REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the implementation of Directive 2009/81/EC on public procurement in the fields of defence and security, to comply with Article 73(2) of that Directive
Date: 2016-11-30
Institutions: Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs, European Commission
Subjects: EU Member State, European defence policy, award of contract, common security and defence policy, invitation to tender, military equipment, national implementing measure, services contract, supplies contract, works contract

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 30.11.2016  COM(2016) 762 final   REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the implementation of Directive 2009/81/EC on public procurement in the fields of defence and security, to comply with Article 73(2) of that Directive {SWD(2016) 407 final}  
 
 
1. 

INTRODUCTION 

Directive 2009/81/EC (the Directive)  lays down rules  for awarding  public contracts in 
the fields of defence and security, following competitive tendering procedures based on 
the principles of transparency and equal treatment.  

This report, required under Article 73(2) of the Directive, sets out the main findings of a 
review  of  its  implementation  and,  based  on  those,  presents  proposals  for  the  way 
forward.  The  accompanying  Staff  Working  Document  (SWD)  contains  the  detailed 
evaluation of the Directive. 

The  review  evaluates  the  Directive’s  functioning  and,  to  the  extent  possible  given  the 
short  time  that  has  elapsed  since  the  transposition  deadline  and  the  even  shorter  time 
since  actual  transposition  by  Member  States,  its  impact  on  the  defence  market  and 
industrial base1. It has been based on the following main sources: the Tenders Electronic 
Daily  database  (OJ/TED),  an  internet-based  public  consultation  and  consultation 
meetings  with  Member  States  and  stakeholders,  Eurostat  data  and  IHS  Jane’s  defence 
database2. 

2.  BACKGROUND 

The main specific problem that led to the Commission’s proposal and then the adoption 
of the Directive in 2009 was that Member States exempted – in particular on the basis of 
Article  296(1)(b)  TEC  (now  Article  346(1)(b)  TFEU)  –  almost  automatically  the 
procurement of military equipment from EU public procurement rules. The main cause of 
the  problem  was  deemed  at  the  time  to  be  that  EU  public  procurement  rules  failed  to 
address the specific needs of defence and sensitive security procurement. 

In  2011-2015,  the  overall  value  of  defence  procurement  expenditure  by  the  28  EU 
Member States and EEA countries ranged between EUR 81 to 82 billion per year3. The 
Directive’s main objective is to ensure that defence and sensitive security procurement in 
that market is carried out under EU rules based on competition, transparency and equal 
treatment.  The  Directive  seeks  to  achieve  this  by  providing  tailor-made  rules  for  such 
procurement, and thus limit the use of exemptions, in particular those under Article 346 
TFEU,  to  exceptional  cases.  In  this  way,  the  Directive  aims  at  supporting  the 
establishment of an open and competitive European defence equipment market (EDEM) 
and,  in  turn,  strengthening  the  competitiveness  of  the  European  defence  technological 
and industrial base (EDTIB). 

1   As required by Article 73(2) of the Directive, the evaluation mainly focuses on the defence market and 

industrial base, although the Directive also applies to sensitive security procurement. 

2   For more details on the evaluation methodology, please see Section 4. and Annex III of the SWD. 

3   This  is  the  general  government  expenditure  on  military  defence  consisting  of  gross  fixed  capital 
formation and intermediate consumption, irrespective of whether the Directive is legally applicable to 
specific purchases. For more details, please see Section 2.1.1. of the SWD. 

2 

 
 
                                                 
3. 

IMPLEMENTATION 

3.1.  Transposition 

Overall,  Member  States’  transposition  of  the  Directive  was  considerably  delayed.  The 
deadline set was 21 August 2011. Only 3 Member States notified complete transposition 
by that date. 19 Member States had done so by March 2012. By May 2013, they had all 
notified complete transposition. 

The  Commission  has  not  identified  fundamental  problems  in  terms  of  national 
transposition  measures’  conformity  with  the  Directive,  i.e.  there  are  no  problems  that 
would jeopardise the overall functioning of the Directive. However, for a limited number 
of the Directive’s provisions, certain issues need to be clarified4. 

