Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on establishing the European defence industry Reinforcement through common Procurement Act
Date: 2022-07-19
Institutions: Directorate-General for Defence Industry and Space, European Commission
Subjects: European arms policy, European defence policy, arms industry, common security and defence policy, defence expenditure, innovation, military equipment, public procurement, rearmament

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   EUROPEAN COMMISSION  Brussels, 19.7.2022  COM(2022) 349 final 2022/0219 (COD)  Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on establishing the European defence industry Reinforcement through common Procurement Act  
 
EXPLANATORY MEMORANDUM 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

Already  characterised  by  an  unstable  situation  in  Europe’s  neighbouring  regions  for  many 
years  and  a  complex  and  challenging  environment,  the  Union’s  geopolitical  context  has 
changed dramatically in light of the Russia’s military aggression against Ukraine. The return 
of territorial conflict and high-intensity warfare on European soil requires Member States to 
rethink their defence plans and capacities.  

EU  Heads  of  State  or  Government,  meeting  in  Versailles  on  11  March  2022,  committed  to 
“bolster  European  defence  capabilities”  in  light  of  the  Russia’s  military  aggression  against 
Ukraine. The Versailles declaration notably states that Member States should increase defence 
expenditures; step up cooperation through joint projects; close shortfalls and meet capability 
objectives;  boost  innovation  including  through  civil/military  synergies;  and  strengthen  and 
develop  the  EU  defence  industry,  including  SMEs.  Moreover,  the  Council  invited  “the 
Commission, in coordination with the European Defence Agency, to put forward an analysis 
of the defence investment gaps by mid-May and to propose any further initiative necessary to 
strengthen the European defence industrial and technological base.”  

In  response  to  this  invitation,  the  European  Commission  and  the  High  Representative 
presented  a  Joint  Communication  on  the  Defence  Investment  Gaps  Analysis  and  Way 
Forward  (the  “Joint  Communication”)  on  18  May  2022.  It  provided  insights  on  three  main 
types  of  gaps:  a  financial  gap,  an  industrial  one,  and  a  capability  gap.  The  Joint 
Communication  notes  that  Member  States’  recent  budgetary  increases  come  after  years  of 
substantial cuts and severe underinvestment. Such underinvestment in defence expenditure led 
to industrial and capability gaps in the EU and to the current low levels of defence equipment 
stocks.  The  transfers  of  defence  equipment  to  Ukraine,  combined  with  a  level  of  stocks 
tailored to peacetime, has resulted into the emergence of urgent and critical gaps in terms of 
military equipment.  

The  Joint  Communication  recalls  that  Member  States  need  to  restore  defence  combat 
readiness as a matter of urgency in light of the security situation and of transfers already made 
to  Ukraine.  In  particular,  a  replenishment  of  stocks  of  material  would  also  enable  them  to 
provide further assistance to Ukraine.  

The  Joint  Communication  indicates  that  as  Member  States  will  proceed  to  replenish  their 
stockpiles  and  increase  the  quantity  of  their  defence  equipment,  they  should  seize  the 
opportunity  to  do  so  in  a  collaborative  way.  This  would  provide  greater  value  for  money, 
enhance  interoperability  and  avoid  that  the  most  exposed  EU  Member  States  face  an 
impossibility  to  obtain  what  they  need,  because  of  conflicting  demands  on  the  defence 
industry, which cannot respond to such a demand surge in the short term.  

Without coordination and cooperation, increased Member State investments into defence risk 
to  deepen  the  fragmentation  of  the  European  defence  sector,  to  limit  the  potential  for 
cooperation throughout the life cycle of the equipment, to intensify external dependencies and 
to  hamper  interoperability.  Choices  made  as  regards  of  short-term  acquisitions  will  have  a 
longer-term impact on the market strength of European Defence Technological and Industrial 
Base (EDTIB) and opportunities for the next decades. 

Given the need to support in a timely and targeted manner the Member States for reinforcing 
their  defence  capacities  in  this  emergency  situation,  the  European  Commission  proposed  to 
incentivise  common  procurement  via  the  EU  budget  through  a  dedicated  Short  Term 

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Instrument  establishing  the  European  Defence  industry  Reinforcement  through  Common 
Procurement Act (the ‘Instrument’).  

The  EU  financial  support  brought  through  the  Instrument  should  stimulate  cooperative 
defence procurement process from Member States and benefit the EDTIB while ensuring EU 
Member States’ armed forces’ ability to act, security of supply and increased interoperability. 

Such an Instrument should be established to incentivise those Member States who are willing 
to pursue common procurement to fill these gaps. The Instrument should be a dedicated tool 
designed to tackle the adverse effects and consequences of the Ukraine war in the Union.  

The  Instrument  will  follow  the  establishment  of  a  Defence  Joint  Procurement  Task  Force 
supporting  the  coordination  of  their  very  short-term  procurement  needs  to  face  the  new 
security  situation.  Following  the  creation  of  the  Instrument,  the  Commission  will  propose  a 
European  Defence  Investment  Programme  (EDIP)  regulation.  The  EDIP  Regulation  could 
serve  as the  anchor  for future joint development  and  procurement projects  of high common 
interest to the security of the Member States and the Union, and by extension of the logic of 
the  short-term  instrument,  for  possible  associated  Union  financial  intervention  for  the 
reinforcement  of  the  European  defence  industrial  base,  in  particular  for  projects  which  no 
single Member State could develop or procure alone. 

• 

Consistency with existing policy provisions in the policy area 

The Instrument is consistent with the European Defence Fund. It complements the latter and 
relies  on  the  same  legal  basis.  While  the  EDF  incentivises  cooperation  of  legal  entities  on 
defence  Research  and  Development  projects,  the  Instrument  will  support  cooperation  on 
common  defence  procurement.  The  Instrument  also  takes  up  the  European  Defence  Fund’s 
approach when it comes to forbidding support for goods or services, which are prohibited by 
applicable  international  law,  or  lethal  autonomous  weapons  without  the  possibility  for 
meaningful human control over selection and engagement decisions when carrying out strikes 
against humans. 

• 

Consistency with other Union policies 

The  Instrument  will  complement  existing  collaborative  EU  defence  initiatives  such  as  the 
Permanent Structured Cooperation (PESCO), and generate synergies with the implementation 
of  the  Strategic  Compass  for  Security  and  Defence,  and  other  EU  programmes,  such  as  the 
European Defence Fund.  

The  Instrument  will  also  be  implemented  in  full  consistency  with  the  EU  capability 
development plan (CDP) identifying the defence capability priorities at EU level, as well as 
with the EU coordinated annual review on defence (CARD), which inter alia identifies new 
opportunities for defence cooperation. In this context, account may also be taken of relevant 
activities  carried  out  by  the  North  Atlantic  Treaty  Organisation  (NATO)  and  other  partners 
where they serve the Union's security and defence interests and do not exclude any Member 
State from participating. 

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

Aimed  at  fostering  the  competitiveness  of  the  EDTIB  by  supporting  cooperation  between 
Member States in the field of defence common procurement, the proposal is based on Article 
173 TFEU (support to competitiveness of the European Industry). 

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• 

Subsidiarity (for non-exclusive competence)  

While  cooperation  presents  several  obvious  advantages  (increased  interoperability,  reduced 
unit  and  maintenance  costs)  EU  Member  States  continue  to  procure  defence  systems  in  a 
mostly national manner.  

This can be explained by several factors: 

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Increased complexity and administrative burden of cooperation; 

different national requirements; 

different procurement calendars and lack of budgetary synchronisation; 

security of Information considerations; 

national defence industrial policy considerations; 

lack of national expertise in procurement agencies. 

According  to  EDA  Defence  Data  for  2020,  EU  Member  States  invested  only  €4.1bn  in 
collaborative defence equipment procurement (11% of their total spending), a 13% decrease 
compared to 2019.  

This is far below the 35% benchmark to which Member States committed. Fragmentation of 
the  demand  side  of  the  defence  market  results  into  a  series  of  problems  and  inefficiencies, 
including  on  the  supply  side,  while  increasing  maintenance  costs  of  a  plethora  of  different 
systems.  

If  this  current  trend  is  not  addressed,  it  will  continue  to  significantly  undermine  the 
competitiveness of the EDTIB and risks affecting its market prospects in the next decade.  

