European Defence Procurement Outside the EC: European Defence Agency, OCCAR Dr. Aris GEORGOPOULOS

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European Defence Procurement European Defence Procurement Outside the EC:Outside the EC:

European Defence Agency, European Defence Agency, OCCAROCCAR

Dr. Aris GEORGOPOULOSDr. Aris GEORGOPOULOS Public Procurement Research Group,Public Procurement Research Group, School of Law, University of NottinghamSchool of Law, University of Nottingham

Seminar on European Defence Procurement, Seminar on European Defence Procurement, Bucharest, 13-14 November 2007Bucharest, 13-14 November 2007

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Aris GeorgopoulosAris Georgopoulos

• Background InformationBackground Information

• European Defence AgencyEuropean Defence Agency

• OCCAR OCCAR

• Conclusions/Food for thoughtConclusions/Food for thought

OUTLINEOUTLINE

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Preliminary Clarifications/ Terminology:Preliminary Clarifications/ Terminology:

What is the definition of “Defence Procurement”?What is the definition of “Defence Procurement”?

Lato SensuLato Sensu Defence Procurement = Defence Procurement =

The acquisition by the authorities in the defence sector The acquisition by the authorities in the defence sector of the various kinds of goods and services they need of the various kinds of goods and services they need for performing their dutiesfor performing their duties

i.e. paperclips, furniture, cleaning services, tanks, i.e. paperclips, furniture, cleaning services, tanks, submarines, Aircraft etc. submarines, Aircraft etc.

Background InformationBackground Information

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Preliminary Clarifications/ TerminologyPreliminary Clarifications/ Terminology

What is the definition of “Defence What is the definition of “Defence Procurement”?Procurement”?

Stricto SensuStricto Sensu Defence Procurement = Defence Procurement =

The acquisition of Armaments The acquisition of Armaments

i.e. materials intended only for military i.e. materials intended only for military purposes (also known as war-like materials, purposes (also known as war-like materials, “hard defence” materials)“hard defence” materials)


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Preliminary Clarifications / TerminologyPreliminary Clarifications / Terminology

Dual-use goodsDual-use goods = =

Products used for both military and non-military Products used for both military and non-military purposespurposes

i.e. military ambulances, motorcycles, IT etc.i.e. military ambulances, motorcycles, IT etc.

Dual use goods Dual use goods do not falldo not fall within the within the strict strict definition definition of Defence Procurementof Defence Procurement


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Some Figures:Some Figures:

• AggregateAggregate spending on defence expenditure spending on defence expenditure among the EU 25: £193 billion per year among the EU 25: £193 billion per year (approx)(approx)

• Aggregate spending on Defence Equipment Aggregate spending on Defence Equipment among EU 25: £30-40 billion per year (approx)among EU 25: £30-40 billion per year (approx)

• Equivalent to 3% (approx.) of EU industrial Equivalent to 3% (approx.) of EU industrial outputoutput


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Some Figures:Some Figures:

• EU aggregate Defence Expenditure EU aggregate Defence Expenditure less than less than half of the UShalf of the US

• Due to market fragmentation EU Member Due to market fragmentation EU Member States should increase their expenditure to a States should increase their expenditure to a level higher of that of the US (at least 10%) in level higher of that of the US (at least 10%) in order to achieve comparable results with the USorder to achieve comparable results with the US


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Why is there fragmentation in the European Why is there fragmentation in the European defence market?defence market?

Defence Market Defence Market Market of the Market of the tools of tools of sovereigntysovereignty

• As a result As a result 27 national defence markets 27 national defence markets

•…….as opposed to one integrated European .as opposed to one integrated European defence marketdefence market


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Arguments for more “Europe” in defence Arguments for more “Europe” in defence procurement:procurement:

• Economic imperatives :Economic imperatives :

Need for increasing the competitiveness of Need for increasing the competitiveness of European Defence firmsEuropean Defence firms

Need for rational use of the limited resources Need for rational use of the limited resources allocated to defence and avoidance of allocated to defence and avoidance of duplicationduplication


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Political/strategic imperatives:Political/strategic imperatives:

• Support of the Support of the credibilitycredibility of the ESDP by a of the ESDP by a healthy European defence industrial basehealthy European defence industrial base

• Bridging the capabilities gap with the US (see Bridging the capabilities gap with the US (see KosovoKosovo))


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At the moment there are three fora of At the moment there are three fora of “regulation” of defence procurement at “regulation” of defence procurement at European level:European level:

1)1) EU 1EU 1stst Pillar (European Community) Pillar (European Community)