Before  the  Directive’s  adoption,  18  Member  States  maintained  offsets  regulations 
systematically  (i.e.  for  all  contracts  or  those  above  a  certain  value)  requiring 
compensation  from  non-national  suppliers  when  purchasing  defence  equipment  from 
them. These regulations were clearly incompatible both with the EU treaties and with the 
correct  transposition  and  application  of  the  Directive.  Member  States  have  now  either 
abolished  or  revised  their  offsets  regulations.  The  remaining  regulations  provide  that 
offsets/industrial  return  can  only  be  required,  following  a  case-by-case  analysis,  if  the 
conditions of Article 346 TFEU are met. Nevertheless, there is still the question of how 
to  ensure  that,  in  concrete  procurement  practice,  the  use  of  offsets/industrial  return 
requirements complies with the strict conditions for the application of Article 346 TFEU. 

3.2.  Use of the Directive 

Upon entry into force, uptake of the Directive was almost immediate and has shown a 
clear upward trend. Since its transposition by Member States, the value of defence and 
security contracts awarded under the Directive has increased more than tenfold. The total 
value  of  defence  and  security  contracts  awarded  under  the  Directive  in  2011-2015 
was around EUR 30.85 billion5. Defence and security procurement contracts have been 
also  awarded  under  the  civil  procurement  Directives,  accounting  for  another  EUR  8 
billion, to arrive at a total of nearly EUR 39 billion in 2011-2015 of contracts awarded 
under EU procurement rules. 

However, the use of the Directive across Member States remains uneven. Contracts 
awarded  by  UK  authorities  accounted  for  over  half  of  the  value  of  contracts  awarded 
under the Directive in the five-year period of the review (nearly EUR 17 billion). France, 
Poland, Germany and Italy, which are among the Member States with the highest defence 
procurement expenditure, followed in the ranking. Between 2011 and 2015, no contract 
award  notice  under  the  Directive  was  published  by  contracting  authorities  from  six 
Member  States:  Cyprus,  Greece,  Ireland,  Malta,  Luxembourg  and  Spain6.  Differences 

4   For more details, please see Section 5.1.2. of the SWD. 

5   Since  a  significant  share  of  contract  award  notices  does  not  include  the  final  value  of  the  contract, 
30.85  billion  EUR  is  the  minimum  value  of  all  contract  awards  under  the  Directive.  If  the  missing 
information  is  imputed  using  average  contract  values,  this  value  is  estimated  to  increase  to  roughly 
34.55 billion EUR. 

6   These  countries  have  published  a  number  of  contract  award  notices  with  a  defence-related  subject-
matter under the civil procurement Directives. For more details, see Section 5.3.1.1. of the SWD. 

3 

 
                                                 
across Member States are significant also when the value of contracts awarded under the 
Directive  is  compared  with  the  available  budgets  (defence  procurement  expenditure). 
This indicator shows differences ranging, for instance, from Lithuania (38.4 %), Slovakia 
(36.4  %),  the  UK  (17.7  %),  France  (10.3  %),  to  the  Netherlands  (1.3  %),  Sweden  and 
Austria (1 %). 

Regarding use of procedures, it is important to note that those with prior advertising and 
a call for competition accounted for 60 % of the number of contract award notices and 76 
%  by value. The negotiated procedure without publication of contract notice accounted 
for 38 % and 23 %, respectively. 

Estimates  on  the  division  between  defence  and  security  contracts  show  that  the  vast 
majority were defence purchases. Sensitive security contracts accounted for just  7 % of 
the number of notices and 3 % of their value. 

4.  OUTCOME OF THE EVALUATION 

The  Directive  has  been  evaluated  against  five  criteria:  effectiveness,  efficiency, 
relevance, coherence and EU added value. 

4.1.  Effectiveness 

The essential  element of  the evaluation is  to assess whether  – and  to  what extent  –  the 
Directive has achieved its objectives. 

4.1.1.  Competition,  transparency  and  non-discrimination  in  the  European 

Defence Equipment Market (EDEM) 

The Directive’s main objective is to help establish an open and competitive EDEM, by 
making  sure  that  public  contracts  in  the  fields  of  defence  and  sensitive  security  are 
awarded through competitive and fair procurement procedures. 

In  the  (baseline)  period  2008-2010,  the  average  yearly  value  of  defence  and  security 
procurement published EU-wide amounted to EUR 2.9 billion and roughly 3.3 % of the 
total  defence  procurement  expenditure7.  After  the  Directive  became  applicable,  the 
average  yearly  value  of  defence  and  security  procurement  published  EU-wide  was 
roughly EUR 6.2 billion or 7.8 billion if defence and security purchases under the civil 
procurement regime were added. This equals, respectively, between 7.6 % or 9.5 % of 
the total value of defence procurement expenditure in the reference period. 