At the same time, the current defence market context, marked by an increased security threat 
and the realistic prospect of a high intensity conflict, sees Member States rapidly increasing 
their defence budgets and aiming at similar equipment purchases. This results in an amount of 
demand which exceeds EDTIB manufacturing capacities, currently tailored for peacetime.  

Consequently,  strong  price  inflation  can  be  anticipated,  as  well  as  longer  delays  in  delivery 
time,  potentially  harming  the  security  of  EU  citizens.  Defence  industries  need  to  secure  the 
production  capacity  necessary  to  process  orders,  as  well  as  critical  raw  materials  and  sub-
components. In this context, defence manufacturers might privilege major orders, potentially 
leaving exposed the most vulnerable countries, lacking the critical size and financial means to 
ensure large orders. 

Fragmented orders placed individually by Member States would result in more limited market 
prospects for defence companies, and necessarily translate into an increased fragmentation of 
the offer, thus significantly harming the economic efficiency of the sector and worsening the 
EDTIB competitiveness. 

Incentivising joint procurement is therefore a necessity, and would present the advantage of 
ensuring that, while the defence industry can more rapidly adapt to current market structural 
changes,  national  Armed  Forces  would  obtain  better  conditions  and  delivery  timelines  by 
cooperating  in  the  acquisition  phase.  On  top  of  this,  cooperation  in  the  field  of  acquisition 
would result in diminished costs in terms of exploitation, maintenance and withdrawal of the 
systems (costs estimated at 55% of the total cost of an equipment).  

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Consequently, the current situation requires a policy intervention at EU level to improve the 
level  of  cooperation  by  incentivising  financial  cooperation  between  Member  States  in  the 
defence procurement process. Such intervention is beneficial for the security of EU citizens as 
well as for the EDTIB. 

• 

Proportionality 

The proposed policy approach is proportionate to the scale and gravity of the problems that 
have been identified, i.e. need to speed up the adjustment of industry to structural changes and 
encourage an environment favourable to cooperation between undertakings within a system of 
open  and  competitive  markets  by  incentivising  cooperation  and  coordination  between 
Member States. It respects the limits of possible Union intervention under the Treaties.  

The initiative is limited to goals that Member States cannot achieve satisfactorily on their own 
and where the Union can be expected to do better. 

• 

Choice of the instrument 

The  Commission  proposes  a  Regulation  of  the  European  Parliament  and  of  the  Council  in 
order to set up the Instrument. This is the most suitable legal instrument as only a Regulation, 
with  its  directly  applicable legal  provisions, can  provide the necessary degree of uniformity 
needed  for  the  establishment  and  operation  of  a  Union  Instrument  aiming  at  promoting  the 
reinforcement of an industrial sector across Europe. 

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Ex-post evaluations/fitness checks of existing legislation 

There  is  no  prior  existing  legislation  covering  or  pertaining  to  this  specific  action.  To  date, 
there  was  no  other  Union  legislative  initiatives  in  the  area  of  defence  with  the  objective  of 
enhancing the competitiveness of the EDTIB in particular by speeding up, in a collaborative 
manner,  the  adjustment  of  industry  to  structural  changes,  including  ramp-up  of  its 
manufacturing capacities. There was also no other Union legislative initiatives in the area of 
defence  with  the  objective  of  fostering  cooperation  in  the  defence  procurement  process 
between  participating  Member  States.  Therefore,  there  is  no  previous  ex-post  evaluation  or 
fitness check of existing legislation that took place for this legislative initiative. 

• 

Impact assessment 

European Council conclusions of 30-31 May 2022 invited the Council to examine as a matter 
of  urgency,  the  short-term  instrument.  Therefore,  Commission  tables  the  proposal  for  a 
regulation  establishing  the  instrument  without  including  an  impact  assessment,  in  order  to 
allow the co-legislators to receive it as early as possible. 

• 

Regulatory fitness and simplification 

The Instrument is not expected to increase the administrative burden.  

The  proposed  performance-based  approach,  relying  on  the  conditionality  between  the 
disbursement of payments and the achievement of milestones and targets by the consortium, 
is also an element of simplification in the implementation of the instrument. 

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• 

Fundamental rights 

Enhancing the security of EU citizens can contribute to safeguarding their fundamental rights. 

In  addition,  actions  for  defence  common  procurement  of  goods  or  services,  which  are 
prohibited  by  applicable  international  law,  shall  not  be  eligible  for  support  from  the 
Instrument.  

Moreover,  actions  with  a  view  to  the  common  procurement  of  lethal  autonomous  weapons 
without the possibility for meaningful human control over selection and engagement decisions 
when  carrying  out  strikes  against  humans  shall  not  be  eligible  for  support  from  the 
Instrument. 

4. 

BUDGETARY IMPLICATIONS 

The  financial  envelope  for  the  implementation  of  the  Instrument  for  the  period  from  period 
XX 2022 to 31 December 2024 shall be EUR 500 million in current prices. 

The impact on the multi-annual financial framework period in terms of required budget and 
human resources is detailed in the legislative financial statement annexed to the proposal. 

5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

The  Commission  should  regularly  monitor  its  actions,  review  progress  made  towards 
delivering the expected results as well as examine synergies with other complementary Union 
programmes.  The  Commission  should  draw  up  an  evaluation  report  for  the  Instrument  and 
communicate it to the European Parliament and to the Council. This report will notably assess 
the progress made towards the achievement of the objectives set in the proposal. 

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2022/0219 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on establishing the European defence industry Reinforcement through common 
Procurement Act 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 173(3) thereof, 

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national parliaments, 
Having regard to the opinion of the European Economic and Social Committee1, 

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

The EU Heads of State or Government, meeting in Versailles on 11 March, committed 
to “bolster European defence capabilities” in light of the Russian military aggression 
against  Ukraine.  They  agreed  to  increase  defence  expenditures,  step  up  cooperation 
through  joint  projects,  and  common  procurement  of  defence  capabilities,  close 
shortfalls, boost innovation and strengthen and develop the EU defence industry. 

The  unjustified  invasion  of  Ukraine  by  the  Russian  Federation  on  24  February  2022 
and  the  ongoing  armed  conflict  in  Ukraine  has  made  it  clear  that  it  is  critical  to  act 
now to address the existing shortfalls It has led to the return of high-intensity warfare 
and  territorial  conflict  in  Europe,  requiring  a  significant  increase  in  the  capacity  of 
Member States to  fill  the most urgent  and critical  gaps, especially those exacerbated 
by the transfer of defence products to Ukraine. 

The  Commission  and  the  High  Representative  presented  a  Joint  Communication  on 
“The  Defence  Investment  Gaps  Analysis  and  Way  Forward”  on  18  May  2022.  The 
Communication  highlighted  the  existence,  within  the  EU,  of  defence  financial, 
industrial and capability gaps. 

A dedicated short-term instrument, designed in a spirit of solidarity, was indicated as a 
tool  to  incentivise  Member  States,  on  a  voluntary  basis,  to  pursue  common 
procurement  to  fill  the  most urgent  and critical  gaps, especially those created by  the 
response to the current Russia’s aggression, in a collaborative way.  

Such a new instrument will contribute to reinforce common defence procurement and, 
through  the  associated  Union  financing,  to  strengthen  EU  defence  industrial 
capabilities.  

Reinforcing the European Defence Technological and Industrial Base should therefore 
be at the core of those efforts. Indeed difficulties and gaps still exist and the European 

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(7) 

(8) 

(9) 

(10) 

defence  industrial  base  remains  highly  fragmented,  lacking  sufficient  collaborative 
action and inter-operability of products. 

In the current defence market context, marked by an increased security threat and the 
realistic perspective of a high intensity conflict, Member States are rapidly increasing 
their  defence  budgets  and  aiming  at  similar  purchases.  This  results  in  an  amount  of 
demand  which  exceeds  European  Defence  Technological  and  Industrial  Base 
manufacturing capacities, currently tailored for peace time. 

As  a  result,  strong  price  inflation  can  be  anticipated,  as  well  as  longer  delays  in 
delivery  time,  potentially  harming  the  security  of  the  Union  and  its  Member  States. 
Defence industries need to secure the production capacity necessary to process orders, 
as well as critical raw materials and sub-components. In this context producers might 
privilege  major  orders,  potentially  leaving  exposed  the  most  vulnerable  countries, 
lacking the critical size and financial means to ensure large orders. 