2)2) EU 2EU 2ndnd Pillar (CFSP, ESDP) Pillar (CFSP, ESDP)

3)3) At European level but outside the EUAt European level but outside the EU

(This Presentation focuses on 2 and 3)(This Presentation focuses on 2 and 3)

““Regulation” of DP at the Regulation” of DP at the European levelEuropean level

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• European Defence Agency (EDA)European Defence Agency (EDA)

• Established by the Council (COUNCIL JOINT Established by the Council (COUNCIL JOINT ACTION 2004/551/CFSP of 12 July 2004)ACTION 2004/551/CFSP of 12 July 2004)

NB The establishment of the EDA was foreseen in the NB The establishment of the EDA was foreseen in the Constitutional Treaty. The Member States decided Constitutional Treaty. The Member States decided (Thessaloniki EU Council meeting 2003) to move (Thessaloniki EU Council meeting 2003) to move on quickly with the establishment of the EDA on quickly with the establishment of the EDA without waiting for the conclusion of the ratification without waiting for the conclusion of the ratification

process.process.

““Regulation” of DP under the Regulation” of DP under the 22ndnd Pillar of the EU Pillar of the EU

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Membership:Membership:26 participating Member States (pMS)26 participating Member States (pMS) • Apart from Denmark (General opt out)Apart from Denmark (General opt out)

Organisation: Organisation: • EDA – Legal personalityEDA – Legal personalityi.e. can conclude contracts on behalf of the i.e. can conclude contracts on behalf of the

pMSpMS• Head of the Agency = High Representative Head of the Agency = High Representative

for CFSPfor CFSP

European Defence AgencyEuropean Defence Agency

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Organisation (cont): Organisation (cont):

• Chief Executive = Head of EDA’s staffChief Executive = Head of EDA’s staff• Steering Board = EDA’s decision making bodySteering Board = EDA’s decision making body SB is composed of 26 representative (one for each SB is composed of 26 representative (one for each

pMS) (The EU Commission participates pMS) (The EU Commission participates without without voting rightsvoting rights))

• Despite its legal personality EDA is Despite its legal personality EDA is notnot completely completely independent independent

→ → EDA is EDA is subject to the political control of the Council subject to the political control of the Council of Ministers (submission of regular reports). of Ministers (submission of regular reports).


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Organisation (cont): Organisation (cont):

• Voting system in the Steering Board Voting system in the Steering Board →→ Qualified MajorityQualified Majority

(Unless a representative of a participating (Unless a representative of a participating Member State declares that it intends to Member State declares that it intends to oppose a decision for important and oppose a decision for important and stated stated reasons of national policyreasons of national policy. In that case the . In that case the matter may be referred to the Council which matter may be referred to the Council which decides by decides by unanimity).unanimity).


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General Principles:General Principles:

• InclusionInclusion- Invitation to all EU Member States to - Invitation to all EU Member States to

participate (not an exclusive club)participate (not an exclusive club)• Flexibility Flexibility - This is illustrated by a look at the - This is illustrated by a look at the

competences and the way they are competences and the way they are exercisedexercised


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Competences (in the area of armaments): Competences (in the area of armaments):

1.1. Promotion of European armaments co-Promotion of European armaments co-operationoperation

2.2. Strengthening of the European Defence Strengthening of the European Defence Technological and Industrial Base Technological and Industrial Base

3.3. Enhancement of the effectiveness in Enhancement of the effectiveness in European Defence Research and European Defence Research and Technology (R&T)Technology (R&T)

EDA CompetencesEDA Competences

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Collaborative Projects: Collaborative Projects:

There are two categories of ad hoc coll. There are two categories of ad hoc coll. projects:projects:

1. Category A 1. Category A → → (participation of all MSs is (participation of all MSs is presumedpresumed - although they are - although they are not obliged to not obliged to contribute)contribute)

2. Category B 2. Category B → → (participation of all Member (participation of all Member States is States is not presumednot presumed) )

EDA CompetencesEDA Competences

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Other Initiatives:Other Initiatives:

• Code of Conduct for Armaments Code of Conduct for Armaments ProcurementProcurement

• Code of best practice in the Supply Code of best practice in the Supply Chain Chain

EDA- InitiativesEDA- Initiatives

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Aim: Aim: • to open up defence markets of participating to open up defence markets of participating

Member States (operational since July Member States (operational since July 2006)2006)

Characteristics:Characteristics:• Voluntary Voluntary • Non bindingNon binding• 24 Member States participate (apart from 24 Member States participate (apart from

Denmark Spain, Hungary joined in 2007) Denmark Spain, Hungary joined in 2007)

