Rethinking Irish Defence Procurement

A surge in defence spending

Shifting geopolitical realities has forced the EU and Ireland to rethink their approach to defence procurement. The European Commission has stressed the need to prioritise collective defence resilience and collaboration between EU Member States. This in turn has resulted in a shift towards increasing and expediting spending in the under-funded defence sector. The EU has recently committed to a defence package of over €800bn and in February 2025, the Irish Government committed to doubling the defence budget over the coming years.

EU Member States’ defence spending has grown by more than 31% since 2021, reaching 1.9% of the EU’s combined GDP or €326bn in 2024. Specifically, defence investment reached an unprecedented €102bn in 2024, almost doubling the amount spent in 2021. However, European defence spending remains far lower than that of the United States, Russia and China. In the knowledge that bolstering European defence will require massive investment over a sustained period, the European Commission recently unveiled its ReArm Europe plan, also known as Readiness 2030.

Budget 2025 in Ireland provides for a record allocation of €1.35bn in defence funding, an increase of €100m compared to the Budget 2024. In February 2025, the Irish Government committed to doubling defence spending to €3bn in the coming years. The increased budget will be used to procure equipment and infrastructure including:

• the establishment of a fleet of armoured vehicles
• the establishment of a military intelligence school
• a corps of 300 troops dedicated to cybersecurity
• a 12-ship Naval Service capable of offensive operations
• a fleet of fighter aircraft

In early April 2025, the Minister for Defence Simon Harris announced the commencement of a process for establishing a military cyber-command with the aim of providing military capacity “to support the full spectrum of cyberoperations”.

The ReArm Europe Plan / Readiness 2030

In the White Paper for European Defence – Readiness 2030, the EU recently unveiled the ReArm Europe plan, which enables spending of over €800bn structured around, inter alia, the following pillars:

1. Unleashing the use of public funding in defence at national level by activating the national escape clause of the Stability and Growth Pact, which will provide Member States additional budgetary freedom to increase their defence spending
2. A new dedicated financial instrument for Security Action for Europe (SAFE) to help Member States increase investments in Europe’s defence capabilities. The Commission has proposed a new EU regulation under Article 122 of the Treaty on the Functioning of the European Union to provide Member States with €150bn worth of EU backed loans for defence investment.

The ReArm plan sets out seven priority areas deemed critical to build a robust European defence, namely:

• air and missile defence
• artillery systems
• ammunition and missiles
• drones and counter-drone systems
• military mobility
• AI, quantum, cyber and electronic warfare
• strategic enablers and critical infrastructure protection.

Member States will decide which areas will receive funding with possibilities to receive funding in additional areas outside of the seven identified priorities.The White Paper provides a framework for the ReArm Europe plan and sets out the necessary steps to rebuild European defence to support Ukraine, address critical capability gaps and build a strong defence industrial base. The White Paper proposes ways for Member States to significantly invest in defence, procure defence systems and build up the readiness of the European defence industry – the SAFE instrument being a key part of this plan.

The SAFE instrument

The new SAFE instrument will support the European defence industry through common procurements and will provide up to €150bn in loans to Member States for defence investments. The main highlights of SAFE are the following:

• To bolster collaboration and interoperability, funds will be allocated for common procurement involving at least two countries, one of which must be a Member State receiving SAFE financial assistance and the other may be another Member State, an EFTA State, member of the EEA or Ukraine.
• As with the European defence industry reinforcement through common procurement (EDIRPA) programme, procurement contracts must be placed with contractors or subcontractors established in the EU, EEA EFTA States or Ukraine and must not be subject to control by non-associated third countries or by non-associated third-country entities.
• Common procurements involving at least one Member State receiving financial assistance under the SAFE Instrument can be made using the negotiated procedure without publication of a contract notice.
• Common procurement contracts originating in the Union, EEA EFTA States or Ukraine should contain a requirement that the costs of the components are not lower than 65% of the estimated costs of the end product.
• Provision for a temporary VAT exemption on the importation and supply of defence products subject to common procurement under SAFE.
• To incentivise and facilitate common procurement the instrument includes provision for the opening of existing framework agreements and contracts to new partners.

The future of collaborative procurement in the EU

Collaborative procurement has existed in the EU for some time and the EU has undertaken joint procurement on Member States’ behalf and at their request. However, the clear message is that joint and common procurement needs to scale up. The White Paper suggests that there is a strong case for closing these capability gaps in a collaborative manner to leverage European economies of scale to lower unit costs. The Commission views collaborative procurement as the most efficient means to procure large numbers of ‘consumables’ such as ammunition, missiles and drones while also being key to deliver on more complex projects since aggregation of demand constrains costs, sends clearer demand signals to the market, shortens lead times and ensures interoperability. Since 2007, in the framework of the European Defence Agency (EDA), 35% of Member States total defence equipment procurement to be done collaboratively. This target has been mirrored in the commitments of the Permanent Structured Cooperation, launched in 2017.

Different collaborative formats and frameworks are available to Member States, including: ad-hoc multinational cooperation such as a ‘lead nation’ framework; the European Defence Agency, the NATO Support and Procurement Agency or the Organisation for joint armaments cooperation. If requested by Member States, the Commission could also act as central purchasing body on behalf of Member States.

Opportunities for companies supplying to the defence sector

The ReArm Europe Plan presents significant opportunities for companies supplying to the defence sector to engage in upcoming EU procurement rounds. There are also opportunities for private investors and financial institutions to invest in defence as well as startups and SMEs active in artificial intelligence (AI), quantum computing and cyber security to compete for contracts.

At a national level, with a significantly increased defence budget, there will be opportunities to compete for Irish government defence contracts (the primary procuring bodies for the State being the Department of Defence, the Irish Defence Forces and the Department of Justice).

What’s next?

The White Paper outlines several immediate actions to be taken including the Commission’s plans to launch a Strategic Dialogue with the defence industry aiming to simplify and harmonise regulations by June 2025 through the Defence Omnibus Simplification Proposal. The Commission has also invited the European Council to adopt the proposed draft Regulation on SAFE as a matter of urgency. Member states are also invited to swiftly step up collaborative defence procurement in line with the target of at least 40% proposed by the European Defence Industry Strategy, including under the aegis of the SAFE instrument.

For further information in relation to this topic, please contact Anna-Marie Curran, Niamh O’Brien or any member of the EU, Competition & Procurement Group. With thanks to Tara Sullivan for her contribution to this article.

Date published: 30 April 2025