Furthermore, efforts should be made so that the increased spending results in a much 
stronger  European  Defence  Technological  and  Industrial  Base.  Indeed,  without 
coordination and cooperation, the increased national investments are likely to deepen 
the fragmentation of the European defence industry. 

In  the  light  of  the  above  challenges  and  the  related  structural  changes  in  the  EU 
Defence  industry,  it  appears  necessary  to  speed  up  the  adjustment  of  the  European 
Defence  Technological  and  Industrial  Base,  enhance  its  competitiveness  and 
efficiency,  and  thereby  contribute  to  strengthening  and  reforming  Member  States’ 
defence  industrial  capabilities.  Addressing  industrial  shortfalls  should  include 
promptly tackling the most urgent gaps.  

(11)  Common investment and defence procurement should in particular be incentivised, as 
such  collaborative  actions  would  ensure  that  the  necessary  changes  in  the  EU 
industrial base takes place in a collaborative manner, avoiding further fragmentation of 
the industry.  

(12)  To that end a Short Term  Instrument for increasing the collaboration of the Member 
States  in  the  defence  procurement  phase  (the  ‘Instrument’)  should  be  established.  It 
will incentivise Member States to pursue collaborative actions and in particular, when 
they  procure  in  order  to  fill  these  gaps,  to  do  so  jointly,  increasing  the  level  of 
interoperability and strengthening and reforming their defence industrial capabilities.  

(13)  The  Short  Term  Instrument  should  offset  the  complexity  and  risks  associated  with 
such  joint  actions  while  allowing  economies  of  scale  in  the  actions  undertaken  by 
Member States to reinforce and modernise the European Technological and Industrial 
Base,  increasing  thereby  the  Union’s  capacity  resilience  and  security  of  supply. 
Incentivizing common procurement would also result into diminished costs in terms of 
exploitation, maintenance and withdrawal of the systems. 

(14)  This  Instrument  will  build  on  and  take  into  account  the  work  of  the  Defence  Joint 
Procurement  Task  Force  established  by 
the  High 
Representative/Head  of  Agency,  in  line  with  the  Joint  Communication  ‘Defence 
Investment Gaps Analysis and Way Forward”, to coordinate very short-term defence 
procurement needs and engage with Member States and EU defence manufacturers to 
support joint procurement to replenish stocks, notably in light of the support provided 
to Ukraine. 

the  Commission  and 

(15)  The  Instrument  is  coherent  with  existing  collaborative  EU  defence-related  initiatives 
such  as  in  the  European  Defence  Fund  as  well  as  the  Permanent  Structured 

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Cooperation  (PESCO),  and  generates  synergies  with  other  EU  programmes.  The 
Instrument is fully coherent with the ambition of the Strategic Compass. 

(16)  As the instrument aims to enhance the competitiveness and efficiency of the Union’s 
defence industry, to benefit from the instrument, common procurement contracts will 
need  to  be  placed  with   legal  entities  which  are  established  in  the  Union  or  in 
associated countries and are not subject to control by non-associated third countries or 
by non-associated third-country entities. In that context, control should be understood 
to be the ability to exercise a decisive influence on a legal entity directly, or indirectly 
through  one  or  more  intermediate  legal  entities.  Additionally,  in  order  to  ensure  the 
protection  of  essential  security  and  defence  interests  of  the  Union  and  its  Member 
States,  the  infrastructure,  facilities,  assets  and  resources  of  the  contractors  and 
subcontractors involved in the common procurement which are used for the purposes 
of the common procurement shall be located on the territory of a Member State or of 
an associated third country. 

(17) 

In  certain  circumstances,  it  should  be  possible  to  derogate  from  the  principle  that 
contractors  and  subcontractors  involved  in  a  common  procurement  supported  by  the 
Instrument  are  not  subject  to  control  by  non-associated  third  countries  or  non 
associated third-country entities. In that context, a legal entity established in the Union 
or in an associated third country and controlled by a non-associated third country or a 
non-associated  third  country  entity  may  participate  as  contractor  and  subcontractor 
involved  in  the  common  procurement  if  strict  conditions  relating  to  the  security  and 
defence interests of the Union and its Member States, as established in the framework 
of  the  Common  Foreign  and  Security  Policy  pursuant  to  Title  V  of  the  Treaty  on 
European  Union  (TEU),  including  in  terms  of  strengthening  the  European  Defence 
Technological and Industrial Base, are fulfilled. 

(18)  Furthermore, the common procurement  procedures and contracts  shall  also include a 
requirement for the defence product to not be subject to control or restriction by a non-
associated third country or a non-associated third country entity.  

(19)  Grants under the  Instrument may take the form of financing not linked to cost based 
on the achievement of results by reference to work packages, milestones or targets of 
the common procurement process, in order to create the necessary incentive effect. 

(20)  Where  the  Union  grant  takes  the  form  of  financing  not  linked  to  costs,  the 
Commission should determine in the work programme the funding conditions for each 
action,  in  particular  (a)  a  description  of  action  involving  cooperation  for  common 
procurement with a view to addressing the most urgent and critical capacity needs, (b) 
the milestones for the implementation of the action, (c) the rough order of magnitude 
expected  from  the  common  procurement  and  (d)  the  maximum  Union  contribution 
available. 

(21)  To generate the incentive effect, the level of Union contribution may be differentiated 
based on factors such as (a) the complexity of the common procurement, for which a 
proportion  of  the  anticipated  size  of  the  procurement  contract,  based  on  experience 
gained in  similar actions,  may serve as an initial  proxy, (b) the characteristics of the 
cooperation,  such  as  joint  usage,  stockpiling,  ownership  or  maintenance,  which  are 
likely to induce stronger interoperability outcomes and long-term investment signals to 
industry, and (c) the number of participating Member States or associated countries or 
the  inclusion  of  additional  Member  States  or  associated  countries  to  existing 
cooperations.  

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(22)  Member States should appoint a procurement agent to conduct a common procurement 
on their behalf. The procurement agent should be a contracting authority established in 
a Member State or an associated third country, including Union bodies or international 
organisations,  such  as  the  Organisation  Conjointe  de  Coopération  en  matière 
d'ARmement (OCCAR). 

(23) 

In accordance with Article 193(2) of the Financial Regulation, a grant may be awarded 
for an action which has already begun, provided that the applicant can demonstrate the 
need  for  starting  the  action  prior  to  signature  of  the  grant  agreement.  However, 
financial contribution should not cover a period prior to the date of submission of the 
grant  application,  except  in  duly  justified  exceptional  cases.  In  order  to  avoid  any 
disruption in Union support which could be prejudicial to the interests of the Union, it 
should  be  possible  to  provide  in  the  financing  decision  for  financial  contributions  to 
actions that cover a period from the 24 February 2022, even if they have started before 
the grant application was submitted. 

Regulation  (EU,  Euratom)  No  2018/1046  (the  ‘Financial  Regulation’)  applies  to  this 
Programme. It lays down rules on the implementation of the Union budget, including 
the rules on grants. 

(25)  This Regulation lays down a financial envelope for the Fund, which is to constitute the 
prime  reference  amount,  within  the  meaning  of  point  18  of  the  Inter-institutional 
Agreement of 16 December 2020 between the European Parliament, the Council and 
the  European  Commission  on  budgetary  discipline,  on  cooperation  in  budgetary 
matters  and  on  sound  financial  management,  as  well  as  on  new  own  resources, 
including a roadmap towards the introduction of new own resources2 (Interinstitutional 
Agreement  of  16  December  2020),  for  the  European  Parliament  and  for  the  Council 
during the annual budgetary procedure. 