The above shows that the Directive has led to a more than twofold increase in the value 
of defence and security contracts published EU-wide and awarded, in competition, under 
rules  based  on  transparency  and  equal  treatment.  However,  as  pointed  out  above,  the 
degree  of  application  of  the  Directive,  and  therefore  of  the  increase  in  competition, 
transparency and non-discrimination, remains uneven across Member States. 

Despite the positive trend in increased volumes of public procurement carried out under 
EU  rules,  the  evaluation  has  found  that  a  very  significant  share  of  defence 

7   This included contracts published in the OJ/TED under the civil procurement Directives and contracts 

published on the Electronic Bulletin Board (EBB) of the European Defence Agency (EDA). 

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procurement  expenditure  is  still  made  outside  the  Directive.  In  particular,  the 
Directive  was  used  to  a  very  limited  extent  for  the  procurement  of  high-value, 
strategic, complex defence systems8. However, there have been some recent examples 
of tenders for complex defence systems launched under the Directive9. 

Regarding cross-border procurement penetration, the evaluation has found  that around 
10 % of the value of contracts awarded under the Directive has been won  directly 
by foreign companies10. When comparing the findings with the baseline period (despite 
some  methodological  discrepancies),  it  appears  that,  since  the  Directive  became 
applicable,  direct  cross-border  procurement  in  the  EU  has  remained  at  similar  levels 
compared to the overall defence procurement expenditure. 

Direct  cross-border  procurement  occurs  when  companies  operating  from  their  home 
market bid and win contracts for tenders launched in another Member State. Cross-border 
procurement  also  occurs  indirectly  through  subsidiaries  (e.g.  the  subsidiary  bids  for 
tenders in a different country from that of its headquarters or parent company). Based on 
a comparison of winning companies with the SIPRI list of Top100 defence companies11, 
the total value of indirect cross-border awards in 2011-2015 equalled roughly 40 % 
of the total value of contracts awarded under the Directive (12.44 billion EUR). The 
number  and  value  of  indirect  cross-border  contracts  in  practice  could  be  larger  as  the 
indirect cross-border wins of smaller companies (not present on the SIPRI list) were not 
captured by this estimation. 

Finally,  another  factor  to  assess  the  functioning  of  the  market  is  the  practice  of 
offsets/industrial  return.  Based  on  industry’s  feedback  and  data  published  by  the  U.S. 
Department of Commerce12, it can be concluded that: Member States still seem to use to 
some  extent  offsets/industrial  return  requirements  (presumably  relying  on  Article  346 
TFEU);  the  frequency  of  such  requirements  seems  to  have  marginally  decreased;  and 
there appears to be a trend to move away from indirect non-military offsets. It should be 
added that some industry stakeholders expressed concerns about uncertainties concerning 
the practical use of offset requirements in certain Member States. 

Therefore, it can be concluded that the objectives of the Directive have only partially 
been  achieved:  it  led  to  an  initial  increase  in  competition,  transparency,  and  non-
discrimination  in  Europe’s  defence  procurement  market,  but  much  more  progress  in 
Member  States’  consistent  use  of  the  Directive  is  needed  to  achieve  fully  those 
objectives. 

8   For more details, please see Section 6.1.2. of the SWD. 

9   The most prominent example is the contract notice published by the German authorities in July 2015 

for the procurement of multi-purpose combat ships. 

10   The proportion of “direct cross-border procurement” under the civil procurement Directives in 2007-

2009 was 3.5 % in terms of value. 

11   The  SIPRI  Top  100  arms-producing  and  military  services  companies  in  the  world  excluding  China, 

December 2015, http://books.sipri.org/files/FS/SIPRIFS1512.pdf. 

12   The  annual  report  on  “Offsets 

in  Defense  Trade”,  https://www.bis.doc.gov/index.php/other-
areas/strategic-industries-and-economic-security-sies/offsets-in-defense-trade.  For  more  information, 
see Section 6.1.1.4. of the SWD. 

