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Defence materiel and the defence industry

Materiel policy and procurements

The Ministry of Defence directs materiel policy in the administrative branch and steers key defence materiel projects. The aim of the defence administration's materiel policy is to maintain and develop military capabilities on a long-term basis by acquiring materiel and services that are suitable for the tasks of the Defence Forces and internationally compatible. Material policy also aims to ensure military security of supply in all situations. Capabilities, the cost-effectiveness of materiel and life cycle management are ensured also in emergencies as part of military security of supply. Further information on materiel policy can be found in the Ministry of Defence's publication Materiel Policy Strategy for the Defence Administration.

The existing national legislation on procurement as well as the European Union’s regulations concerning public contracts are observed in the defence administration procurement. The Act on Public Procurement in the Fields of Defence and Security (1531/2011) and the Act on Public Procurement and Concession Contracts (1397/2016) apply to defence and security procurements. Directive 2009/81/EC has been implemented in Finland by the Act on Public Defence and Security Contracts. The general terms of public procurement (JYSE 2014 SUPPLIES and JYSE 2014 SERVICES, documents in Finnish) as well as the regulations and instructions of the defence administration are followed.

The Ministry of Defence decides on the most significant procurements while the Defence Forces prepare and carry out the procurements. Competitive tendering, ensuring the most economically advantageous procurements, and equal and confidential treatment of tenderers are the key principles of the procurement policy. In addition, the defence administration’s own general principles play a central role, for example, for

  • ensuring security of supply; and
  • emphasising international cooperation, which means that the materiel must be compatible and the possibilities for Nordic or European procurement cooperation must be taken into consideration.

Detailed information on the general procurement principles is available from the Ministry of Defence.

Finland must possess the industrial and technological expertise required for maintaining and updating its critical systems so that their independent use can be ensured in all circumstances. Most of this expertise is in the domestic defence industry.

The Government decision Securing the technological and industrial basis of Finland's defence (in Finnish) specifies the critical capability areas in Finland's defence and the technology sectors of particular importance for managing these capabilities. As far as these sectors are concerned, it must be ensured that Finland maintains the necessary technological expertise, management of the systems’ life cycle, manufacturing, research and development, planning, and the capacity for integration, service, maintenance and damage repair in all circumstances.

Industrial cooperation may be required for procurements most important for Finland's defence and security. The arrangements for industrial cooperation ensure military security of supply and access to critical technology in all circumstances. When an obligation is imposed, it is always based on a case-by-case consideration and the criteria must fulfil the conditions for applying Article 346 of the Treaty on the Functioning of the European Union (TFEU). More information on industrial cooperation in defence procurement is available on the website of the Ministry of Economic Affairs and Employment and in the following publications by the Ministry of Defence and the Ministry of Economic Affairs and Employment:

International defence materiel cooperation

The most important objective of international defence materiel cooperation is to establish the prerequisites for cost-effective  procurement projects that ensure military security of supply. The aim of the cooperation is to avoid duplication of effort and generate synergies. This will lead to technological and economic benefits. International materiel cooperation that covers the entire life cycle of materiel is divided into bilateral and multilateral cooperation.

As part of international cooperation, the defence administration promotes the internationalisation potential of the domestic defence industry. Cooperation to promote exports is carried out with Finnish delegations, the Association of Finnish Defence and Aerospace Industries (AFDA) and Team Finland.

Bilateral cooperation is based on Memorandum of Understanding (MoU) documents signed with different countries. Cooperation is conducted in the fields of research, development, manufacturing, service, quality assurance, procurement, and joint procurements and maintenance. Through cooperation, the goal is to establish the prerequisites for military security of supply under emergencies. Cooperation is promoted through regular negotiations on cooperation.

Multilateral materiel cooperation is carried out, for example, under the auspices of the EU, the European Defence Agency (EDA), the Nordic defence cooperation body (NORDEFCO) and NATO.

The European Defence Agency aims to strengthen the Common Security and Defence Policy (CSDP) of the European Union and to support the Council and the Member States in developing military capabilities. For example, efforts to improve the functioning of the defence market and the strategic work to support the development of the CSDP have produced good results. Further information on the Agency can be found on the EDA website.

