Marché intérieur, industrie, entrepreneuriat et PME

Defence procurement

Defence procurement

Opening up the internal market for defence products will improve the competitiveness of the sector’s technological and industrial base. The persisting fragmentation of European defence markets leads to the unnecessary duplication of capabilities, organisations and expenditures. As a result, the industry is lacking the necessary economies of scale and risks losing critical expertise and autonomy in key capability areas.

Need for more effective implementation of EU defence procurement rules

A European Commission evaluation report on the Defence Procurement Directive 2009/81/EC concluded that it helped open up the internal market for defence but that much more progress is needed.

The Report states that the Directive led to an initial increase of defence procurement in EU-wide competition, but that a significant share of expenditure, especially for high-value, strategic, complex defence systems, is still done outside the Directive. Moreover, the degree of application of the Directive remains uneven across EU countries.

To address this situation, the report underlines the strong need to focus on the effective implementation of the Directive and proposes a number of actions such as guidance on the interpretation of specific provisions, dialogue with EU countries, enforcement actions, and scoreboards on countries’ use of the Directive.

Overall, the report concludes that the Directive is largely fit for purpose and that the rules do not need to be amended. It stresses that a more open defence internal market will improve the competitiveness of the sector’s technological and industrial base, in particular by enabling economies of scale.

Full evaluation report (includes related Staff Working Paper with essential background for the evaluation of the Directive including data on national expenditure on defence/security and procurement). 

EU Directive on defence and sensitive security procurement

The EU Directive 2009/81/EC on defence and sensitive security procurement sets out European rules for the procurement of arms, munitions and war material (plus related works and services) for defence purposes. It also sets out rules for the procurement of sensitive supplies, works and services for security purposes. These rules are adapted to the specificities of defence procurements, which tend to be particularly complex and sensitive. The Directive provides rules that enhance transparency and openness in defence markets between EU countries, while also ensuring that individual countries’ security interests are protected.

Directive 2009/81/EC contains a number of innovations tailored to the specific needs of procurement in defence and security markets. These include:

  • awarding authorities may use the negotiated procedure with prior publication as a standard procedure, which gives them flexibility to fine-tune all details of the contract;
  • candidates may be required to submit specific guarantees ensuring security of information (safeguarding of classified information) and security of supply (timely and reliable contract execution, especially in crisis situations).
  • specific rules on research and development contracts strike a balance between the need to support innovation and the necessary openness of production markets.
  • awarding authorities may oblige contractors to award subcontracts in a competitive manner, opening-up supply chains and creating business opportunities for small and medium-sized enterprises (SMEs) in the defence and security sector;
  • a set of national review procedures will provide effective remedies to protect the rights of businesses taking part in the award procedure.

The European Commission is supporting the implementation of Directive 2009/81/EC. In particular, it is working to provide guidance on cooperative procurement.

Cross-border access for SMEs in defence contracts

Despite being an important part of the defence supply chain, small and medium-sized enterprises (SMEs) face considerable challenges in cross-border access to defence and security contracts. These include legal, administrative, geographic, language and cultural obstacles, as well as classified information, security of supply requirements, standardisation and certification, and national export control regulations.

This situation contributes to the fragmentation of the European defence equipment market and hinders transparency and openness between EU countries. It also affects the efficiency and competitiveness of the European Defence Technological and Industrial Base (EDTIB), undermining the EU's strategic autonomy.

To respond to these challenges, the Commission set up an Advisory Group on cross-border access for SMEs to defence and security contracts. This group included representatives from EU countries and stakeholders. It worked from April 2015 to November 2016. The Group prepared a report, outlining recommendations in government procurement, prime contractors, access to EU-wide supply chains and cross-border contracts, SMEs and sub-suppliers’ capacity building, research and technology (R&T) and innovation, and intra-community transfer of defence-related products.

The European Defence Action Plan (EDAP) of 30 November 2016 announced that the Commission will make recommendations to facilitate cross-border market access for SMEs and intermediate companies in the defence sector. This was further confirmed in the Commission Communication 'Launching the European Defence Fund', adopted on 7 June 2017.

On 20 April 2018, the Commission published a 'Recommendation on cross-border market access for sub-suppliers and SMEs in the defence sector'. Specific proposals were made for:

Public procurement by national authorities

  • providing early information about long-term plans and priorities in defence procurement
  • voluntary publication of contract opportunities and additional transparency measures, including targeted events
  • improving the quality of procurement information
  • possibly dividing procurement contracts into lots and/or tendering in separate lots
  • preparing and conducting procedures which reduce hurdles for bidders, especially SMEs
  • using qualitative selection with proportionate and non-discriminatory criteria
  • providing training and capacity building for procurement officers and contractors

Industrial policy at national and European level

  • using national and European funding for SMEs and intermediate companies in defence supply chains
  • establishing, reviewing or disseminating databases on defence-related companies
  • supporting the development of defence clusters at regional, national and European level
  • encouraging SMEs' involvement in innovation and R&T projects with defence applications
  • addressing skills needs and gaps in the European defence industry
  • helping improve SMEs and sub-suppliers' capacity for cross-border bidding

In addition to the Recommendation, the Commission has started a dialogue with industry stakeholders on further actions aimed at creating the conditions necessary for competitive cross-border defence supply chains.

Guidance documents

On 30 November 2016, the Commission adopted a Notice providing guidance on government-to-government contracts in defence. This Notice is to help EU countries’ procurement authorities applying this exclusion (Article 13(f) of the Directive). It replaces section 3.6 “Contracts awarded between governments” (paragraphs 24-26) of the guidance document Exclusions.

Interpretative Communication on the application of Article 296 of the Treaty (now Article 346 TFEU) in defence procurement. This provides guidance on the extent to which EU countries can exempt defence contracts from the Directive in the interest of essential security. It enhances legal certainty and limits abuse of the exemption.

2011 High Level Conference on Defence and Security Industries and Markets

Summary of discussions and programme of the May 2011 conference with European Commissioner for Internal Market and Services Michel Barnier and European Commissioner for Industry and Entrepreneurship Antonio Tajani.