5 

 
                                                 
Several  factors  are  thought  to  have  contributed  to  the  uneven  and  partial  use  of  the 
Directive and, in turn, affected the achievement of the Directive’s objectives. A relatively 
short time (2-3 years) elapsed between actual transposition by Member States and the last 
year  covered  in  the  evaluation  (2015).  If  the  upward  trend  in  the  use  of  the  Directive 
continues, its impact will become more visible in the next few years. There may also still 
be  limited  awareness  of  the  Directive’s  rules  among  Member  States’  authorities.  A 
related factor is probably a still too broad interpretation of possible exemptions, including 
under  Article  346  TFEU.  Moreover,  a  significant  share  of  defence  procurement 
expenditure may have been spent on contracts awarded in the framework of cooperative 
programmes started well before the adoption of the Directive. Finally, the financial crisis 
may have led to the cancellation or postponement of new major procurement projects to 
be implemented under the Directive. 

4.1.2.  Rules adapted to defence procurement 

The  Directive  aims  to  ensure  there  is  competition,  transparency  and  equal  treatment, 
while it also lays down provisions adapted to the specific needs of defence procurement 
and  safeguarding  Member  States’  security  interests.  The  most  relevant  provisions  here 
are those on exclusions (i.e. provisions excluding certain contracts from the scope of the 
Directive  in  particular  circumstances  that  are  specific  to  defence  procurement)  and  the 
provisions on security of information and security of supply. 

As  regards  the  exclusions,  in  the  light  of  the  consultations  with  Member  States  and 
stakeholders,  it  can  be  concluded  that  their  wording  does  not  need  to  be  amended. 
However,  it  may  be  useful  to  provide  guidance  on  the  application  of  some  of  these 
provisions. Several Member States mentioned in particular that clarifications on Article 
12(c)  on  international  organisations  would  be  useful.  Some  industry  stakeholders 
expressed  concerns  about  the  application  of  certain  exclusions,  especially  Article  13(f) 
on  government-to-government  sales,  and  called  for  guidance  and  enforcement  on  this 
aspect. 

It  can  also  be  confirmed  that  the  provisions  on  security  of  information  are 
appropriate. No specific problem has been identified with regard to the provisions 
on security of supply. It is clear, however, that these latter provisions only address part 
of  a  much  more  complex  problem  and  cannot,  by  themselves,  be  sufficient  to  fully 
guarantee Member States’ security of supply. 

4.1.3.  Impact on the European Defence Technological and Industrial Base 

(EDTIB) 

The analysis conducted on the state of Europe’s defence industry, based on the available 
data, shows that it is difficult to conclude that overall the EDTIB has fundamentally 
changed in the period 2011-2015 as a result of the introduction of the Directive. In fact, 
there are a number of factors that could affect the EDTIB, such as changes in Member 
States’  budgets,  the  emergence  of  new  competitors  on  non-EU  countries’  markets,  and 
technological developments, with a more efficient European market being one of them. 
Given the long life-cycle of defence products, all these factors are likely to take several 
years to bring about changes in the EDTIB. Therefore, it is impossible to establish any 
causal link yet between the effects of the Directive and developments in the EDTIB, 
only five years after the transposition deadline. Significant delays in transposition and the 
still partial uptake by Member States must also be taken into account. 

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4.1.4.  The situation of SMEs 

Smaller  companies  can  access  the  public  procurement  market  by  bidding  and  winning 
public  contracts  or  by  obtaining  subcontracts 
tenderer 
(subcontracting). 

the  successful 

from 

To estimate the share of contracts awarded to SMEs under the Directive, the evaluation 
looked at a sample of winning firms and checked the presence of SMEs13. This analysis 
showed that 27.9 % of contracts included in this sample had been awarded to SMEs. 
In  terms  of  market  share,  these  contracts  accounted  for  6.1  %  of  the  total  value  of 
contracts  in  the  sample.  Therefore,  SMEs  appear  to  be  less  successful  in  winning 
contracts under the Directive than in general EU public procurement, where the share is 
56 % in number of contracts and 29 % by value. This difference may be explained by the 
specific nature of the defence procurement market. 

Stakeholders’ perceptions of the Directive’s impact on SMEs is rather mixed. Many do 
not see a significant impact (positive or negative). Overall, stakeholders seem to consider 
that,  while  no  fundamental  change  in  the  situation  of  SMEs  in  the  defence  sector  has 
occurred in recent years, these companies face some additional difficulties. According to 
stakeholders, these are, however, most likely due to factors such as reductions in national 
defence budgets rather than to the Directive. 

