Briefing by Defence Minister Nikolaos Panagiotopoulos briefed on the Draft Law οf the Ministry of Development and Investments pertaining to the Modernisation, Simplification, Reform of the Regulatory Framework of Public Contracts

February 25, 2021

On Thursday 25 February 2021, the Minister of National Defence Mr. Nikolaos Panagiotopoulos briefed the Standing Committee on National Defense and Foreign Affairs of the Hellenic Parliament on the Draft Law οf the Ministry of Development and Investments pertaining to the Modernisation, Simplification, Reform of the Regulatory Framework of Public Contracts.

The briefing was also attended by the Deputy Minister of National Defence Mr. Alkiviadis Stefanis, and the Director General of the Defence Investments and Armaments Dte, Lt General (AF) Mr. Theodoros Lagios (ret.).

The promoted provisions of the said Draft Law, between articles 143-179, regulate all programming issues of Public Contracts in the field of Defence and matters concerning the execution of Public Contracts.

More precisely, the basic criteria for the selection of part of the Draft Law concerning Public Contracts in Defence, were to overcome certain confirmed obstacles, to restore the balance between the contracting authority and the modern market conditions in the fields of Defence and Security to defend national interests.

The objective is to rationalise and improve the current institutional framework of Public Contracts in Defence, to tackle all weaknesses, as well as to introduce modernisation measures with targeted amendments of crucial provisions and with the introduction of new articles.

The basic structure of the said part of the draft law follows three thematic issues which relate to the procurement phases of military equipment. More precisely:

  1. The planning (articles 72-76 of L.3883/10), concerning the procedures to define the requirements and integrate them in one comprehensive programming (operational and financing) until the decision to implement the procurement is reached,

  2. the conclusion (L. 3978/2011) concerning all invitations to tender which result to the selection of the financial body as a contractor and the conclusion of the related contract, and

  3. the execution (L. 3433/2006) concerning the procedures of monitoring and supervising the smooth execution of the contract to its conclusion.

During the briefing of the Standing Committee the Minister of National Defence stated the following :

“Ladies and Gentlemen, dear colleagues,

I won’t be long, given that the Ministry of National Defence contributes to this effort to change and improve the legislation concerning public contracts with 36 articles, in a rather significant manner as far as procurements and public contracts in the field of defence are concerned. I gather that the focal discussion on the Provisions we are introducing can be held during our talks on the articles of this Bill, since we are presenting all substantial details there. This is when we are going to analyze the procedures we are improving concerning public contracts and generally speaking the procurement contracts in the field of Defence and Security.

This legislative intervention (as well as the interventions concerning the amendment of the institutional framework for the procurement and public contracts in the field of Defence) is a product of a common acceptance by all members of the Committee of Foreign Affairs and Defence following many discussions, that there is room for improvement in the general institutional framework for procurements in Defence and that the current system causes malfunctions, rigidities and great delays, which undoubtedly we all recognize under the present geopolitical circumstances that should be overcome. On one hand it is the product of a coordinated effort by the members of the Legal Service of the Ministry, the General Dte for Defence Investments and Armaments and the members of the Staffs, under the auspices of the Secretary General of the Ministry of National Defence, to find ways to improve the institutional framework . I would like to thank them for their contribution.

The third point is that this intervention of ours, this contribution to the Bill is the product of understanding with the Ministry of Development – and at this point I would like to thank its leadership, the Minister Mr. Georgiadis – for integrating these Provisions to the Bill which amends public contracts for reasons of course which are obviously promoting the unity of the legislation in the framework of regulating public contracts.

The bill under discussion is a systematic and substantial bi-ministerial effort to modernize, simplify, and reform, the regulatory context of public contracts. During such dire times of the pandemic, during which the efforts of states and governments are quite obvious to support all stricken sectors of free financial activities which can no longer act quite freely and which shall suffer until all health variables change, this field plays a wider role. It plays a rather financial, commercial and social role at national and European level, rendering the said regulatory intervention a legislative initiative of vital importance, and a significant step toward the most beneficial servicing of this role.

Especially in the field of defence, the constant need to enhance the operational and deterring power of the Armed Forces , by the purchasing and upgrading our armament systems, constitutes a comprehensive and useful regulatory framework which will contribute to the amelioration and acceleration of the procedures of concluding public contracts, while simultaneously it safeguards our national interest under terms of transparency and effectiveness. I have many times mentioned in our discussions in the Committee and the Plenary Session that speed and effectiveness must go hand in hand with transparency. This is the way to achieve the optimum result.

As far as the Ministry of National Defence is concerned, the draft law includes in its second part the more special regulations on public procurement contracts, services and projects in the field of defence. The basic pursuit of these regulations is to improve the administrative procedure in all phases of military armaments contracts (I;e. programming, conclusion and implementation of contracts), aiming to better tend to the needs of the Armed Forces, in the context defined by the modern market conditions and the European legal framework, the known Directive 2009/81 of the EU. We cannot escape it, but those who are familiar with European Law matters, know that a Directive merely defines the basic guidelines along which Member -States should act in order to incorporate these basic guidelines and not the Directive itself, as would be the case with a Regulation within their Law.