(26) 

including 

In accordance with the Financial Regulation, Regulation (EU, Euratom) No 883/2013 
of  the  European  Parliament  and  of  the  Council3,  Council  Regulation  (Euratom,  EC) 
No 2988/954, Council Regulation (Euratom, EC) No 2185/965 and Council Regulation 
(EU)  2017/19396,  the  financial  interests  of  the  Union  are  to  be  protected  through 
proportionate  measures, 
the  prevention,  detection,  correction  and 
investigation  of  irregularities  and  fraud,  the  recovery  of  funds  lost,  wrongly  paid  or 
incorrectly used and, where appropriate, the imposition of administrative sanctions. In 
particular, in accordance with Regulation (EU, Euratom) No 883/2013 and Regulation 
(Euratom,  EC)  No  2185/96  the  European  Anti-Fraud  Office  (OLAF)  may  carry  out 
investigations,  including  on-the-spot  checks  and  inspections,  with  a  view  to 
establishing  whether  there  has  been  fraud,  corruption  or  any  other  illegal  activity 
affecting  the  financial  interests  of  the  Union.  In  accordance  with  Regulation  (EU) 
2017/1939,  the  European  Public  Prosecutor's  Office  (EPPO)  may  investigate  and 

2 
3 

4 

5 

6 

OJ L 433I, 22.12.2020, p. 28. 
Regulation  (EU,  Euratom)  No  883/2013  of  the  European  Parliament  and  of  the  Council  of  11 
September 2013 concerning investigations conducted by the European Anti-Fraud Office (OLAF) and 
repealing Regulation (EC) No 1073/1999 of the European Parliament and of the Council and Council 
Regulation (Euratom) No 1074/1999,(OJ L248, 18.9.2013, p. 1. 
Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European 
Communities financial interests (OJ L 312, 23.12.95, p.1). 
Council  Regulation  (Euratom,  EC)  No  2185/96 of  11  November  1996  concerning  on-the-spot  checks 
and inspections carried out by the Commission in order to protect the European Communities' financial 
interests against fraud and other irregularities (OJ L292,15.11.96 , , p.2). 
Council  Regulation  (EU)  2017/1939  of  12  October  2017  implementing  enhanced  cooperation  on  the 
establishment of the European Public Prosecutor’s Office (‘the EPPO’) (OJ L283, 31.10.2017, p.1). 

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prosecute fraud and other illegal activities affecting the financial interests of the Union 
as  provided  for  in  Directive  (EU)  2017/1371  of  the  European  Parliament  and  of  the 
Council7. In accordance with the Financial Regulation, any person or entity receiving 
Union funds is to fully cooperate in the protection of the Union’s financial interests, to 
grant  the  necessary  rights  and  access  to  the  Commission,  OLAF,  the  EPPO  and  the 
European Court of Auditors (ECA) and to ensure that any third parties involved in the 
implementation of Union funds grant equivalent rights.  

(27)  Pursuant  to  Article  94  of  Council  Decision  2013/755/EU8,  persons  and  entities 
established in overseas countries and territories (OCTs) are eligible for funding subject 
to the rules and objectives of the Instrument and possible arrangements applicable to 
the Member State to which the relevant overseas country or territory is linked. 

(28)  Since the objectives of this Regulation cannot be sufficiently achieved by the Member 
States but can rather be better achieved at Union level, the Union may adopt measures, 
in  accordance  with  the  principle  of  subsidiarity  as  set  out  in  Article  5  TEU.  In 
accordance  with  the  principle  of  proportionality  as  set  out  in  that  Article,  this 
Regulation does not go beyond what is necessary in order to achieve those objectives. 

HAVE ADOPTED THIS REGULATION: 

Article 1 
Subject matter 

This Regulation establishes the European Defence Industry Reinforcement through common 
Procurement Act (the ‘Instrument’). 

For the purposes of this Regulation, the following definitions apply:  

Article 2 
Definitions 

(1) 

(2) 

(3) 

(4) 

(5) 

7 

8 

‘common  procurement’  means  a  cooperative  procurement  jointly  conducted  by  at 
least three Member States;  

‘control by a non-associated third country or by a non-associated third country 
entity’ means the ability to exercise a decisive influence on a legal entity directly, or 
indirectly through one or more intermediate legal entities; 

‘executive  management  structure’  means  a  body  of  a  legal  entity,  appointed  in 
accordance with national law, and, where applicable, reporting to the chief executive 
officer,  which  is  empowered  to  establish  the  legal  entity’s  strategy,  objectives  and 
overall direction, and which oversees and monitors management decision-making; 

‘non-associated  third-country  entity’  means  a  legal  entity  that  is  established  in  a 
non-associated  third  country  or,  where  it  is  established  in  the  Union  or  in  an 
associated country, that has its executive management structures in a non-associated 
third country; 

‘procurement  agent’  means  a  contracting  authority  established  in  a  Member  State 
or  an  associated  country  designated  by  at  least  three  Member  States  to  conduct  a 

Directive (EU) 2017/1371 of the European Parliament and of the Council of 5 July 2017 on the fight 
against fraud to the Union's financial interests by means of criminal law (OJ L 198, 28.7.2017, p. 29). 
Council Decision 2013/755/EU of 25 November 2013 on the association of the overseas countries and 
territories with the European Union (Overseas Association Decision) (OJ L 344, 19.12.2013, p. 1). 

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common  procurement  on  their  behalf,  including  Union  bodies  or  international 
organisations;  

(6) 

‘third country’ means a country that is not member of the Union. 

1. 

The Instrument has the following objectives: 

Article 3 
Objectives 

(a) 

(b) 

to  foster  the  competitiveness  and  efficiency  of  the  European  Defence 
Technological  and  Industrial  Base  (EDTIB)  for  a  more  resilient    Union,  in 
particular by speeding up, in a collaborative manner, the adjustment of industry 
to structural changes, including ramp-up of its manufacturing capacities; 

to  foster  cooperation  in  defence  procurement  process  between  participating 
Member  States  contributing  to  solidarity,  interoperability,  prevention  of 
crowding-out  effects,  avoiding  fragmentation  and  increasing  the  effectiveness 
of public spending. 

The objectives shall be  pursued with  an emphasis  on strengthening and  developing 
the Union defence industrial base to allow it to address in particular the most urgent 
and critical defence products needs, especially those revealed or exacerbated by the 
response to the Russian aggression against Ukraine, taking into account the work of 
the Defence Joint Procurement Task Force. 

Article 4 
Budget 

The financial envelope for the implementation of the Instrument for the period from 
the  entry  into  force  of  this  Regulation  to  31  December  2024  shall  be  EUR  500 
million in current prices. 

The amount referred to in paragraph 1 may be used for technical and administrative 
assistance for the implementation of the Instrument, such as preparatory, monitoring, 
control,  audit  and  evaluation  activities  including  corporate  information  technology 
systems. 

Resources  allocated  to  Member  States  under  shared  management  may,  at  their 
request,  be  transferred  to  the  Instrument  subject  to  the  conditions  set  out  in  the 
relevant  provisions  of  the  Common  Provisions  Regulation  for  2021-2027.  The 
Commission shall implement those resources directly in accordance with point (a) of 
the first  subparagraph of Article 62(1) of Regulation (EU, Euratom) No  2018/1046 
(the ‘the Financial Regulation’). Those resources shall be used for the benefit of the 
Member State concerned.  

2. 

1. 

2. 

3. 

4. 

Budgetary  commitments  for  activities  extending  over  more  than  one  financial  year 
may be broken down over several years into annual instalments. 

Article 5 
Third countries associated to the Instrument 

The  Instrument  shall  be  open  to  the  participation  of  Member  States  and  members  of  the 
European  Free  Trade  Association  which  are  members  of  the  European  Economic  Area 

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11 

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(associated countries), in accordance with the conditions laid down in the  Agreement on the 
European Economic Area. 

Article 6 
Implementation and forms of EU funding 

1. 

2. 

3. 

4. 

The  Instrument shall be  implemented in  direct management in accordance with  the 
Financial Regulation. 

The  EU  funding  shall  incentivize  the  cooperation  between  Member  States  to  fulfil 
the  objectives  referred  to  in  Article  3.  The  financial  contribution  shall  be  set  up 
taking  into  consideration  the  collaborative  nature  of  the  common  procurement  plus 
an appropriate amount to create the incentive effect necessary to induce cooperation.  

Where  necessary  for  the  implementation  of  an  action,  financial  contributions  may 
cover  a  period  prior  to  the  date  of  the  request  for  financial  contributions  for  that 
action, provided that the action has not started prior to the 24 February 2022. 

Grants  implemented  under  direct  management  shall  be  awarded  and  managed  in 
accordance with Title VIII of the Financial Regulation. 