According to the traditional approach to subcontracting, the successful tenderer is free to 
decide  about  letting  subcontracts  to  other  firms.  In  around  10  %  of  contract  award 
notices under the Directive, the contracting authorities stated that some share of the 
awarded  contract  is  likely  to  be  subcontracted  to  third  parties.  In  terms  of  value, 
these  contracts  accounted  for  42  %  of  overall  procurement  under  the  Directive,  nearly 
EUR 13 billion. If a value of 30 % is used as proxy for the subcontracted share of these 
contracts, the total value of this subcontracting would be around EUR 3.8 billion. This 
represents  an  estimation  of  business  opportunities  for  SMEs  and  sub-suppliers  to  be 
freely selected by the successful tenderer (main contractor). 

The specific subcontracting provisions of the Directive allow the contracting authority 
to require the successful tenderer to subcontract a share of the contact to third parties via 
competitive  tendering,  following  the  rules  specified  in  Articles  50  to  53.  These 
provisions have clearly not been used by Member States’ authorities: the number of 
published subcontract notices is negligible. The negative assessment of the effectiveness 
of the Directive’s provisions on subcontracting is confirmed by the Member States, the 
EDA, and industry. Based on their input, the main reasons why these provisions have not 
been  used  appear  to  be:  i)  Member  States  have  no  incentive  to  use  these  provisions, 
because they do not  guarantee the involvement of local companies; ii) these  provisions 
seek to  open supply chains for the award  of specific  contracts, while supply  chains are 
established  long  before,  especially  in  defence;  iii)  using  this  form  of  competitive 
subcontracting would raise several legal and administrative problems. 

Since  the  subcontracting  provisions  merely  lay  down  options  for  Member  States  and 
contracting authorities, the fact that they have not been used does not prevent the use of 
the  Directive  or  undermine  its  functioning.  However,  the  aim  of  providing,  through 

13   For more details, see Section 6.1.4.5. and Annex III of the SWD. 

7 

 
                                                 
legislative  measures,  additional  opportunities  to  sub-suppliers  and  SMEs  by  injecting 
competition into the supply chains of prime contractors has not been achieved. 

4.2.  Efficiency 

To assess the Directive’s efficiency, the evaluation looked at the costs stemming from its 
application, and at how they compare to the benefits. 

The total costs of procurement procedures carried out under the Directive are estimated 
to be approximately EUR 89.6 million in 2011-2015 (EUR 27.6 million for contracting 
authorities  and  nearly  EUR  62  million  for  all  businesses,  including  the  unsuccessful 
ones). These costs are not only those directly resulting from the Directive’s obligations, 
but could include other cost elements, which cannot be disentangled, such as “business as 
usual cost” or  costs resulting  from  national legislation14. When compared to  the  total 
value  of  awarded  contracts  (EUR  30.85  billion  in  2011-2015),  the  costs  of 
procedures account for around 0.3 % of the contract value. 

The  perception  of  a  number  of  stakeholders  (including  the  majority  of  business 
respondents  to  the  online  survey)  is  that  the  costs  have  increased  under  the  Directive. 
However, this perception emerges when the Directive’s costs are compared to a previous 
situation where defence procurement was not subject to competitive rules. It also results 
from  consultation  meetings  that  industry  stakeholders  do  not  believe  that  it  would  be 
possible to achieve the Directive’s objectives with significantly less regulation. 

As regards the cost-benefit analysis, the Directive would be likely to generate savings of 
roughly EUR 770 million, if a conservative assumption of 2.5 % savings was used, based 
on  the  2011  evaluation  of  the  civil  procurement  Directives.  Therefore  the  savings 
generated by the Directive are likely to exceed, by nearly a factor of nine, the costs 
of the procedures for public authorities and firms15. 

During the consultations, stakeholders were also asked to give an overall assessment on 
the  Directive’s  efficiency  by  comparing  the  costs  and  benefits  of  carrying  out  (for 
contracting authorities) or participating in (for businesses) procurement procedures under 
the Directive. Among contracting authorities, the perception is largely positive, while the 
perception  of  business  respondents  is  more  critical.  As  it  results  from  consultation 
meetings,  businesses  seem  to  consider  that  the  costs  of  participating  in  procurement 
procedures under the Directive outweigh the benefits not because of the Directive itself, 
but rather due to the limited uptake and inconsistencies in applying its rules. 

