront investment (e.g. reorganisation and reskilling, new processes, and the internal and external learning curve to adapt to them). Accordingly, lump sum funding is being introduced in a stepwise manner, with the first significant wave of lump sum grants starting around mid-2023. Savings should successively materialise after that and become measurable.

Implementation report: expected in Q2 2022