Article 7 
Eligible actions 

1. 

Only actions fulfilling all of the following criteria shall be eligible for funding:  

(a) 

the  actions  shall  involve  cooperation  for  common  procurement  of  the  most 
urgent and critical defence products between eligible entities implementing the 
objectives referred to in Article 3; 

(b) 

the  actions  shall  involve  new  cooperation  or  an  extension  of  existing 
cooperation to new Member States or associated countries; 

(c) 

the actions shall be carried out by a consortium of at least three Member States;  

(d) 

the actions shall fulfil the additional conditions as set out in Article 8. 

2. 

The following actions shall not be eligible for funding: 

(a) 

(b) 

actions for common procurement of goods or services which are prohibited by 
applicable international law; 

actions  for  common  procurement  of  lethal  autonomous  weapons  without  the 
possibility  for  meaningful  human  control  over  selection  and  engagement 
decisions when carrying out strikes against humans. 

Article 8 
Additional funding conditions  

1. 

2. 

Member States or associated third countries shall appoint a procurement agent to act 
on their behalf for the purpose of the common procurement. The procurement agent 
shall  carry  out  the  procurement  procedures  and  conclude  the  resulting  agreements 
with contractors on behalf of the participating Member States. 

The  procurement  procedures  referred  to  in  paragraph  1  shall  be  based  on  an 
agreement  to  be  signed  by  the  participating  Member  States  with  the  procurement 
agent under the conditions set out in the work programme referred to in Article 11. 

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3. 

4. 

5. 

6. 

Common  procurement  procedures  and  contracts  shall 
requirements  for  contractors  and  subcontractors 
procurement as referred to in paragraphs 4 to 10. 

involved 

include  participation 
the  common 

in 

Contractors  and  subcontractors  involved  in  the  common  procurement  shall  be 
established and have their executive management structures in the Union. They shall 
not  be  subject  to  control  by  a  non-associated  third  country  or  by  a  non-associated 
third country entity. 

By way of derogation from paragraph 4, a legal entity established in the Union or in 
an associated third country and controlled by a non-associated third country or a non-
associated  third  country  entity  may  participate  as  contractor  and  subcontractor 
involved in the common procurement only if it provides guarantees approved by the 
Member State or associated third country in which the contractor is established. 

The  participating  Member  States  shall  provide  to  the  Commission    a  notification 
from  the  procurement  agent  on  the  guarantees  provided  by  a  contractor  or 
subcontractor involved in the common procurement that is established in the Union 
or an associated third country and controlled by a non-associated third country or a 
non-associated  third  country  entity.  The  guarantees  and  related  provisions  in  the 
procurement contract shall be made available to the Commission upon request. The 
guarantees  shall  provide  assurances  that  the  involvement  of  the  contractor  or 
subcontractor involved in the common procurement does not contravene the security 
and  defence  interests  of  the  Union  and  its  Member  States  as  established  in  the 
framework of the CFSP pursuant to Title V of the TEU, or the objectives set out in 
Article 3. 

7. 

The guarantees shall in particular substantiate that, for the purposes of the common  
procurement, measures are in place to ensure that:  

(a) 

(b) 

control  over  the  contractor  or  subcontractor  involved  in  the  common 
procurement is not exercised in a manner that restrains or restricts its ability to 
carry out the order and to deliver results and;  

access  by a non-associated third country or by  a non-associated third-country 
entity to sensitive information is prevented and the employees or other persons 
involved  in  the  common  procurement  have  national  security  clearance  issued 
by a Member State. 

infrastructure,  facilities,  assets  and  resources  of 

The 
the  contractors  and 
subcontractors involved in the common procurement which are used for the purposes 
of the common procurement shall be located on the territory of a Member State or of 
an associated third country. Where no competitive substitutes are readily available in 
the Union or in an associated third country, contractors and subcontractors involved 
in  the  common  procurement  may  use  their  assets,  infrastructure,  facilities  and 
resources  located  or  held  outside  the  territory  of  the  Member  States  or  of  the 
associated third countries provided that such use does not contravene the security and 
defence  interests  of  the  Union  and  its  Member  States  and  is  consistent  with  the 
objectives set out in Article 3. 

Common procurement procedures and contracts shall also include a requirement for 
the  defence  product  to  not  be  subject  to  a  restriction  by  a  non-associated  third 
country or a non-associated third country entity. 

For  the  purposes  of  this  Article,  ‘subcontractors  involved  in  the  common 
procurement’ means all of the following: 

8. 

9. 

10. 

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(a) 

subcontractors with a direct contractual relationship to a contractor; 

(b)  other subcontractors to which at least 10 % of the work share is allocated; 

(c) 

subcontractors  which  may  require  access  to  classified  information  in  order  to 
carry out the common procurement. 

Article 9 
Eligible entities  

Provided that they comply with the eligibility criteria set out in Article 197 of the Financial 
Regulation, the following entities are eligible for funding:  

(a) 

public  contracting  authorities  or  contracting  entities  as  defined  in  Directives 
2014/24/EU9    and  2014/25/EU10  of  the  European  Parliament  and  of  the 
Council; 

(b)  public authorities of associated third countries. 

Article 10 
Award criteria 

The Commission shall evaluate the proposals submitted on  the basis of the following award 
criteria: 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

9 

10 

The  contribution  of  the  action  to  strengthening  and  developing  the  Union  defence 
industrial base to allow it to address in particular the most urgent and critical defence 
products  needs  as  referred  to  in  Article  3,  including  with  respect  to  procurement 
procedure and delivery lead times, replenishment of stocks, availability and supply; 

the  contribution  of  the  action  to  competitiveness  and  adaptation  of  the  EDTIB, 
including through the envisaged ramp-up of its manufacturing capacities, reservation 
of manufacturing capacities, its reskilling and upskilling, and overall modernization; 

the contribution of the action to strengthening cooperation among Member States or 
associated countries and interoperability of products; 

the  number  of  Member  States  or  associated  countries  participating  in  the  common 
procurement; 

the  estimated  size  of  the  common  procurement  and  any  declaration  by  the 
participants  that  they  will  jointly  use,  stockpile,  own  or  maintain  the  procured 
defence products; 

catalytic effect of Union financial support through demonstration of how the Union 
contribution can overcome obstacles to common procurement;  

quality and efficiency of the plans for carrying out of the action. 

Directive  2014/24/EU of  the  European  Parliament  and  of  the  Council  of  26  February  2014 on  public 
procurement and repealing Directive 2004/18/EC (OJ L 94, 28.3.2014, p. 65). 
Directive  2014/25/EU  of  the  European  Parliament  and  of  the  Council  of  26  February  2014  on 
procurement  by  entities  operating  in  the  water,  energy,  transport  and  postal  services  sectors  and 
repealing Directive 2004/17/EC (OJ L 94, 28.3.2014, p. 243). 

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1. 

2. 

3. 

4. 

1. 

2. 

1. 

2. 

1. 

2. 

Article 11 
Work programme 

The  Instrument  shall  be  implemented  through  a  work  programme  as  referred  to  in 
Article 110 of the Financial Regulation.  

The Commission shall, by means of an implementing act, adopt the work programme 
referred to in paragraph 1. The implementing act shall be adopted in accordance with 
the examination procedure referred to in Article 14 paragraph 3. 

The  work  programme  shall  set  out  the  minimum  financial  size  of  the  joint 
procurement  actions  and  determine  the  indicative  amount  of  financial  support  for 
actions carried out by the minimum number of Member States as referred to in point 
c) of Article 7 paragraph 1 as well as incentives for procurement of higher value and 
inclusion of additional Member States or associated countries. 

The  work  programme  shall  set  out  the  funding  priorities  in  line  with  the  needs 
referred to in Article 3 paragraph 2. 

Article 12 
Monitoring and reporting 

The Commission shall draw up an evaluation report for the Instrument not later than 
31 December 2024 and submit it to the European Parliament and to the Council. The 
report  shall  evaluate  the  impact  and  effectiveness  of  the  actions  taken  under  the 
Instrument. 

The report shall build on consultations of Member States and key stakeholders and 
shall,  in  particular,  assess  the  progress  made  towards  the  achievement  of  the 
objectives set out in Article 3. 

