European Defence Fund (EDF) – Interim Evaluation
SOFF Preliminary Comments
Note: SOFF advocates for a comprehensive EDF interim review that integrates perspectives from both the industry and Member States. This approach aims to confirm the EDF’s effectiveness in fostering collaboration among Member States, while also boosting the competitiveness and technological capabilities of the EDTIB.
SOFF and the EDF
Since its inception in 2021, SOFF has played an active role in the activities of the EDF, along with its precursor mechanisms, viewing it as a key enhancement to the EU’s efforts towards a more integrated defence market in Europe and a competitive EDTIB. The EDF’s focus on promoting cross-border partnerships and cooperation aligns with the EU’s goal of achieving technological sovereignty, by encouraging collaborative research and the creation of new systems and technologies for the EU’s security and defence.
SOFF’s member companies have been instrumental in shaping the EDF from its early stages, beginning with the Group of Personalities, through the European Defence Action Plan (EDAP), and in collaborative efforts within the AeroSpace and Defence Industries Association of Europe (ASD).
- Added value of EDF for the EDTIB
Despite the EDF being operational for only three years, assessing its full impact is complex due to the defence industry’s unique characteristics, such as extended R&D timelines (ranging from 5 to 30 years). This has meant that intentions by Member States to support EDF consortia with future procurements have not yet materialised into actual purchases. Moreover, the EDF faces inherent limitations that prevent it from placing immediately procurable products onto the market. However, there are numerous positive outcomes to acknowledge.
One significant advantage of the EDF is its facilitation of consortium formation, which is crucial for developing common standards and enhancing interoperability through collaborative efforts. This initiative has led to an increase in cross-border cooperation within the European Defence Technological and Industrial Base (EDTIB), a development SOFF views as beneficial. The EDF has been instrumental in forging new partnerships across Europe, including with SMEs and mid-caps, and strengthening existing relationships. These collaborations not only enhance market access but also bolster credibility over the medium to long term.
From the perspective of the customers, namely the Member States, the EDF has played a pivotal role in deepening the understanding of future capability needs as it has incentivised companies to further engage in EDA’s CARD, CDP, CODABA, etc. This is particularly relevant in supporting the EU’s role within NATO. The EDF has been effective in uniting Member States to coordinate on requirements, financial incentives, and project timings. It has enabled the realisation of projects, such as demonstrators, which might have been prohibitively expensive to fund on a national level alone. However, going forward EDF would benefit on an increased clarity in how all EU initiatives and other initiatives link to translated strategy, in cooperation, synergies and added values.
- Involvement of the different stakeholders in the EDF
Over time, the European Defence Fund (EDF) has garnered increasing interest, particularly from smaller enterprises, as awareness of the instrument and its offerings has expanded. The EDF’s specific criteria and incentives for Small and Medium-sized Enterprises (SMEs), cross-border SMEs, and Midcaps have motivated larger companies to actively seek and include smaller firms in their consortia and proposals, marking a positive development.
Nonetheless, the administrative demands associated with EDF projects are notably burdensome, particularly for SMEs. The extensive preparation time for calls, evaluation periods, contract negotiations, and the duration of the projects themselves, which often exceed three years, pose significant challenges. These challenges are not only daunting for small companies, which must manage their limited resources carefully, but also for larger companies. The latter face pressures to quickly increase production of current products and systems while accelerating the development of new ones, making the administrative load even more problematic.
Enhancing SME participation could be achieved with improved support from Member States and the Commission throughout the proposal preparation, evaluation, and contracting phases. Such support could significantly lower barriers for smaller companies, enabling them to contribute more effectively to EDF projects. In many cases, SME’s are only used to work on a national basis with defence matters. In an international context, they lack the knowledge, experience and functions needed to be compliant in accordance with security classified information and export control and, therefore, needs greater support nationally to participate.
- Management and planning of the EDF
The cycle of Annual Work Programs (AWP) poses challenges for strategic planning due to its lack of foresight and predictability, which are crucial for managing the types of projects funded by the European Defence Fund (EDF). This issue is highlighted in our suggestions for improvement.
SOFF wishes to highlight a significant concern to the Commission regarding the inconsistent dissemination of information by the Commission and Member States in the early phases of EDF projects. This inconsistency results in uneven access to information among industry stakeholders, at times excluding certain companies from preliminary discussions related to the Work Program. Such disparities negatively impact the industry’s capacity to compete on a level playing field.
The Commission’s recent approach to harmonising call cycles has shown considerable improvements in efficiency compared to previous methods led by Member States. Despite these advancements, technical challenges have hindered some Member States’ ability to fully engage in harmonisation meetings, occasionally leading to imbalanced call texts. It is vital that the budget considerations are integrated during the call text harmonisation to ensure consortia can meet proposal expectations realistically.
The support provided by Commission Project Officers for the projects has been commendable. As Member States initiate their collaborations, the role of Member State Project Officers becomes critical. They facilitate cooperation among Member States in reviewing deliverables and ensuring that the projects progress in alignment with their needs and expectations.
- Project implementation and co-funding
The release of co-funding, which is tied to the contracts between Member States and consortia, can also experience delays. Such delays pose difficulties for Small and Medium-sized Enterprises (SMEs), which may lack the financial buffer to sustain operations while awaiting funding. Consequently, consortia members face financial risks, as projects often need to be initially financed from their own resources before receiving support from Member States.
SOFF advocates for a more expedited approach to process management and project implementation. The current conflict in Ukraine underscores the urgent need for the European Union and the European Defence Technological and Industrial Base (EDTIB) to accelerate the development and production of the necessary systems and equipment for armed forces, highlighting the critical nature of these improvements.