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April 19, 2014

The UK's Defense Department turns to the private sector

As a general rule, high-value government contracts in the EU must not be awarded by public authorities without first complying with the detailed EU procurement rules designed to ensure non-discriminatory access to such contracting opportunities and“value-for-money” for public authorities and, ultimately, EU taxpayers. However, due to national sensitivities in the EU Member States, the defence procurement market was traditionally largely exempt from the EU public procurement regime. That position changed in August 2011 when the EU's newly liberalised defence procurement regime officially opened for business.

It is still too early to judge whether the reforms are having the desired effect - namely to increase the level and intensity of international competition for the EU's estimated annual defence spend of over €170 billion. Ultimately the success of the initiative will depend on the confluence of two phenomena: (i) total commitment on the part of national contract authorities to look beyond their "national champions" to the better deals being offered by foreign suppliers; and (ii) enthusiastic engagement by foreign suppliers in the new market(s). Should either fail to materialise then the market opening will almost certainly be deemed a damp squib.

On the latter score, opportunities would appear to be opening up in the UK. The UK government, keen to find defence budget savings in the current macro-economic climate, recently announced plans to reduce regular forces numbers from 102,000 to 82,000. To fill the resulting capability deficit the UK government is planning to plug gaps by contracting out more to the private sector. Among the outsourcing projects being considered is a $22 billion tender for the provision of procurement and support service functions. The overwhelming majority of such contracts will have to be let via the EU's general procurement system described above.

This system is, for the most part, open to contractors based outside of the EU.

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About the Author

Stephen C. Tupper, EU Competition Attorney, Greenberg Traurig, Law firm
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Stephen Tupper specialises in EU and competition law. He has been practising law for more than 20 years, including working in New York, Washington, D.C. and in Brussels for 10 years. He has handled a range of significant competition law and merger control cases/filings and has particular expertise in the water, energy, shipping and chemical sectors. Best known, perhaps, for his work with water companies, Stephen has represented three of them before the Competition Appeal Tribunal and, more recently, represented Bristol Water in front of the Competition Commission during a full price...

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About the Author

Chair, Government Contracts Practice

Jacob B. Pankowski is Chair of the firm’s Government Contracts Practice Group. His practice spans nearly 30 years of experience and is focused on representing government contractors and subcontractors of all sizes in their dealings and disputes with federal, state, and local governments. Mr. Pankowski’s government contracts practice covers a broad range of areas and concentrates in contract and subcontract performance issues, claims analysis and preparation, federal supply schedule issues, information technology issues, rights in technical data and intellectual property, and...

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