Article 13 
Information, communication and publicity 

The  recipients  of  Union  funding  shall  acknowledge  the  origin  and  ensure  the 
visibility  of  the  Union  funding  (in  particular  when  promoting  the  actions  and  their 
results)  by  providing  coherent,  effective  and  proportionate  targeted  information  to 
multiple audiences, including the media and the public. 

The Commission shall implement information and communication actions relating to 
the  Instrument,  and  its  actions  and  results.  Financial  resources  allocated  to  the 
Instrument  shall  also  contribute  to  the  corporate  communication  of  the  political 
priorities  of  the  Union,  as  far  as  they  are  related  to  the  objectives  referred  to  in 
Article 3. 

Article 14 
Committee procedure 

The  Commission  shall  be  assisted  by  a  committee.  That  committee  shall  be  a 
committee within the meaning of Regulation (EU) No 182/2011. 

The European Defence Agency shall be invited to provide its views and expertise to 
the  committee  as  an  observer.  The  European  External  Action  Service  shall  also  be 
invited to assist in the committee. 

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3. 

Where  reference  is  made  to  this  paragraph,  Article  5  of  Regulation  (EU)  No 
182/2011 shall apply. 

Article 15 
Entry into force 

This  Regulation  shall  enter  into  force  on  the  day  following  that  of  its  publication  in  the 
Official Journal of the European Union. 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels, 

For the European Parliament 
The President 

For the Council 
The President 

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EN 

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LEGISLATIVE FINANCIAL STATEMENT 

1. 

FRAMEWORK OF THE PROPOSAL/INITIATIVE  

1.1. 

Title of the proposal/initiative 

Proposal for a Regulation of the European Parliament and of the Council establishing 
the European defence industry Reinforcement through common Procurement Act. 

1.2. 

Policy area(s) concerned  

Union defence industrial policy   

1.3. 

The proposal/initiative relates to:  

 a new action  

 a new action following a pilot project/preparatory action11  

 the extension of an existing action  

 a merger or redirection of one or more actions towards another/a new action  

1.4. 

Objective(s) 

1.4.1.  General objective(s) 

The Instrument has the following objectives: 

See attached proposal for legal act. 

1.4.2. 

Specific objective(s) 

N/A 

1.4.3.  Expected result(s) and impact 

Specify the effects which the proposal/initiative should have on the beneficiaries/groups targeted. 

Expected results:  

The Instrument will help to reinforce and developp the Union defence industrial base 
to  allow  it  to  address  the  industrial  gaps  relative  to  the  most  urgent  and  critical 
defence products  needs  especially those revealed or exacerbated by the response to 
the Russian aggression against Ukraine.  

The  financial  contribution  of  the  EU  should  contribute  to  unlock  a  number  of 
common procurement actions which otherwise would not be started considering the 
risks and complexity involved in common defence procurements.  

The increased cooperation is  expected to  provide greater value for money, enhance 
interoperability  and  avoid  that  the  most  exposed  EU  Member  States  face  an 
impossibility  to  obtain  what  they  need,  because  of  conflicting  demands  on  the 
defence industry, which is not tailored for such a demand surge.  

Expected impacts:  

A  Union  contribution  of  EUR  500 Million  would  allow  for  a  appropriate  incentive 
for Member States to induce them to procure in common. EU common procurement 

11 

As referred to in Article 58(2)(a) or (b) of the Financial Regulation. 

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should become the norm rather the exception. Additionally the instrument will foster 
an  agile  and  competitive  EDTIB.  On  a  longer  term,  it  is  expected  that  additional 
investments  in  the  EDTIB  bring  benefits  as  regards  jobs  creations  and  skills  and 
enhance security of supply. 

1.4.4. 

Indicators of performance 

Specify the indicators for monitoring progress and achievements. 

Taking into consideration the short period of implementation, the results and impacts 
of  the  Instrument  will  be  assessed  under  retrospective  evaluation  at  the  end  of  the 
programme implementation. 

The Commission will ensure that the necessary indicators used for the monitoring of 
programme  implementation  will  be  put  in  place  by  the  entity  entrusted  with  the 
programme implementation. These will include: 

- number of common procurement actions implemented 

- total value of common procurement actions implemented  

- number of Member States involved as consortium members  

- the fact that Member States openened existing cooperations to new members 

1.5. 

Grounds for the proposal/initiative  

1.5.1.  Requirement(s) to be met in the short or long term including a detailed timeline for 

roll-out of the implementation of the initiative 

The  Regulation  will  be  implemented  through  direct  management.  The  Commission 
will need to be staffed with the appropriate experts in order to monitor effectively the 
implemention. 

1.5.2.  Added  value  of  Union  involvement  (it  may  result  from  different  factors,  e.g. 
coordination gains, legal certainty, greater effectiveness or complementarities). For 
the purposes of this point 'added value of Union involvement' is the value resulting 
from  Union  intervention  which  is  additional  to  the  value  that  would  have  been 
otherwise created by Member States alone. 

While  cooperation  presents  several  obvious  advantages  (increased  interoperability, 
reduced unit and maintenance costs) EU Member States continue procuring defence 
systems  in  a  mostly  national  manner.  This  has  led  to  a  highly  fragmented  market 
with national industrial silos and a corresponding multitude of defence systems of the 
same kind, often not interoperable amongst each other. In the same time, the current 
defence  market  context,  marked  by  an  increased  security  threat  and  the  realistic 
prospect  of  a  high  intensity  conflict,  sees  Member  States  rapidly  increasing  their 
defence  budgets  and  aiming  at  similar  equipment’s  purchases.  This  results  into  an 
amount  of  demand  which  overcome  EDTIB  manufacturing  capacities,  currently 
tailored for peacetime.  

Consequently,  strong  price  inflation  can  be  anticipated,  as  well  as  longer  delays  in 
delivery  time,  potentially  harming  the  security  of  EU  citizens.  Defence  industries 
need to secure the production capacity necessary to process orders, as well as critical 
raw  materials  and  sub-components.  In  this  context,  defence  manufacturers  might 
privilege  major  orders,  potentially  leaving  exposed  most  vulnerable  countries, 
lacking the critical size and financial means to ensure large orders. Incentivising joint 
procurement  is  therefore  a  necessity,  and  would  present  the  advantage  of  ensuring 

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that, while the defence industry can more rapidly adapt to current market structural 
changes, national Armed Forces would obtain better conditions and delivery timeline 
by  cooperating  in  the  acquisition  phase.  On  top  of  this,  cooperation  in  the  field  of 
acquisition would result into diminished costs in terms of exploitation, maintenance 
and retreat of the systems (costs estimated at 55% of the total cost of an equipment).  

Consequently,  the  current  situation  requires  a  policy  intervention  at  EU  level  to 
improve  the  current  state  of  level  of  cooperation  by  incentivising  financial 
cooperation  between  Member  States  in  the  defence  procurement  process.  Such 
intervention is beneficial for the security of EU citizens as well as for the EDTIB.  

1.5.3.  Lessons learned from similar experiences in the past 

N/A 

1.5.4.  Compatibility  with  the  Multiannual  Financial  Framework  and  possible  synergies 

with other appropriate instruments 

The  Instrument  will  complement  existing  EU  programmes  such  as  the  European 
Defence Industrial Development Programme and the European Defence Fund as well 
as EU defence initiatives such as the Permanent Structured Cooperation (PESCO). It 
will also  generate synergies with    the implementation  of the Strategic Compass for 
Security and Defence and other EU programmes.  

1.5.5.  Assessment  of  the  different  available  financing  options,  including  scope  for 

redeployment 

N/A 

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1.6. 

Duration and financial impact of the proposal/initiative 

 limited duration  

–    in effect from 2022 to 31/12/2024  

–    Financial impact from 2022 to 2024 for commitment appropriations and from 

2023 to 2027 for payment appropriations.  

 unlimited duration 

–  Implementation with a start-up period from YYYY to YYYY, 

–  followed by full-scale operation. 

