Defence procurement law fundamentals

Mandatory procurement clauses

Are there mandatory procurement clauses that must be included in a defence procurement contract or that will be read into the contract regardless of their actual inclusion?

The standard administrative clauses (CAC) are specific to the French Defence Procurement Agency (DGA). This document is part of the procurement contract and is common to all defence services. The DGA will typically seek to include certain standard clauses in its contracts. Primarily, these are the DGA standard clauses of 2014, which constitute a collection of standard contractual clauses relating to the most frequent cases encountered in defence or security contracts awarded under the previous Public Procurement Code of 2006.

Cost allocation

How are costs allocated between the contractor and government within a contract?

The CAC Armement does not provide any pricing methods. The allocation of costs will, therefore, be contained in a commercial agreement between the parties. Fixed or firm prices are the most common pricing methods for MPDS (in 98 per cent of the cases, see the article by Jean-Michel Oudot cited in question 6). However, under public procurement rules, the procuring entity may conclude a framework agreement and then issue individual purchase orders for each required service. This volume-driven pricing is common in long-term MPDS contracts.

In order to take into account particular circumstances, such as urgency or the technical, functional or economic characteristics of a defence equipment or service, a joint decision of the minister responsible for defence and the minister responsible for the budget may authorise the insertion of a clause providing for a deferred payment (article L. 2391-5 and article R. 2391-18 of the PPC).

Disclosures

What disclosures must the contractor make regarding its cost and pricing?

According to article 7.2 of the CAC Armement, the contractor is required to report on the costs that it will incur or has incurred in performing the contract. It must keep all accounting documents and data for at least five years from the date of completion of the contract. When it is subject to a cost control, it is required to provide, at the request of the procuring entity, cost statements showing a breakdown of the cost components, including volume of hours, hourly rates, procurement expenses and overhead costs.

Audits

How are audits of defence and security procurements conducted in this jurisdiction?

Under the CAC Armement, the contract and related records shall be accessible to the contracting authority or its designated representative. The right of audit can be exercised at any time.

IP rights

Who gets the ownership rights to intellectual property created during performance of the contract? What licences are typically given and how?

In France, in general, the private contracting party obtains the intellectual property resulting from the contract. Contractual relationships between public and private entities are governed by the French PPC and Chapter VII of the CAC Armement relating to intellectual property. The main difference regarding contractual relationships concerns the use of the services produced, rather than their property rights. In return for the ownership of intellectual property rights, the Ministry of Defence expects the right to disclose and use the intellectual property for government purposes (including security and civil protection). By way of derogation from article 62 of the CAC Armament, the clauses of the contract may provide for certain scenarios where intellectual property rights will be granted to the public entity.

Economic zones

Are there economic zones or other special programmes in this jurisdiction commonly utilised by foreign defence and security contractors for financial or other procurement related benefits?

In France, there are no special defence units located in special economic zones and benefiting foreign defence and security contractors.

Forming legal entities

Describe the process for forming legal entities, including joint ventures, in this jurisdiction.

Under French law, the term ‘joint venture’ does not correspond to any specific legal situation. It refers, in fact, to any form of cooperation between companies that have in common their contractual and associative natures. The structure of a joint venture can be either purely contractual (collaboration agreement), or both contractual and corporate (collaboration agreement and a joint subsidiary). When this cooperation is expected to last, partners may wish to set up a new legal structure (usually a simplified joint-stock company (SAS) or a company with limited responsibility (SARL) structure is used for this). To establish a company, the parties must carry out the formalities of constitution required by the legislation applicable to the specific type of legal entity.

Access to government records

Are there statutes or regulations enabling access to copies of government records? How does it work? Can one obtain versions of previous contracts?

Under the French Code of Relations Between the Public and the Administrations (CRPA), there is a general right for the public to access information held by public bodies. As the Ministry of Defence is a public body, its contracts and records may, in principle, be requested by any involved entity. With regard to the rules of public procurement, a signed contract may be disclosed. However, this right of access must be exercised in compliance with industrial and commercial confidentiality protected by the provisions of article L. 311-6 of this Code. In addition to the information protected by industrial and commercial secrecy, the secrecy of documents classified as national defence secrets pursuant to article 413-9 of the Criminal Code are also protected by law. In addition, national defence secrets are considered to be heavily classified by article L311-5 of the CRPA, which provides that ‘other administrative documents whose consultation or disclosure would prejudice . . . national defence secrecy . . . shall not be disclosed’.

Compliance with the principle of access to administrative documents is monitored by the Commission for Access to Administrative Documents (CADA), which has developed a doctrine on access to the various documents that may be involved in the award, conclusion and performance of public contracts.

Supply chain management

What are the rules regarding eligible suppliers and supply chain management and anti-counterfeit parts for defence and security procurements?

There are no specific rules regarding eligibility for MPDS contracts. Suppliers are generally considered eligible for public contracts if they meet the standard requirements of public procurements (both on the professional and the financial and economic side). Subject to limited exceptions, the defence procurement rules oblige an authority to reject tenders from bidders who have been convicted of certain serious offences (see question 36).

Regarding supply chain management, the PCC and the CAC Armement include specific commitments by the contractor to ensure the security of supply. Furthermore, the first paragraph of article L. 2393-1 of the PPC defines the legal regime applicable to subcontracts for defence or security contracts. It provides that ‘the holder of a defence or security contract may, under his responsibility, entrust another economic operator, referred to as a subcontractor, with the performance of part of his contract, including a supply contract, without this consisting in an assignment of the contract’. The concept of subcontractor used by the DSPCR is broader than in national law, which excludes from its scope standardised contracts for goods or services that are not specifically designed to meet the needs of the public entity. The rules expressly permit authorities to consider the same exclusion grounds for sub-contractors, as well as giving them broad rights, for example, to require a supplier to openly compete some of the sub-contracts or to flow down obligations regarding information security (article 2393-3 of the PCC).

There are no specific rules regarding anti-counterfeit parts.