So, under these conditions, this pursuit is achieved by the targeted amendment of Provisions of the current institutional framework (that is L.3883/2010, L.3978/2011 και L.3433/2006 on Public Contracts revised in the best possible manner by the 2016 law, which we voted for as well, as New Democracy party, in Parliament). The 36 articles of the second part achieve to restore the balance between the requirements of the contracting authority and the modern market conditions and Public Administration, as well as to render effective procurement procedures in defending national interests.

The current legislative framework on contracts in the field of Defence contributed to the effective meeting of the Armed Forces requirements; however it did have some problems. L.3978/2011, which incorporated the European Directive 2009/81/EC in the national legal class, provided for certain excessive demands and actions on part of the financial bodies which resulted to very few of them being attracted to the idea of participating in the invitation to tender procedures. Sometimes it would be unfeasible and impossible for financial bodies (companies) to do so , the invitation to tenders were unfruitful, thus the needs of the Armed Forces were unmet and some members of the Armed Forces who spoke openly about this, this Law was for them a “Law of Non-Procurements in Defence”, with all its consequences. Our intention is not to merely stick to conclusions but to proceed with the required reform initiatives and render the “Law of Non-Procurements in Defence” a more usable and effective one for the Armed Forces and the total security of the country.

Furthermore, the accumulated experience we have gained from monitoring the contracts has led to a number or conclusions reached concerning the application of L.3433/2006 on the execution of contracts in the field of defence, which was deemed antiquated and not in harmony with the modern market practices and Public Administration, as they are portrayed in L.4412/2016 on public contracts. It is highlighted that the predictions concerning the execution of contracts are transferred to the special terms of contracts included in the invitations to tender and thus causing problems during their execution and deter candidates. These remarks have led to the restatement of the Provisions of L.3433/2006, as well as to the annexing of new provisions, in harmonization with the provisions of L.4412/2016.

As far as the programming of the procurement of defence armaments is concerned, we realise that the current provisions for drafting a Long-term and Rotating Planning have not been implemented to a certain degree due to conceptual ambiguities leading to isolated cases of activation of subprogrammes.

While there was an overall programming, we were coming every once in a while to launch initiatives, since there was no time range which would induce changes, among other things, to the geopolitical conditions and imposed needs as well, so as to solely activate, out of planning, a single sub-programme. For example, we suddenly discovered the need for Unmanned Aerial Vehicles. Even though they were not included in the Long-Term or the Rolling defence armaments Plan, we were suddenly “running hastily and randomly” to make provisions for the procurement of UAVs; because, let’s say, this emerged from the altering conditions. This is now remedied.

In particular, the second part of the draft law is structured in four chapters, as I already said, and 37 Articles – Articles 143-179, the transitional provisions. The first chapter refers to the programming of public procurements in the field of Defence. I glean them, while reminding at the same time that the main discussion on them and the remarks on the formulation of the articles should be done at the discussion on the articles. Yet, the colleagues are welcome to do as they wish.

Therefore, here, in Chapter A, a targeted restatement of articles 72 to 76 of the 2010 Law, regarding the programming of military equipment procurements to the benefit of the administrative procedure (in Art. 143-146), is attempted. This is an important and targeted intervention, aiming at making feasible the timely designing of the Long-term, as well as the Rotating, Planning, but also at simplifying the procedure of programme activation.

In this way no programme will intrude unplanned to cover needs that have emerged, everything will be done at the basis of specific planning, with schedules and time frames. Thus, the Long-term Planning is set to 12 years, from 15 years it is now, and the respective planning for armaments procurement is set to four, from three, years, so as to harmonise with the Mid-term Fiscal Strategy Programme. Therefore, from now on, the approval of sub-programmes from the pertinent Armaments Committee of the Hellenic Parliament, and probably later –due to financial involvement– from the Governmental Council on Foreign Policy and National Defence as well, will be done only once, through the approval stage, either of the long-term, or from the rotating, planning.

Moreover, the reassessment and update of the Forces Structure regarding the means is redetermined to three, instead of five, years, based on which the Long-term Planning will be established.

The second chapter of our interventions tackles matters regarding public procurement contracts in the field of Defence. The main parts of interventions to L.3978/2011, regarding the concluding of contracts in the field of Defence, are the following, to mention a few:

– Enabling FOS (Follow-On Support) for military equipment, by signing framework agreements and their executive contracts, since all essential clauses for support cannot be agreed upon beforehand. We had a recent experience in December 2019, with a respective legislative proposal, with a Special Law though, as it was not provided for by the legislative framework we are now coming to finally alter, to the long due signing of a framework-agreement for the follow-on support of the “Mirage 2000-5” aircraft which, since 2012, were without FOS and were underutilised, one after another, due to the lack of spare parts. Now, the possibility to sign FOS Agreements, along with their executive agreements, as well as the authorisation procedure at the stage of pre-contractual control by the Court of Auditors, embedded in a Law Article, are finally incorporated.