1.7.  Management mode(s) planned12  

 Direct management by the Commission 

–  by its departments, including by its staff in the Union delegations;  

–    by the executive agencies  

 Shared management with the Member States  

 Indirect management by entrusting budget implementation tasks to: 

–   third countries or the bodies they have designated; 

–   international organisations and their agencies (to be specified); 

–   the EIB and the European Investment Fund; 

–   bodies referred to in Articles 70 and 71 of the Financial Regulation; 

–   public law bodies; 

–    bodies governed by private law with a public service mission to the extent that 

they provide adequate financial guarantees; 

–   bodies governed by the private law of a Member State that are entrusted with 
the  implementation  of  a  public-private  partnership  and  that  provide  adequate 
financial guarantees; 

–    persons  entrusted  with  the  implementation  of  specific  actions  in  the  CFSP 

pursuant to Title V of the TEU, and identified in the relevant basic act. 

– 

If more than one management mode is indicated, please provide details in the ‘Comments’ section. 

Comments  

The instrument shall be implemented in direct management in accordance with the Financial 
Regulation.  

12 

Details of management modes and references to the Financial Regulation may be found on the 
BudgWeb site: 
https://myintracomm.ec.europa.eu/budgweb/EN/man/budgmanag/Pages/budgmanag.aspx  

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2. 

MANAGEMENT MEASURES  

2.1.  Monitoring and reporting rules  

Specify frequency and conditions. 

In  accordance  with  article  13  of  the  Instrument  the  Commission  will  draw  up  an 
evaluation report not later than 31/12/2024 for the instrument and submit it to the EP 
and  Council.  The  report  shall  evaluate  the  impact  and  effectiveness  of  the  actions  
under the Instrument.  

To this end, the Commission will put in place necessary monitoring arrangements to 
ensure that relevant data are collected reliably and smoothly. 

2.2.  Management and control system(s)  

2.2.1. 

Justification of the management mode(s), the funding implementation mechanism(s), 
the payment modalities and the control strategy proposed 

The  Commission  would  have  overall  responsibility  for  the  implementation  of  the 
Instrument.  In  particular,  the  Commission  intends  to  implement  the  Instrument  in 
direct management. The use of direct management mode clarifies the responsibilities 
(implementation by authorising officers), shortens the delivery chain (reducing Time 
To  Grant  and  Time  To  Pay),  avoids  conflicts  of  interests  and  reduces  the 
implementation costs (no management fees for an entrusted entity). The Commission 
should  define  the  funding  priorities  and  conditions  through  one  multi-annual  work 
programme.  The  definition  of  priorities  should  be  supported  by  the  work  of  the 
Defence Joint Procurement Task Force. A Programme Committee of Member States 
should  be  established,  to  which  the  European  Defence  Agency  shall  be  invited  to 
provide  its  views  and  expertise  to  the  committee  as  an  observer,  and  the  European 
External Action Serviceshall be invited to assist in the committee. The Commission 
would  adopt  the  multi-annual  work  programme  following  the  opinion  of  the 
committee under the examination procedure. 

The funding under the Instrument will mainly take the form of grants. The financial 
contribution shall be set up to take into consideration the collaborative nature of the 
common  procurement  plus  an  additional  amount  to  incentivize  the  cooperation 
between Member States to procure together.The Commission may use financing not 
linked to  cost, to  reduce the administrative burden for the beneficiaries  and put  the 
focus  on  achieving  the  desired  objectives,  thus  increasing  the  effectivenes  and 
efficiency of the Union support. 

The payment modalities will remain similar to the modalities experienced in EDIDP 
and  EDF,  i.e.  three  payments  for  each  grant  (including  at  least  one  pre-financing). 
The payment forecast will be prepared based on the beneficiary’s proposal, in order 
to  allow  the  beneficiary  to  effectively  manage  the  procurement  and  avoid  any 
treasury  issue.  The  Commission  keeps  the  authority  when  approving  a  payment,  in 
particular  having  the  legal  right  to  reduce  it  should  the  conditions  to  release  the 
payment are not met (milestones not achieved, devliverables not produced on time). 

The control strategy that will be defined in the grant agreement will be built around 
the modest  experience acquired in  the  EDF, and its precursor programmes,  EDIDP 
and  PADR,  where  grants  using  simplified  cost  options  (lump  sum  contributions) 
have been used. In particular, the Commission intends to use financing not linked to 

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costs,  where  the  grant  amount  is  determined  ex  ante  based  on  the  fulfilment  of 
certain  conditions  (including  eligibility  of  costs)  and  disbursed  on  the  basis  of 
deliverables  (reports)  demonstrating  that  the  expected  results  defined  in  the  grant 
agreement (technical annexes) are met. 

2.2.2. 

Information concerning the risks identified and the internal control system(s) set up 
to mitigate them 

The  Instrument  is  meant  to  support  cooperation  in  the  procurement  of  the  most 
urgent  and  critical  defence  products.  Thus  the  main  risk  identified  are:  Timetable 
Risk:  Schedule  issue,  delays  in  implementation,  Governance  risk:  Lack  of 
cooperation  between  Member  States  and/or  national  industry  leading  to  delays  of 
inefficient  implementation,  Financial  risk:  Cost  management,  Low  absorption 
(delays), etc. Technical risks: Difficulties in specific development; Technical issues; 
Lower  performance  level.  The  Commission  would  therefore  implement  the 
Instrument  in  direct  management  building  on  the  expertise  gained  in  implementing 
the  European  Defence  Fund,  prepare  and  adopt  only  one  multi-annual  work 
programme, shorten the time to grant and apply financing not linked to costs. 

2.2.3.  Estimation and justification of the cost-effectiveness of the controls (ratio of "control 
costs ÷ value of the related funds managed"), and assessment of the expected levels 
of risk of error (at payment & at closure)  

The  budget  of  the  programme  will  be  under  direct  management.  Based  on  the 
Commission  experience  on  grant  management,  the  overall  control  costs  of  the 
Instrument  by  the  Commission  are  estimated  at  less  than  1%  of  the  related  funds 
managed.  

In  terms  of  expected  error  rate(s),  the  aim  is  to  maintain  the  error  rate  below  the 
threshold  of  2%.  The  Commission  considers  that  the  implementation  of  the 
programme in direct management, with trained (experienced staff, possibly recruited 
as from  Member States  Ministries of Defence) and well-staffed teams  acting under 
delegated authorising officers, applying clear rules and making an appropriate use of 
output  based  instruments  (i.e.  financing  not  linked  to  costs)  will  maintain  an  error 
rate below the 2% materiality threshold.  

2.3.  Measures to prevent fraud and irregularities  

Specify existing or envisaged prevention and protection measures, e.g. from the Anti-Fraud Strategy. 

The European Anti-Fraud Office (OLAF) is competent to carry out investigations on 
operations supported under this initiative. Agreements resulting from this Regulation, 
including  agreements  concluded  with  international  organisations,  shall  provide  for 
supervision  and  financial  control  by  the  Commission,  or  any  representative 
authorised by it, and audits by the European Court of Auditors, the European Public 
Prosecutor’s  Office  (EPPO)  or  OLAF,  if  necessary  on-the  spot.  Commission's 
officials  who  have  the  required  security  clearance,  can  also  make  on  site  visits.

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3. 

3.1. 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE  

Heading(s)  of  the  multiannual  financial  framework  and  expenditure  budget 
line(s) affected  

  Existing budget lines (see table under section 3.2) 

In order of multiannual financial framework headings and budget lines. 

Budget line 

Heading of 
multiannual 
financial 
framework 

Number  

[XX.YY.YY.YY] 

Type of  
expenditure 

Diff./Non-
diff.13 

Diff./Non
-diff. 

Contribution  

from 
EFTA 
countries
14 

from 
candidate 
countries15 

from third 
countries 

within the 
meaning of 
Article 21(2)(b) of 
the Financial 
Regulation  

YES/NO  YES/NO  YES/NO 

YES/NO 

  New budget lines requested  

In order of multiannual financial framework headings and budget lines. 

Heading of 
multiannual 
financial 
framework 

Number  

5 

5 

13.0106 

13.06 

Budget line 

Type of 
expenditure 

Contribution  

Diff./Non-
diff. 

from 
EFTA 
countries 

from 
candidate 
countries 

from third 
countries 

within the 
meaning of 
Article 21(2)(b) of 
the Financial 
Regulation  

Non-
Diff 

Diff 

YES 

NO 

NO 

YES 

NO 

NO 

NO 

NO 

13 
14 
15 

Diff. = Differentiated appropriations / Non-diff. = Non-differentiated appropriations. 
EFTA: European Free Trade Association.  
Candidate countries and, where applicable, potential candidates from the Western Balkans. 

