Security of Supply

Security of supply is one of the distinguishing features of defence and security procurement that has no equivalent in standard public procurement. Contracting authorities procuring military equipment, critical infrastructure protection systems, or sensitive services must be confident not only that a supplier can deliver under normal commercial conditions, but that delivery will be maintained when it is most needed: during crises, conflicts, or supply chain disruptions.

What is security of supply?

Security of supply encompasses several related concerns. Continuity of delivery means that the supplier can fulfil its contractual obligations across the full contract term, including under adverse conditions. Supply chain resilience means that the supplier's own supply chain, including sub-suppliers and component manufacturers, does not have points of failure that could interrupt delivery of critical equipment or services. Operational availability means that delivered systems will be maintained, upgraded, and sustained to the required operational standard throughout their service life.

Under Directive 2009/81/EC, contracting authorities are explicitly permitted to impose security of supply requirements as selection or contract performance conditions. These may include requirements for the supplier to maintain strategic stocks of spare parts, to prioritise government orders in the event of scarcity, to agree to government oversight of subcontractor chains, to ensure that production capacity can be surged in an emergency, and to obtain their government's commitment that export licences will be granted for ongoing supply of the contracted system.

The export licence dimension is particularly significant. A weapon system or sensitive equipment component may require an export licence from the manufacturer's home country before it can be supplied to a foreign government. Where the supplier is a foreign company, the contracting authority must assess the risk that the manufacturer's government could, for political reasons, decline to issue the necessary export licence at a critical moment, interrupting support for an in-service system. This risk is one driver of preferences for domestic suppliers or for government-to-government arrangements that build supply assurance into the inter-state relationship.

The European Defence Agency (EDA) has worked to develop frameworks that support supply assurance across European markets, including model clauses that member states can include in contracts to standardise security of supply expectations.

Why it matters for bidders

For suppliers competing in European defence markets, demonstrating credible security of supply is increasingly a differentiator. Contracting authorities are acutely aware of supply chain vulnerabilities following recent global disruptions, and suppliers who can show robust supply chain management, strategic stock arrangements, and cooperative export licence arrangements with their home government will score more favourably in evaluations.

Suppliers who source critical components from countries whose export reliability is questionable, or who cannot demonstrate operational surge capacity, may face disadvantage even if their primary technical solution is superior. Building supply assurance into bid proposals, including evidence of supply chain resilience, stockpile arrangements, and government-to-government supply commitments where relevant, is essential in competitive tenders under 2009/81/EC.

Example

A Czech Republic ministry of defence procures an air defence radar system from a French manufacturer. The contract specification includes security of supply conditions requiring the manufacturer to maintain a ten-year stock of critical replacement modules in a bonded warehouse in the Czech Republic, to provide priority delivery rights for Czech government orders during any period of global scarcity, and to confirm that the French government has agreed to grant export licences for spare parts on an expedited basis at any point during the system's operational life.

Frequently Asked Questions

Can security of supply requirements be used to discriminate in favour of domestic suppliers?

Security of supply requirements must be proportionate and applied equally to all tenderers. They cannot be drafted in a way that only a domestic supplier could realistically satisfy. However, objective supply assurance conditions, such as requirements for local spare part stockholding or export licence commitments, that a domestic supplier happens to satisfy more easily than a foreign one are generally permissible under 2009/81/EC.

How does security of supply interact with the offset and industrial participation framework?

Governments often structure industrial participation programmes partly to address security of supply concerns. By requiring domestic production of key components as part of an offset obligation, a government creates a domestic supply source that is not subject to foreign export controls. The two concepts are legally distinct but strategically interconnected.

Is security of supply relevant for services contracts as well as equipment contracts?

Yes. For critical IT and communications services, cybersecurity, logistics, and maintenance contracts in the defence and security sector, the contracting authority needs the same assurance that the service can be maintained reliably and securely. Data sovereignty (ensuring that sensitive data does not pass through systems controlled by potentially adversarial states) is an increasingly prominent security of supply issue in services procurement.