The Ministry of Defence ("the MOD") recently published a second consultation on the implementation of the EU's Directive on the coordination of procedures for the award of certain works contracts, supply contracts and services by contracting entities in the field of defence ("the Defence Directive"). All the signs now indicate that the UK will be ready to implement the Defence Directive, in full, before the deadline of 20 August 2011. The MOD's consultation seeks input on a small number of "open" issues relating to sub-contracting requirements, notification of potential claims, the MOD's impact assessment, etc. Interested parties have until 7 March 2011 to file their comments.
The Commission estimates that the EU's defence expenditure amounts to nearly €170 billion per annum, equivalent to 1.7% of the EU's combined GDP. That total includes some €82 billion for defence procurement in general and €30 billion for the purchase of new equipment. Up until now the overwhelming majority of the contracts have been fed to national suppliers via local rules. This fracturing into what is, in effect, 25 "mini" markets has impeded the development of an efficient and successful European defence sector. The Defence Directive is designed to help sweep away the barriers to cross-border competition thereby, it is hoped, promoting a significant and healthy rationalisation of the industry in Europe. However, whilst this should provide a significant stimulus to many companies on the back of the resultant liberalisation, defence contractors should not assume that the new EU-wide system is going to be a walk in the park. The last few months has seen a significant increase in procurement litigation before the UK and EU courts - any kind of challenge was almost unheard of no more than three years ago - with new "case law" being written on a regular basis. What started out as a relative simple set of procedures is progressively becoming more complex and contentious. So whilst the defence industry may be leaving the proverbial jungle it is still going to need a hand to make it through the new procurement woods.