The  Directive  imposes  information  obligations  about  award  procedures  essentially  on 
contracting  authorities,  and  not  on  businesses.  These  obligations  are  the  basis  of  EU 
public  procurement  rules  and  do  not  differ  from  those  under  the  civil  procurement 
Directives. Therefore, the evaluation concluded that the administrative burden stemming 
from the Directive’s rules is negligible. 

Although  the  stakeholders’  views  about  efficiency  are  not  entirely  positive,  the 
Commission concludes, especially in the light of costs and savings’ estimations, that the 

14   For more details on costs estimations and on related methodological issues, please see Section 6.2.1. 

and Annex III of the SWD. 

15   For more details on savings estimations, please see Section 6.2.2. of the SWD. 

8 

 
                                                 
Directive is broadly  efficient but that further progress is needed to  ensure  a  more 
consistent and increased use of the Directive by Member States. 

4.3.  Relevance 

The  Commission  considers  that  the  Directive’s  objectives  are  still  fully  relevant.  As 
shown  above,  significant  progress  towards  these  objectives  has  been  made,  but  much 
more  is  needed.  The  whole  rationale  and  needs  that  led  to  the  adoption  of  the 
Directive  remains  relevant.  All  of  this  is  supported  by  a  broad  consensus  among 
Member States and stakeholders. 

The  new  developments  that  occurred  after  the  adoption  of  the  Directive  –  the 
deteriorating  security  situation,  budgetary  constraints,  emerging  consensus  on  the  need 
for  strategic  autonomy  and  more  cooperation,  the  new  legal  framework  for  civil 
procurement – do not question the relevance of the Directive’s objectives. 

4.4.  Coherence 

The evaluation looked at the internal consistency between the different provisions of the 
Directive, and their consistency with legislative or policy instruments in related areas. 

The  Commission  has  not  identified  internal  coherence  problems  concerning  the 
Directive’s provisions, neither has any such issue emerged from the consultations. 

The Directive’s consistency with the framework of EU public procurement law has also 
been analysed. The Commission finds that there are no problems of coherence with the 
other  instruments  of  EU  public  procurement  law,  including  the  new  civil  procurement 
Directives. In this context, the question of whether (some of) the innovations introduced 
by  the  new  civil  procurement  Directives  should  be  rolled  over  to  the  (defence 
procurement)  Directive  attracted  particular  attention  from  Member  States  and 
stakeholders, which have rather mixed views on the issue. The Commission observes that 
the  innovations  of  the  new  civil  Directives  do  not  create  coherence  problems  with 
regard to the existing text of the (defence procurement) Directive. 

The  Commission  finds  that  there  are  no  inconsistencies  between  the  provisions  of  the 
Directive  and  those  of  Directive  2009/43/EC  on  intra-EU  transfers  of  defence-related 
products16.  Member  States’  and  stakeholders’  have  highlighted  that  the  implementation 
of the latter is an important factor for the full uptake of the Directive. 

In recent years, Member States, EU institutions and stakeholders have stressed the need 
to strengthen European defence cooperation, including in the field of procurement. The 
Directive recognises the importance of this aspect and seeks to enable Member States to 
pursue  cooperative  procurement  in  different  forms.  Based  on  discussions  with  Member 
States  experts,  the  stakeholders’  consultations,  and  a  specific  contribution  from  the 
European  Defence  Agency  (EDA),  it  can  be  concluded  that  the  Directive  does  not 
hinder  cooperative  procurement.  However,  it  is  important  to  encourage  Member 
States’  authorities  to  make  full  use  of  the  available  flexibility  under  the  Directive  to 
pursue cooperative procurement. 

16   See Section 6.4.2. of the SWD. 

9 

 
                                                 
4.5.  EU added value 

The Directive has led to an increase in the value of defence contracts published EU-wide 
and awarded through fair and competitive tendering procedures. The estimates done for 
the cost-benefit analysis also show that the Directive is likely to have generated savings 
significantly  exceeding  the  costs  of  running  the  procedures  for  public  authorities  and 
businesses.  If  the  uptake  of  the  Directive  further  increased  in  the  future,  these  results 
seem likely to be even more pronounced. 

The same results could not be achieved through action by Member States which would 
inevitably  result  in  different  regimes  increasing  regulatory  complexity  and  causing 
unnecessary obstacles to cross-border activities. With no specific EU regime for defence 
and  sensitive  security  procurement,  the  increase  in  the  use  of  transparent,  fair  and 
competitive  tendering  procedures,  and  the  corresponding  decrease  in  the  use  of 
exemptions, would not continue and might even be reversed. 

