European Defence Procurement Outside the EC:

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European Defence Procurement Outside the
EC European Defence Agency, OCCAR Dr. Aris
GEORGOPOULOS Public Procurement Research Group,
School of Law, University of Nottingham
Seminar on European Defence Procurement,
Bucharest, 13-14 November 2007
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Aris Georgopoulos
OUTLINE

• Background Information
• European Defence Agency
• OCCAR
• Conclusions/Food for thought

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Background Information

• Preliminary Clarifications/ Terminology
• What is the definition of Defence Procurement?
• Lato Sensu Defence Procurement
• The acquisition by the authorities in the defence
  sector of the various kinds of goods and services
  they need for performing their duties
• i.e. paperclips, furniture, cleaning services,
  tanks, submarines, Aircraft etc.

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Background Information

• Preliminary Clarifications/ Terminology
• What is the definition of Defence Procurement?
• Stricto Sensu Defence Procurement
• The acquisition of Armaments
• i.e. materials intended only for military
  purposes (also known as war-like materials, hard
  defence materials)

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Background Information
Preliminary Clarifications / Terminology Dual-us
e goods Products used for both military and
non-military purposes i.e. military ambulances,
motorcycles, IT etc. Dual use goods do not fall
within the strict definition of Defence
Procurement
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Background Information

• Some Figures
• Aggregate spending on defence expenditure among
  the EU 25 193 billion per year (approx)
• Aggregate spending on Defence Equipment among EU
  25 30-40 billion per year (approx)
• Equivalent to 3 (approx.) of EU industrial
  output

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Background Information

• Some Figures
• EU aggregate Defence Expenditure less than half
  of the US
• Due to market fragmentation EU Member States
  should increase their expenditure to a level
  higher of that of the US (at least 10) in order
  to achieve comparable results with the US

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Background Information

• Why is there fragmentation in the European
  defence market?
• Defence Market ? Market of the tools of
  sovereignty
• As a result ? 27 national defence markets
• .as opposed to one integrated European defence
  market

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Background Information

• Arguments for more Europe in defence
  procurement
• Economic imperatives
• Need for increasing the competitiveness of
  European Defence firms
• Need for rational use of the limited resources
  allocated to defence and avoidance of duplication

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Background Information

• Political/strategic imperatives
• Support of the credibility of the ESDP by a
  healthy European defence industrial base
• Bridging the capabilities gap with the US (see
  Kosovo)

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Regulation of DP at the European level

• At the moment there are three fora of
  regulation of defence procurement at European
  level
• EU 1st Pillar (European Community)
• EU 2nd Pillar (CFSP, ESDP)
• At European level but outside the EU
• (This Presentation focuses on 2 and 3)

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Regulation of DP under the 2nd Pillar of the EU

• European Defence Agency (EDA)
• Established by the Council (COUNCIL JOINT ACTION
  2004/551/CFSP of 12 July 2004)
• NB The establishment of the EDA was foreseen in
  the Constitutional Treaty. The Member States
  decided (Thessaloniki EU Council meeting 2003) to
  move on quickly with the establishment of the EDA
  without waiting for the conclusion of the
  ratification process.

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European Defence Agency

• Membership
• 26 participating Member States (pMS)
• Apart from Denmark (General opt out)
• Organisation
• EDA Legal personality
• i.e. can conclude contracts on behalf of the pMS
• Head of the Agency High Representative for CFSP

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European Defence Agency

• Organisation (cont)
• Chief Executive Head of EDAs staff
• Steering Board EDAs decision making body
• SB is composed of 26 representative (one for
  each pMS) (The EU Commission participates without
  voting rights)
• Despite its legal personality EDA is not
  completely independent
• ? EDA is subject to the political control of the
  Council of Ministers (submission of regular
  reports).