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3.2. 

Sources of financing for the proposal 

3.2.1. 

Source of financing of appropriations under the proposal 

Contribution from  
margins and special 
instruments of the 
MFF 

Marrgins of Heading 
5 

Special instruments 
of the MFF 

2021 

2022 

2023 

2024 

2025 

2026 

2027 

Total 

83.700 

44.900 

32.100 

1 

111.400 

227.900 

Total  

83.700 

156.300 

260.000 

160.700 

339.300 

500.000 

3.2.2. 

Summary of estimated impact on operational appropriations  

–    The proposal/initiative does not require the use of operational appropriations  

–    The proposal/initiative requires the use of operational appropriations. as explained below: 

EUR million (to three decimal places) 

Heading of multiannual financial  
framework  

05 

Security and Defence – Cluster 13 Defence 

2021 

2022 

2023 

2024 

2025 

2026 

2027 

Post 
2027 

TOTAL 

13.0601 Operational 

Commitments 

(1) 

83.700 

156.300 

260.000 

500.000 

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appropriations  STI defence 
products 

Payments 

(2) 

72.000 

174.000 

104.000 

72.000 

78.000 

13.016 – Support expenditure  

Commitments 
= Payments 

(3) 

p.m.. 

p.m. 

Commitments 

=1+3 

83.700 

156.300 

260.000 

TOTAL appropriations for 
the envelop of the 
programme under heading 
5 

Payments 

=2+3 

0 

72.000 

174.000 

104.000 

72.000 

78.000 

500.000 

500.000 

0 

500.000 

Heading of multiannual financial  
framework  

7 

‘Administrative expenditure’ 

This section should be filled in using the 'budget data of an administrative nature' to be firstly introduced in the Annex to the Legislative 
Financial Statement (Annex V to the internal rules). which is uploaded to DECIDE for interservice consultation purposes. 

Human resources  

Other administrative expenditure  

EUR million (to three decimal places) 

2021 

2022 

2023 

2024 

2025 

2026 

2027 

Post 
2027  TOTAL 

0.961 

1.831 

1.831 

1.517 

1.517 

1.187 

0.047 

0.279 

0.279 

0.067 

0.057 

0.057 

8.844 

0.786 

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TOTAL appropriations under 
HEADING 7 of the multiannual 
financial framework 

(Total commitments 
= Total payments) 

1.008 

2.110 

2.110 

1.584 

1.574 

1.244 

9.630 

2021 

2022 

2023 

2024 

2025 

2026 

2027 

Post 
2027  TOTAL 

EUR million (to three decimal places) 

Commitments 

84.708 

158.410 

262.110 

1.584 

1.574 

1.244 

509.630 

Payments 

1.008 

74.110 

176.110 

105.584 

73.574 

79.244 

0 

509.630 

TOTAL 
appropriations  
across 
HEADINGS  
of the multiannual 
financial 
framework  

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3.2.3. 

Summary of estimated impact on administrative appropriations  

–    The  proposal/initiative  does  not  require  the  use  of  appropriations  of  an 

administrative nature  

–    The proposal/initiative requires the use of  appropriations of an administrative 

nature. as explained below: 

EUR million (to three decimal places) 

Years 

2021 

2022 

2023 

2024 

2025 

2026 

2027 

TOTAL 

0.961 

1.831 

1.831 

1.517 

1.517 

1.187 

8.844 

0.047 

0.279 

0.279 

0.067 

0.057 

0.057 

0.786 

1.008 

2.110 

2.110 

1.584 

1.574 

1.244 

9.630 

HEADING 7 
of the 
multiannual 
financial 
framework 

Human 
resources  

Other 
administrative 
expenditure  

Subtotal 
HEADING 7 
of the 
multiannual 
financial 
framework  

Outside 
HEADING 7 
of the 
multiannual 
financial 
framework  

Human 
resources  

Other 
expenditure  
of an 
administrative 
nature (former BA 
lines) 

Subtotal  
outside 
HEADING 7 
of the 
multiannual 
financial 
framework  

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TOTAL 

1.008 

2.110 

2.110 

1.584 

1.574 

1.244 

9.630 

The administrative appropriations required will be met by the appropriations which are already assigned to management of 
the action and/or which have been redeployed, together if necessary with any additional allocation which may be granted to 
the managing DG under the annual allocation procedure and in the light of existing budgetary constraints.  

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3.2.3.1.  Estimated requirements of human resources  

–    The proposal/initiative does not require the use of human resources.  

–    The  proposal/initiative  requires  the  use  of  human  resources.  as  explained 

below: 

Estimate to be expressed in full time equivalent units 

Years 

2021 

2022 

2023 

2024 

2025 

2026 

2027 

• Establishment plan posts (officials and temporary staff) for DG DEFIS 

Headquarters and 
Commission’s 
Representation Offices 

Delegations 

Research 

5 

10 

10 

8 

8 

7 

• External staff (in Full Time Equivalent unit: FTE) - AC. AL. END. INT and JED  for DG DEFIS 
Heading 7 

Financed from 
HEADING 7 of 
the multiannual 
financial 
framework  

Financed from 
the envelope of 
the programme  

Research 

Other (specify) 

TOTAL 

- at Headquarters 

2 

3 

3 

3 

3 

1 

- in Delegations  

- at 
Headquarte
rs 

- in 
Delegation
s  

7 

13 

13 

11 

11 

8 

The human resources required will be met by staff from the DG who are already assigned to management of the action and/or 
have  been  redeployed  within  the  DG,  together  if  necessary  with  any  additional  allocation  which  may  be  granted  to  the 
managing DG under the annual allocation procedure and in the light of budgetary constraints.”  

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Description of tasks to be carried out: 

Officials and temporary staff 

5 FTEs (5 AD) will be required to ramp-up the Instrument in 2022 and to start up the 
first activities, 10 FTEs (7AD and 3 AST) to implement the activities. and reduced to 7 
(5 AD and 2 AST)  in 2027 to ensure the  work programme adoption;  management of 
the  evaluation  and 
the 
implementation of the projects. 

the  operational.  financial  and 

legal  monitoring  of 

External staff 

2 FTEs to start the activities (2 SNE). increasing to 3 (1 AC and 2 SNE) reduced to 1 
in  2027  (1  AC)  to  ensure  the  the  operational.  financial  and  legal  monitoring  of  the 
implementation of the projects.  

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3.2.4.  Compatibility with the current multiannual financial framework  

The proposal/initiative: 

–    can be fully financed through redeployment within the relevant heading of the 

Multiannual Financial Framework (MFF). 

–    requires use of the unallocated margin under the relevant heading of the MFF 

and/or use of the special instruments as defined in the MFF Regulation. 

Margin of Heading 5. See details in section 3.2 

–    requires a revision of the MFF. 

Explain what is required. specifying the headings and budget lines concerned and the corresponding 
amounts. 

3.2.6.  Third-party contributions  

The proposal/initiative: 

–    does not provide for co-financing by third parties 

–    provides for the co-financing by third parties estimated below: 

Appropriations in EUR million (to three decimal places) 

2023 

2024 

2025 

2026 

2027 

Total 

TOTAL appropriations 
co-financed  

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3.3. 

Estimated impact on revenue  

–    The proposal/initiative has no financial impact on revenue. 

–    The proposal/initiative has the following financial impact: 

 

 

on own resources  

on other revenue 

please indicate. if the revenue is assigned to expenditure lines  

Appropriations 
available for 
the current 
financial year 

Budget revenue line: 

Article …………. 

     EUR million (to three decimal places) 

Impact of the proposal/initiative16 

Year 
N 

Year 
N+1 

Year 
N+2 

Year 
N+3 

Enter as many years as necessary to show 
the duration of the impact (see point 1.6) 

For assigned revenue. specify the budget expenditure line(s) affected. 

[…] 

Other  remarks  (e.g.  method/formula  used  for  calculating  the  impact  on  revenue  or  any  other 
information). 

[…] 

16 

As regards traditional own resources (customs duties, sugar levies), the amounts indicated must be net 
amounts, i.e. gross amounts after deduction of 20 % for collection costs. 

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