– Redefining the pertinence of the contracts’ awarding bodies (i.e. GDDIA and the General Staffs), by virtue of the horizontal segregation, based on the contract value and in accordance with the financial limits set by the EU, by Directive 2009/81/EC. I would like to remind those who need to be reminded that EU’s financial limits are 428 thousand Euros for a procurement contract, and five million Euros for a works contract. In this way, the signing and monitoring of contracts of equal or greater value than the limits set by the EU is assigned to GDDIA, regardless from the legal nature of the contract (commercial contract, interstate agreement etc), whilst on the contrary, the signing and monitoring of contracts valued below EU’s limits is assigned to the General Staffs, so as to facilitate the procedure.

– Reviewing the rules for transparency and ethics applied by the Armed Forces’ bodies, as well as the rules for transparency and the fight against corruption, enforced on the financial bodies. Maintaining the provision for pre-contractual control by the Court of Auditors is deemed vital. Pre-contractual control of the contracts by the Court of Auditors – we recently saw that, in the contract for the acquisition of the Rafale – is a legitimizing presumption of transparency. Along with swiftness, with the precedence also of pre-contractual control by the Court of Auditors, the much sought after purpose of transparency in contracts is finally ensured; due to the circumstances, the contracts need to be completed in very tight schedules for Greek, but not only, standards, just like the recent case of the eighteen Rafale acquisition.

– An important novelty is also the addition of an Article which defines the requirements and the procedure that should be followed, so that the contracting authority implementing the contracts may take the necessary measures to protect the country’s essential Security interests, by invoking the provision of Article 346 of the Treaty on the Functioning of the European Union. It refers that, in order to ensure the essential interests of its security, a country may resort to the means which allow it, even to Defence Materiel procurement agreements, even by exemption of what is provided for in the relative EU Directive for Defence procurements. The decision for exemption from the Union market’s rules, by invoking Article 346 of the Treaty on the Functioning of the European Union, is taken each time by the Governmental Council on Foreign Policy and National Defence, after obtaining the assent of the Parliament’s Special Standing Committee of Armament Programmes & Contracts.

The rest issues of the second chapter will be examined at the discussion on the articles, as well as the third chapter, regarding matters of performance of public contracts in the field of Defence.

I need only mention what we recently saw again in the contracts regarding the Rafale, which is, at the same time, a long-standing request of the domestic defence industry companies: the reduction of guarantee cap for the participation, from 5% to 2%, as well as the fixing of a guarantee cap for good performance of the contracts to 5%, from 10%. You can now understand that, in this way, it would be made easier to attract more companies, especially from the local industry, that, in many cases, would see that they did not have the opportunity to participate in an event in the field of Defence.

To sum up, I will briefly mention the most important amendments, so that we can reach a conclusion regarding our interventions:

  1. The planning and the procedure for the activation of these contracts. I referred to the Long-term and the Rotating Defence Planning. This is the first breakthrough and difference, compared to the past; the change of time limits.

  2. Framework-agreements in FOS contracts, this is article 150. It is the new provision I referred to.

  3. Introduction of the European Single Procurement Document (ESPD) and use of the Standardised Self Declaration Document (SSDD). This is one of the most noteworthy modifications of the procurement procedure; the provision to use this document, which is used in a unified way in the EU, to ameliorate and unify, to homogenise the procurements procedure in Defence, at European level.

  4. Modifications at the ownership and administration of the Financial Body.

  5. Letters of guarantee and amendment to contracts and framework-agreements, while they still go.

  6. An overall benefit comes into view from the settlement of matters regarding the performance of the contract, since, with the case settlement for annulment of the procedure or the inclusion of a clause for price adjustment, the deduction for the tenderer, and applicable penalties (which are touched on in separate articles of our intervention), the requirements enabling the contracting authority to make relevant decisions are clarified, and legal certainty is reinforced; in this way, valuable assets and time are released, by avoiding the suggestion of meaningless and dilatory appeals and complaints. I heard just before the correct view from the speaker of “Elliniki Lisi”, that we need to go to the less appeals possible, since, that way, the procedure and the deadlines for the performance of the contracts, are not obstructed as much.

In conclusion, let me say that with the interventions we have done in the legal framework, we shall improve effectiveness in the planning, signing and good performance (i.e. execution) of the supply contracts in the field of Defence. I believe that the time for this has come, since the geopolitical conditions and the security challenges faced by our country entail the elaboration of a faster and more efficient system, under conditions of ensuring transparency for the vital subject of armaments in the country’s Armed Forces. Thus, the overall deterrence imprint of our Armed Forces will be drastically reinforced, in times this is considered absolutely necessary, even though we do not mean that only the armaments can ensure this. However, if the Armed Forces personnel – who are skilled, and fully aware of their mission and duty – have the opportunity to handle the best armaments, depending on their needs (as they are determined by the General Staffs and tailored, contract-wise, by GDDIA and te Ministry’s Services, then I think that this will bring an overall national benefit.

This is how we can strengthen our Armed Forces’ deterrence imprint; this is how the Greeks can feel safe, with an actual – rather than a pretended – feeling. In our times, we cannot risk this; we need to ensure it. I believe that this intervention is one more action towards satisfactorily ensuring the Armed Forces’ improvement. Thank you.”