Romania's current legislation dealing with public procurement, public-private partnerships (PPPs) and concessions is in the process of being modified (all of these to be included in one law), especially since these are some of the major problems areas identified by the European Union in its recent country report.  The previous rules also had to be modified in light of the new EU directives dealing with public procurement (Directives 2004/17/EC & 2004/18/EC).  At the same time, relating to defense procurement, the acquisition of military hardware is generally exempted across the EU from these directives, as such acquisitions are made on the basis of the relevant national laws (this exemption is based on Article 296 of the EU Treaty), which as resulted in a fragmented system across the EU.  Nonetheless, according to European Court of Justice case law, Article 296 does not permit an automatic exemption for all defense procurement, but in practice, most national authorities make extensive use of the exemption. 
But things will change soon enough, since the EU commenced an official Consultation in 2004 regarding defense procurement, with the result being the publishing of a green paper in September 2004 that recognized certain short-comings of the current system ("This fragmentation poses a major problem for all Member States with defense industries ... [ which ] increases the cost to the taxpayer and damages ... the competitiveness of the European defense industry ....", p. 5) and the need to make the acquisition process transparent and open to non-national players.  In addition, the European Defense Agency (EDA) was set up in 2004, which on November 21, 2005 issued a Code of Conduct relating to Defense Procurement (<http://www.eda.eu.int/news/2005-11-21-1.htm>), with the stated main objectives of this Code of Conduct being, " ... to encourage competition in the European defense equipment market, where contracts are currently exempt from normal EU internal market rules."  In fact, at a meeting of the EDA's Steering Board, EU Defense Ministers decided that the new Code of Conduct would cover contracts worth more than EUR 1 million and would take effect from July 1, 2006.
Practically, this means that Romania's new public procurement legislation, which is intended to come into effect on June 1, 2005, should make specific mention of the EDA's Code of Conduct with respect to defense procurement.  This would be "proactive" behavior which I am quite certain would be highly appreciated by the EU Commission and EU Parliament, especially considering the upcoming EU entry evaluation in April/May 2006 as well as the official decision as to whether Romania will join the EU in 2007 or 2008.  Let us not forget that Romania, within the upcoming three to five years, will also purchase up to 50 jet fighters (meaning a budget expenditure of between EUR 2 to 3 billion), so all defense procurement should be carried out in the most transparent way possible (the last thing that Romania needs is yet another scandal).  In short, Romania needs to show and in fact prove that it belongs to the European Union, meaning that it needs to start evidencing (through actions, not words) that it accepts the implementation of certain fundamental principles ... such as transparency.  In addition, Romania has no local jet fighter industry to protect, so ensuring that its impending acquisition of the jet fighters is carried out through a transparent procedure will be a win-win situation (taxpayers will pay a better price, not to mention that an open procedure should avoid major scandals).  Getting back to the Code of Conduct, the EDA has officially stated that, "[a]ll relevant new defense procurement opportunities will be published on a single online portal operated by the EDA. Fair and equal treatment of all companies will be assured through evaluation of the offers on the basis of transparent and objective standards. The fundamental criterion for the selection of the contractor will be the most economically advantageous solution for a particular requirement, taking into account, among other things, considerations such as compliance, costs (both acquisition and life cycle), and security of supply."  Consequently, current decision makers should ensure that the new public procurement legislation will include language which specifies that defense procurement will be carried out pursuant to the EDA's Code of Conduct.  This is very important, especially since it is expected that the EU (arising from the official Consultation and related questionnaire) will issue an interpretative Communication and approve a Directive on defense procurement in the not-so-distant future (which should be similar in substance to the Code of Conduct).  What is very clear is that Romanian decision-makers need to do as much as possible in the next four months to ensure that Romania is welcomed into the EU in 2007, and consequently the inclusion of such language into the new public procurement law which would ensure defense procurement transparency would be a huge step forward.  And let us not forget that once Romania does join the EU, it will be a member of the EDA and thus should abide by this Code of Conduct (so really no reason at all to wait to implement this code).

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