EDA- Code of ConductEDA- Code of Conduct

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Field of application:Field of application:

• Armaments contracts of € 1 million or more where Armaments contracts of € 1 million or more where the conditions for application of Art. 296 EC are the conditions for application of Art. 296 EC are metmet

• except for: except for: - procurement of research and technology;procurement of research and technology;- collaborative procurements; collaborative procurements; - nuclear weapons and nuclear propulsion systems,nuclear weapons and nuclear propulsion systems,- chemical, bacteriological and radiological goods chemical, bacteriological and radiological goods

and servicesand services- cryptographic equipment cryptographic equipment


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Publicity requirement:Publicity requirement:

• Contract opportunities are to be published Contract opportunities are to be published on the electronic bulletin Board of the EDAon the electronic bulletin Board of the EDA

http://www.eda.europa.eu/ebbweb/• So far 282 contract opportunities have been So far 282 contract opportunities have been

advertised (of approx value €advertised (of approx value € 10 billion)10 billion)


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Enforcement of the CoC(?):Enforcement of the CoC(?):

• Only Peer PressureOnly Peer PressureN.B. Subscribing Member States may proceed N.B. Subscribing Member States may proceed

to procurment without publication for to procurment without publication for extraordinary and compelling reasons of extraordinary and compelling reasons of national securitynational security

Question: How different is the notion of Question: How different is the notion of extraordinary and compelling reasons extraordinary and compelling reasons from from the the essential interests of securityessential interests of security of Article of Article 296 EC296 EC??


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Aim:Aim:- Influence behaviour in the supply chainInfluence behaviour in the supply chain- Promote efficient and fair competitionPromote efficient and fair competition- Support the involvement of SME’sSupport the involvement of SME’s

Characteristics:Characteristics:- Non binding Non binding - Publicity: Companies (1Publicity: Companies (1stst tier etc.) may tier etc.) may

advertise contract opportunities on the advertise contract opportunities on the Electronic Bulletin BoardElectronic Bulletin Board

Code of Best Bractice in the Code of Best Bractice in the Supply ChainSupply Chain

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• Organisation for Joint Armaments Co-Organisation for Joint Armaments Co-operation “OCCAR”operation “OCCAR”

- Established in 2001Established in 2001- Legal PersonalityLegal Personality- Six Participating Countries:Six Participating Countries:France, Germany, Italy and the United France, Germany, Italy and the United

Kingdom, Belgium and SpainKingdom, Belgium and Spain

““Regulation” of Defence Regulation” of Defence Procurement outside the EUProcurement outside the EU

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Field of competence:Field of competence:- management agency of defence collaborative - management agency of defence collaborative

projects between participating countriesprojects between participating countries

Programmes: Programmes: - A400M A400M - TIGER TIGER - ROLAND ROLAND - BOXERBOXER- FREMMFREMM- FSAFFSAF- COBRA COBRA

OCCAROCCAR

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Key principles:Key principles:

- Cost effectiveness in collaborating Cost effectiveness in collaborating programmesprogrammes

- Harmonisation of requirements Harmonisation of requirements - CompetitivenessCompetitiveness- Elimination of the practice of “juste retour” Elimination of the practice of “juste retour” - Principle of “Principle of “overall multi-programme/multi-overall multi-programme/multi-

year balanceyear balance” (global balance)” (global balance)

OCCAROCCAR

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• Institutional Traffic?Institutional Traffic?

• SomeSome streamlining of the institutional streamlining of the institutional framework of (establishment of EDA and framework of (establishment of EDA and assimilation of WEAG/WEAO)assimilation of WEAG/WEAO)

• Enforcement of the regimes?Enforcement of the regimes?

• Even if “juste retour” abandoned, work-Even if “juste retour” abandoned, work-sharing still present. sharing still present.

Food for thoughtFood for thought

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• Global balance easier for MSs with strong Global balance easier for MSs with strong defence industrial base. defence industrial base.

• How compatible are the initiatives of the How compatible are the initiatives of the EDA especially the Code of Conduct with EDA especially the Code of Conduct with the parallel initiatives of the Commission in the parallel initiatives of the Commission in this field?this field?

Food for thoughtFood for thought

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Thank YouThank You

Dr Aris GEORGOPOULOS

Public Procurement Research Group

School of Law

University of Nottingham

NG7 2RD

United Kingdom

Tel: 0044 (0) 115 8466307

Fax: 0044 (0) 115 9515696

[email protected]

Documents

European Defence Procurement Outside the EC: European Defence Agency, OCCAR Dr. Aris GEORGOPOULOS