Therefore,  the  Directive  has  a  clear  EU  added  value  and  continues  to  comply  with 
the principle of subsidiarity. 

5.  CONCLUSIONS AND WAY FORWARD 

Following  the  evaluation,  and  in  general  concurrence  with  Member  States’  and 
stakeholders’ inputs, the Commission believes that overall the text of the Directive is 
fit for purpose, that the Directive is broadly on track towards meeting its objectives 
and that an amendment of the Directive is not necessary. Nevertheless, as shown above, 
and considering the short period of time that has elapsed since the actual transposition of 
the Directive, there is a strong need to focus on its effective implementation, in order 
to  improve  its  effectiveness  and  in  turn,  its  efficiency.  This  requires,  among  other 
things,  a  stable  legal  framework.  Even  if  a  legislative  proposal  could  lead  to  a  few 
marginal  improvements  to  the  text,  at  this  stage  it  would  not  help  with  progression 
towards achieving the Directive’s objectives.  Therefore, the Commission has decided 
not  to  put  forward  a  legislative  proposal  with  this  report.  However,  a  number  of 
proposals  for  the  way  forward,  based  on  the  conclusions  of  the  evaluation,  are  made 
below. 

There  were  no  fundamental  problems  identified  regarding  the  Directive’s  transposition 
into  national  legislation.  However,  there  are  certain  issues  to  be  clarified  on  the 
transposition of a limited number of provisions of the Directive: 

  The  Commission  will  contact  the  Member  States  concerned  to  solve  these 

outstanding issues and seek any clarifications needed. 

The  Directive  has  led  to  an  initial  increase  of  competition,  transparency,  and  non-
discrimination in Europe’s defence procurement market, and to a corresponding decrease 
in  the  use  of  exemptions.  However,  a  very  significant  share  of  defence  procurement 
expenditure is still done outside the Directive. The Directive was used to a very limited 
extent  for  procuring  high-value,  strategic,  complex  defence  systems.  In  addition,  the 
degree of application of the Directive remains uneven across Member States, leading to 
additional costs for industry. Furthermore, Member States still seem to use – at least to a 
certain extent – offsets/industrial return requirements (presumably relying on Article 346 
TFEU). Industry stakeholders expressed concerns about the uncertainties concerning the 
use of these requirements. 

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In this context, the Commission will take the following actions: 

  Provide  guidance  on  the  interpretation/application  of  specific  provisions  of  the 
Directive concerning exclusions. The adoption of a Commission notice providing 
guidance on government-to-government contracts is a first step in this direction. 
The  Commission  will  also  consider  developing  further  guidance  on  the  use  of 
offsets/industrial return requirements. 

  Develop  the  dialogue  with  Member  States  and  stakeholders  on  applying  the 
Directive. Advanced consultations between Member States and the Commission 
may be particularly useful with regard to major defence procurement projects. 
  Publish  periodic  statistical  reports  (scoreboards)  on  Member  States’  use  of  the 

Directive. 

  Start  infringement  procedures,  where  serious  breaches  of  EU  law  are  identified 
with regard to specific defence procurement cases. The focus should especially be 
on  cases  of  non-application  of  the  Directive  and  on  related  market  distortions 
such as offsets/industrial return requirements. 

The  subcontracting  provisions  of  the  Directive  have  not  been  used  and  are  considered 
ineffective: 

  The  Commission  will  revise  the  guidance  on  the  subcontracting  provisions  in 
order to increase flexibility for Member States’ procurement authorities, thereby 
providing  the  incentive  for  them  to  use  these  provisions  and,  more  in  general, 
enabling them to drive competition into supply chains. 

The Directive does not hinder cooperative procurement. However, to encourage Member 
States’ authorities to fully use the flexibility existing under the Directive: 

  The Commission will provide guidance to clarify the whole range of options for 

cooperative procurement. 

The Commission will produce additional or revised guidance on all these issues in close 
cooperation with Member States and in consultation with stakeholders. 

Finally, the European Defence Action Plan proposals aimed to foster cross-border market 
access  for  sub-suppliers  and  SMEs  are  also  expected  to  help  improving  the  levels  of 
cross-border penetration and of SMEs participation in defence contracts. 

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