Government-to-Government Procurement (Defence)

Government-to-government (G2G) defence procurement is a distinctive acquisition route in which the purchasing government contracts with a foreign government rather than directly with a commercial supplier. The selling government then typically fulfils the contract using its own defence industrial base, either through a state-owned enterprise, through a government-controlled agency, or by subcontracting to a commercial company that delivers on behalf of the government.

What is government-to-government procurement in defence?

G2G arrangements are used for a variety of reasons. Security of supply is a primary driver: where a government wishes to acquire a sensitive capability, it may prefer to anchor the supply relationship at the inter-state level, where diplomatic, treaty, and political obligations provide assurance that supply will continue even in adverse circumstances. A commercial contract provides contractual remedies if supply fails, but a G2G arrangement provides a fundamentally different layer of commitment.

Political and strategic relationships also drive G2G. Governments may prefer to buy from allied nations as a signal of strategic alignment, or as part of a broader bilateral relationship in which defence cooperation is one element. The US Foreign Military Sales (FMS) programme is the most prominent global G2G mechanism, through which the US government acts as the contracting party for sales of US defence equipment and services to foreign governments. Many European nations use FMS to acquire US systems such as the F-35 fighter, Patriot missile defence, and C-17 transport aircraft.

Within Europe, G2G arrangements also exist between member states, typically for collaborative programmes where a lead nation manages procurement on behalf of partner nations, or for specific bilateral deals between allied governments.

From a procurement law perspective, G2G arrangements are typically excluded from the competitive requirements of Directive 2009/81/EC and, in the UK, from the Defence and Security Public Contracts Regulations 2011. The Directive explicitly excludes contracts governed by international agreements between EU member states or between a member state and a third country covering works, supplies, or services. Article 346 TFEU may also be invoked to exclude G2G arrangements from EU procurement rules where essential security interests justify it.

G2G procurement does not disappear from transparency requirements entirely. Award notices may still be required in some jurisdictions, and parliamentary scrutiny of major G2G deals is common.

Why it matters for bidders

G2G procurement represents a significant portion of European defence spending that is effectively inaccessible to competitive bidding. When a European government decides to procure through a G2G route, the decision is typically made at a political level before any commercial competition is announced, meaning commercial suppliers cannot normally intervene in the award decision.

However, G2G is not the end of the commercial opportunity. The selling government must fulfil the contract using industry, and the commercial subcontracts placed by the selling government's procurement agency are frequently open to competition. Under US FMS, for example, the US government awards a Letter of Offer and Acceptance to the foreign government, and then the relevant US programme office may award contracts to commercial suppliers to fulfil the FMS commitment. European suppliers can participate in these subcontracting opportunities.

Understanding whether a national programme is likely to follow a G2G route, a competitive route under 2009/81/EC or the DSPCR 2011, or a combination of both, is therefore critical to business development strategy in defence markets. Monitoring political signals, bilateral defence cooperation agreements, and strategic defence review conclusions helps anticipate the route before competitions are formally announced.

Example

Poland decides to acquire a new short-range air defence system and structures the acquisition as a G2G arrangement with the United States, using the US FMS programme. The US Defense Security Cooperation Agency (DSCA) issues an FMS case, and the US Army manages the programme on behalf of Poland. The actual manufacture of the system is subcontracted to a US defence prime, which in turn sources components from suppliers across Europe and the United States. A Polish electronics company that would have had no ability to bid in the G2G arrangement successfully pursues a subcontract from the US prime for radar components, using industrial participation obligations as leverage.

Frequently Asked Questions

Does G2G procurement always exclude competitive bidding?

Not always. In some G2G frameworks, the selling government commits to use competitive procedures when placing subcontracts. The NATO Support and Procurement Agency (NSPA) model involves competitive procurement at the subcontract level, even though the top-level contracting relationship is between NATO and member nations. However, where the G2G arrangement involves a specific preferred contractor, the competitive opportunity may be very limited.

Can a G2G arrangement be challenged under EU law?

Challenges are difficult. If the arrangement falls within a recognised exclusion under Directive 2009/81/EC or is justified under Article 346 TFEU, EU procurement obligations do not apply. A third party could challenge whether the exclusion was properly invoked, but courts extend considerable deference to government decisions on security-related procurement.

Are G2G arrangements transparent?

Transparency varies. Some governments publish high-level information about G2G agreements, and parliamentary processes often involve scrutiny of major deals. However, the detailed commercial terms, pricing, and delivery conditions of G2G arrangements are frequently treated as confidential, limiting the public visibility that competitive procurement would require.