Nordic defence cooperation (NORDEFCO) aims to benefit the development and use of defence capabilities through networking. Cooperation takes place in five areas, one of which is defence materiel. The aim of Nordic defence materiel cooperation is to achieve economic and technical benefits in terms of procurement and support to the life cycle of defence materiel. At the practical level, cooperation is carried out in the NORDEFCO working groups. For more information on Nordic defence cooperation, see the article for NORDEFCO on Ministry of Defence website and the NORDEFCO website.

Opportunities for Finnish industry

Defence materiel procurements

Defence materiel procurements are announced on the national HILMA database, which is an electronic channel for public procurement notices maintained by the Ministry of Economic Affairs and Employment. From HILMA, procurement notices are automatically transferred to the EU's Tenders Electronic Daily (TED) database.

Industrial cooperation

The objective of industrial participation is to develop and maintain the production, technology and expertise in the defence and security industry that is critical for national defence, state security and functions vital to society. Another goal is to improve and safeguard the national security of supply.

Industrial participation will ensure that the technology and expertise critical for the security of supply associated with defence equipment to be procured will be available to the Finnish Defence Forces even during a crisis and in emergency conditions comparable to a crisis.

Industrial participation may be direct or indirect. Direct participation means that cooperation between foreign industry and domestic industry concerns the system to be procured. Participation ensures that the technology and expertise critical for security of supply associated with the defence equipment to be procured will be available to the Finnish Defence Forces even during a crisis and in emergency conditions comparable to a crisis

Indirect participation means cooperation where technology and expertise important for the key security interests of the Finnish state are transferred to the Finnish defence and security industry

Opening the EU defence market for competition

As a rule, Member States have an obligation to put their defence and security procurement out to tender in accordance with the EU’s Defence and Security Procurement Directive (2009/81/EC). Derogation from this principle is only permissible under the exceptions defined in Article 346 of the Treaty on the Functioning of the European Union (TFEU). This means that Finland has the right to conclude defence contracts that are essential for national security without complying with the provisions of the directive and to follow national contract award procedures. However, the obligation of industrial participation may still be established in such exceptional circumstances.

The need for and the scope of the obligation of industrial participation is always assessed in advance and on a case-by-case basis by the procurement authority, and criteria must meet the conditions in Article 346 of the TFEU. The rules on industrial participation from 2012 (revised on 25 April 2013, 1 May 2017 and 25 June 2018) apply to any such industrial participation agreements.

The Ministry of Defence’s role in industrial participation on defence procurement

The Ministry of Defence and the Finnish Committee on Industrial Participation under its purview are responsible for the practical governance of industrial participation, together with foreign defence equipment manufacturers. However, the Ministry of Defence acts as the contracting party in industrial participation agreements associated with a procurement contract.

The Finnish Committee on Industrial Participation is chaired by Director General Olli Ruutu. The Secretariat of the Finnish Committee on Industrial Participation at the Ministry of Defence is responsible for the practical arrangements of the Committee’s meetings and for matters related to the administration of industrial The Committee meets about six times each year, and its members represent the Ministry of Defence, the Ministry for Foreign Affairs, and the Ministry of Economic Affairs and Employment.

Inquiries

Finnish Committee on Industrial Participation

Ministry of Defence

P.O. Box 31, FI-00131 Helsinki

fcip(at)gov.fi

Defence research and development in the EU

In recent years, the European Union has intensified its security and defence cooperation. One of the so-called new defence initiatives is the European Defence Fund (EDF).

The Defence Fund consists of research and development packages. For both packages, a preliminary phase has been carried out in which procedures have been tested before the actual programme, which was launched in 2021. The preparatory action for defence research was carried out in 2017–2019 and the European Defence Industrial Development Programme in 2019–2020.

Further information on the European Defence Fund can be found in the article for EDF on Ministry of Defence website.

In addition, information on European funding opportunities for defence sector companies can be found on the European Defence Agency's website.