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European Defence Agency

• Organisation (cont)
• Voting system in the Steering Board ? Qualified
  Majority
• (Unless a representative of a participating
  Member State declares that it intends to oppose a
  decision for important and stated reasons of
  national policy. In that case the matter may be
  referred to the Council which decides by
  unanimity).

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European Defence Agency

• General Principles
• Inclusion
• - Invitation to all EU Member States to
  participate (not an exclusive club)
• Flexibility
• - This is illustrated by a look at the
  competences and the way they are exercised

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EDA Competences

• Competences (in the area of armaments)
• Promotion of European armaments co-operation
• Strengthening of the European Defence
  Technological and Industrial Base
• Enhancement of the effectiveness in European
  Defence Research and Technology (RT)

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EDA Competences
Collaborative Projects There are two
categories of ad hoc coll. projects 1. Category
A ? (participation of all MSs is presumed -
although they are not obliged to contribute) 2.
Category B ? (participation of all Member States
is not presumed)
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EDA- Initiatives

• Other Initiatives
• Code of Conduct for Armaments Procurement
• Code of best practice in the Supply Chain

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EDA- Code of Conduct

• Aim
• to open up defence markets of participating
  Member States (operational since July 2006)
• Characteristics
• Voluntary
• Non binding
• 24 Member States participate (apart from Denmark
  Spain, Hungary joined in 2007)

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EDA- Code of Conduct

• Field of application
• Armaments contracts of 1 million or more where
  the conditions for application of Art. 296 EC are
  met
• except for
• procurement of research and technology
• collaborative procurements
• nuclear weapons and nuclear propulsion systems,
• chemical, bacteriological and radiological goods
  and services
• cryptographic equipment

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EDA- Code of Conduct

• Publicity requirement
• Contract opportunities are to be published on the
  electronic bulletin Board of the EDA
• http//www.eda.europa.eu/ebbweb/
• So far 282 contract opportunities have been
  advertised (of approx value 10 billion)

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EDA- Code of Conduct

• Enforcement of the CoC(?)
• Only Peer Pressure
• N.B. Subscribing Member States may proceed to
  procurment without publication for extraordinary
  and compelling reasons of national security
• Question How different is the notion of
  extraordinary and compelling reasons from the
  essential interests of security of Article 296
  EC?

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Code of Best Bractice in the Supply Chain

• Aim
• Influence behaviour in the supply chain
• Promote efficient and fair competition
• Support the involvement of SMEs
• Characteristics
• Non binding
• Publicity Companies (1st tier etc.) may
  advertise contract opportunities on the
  Electronic Bulletin Board

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Regulation of Defence Procurement outside the EU

• Organisation for Joint Armaments Co-operation
  OCCAR
• Established in 2001
• Legal Personality
• Six Participating Countries
• France, Germany, Italy and the United Kingdom,
  Belgium and Spain

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OCCAR

• Field of competence
• - management agency of defence collaborative
  projects between participating countries
• Programmes
• A400M
• TIGER
• ROLAND
• BOXER
• FREMM
• FSAF
• COBRA

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OCCAR

• Key principles
• Cost effectiveness in collaborating programmes
• Harmonisation of requirements
• Competitiveness
• Elimination of the practice of juste retour
• Principle of overall multi-programme/multi-year
  balance (global balance)

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Food for thought

• Institutional Traffic?
• Some streamlining of the institutional framework
  of (establishment of EDA and assimilation of
  WEAG/WEAO)
• Enforcement of the regimes?
• Even if juste retour abandoned, work-sharing
  still present.

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Food for thought

• Global balance easier for MSs with strong
  defence industrial base.
• How compatible are the initiatives of the EDA
  especially the Code of Conduct with the parallel
  initiatives of the Commission in this field?

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Thank You

• Dr Aris GEORGOPOULOS
• Public Procurement Research Group
• School of Law
• University of Nottingham
• NG7 2RD
• United Kingdom
• Tel [phone]
• Fax [phone]
• aris.georgopoulos_at_nottingham.ac.uk