A French View on European Defence Procurement Policy
A French View on European Defence Procurement Policy
Address by François Lureau, French Acquisition
Director at the Royal United Services Institute for Defence and Security studies
November 19, 2004.
Source: DGA, Paris, December 8, 2004.
Ladies and gentlemen,
It is for me a great honour to be present today at such a prestigious Conference
to celebrate the centenary of the entente cordiale. When I received the
invitation to speak in that conference I must confess I was rather taken aback.
It lead me to think about an anecdote related to two
diplomats, a British one and a French one, who were living a long time ago.
Those two diplomats were involved in very tough negotiations, perhaps about the
terms and conditions of the Entente Cordiale we are commemorating this year.
After hours of discussions, the British diplomat said to his French counterpart
: « The problem with you French is that you never give anything ». The answer
came immediately : « You’re wrong : we give lessons ». And he added : «
give them free! ».
If you allow me to do so, far from giving any lessons, I will at least give some
ideas on what could or even should be a European defence procurement policy
regarding our common experience in that field.
Looking back over those past 20 years or so, one can measure to what extent we
have moved ahead on both side of the channel in the defence procurement domain.
The setting up of the European Defence Agency is breaking new grounds by the day
and provides for new opportunities in procurement. To take full advantage of
those opportunities, I would like first to point out what are the main drivers
in Europe : the European defence Agency and the industrial baseline, then to
present the new procurement policy of the French MoD and compare it to the
British “Defence industrial policy paper” presented at this conference 2 years
ago, and finally to sketch out a few potential ways ahead in support of a common
Cooperation between the United-Kingdom and France is nothing
new. It stands as an evidence for our two countries sharing intricate history,
having similar ambitions and defence policies, and having comparable
technological and industrial basis as well as defence budgets. Past records show
bright successes in cooperation: the Lynx helicopter, the Concorde, the Jaguar,
the storm shadow. We have also launched promising ones: the Meteor missile, the
transport aircraft A400M. I will not say much more on those programmes since
Peter Spencer will address them.
I will only add that alongside those successes, some other attempts to promote
cross procurement between our two countries proved less successful showing that
good will or political will however present are not sufficient to create success.
It is clear that the setting up of new initiatives relies to a large extent on a
proper combination of : a shared collective defence policy ; political will ;
industry initiatives ; a strong technological and industrial European base and
modern and economically efficient procurement policy.
As we have seen, the political will has not been absent from
previous attempts. The emergence of the European Policy on Security and Defence
with the decisive impulse from the St Malo Summit, the decision to sustain
Petersberg missions and the willingness of the European nations to provide
operational capabilities through the European Capabilities Action Plan has
provided a new impulse as well as the missing link between Defence activities
and the building up of Europe.
The PSC (Political and Security Committee) the EUMC (European Union Military
Committee), the European Defence Agency have sketched out this new political
picture. It paves the way for a shared political vision in the armament domain
and provides the proper intergovernmental backing in support of negotiations
with the European Commission to further consolidate the construction. The
remarkable achievements of Nick Witney’s team in a very short timeframe sets the
standard for future activities of the Agency.
The Agency is going to take shape with the nominations of its chief executive,
his deputy and directors of the four divisions already achieved. In that
respect, keeping the momentum rather than sheer speed seems to be the main
challenge. We are dedicated to support it to the best of our abilities and I
will come back to that part later.
The industrial base has also gone through major evolutions and is not specific
to Europe. The launching of large programmes such as the A400M aircraft,
supported by an industrial initiative, combined the benefit of satisfying an
operational requirement with the support to a major restructuring of the
aeronautical domain. It also showed the importance of the market forces which is
new for France. It indeed proved successful.
But we must not forget that industry has its own rational. It is essential in a
highly competitive environment to give it the ability to increase its
It means drastic changes in nature of the control exercised by the French
government on companies. The government held the majority of shares but now
prefers to exercise a strategic control through golden shares or share holders
agreements at least for main security sensitive companies.
The government ownership is no longer a policy in France. In parallel, the
complexity of our defence system makes it essential for companies to be able to
embrace the whole scope of technologies and to be of a financial strength large
enough to contract with governments on large systems.
The aeronautical domain has lead the way with successes such as EADS, MBDA. In
the electronic industry, Thales UK is becoming the second player in the UK
Concurrently, recognizing the importance of the development of the defence
industrial and technological base at the national and European level, the French
Ministry of Defence implements a new procurement policy based on the principle
of competitive autonomy. It is built around two complementary goals. The first
one is to optimise the economic efficiency of investments made by the ministry
of defence to meet Armed Forces’ requirements. The second one is to guarantee
access to the industrial and technological capabilities on which the long-term
fulfilment of these requirements depends, to make it short: the security of
To obtain the best return on investments in terms of the national defence
system’s efficiency, priority shall be given to market rules and competitive
biddings. The Ministry of Defence must therefore seek to maintain and develop an
industrial and technological base which degree of autonomy at the national and
European levels should guarantee secure supply sources for the Armed forces,
unrestricted use of equipment procured and the possibility of exporting arms to
friendly nations and allies.
The way in which the competitive autonomy principle is applied depends on the
type of equipment considered. We identify three categories.
