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IP/04/1133

Brussels, 23rd September 2004

Public procurement: Commission consults on more open and efficient defence procurement

The European Commission has published a consultative Green Paper on how to improve cross-border competition in certain types of defence procurement in a way consistent with the special nature of the sector. EU law (Article 296 EC) does not require competition in procuring supplies, works and services intended for specifically military purposes and crucial to national security. However, the Commission wants to help Member States to get better value in the €30 billion plus EU market for defence procurement and to help EU defence industries to be more competitive, by providing guidance on how EC Treaty exceptions and requirements should be interpreted.

Internal Market Commissioner Frits Bolkestein said: “This is a win-win-win situation: more efficient defence procurement, new opportunities for SMEs and more competitive EU industry. Defence cannot be lumped in under general procurement rules. But contracts for supplies such as boots and food often do not raise national security issues. With the exception of obviously sensitive areas, this is probably true of much other military equipment. We are exploring how to extend the benefits of more open procurement to those contracts.”

The Green Paper assesses how the Commission might clarify in a Communication the criteria to establish when procurement of military equipment, services and works can be exempted from competitive procurement requirements and when they cannot. It would take into account the existing legal framework and case law.

The Green Paper also asks whether the Commission should propose a Directive coordinating procedures for defence procurement, in cases where the exemption under Article 296 EC is not applicable or a Member State chooses not to take advantage of it. For such contracts, it would introduce new, flexible, EU-wide rules in line with the special nature of the sector;

The Commission has worked closely with Member States and industry to prepare the Green Paper, announced in the March 2003 Communication “Towards an EU defence equipment market” (see IP/03/355).

Background

The development of a European defence market is even more important given advances in European Security and Defence Policy (ESDP) and the recent creation of the European Defence Agency. Currently, procurement for multinational defence programmes is often carved up along national lines. For national procurement, contracts are usually handed to national suppliers.

Article 296 of the EC Treaty stipulates that a Member State may take such measures “as it considers necessary for the protection of the essential interests of its security”. But Article 296 EC also states that measures connected with the production or trade of arms, munitions and war material must not adversely affect competition in the market for “products not intended for specifically military purposes.”

According to European Court of Justice case law, Article 296 EC does not permit automatic exemption for all defence procurement. But in practice, most national authorities make extensive use of the exemption. Contract notices are published, if at all, only at national level, technical specifications are based on differing standards and criteria for awarding contracts are vague.

The Green Paper is available at:

http://ec.europa.eu/internal_market/consultations/index_en.htm

Interested parties are invited to respond by 31st January 2005.


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