Magazine article Europe-East

Public Procurement: Two-Pronged Bid for More Open Defence Markets Unveiled

Magazine article Europe-East

Public Procurement: Two-Pronged Bid for More Open Defence Markets Unveiled

Article excerpt

Defence spending by the 25 EU member states in 2003 was some euro 169 billion, according to Eurostat estimates, including 82 billion on defence procurement, of which euro 30 billion on defence equipment. The UK, France, Germany and Italy - the four largest producers - together account for around 80% of spending on defence equipment.

Defence procurement is still very much a national preserve and cross-border competition within Europe is restricted. Under Article 296 of the EU Treaty, member states can claim an exemption on national security grounds from the normal EU public procurement rules. It is thought that such exemptions are invoked in more than half of all defence equipment purchases by EU governments.

Communication.

The Commission said that it would move to promote more open and efficient defence procurement firstly by issuing in 2006 a non-legislative 'interpretative Communication'. This should clarify when EU member states can invoke Article 296 derogations. Interpretation of the article in EU member states varies, which the Commission believes causes market fragmentation and legal uncertainty.

Officials signalled that the Commission would be looking to make clear that items such as soldiers' socks, shoes and food should not be considered a matter of essential national security.

Directive.

The Commission also confirmed that preliminary work, including an impact assessment, would begin on a possible Directive governing defence procurement procedures. This would deal with cases where the derogation under Article 296 was not applicable or where a member state chose not to take advantage of it.

This option would be "vigorously pursued" as, the EU executive pointed out, the existing EU public procurement Directives - which apply to defence contracts not covered by Article 296 - are inadequate as far as the specific features of defence procurement are concerned. …

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