A first category groups together equipment that can be acquired through
cooperation with partner nations or allies. This provides the reference
framework for an increasing number of equipment. Equipment in that category can
be procured on the European market or manufactured through European cooperation.
It implicitly leads to stronger ties between Member states within a framework of
mutually accepted interdependence, drawing on widely accepted centres of
excellence (such as the agreement being negotiated with Sweden and Finland on
The second category of equipment concerns areas involving the notion of
sovereignty where the nation’s vital interests are at stake. Nuclear deterrence
is one such area.
The third category groups equipment for which the ministry of defence turns to
the global marketplace (5.56mm ammunitions, camouflage systems, or specific
product to be procured in very limited quantities, etc.).
As part of this process, the government intends to proceed with a controlled
sale of its holdings in defence companies to allow them more freedom of action
and promote European consolidation. The UK is already involved in half of the
investments projects in France. The recent acquisition of the French company
SAFT by British Doughty&Hanson seems to be a success. The creation of Roxel in
February 2003, by merging the activities of Celerg and Royal Ordnance Rocket
Motors is an other example of a successful common joint venture.
It hence appears that the UK policy paper and the French one have many things in
common. Both are looking for the best efficiency of the MoD investment made in
order to provide the Armed Forces with the equipment which they require, both
are promoting competition as the bedrock of their procurement policy.
However, whereas France put the emphasis on the development of a strong European
industrial and technological base, the UK is putting the emphasis on a open
competitive market while looking for the development of a high value
technologically skilled industrial base consistent with the British
manufacturing strategy. Those two approaches are not exclusive.
As I stated earlier, the European Defence Agency raises great
expectations. One however need to be pragmatic. The agency will have a limited
workforce to start with and also in the long term. Accordingly, the majority of
projects will still be managed by existing national entities such as DPA, DGA or
existing entities such as OCCAR.
However, I think the agency is pivotal in bringing our partner European nations
to sustain a more efficient effort in defence budgets and more specifically in
the Research and Technology area in which the UK and France have so far been the
main players. Early cooperation in R&T is essential.
To do so, the European Defence Agency should have a common budget made available
to her to launch R&T programmes. That budget could be funded by all EDA 24
nations through appropriate apportionment rules and should be large enough, with
a few hundred of Million Euros, to support significant research programmes and
to make the existence of the defence R&T effort a reality when compared to
research programmes launched by the European Commission.
The credibility of the European defence R&T is at stake as well as our ability
to coordinate research activities with the European Commission on a comparable
footing. That common budget should be supplemented by funds provided by nations
in support of specific ad’hoc research programmes for another few hundred
millions Euros. I think that apportioned between the EDA member states, the
common budget will represent a limited burden per nation as a supplement to
In parallel, and I should have started with that, we consider that capabilities
essential for enforcing ESDP should be dealt within the Agency, thus the Agency
should be leading initiatives in as many as possible areas such as :UAVs/ISTAR :
technology demonstration work on long-endurance UAVs, in the context of
development of a wider ISTAR architecture. It should investigate the scope for
“adding value” in areas such as Air to Air refuelling to Review European
capability needs, national requirements and programmes, interoperability issues
and potential for collaboration, or A 400 M to review the scope for common
approaches to all aspects of A 400 M operations (including logistics,
configuration control, etc.).
The Agency should be involved in the space issues that are already considered
and prepared by the European Commission. It is essential to master Space
technologies to ensure the European decision autonomy. The Headline Goal 2010
consider thus the development of an European space policy as a clear and key
Having said all that, it still falls short of a Franco-British approach to
acquisition which needs to go beyond individual contracts or R&T. The emergence
of a European Defence, in return, triggers an increased interest paid by the
European Commission to strengthening the European defence industry and to the
defence market, the “green paper” being a clear signal.
This of course, overlooks the political issue that underpins defence acquisition
activities but this is a clear incentive to look for an harmonised
Franco-British approach to acquisition in defence.
Where do we need to stand between the two extremes that would be either a fully
regulated market and a fully non regulated one. I am not in a position to
provide a definite answer apart that both extremes seem to be equally
problematic. Capitalizing on our experience through a code of good conduct is a
starter to address that issue. It is an incentive towards the promotion of
effective competition on an European basis. I am also convinced that we need to
go further to withstand the art. 296 issue as raised by the EU. The code of good
conduct should in that respect should allow us to shape out what future rules
should be in support art.296 application.
Finally, I am convinced that the European Defence Agency should be tasked to
prepare in partnership with the European Commission a response to the “Green
Paper” issues ; this response, agreed by the Steering Committee, should also be
the first step of the Agency’s work in the field of market and DTIB matters.
I am afraid I have been rather long and it is probably high time to conclude
since I do recognize that we are on a Friday evening. I must say that as Peter
said we were rather anxious to see whether we would have an audience at all. I
am very happy to have one so I will be kind to it and stop now.
Considering what we are aiming at, it appears that we are trying to do the
opposite to what the Entente cordiale agreement was about. Whereas, the
Landsdowne/Cambon agreement that started the entente cordiale was rather cynical
in nature carving spheres of influence in the world for both countries, I am
convinced that we are now setting a new standard of entente cordiale in the
acquisition domain to a point where we are even celebrating Trafalgar together.
Much depends on a common understanding supported by a shared sense of urgency.
Thank you for your attention.