Defence procurement: EC opens infringement procedures against 5 Member States
The EC has decided to send letters of formal notice to Denmark, Italy, the Netherlands, Poland and Portugal for not applying – or doing so incorrectly – EU rules on public procurement in defence and security markets.
Elżbieta Bieńkowska, Commissioner for Internal Market, Industry, Entrepreneurship and SMEs, said: "Ensuring that public expenditure on defence is spent efficiently is in everyone's interest: public authorities, industry, and most importantly our citizens. If effectively implemented, the Defence Procurement Directive can help ensure that taxpayer money is well spent and improve the competitiveness of Europe's defence industry, including its many SMEs. These efforts go hand in hand with boosting defence cooperation with the European Defence Fund that could generate a total investment in defence research and capability development of €5.5 billion per year after 2020."
The infringement procedures launched concern:
The direct award by Italy, Poland and Portugal of a number of defence contracts to national suppliers in breach of the Defence Procurement Directive. According to this Directive, contracting authorities are obliged to – except narrowly defined exceptions – award contracts by applying one of the procurement procedures laid down in Article 25 of Directive 2009/81/EC and make their intentions known by publishing a contract notice in the Tenders Electronic Daily (TED) database.
In the case of Denmark and the Netherlands, the Commission is concerned that the two countries have imposed unjustified offset requirements demanding compensation from non-national suppliers when purchasing defence equipment from them. Offset requirements are restrictive measures which hinder the free movement of goods and services and are incompatible both with the EU Treaty and with the correct transposition and application of the Directive.
The Member States now have two months to respond to the arguments put forward by the Commission.
EU public procurement legislation helps improve the value of taxpayer money by requiring all public contracts above a certain threshold to be put out for tender respecting the principles of transparency, equal treatment and non-discrimination.
The Defence Procurement Directive (Directive 2009/81/EC) contains specific European rules for the procurement of arms, munitions and war material (plus related works and services) for defence purposes. It also sets out a legal framework for the procurement of sensitive supplies, works and services for security purposes. These are adapted to the specificities of defence procurements, which tend to be particularly complex and sensitive. The Directive provides a legal framework to enhance transparency and openness in defence markets between EU countries, while also ensuring that individual countries' security interests are protected.
Offset requirements (or equivalent forms of industrial return, compensation, industrial participation, industrial cooperation required from non-national suppliers) are restrictive measures which go against the basic principles of the Treaty, because they discriminate against economic operators, goods and services from other Member States and impede the free movement of goods and services. A contract may only include the requirement to implementing part of it in the recipient's country based on local resources if such a measure is necessary, if it is not possible to obtain this same result using less restrictive measures and if the measure does not adversely affect competition of non-military products.
An Evaluation report on the Defence Procurement Directive done by the European Commission in November 2016 concluded that it helped open up the internal market for defence but that much more progress is needed. As announced in the European Defence Action Plan in November 2016, the Commission aims to strengthen the conditions for an open and competitive defence market in Europe to help companies operate across borders and help Member States get best value for money when procuring in the defence area. The Commission is, therefore, closely monitoring the effective application of the two Directives on defence and security procurement (Directive 2009/81/EC) and on EU transfers (Directive 2009/43/EC).
The Commission is also working on a recommendation to encourage public procurement authorities in the Member States to facilitate cross-border involvement of SMEs and intermediate companies in the defence supply chains.
The European Defence Fund, announced by President Juncker in September 2016 and launched in June 2017, will further address unnecessary duplication of capabilities and expenditure in European defence markets by boosting collaborative projects in the area of defence research, prototype development and joint acquisition of capabilities.
For More Information
- On the key decisions in the January 2018 infringements package, see full MEMO/18/349
- On the general infringements procedure, see MEMO/12/12 (an infograph).
- On the EU infringements procedure.
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