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21 Nov 05. The announcement that EU Defence Ministers including Secretary of State for Defence, John Reid, agreed a voluntary Code of Conduct to encourage more use of open competition for Defence equipment procurements within the EU could push the U.K. FRES requirement into a Pan-European project, a source close to BATTLESPACE said.

The creation of an internationally competitive European Defence Equipment Market (EDEM) is one of the EDA’s ‘flagship’ projects for 2005, as agreed by Defence Ministers. The cornerstone of the EDA’s work on EDEM is the development of the Code of Conduct.

The Code of Conduct seeks to introduce the principles of the European Community (EC) public procurement rules – transparency, non-discrimination and equal treatment of suppliers from any EU Member State – into defence equipment procurements that are exempted from the EC procurement rules by Article 296 of the Treaty of the European Community. Article 296 enables Member States to derogate from the EC public procurement rules where this is necessary to protect essential national security interests. The Code of Conduct has a number of exemptions, including nuclear technology, collaborative programmes, research & technology services, pressing operational urgency and follow-on orders.

The EDA’s initiative to create an EDEM complements the European Commission’s work on defence equipment markets, following its 2004 Green Paper on Defence Procurement. The Green Paper considered only that part of the defence equipment market where EC public procurement rules must be applied.

The source continued that the current Phase may be to prove the TRACER/FSCS Technology into FRES to prove that the £96m was not wasted. The TRACER/FSCS Technologies including CTA, Electric Drive and Electric Armour can now be viewed as Risk-Reduction FRES Projects. The project may finish at that stage when Atkins ‘fails’ to establish a sound procurement process and the project then goes European. This was hinted at in our coverage of the FRES Adjournment Debate held by Anne Winterton earlier this year. Other sources suggest that Finmeccanica is also keen to get into the Warrior Improvement Programmes and FRES through its Oto Melara subsidiary to supply the turret. Their turret suits the WLIP requirement in that it does not enlarge the turret ring and thus does not reduce troop carrying capability. Another source said that the current problems with regard to gas ‘blow-back’ with the CTA 40mm system may preclude it from selection as any gas blow-back would ruin the valuable germanium sight systems and cause health and safety issues for the crew as well as corroding the barrel.

Any suggestion of a Pan-European project would delay the FRES Programme and almost certainly require an interim buy for the Saxon vehicles in particular. But it would save £14bn from the U.K. Budget. Any Pan-European project wmay also preclude U.S. companies, particularly in view of the failure to agree the ITAR waivers, and may explain Lockheed Martin’s drive to get into the WLIP Programme. (See: UK DENIED ITAR WAVER, LOCKHEED MARTIN ESTABLISHES FRES BID TEAM)

The voluntary code was agreed at a meeting of the European Defence Agency (EDA) Steering Board in Brussels.

John Reid said: “The European Defence Agency was set up to help EU Member States rise to the challenge of making European forces more deployable, sustainable and interoperable. Today’s initiative illustrates how the EDA can help achieve that goal.

“The Code of Conduct that we have agreed today recognises the benefits that come from a more open and competitive approach to defence equipment procurement – an approach we have taken for some time in the UK.

“This Code of Conduct has the potential to deliver defence capability in a way that provides better value for money to the taxpayer.”

The following capability improvements were announced today following agreement between all 25 EU Defence Ministers:

* The completion of th

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