1. Defence Procurement March 2010
Contacts
For further information,
On our way to a truly European
please contact your usual
Eversheds contact or Defence Equipment Market
Mogens Vind
Partner
+45 33 75 05 05 After more than five years of discussion, Directive 2009/81/EC on
mogensvind@eversheds.com defence and sensitive security procurement (the “Directive”) has
entered into force.
For a full list of our offices and
contact details please visit
The Directive is aimed at establishing a truly European Defence
Market and it contains a number of novelties that enhance the
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specific requirements of the industry. In addition, the Directive is
expected to create more flexibility.
Member States now have two years to implement the Directive into
national law (implementation is mandatory) and the transition will be
carefully monitored by the Commission as well as the Aerospace and
Defence Industries Association of Europe.
Background
The European Commission has long been concerned that Member States are
relying too frequently on the possibility in the Lisbon Treaty to exempt
defence and security contracts from the classic procurement rules.
Under Article 346 TFEU Member States are permitted to take such measures
as it considers necessary for the protection of their essential security
interests. Member States have historically relied on this provision to exempt
defence contracts from public procurement procedures, arguing that the
classic procurement rules were ill-suited to complex defence contracts.
Although it will still be possible to invoke Article 346 TFEU it is expected that
the Directive will be used for the majority of defence and security contracts
since one of the objectives of the Directive is to limit the use of the
exemption to only truly exceptional cases.
Innovations within the Directive
Procurement procedures
It is recognised that contracts awarded in the field of defence and security
often are technically complex and that there is need for more flexibility in
relation to such contracts.
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2. Accordingly, the contracting authorities may under the Directive use the
negotiated procedure with prior publication of a contract notice as the
standard procedure.
The possibility to use the negotiated procedure will undoubtedly provide
contracting authorities with more flexibility and accommodate the specific
security requirements needed in the field of defence and security contracts.
For companies within the defence sector this is probably good news since
more contracts are likely to be tendered for, in the years to come.
Subcontracting
As one of the more significant departures from the classic procurement rules,
Member States may require contracting authorities (or successful tenderers)
to subcontract up to 30% of the contract to third parties.
The aim of the provision is to encourage Member States to increase the
diversity of the defence related supplier base. As a result, hopefully, small
and medium sized enterprises will find it easier to participate in the European
defence and security markets.
Security of supply
Another new initiative under the Directive is that Member States can specify
requirements in relation to security of supply. Thus, contracting authorities
may for example require tenderers to submit documentation that confirms
that their national governments are not planning to impose bans on the
transfer (through for example export control rules) of the defence related
products and services.
Security of information
When contracts involve classified information, contracting authorities are
required to specify the measures and requirements needed to ensure the
security of such information at the requisite level.
To this end, contracting authorities may require a commitment from
tenderers and subcontractors already selected to appropriately safeguard the
confidentiality of all classified information in their possession or coming to
their notice throughout the duration of the contract.
Remedies
Perhaps not surprisingly, the Directive requires Member States to implement
the full package of remedies, including interim measures, damages, setting
aside the contract and fines.
Offset agreements
The Directive does not specifically address offset arrangements which is
probably due to legal controversy. Use of offsets arrangements are therefore
likely to continue even though their legality under the EC rules are considered
questionable.
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