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SEDE European Parliament
Ihren Sitzungen folgenDaniel Fiott
But there is also this question of how when Europe initiates larger defense programs, how is it possible then to integrate SMEs maybe outside of the usual SME structures? And that question there is important because it helps us unlock as well this context, this idea of do we forego innovation or not depending on which SMEs are involved. I should also say that the EU has not been idle when it comes to these three issues. I think we've seen a lot in terms of trying to have a lot more EU-level financing for defense. That's very clear.
That's worked hand in hand with increased defense investment at the member state level, much more in terms of the steps of unlocking private capital as well and private investment. We also have the, sorry for me saying that, but the usual alphabet soup of acronyms involved in here: EDF, EDIP. Yesterday the committee was agreeing on ASAP as well, another one, FAST, EDIS. I mean, everyone knows where this goes. So it's not that we lack initiative in Europe, but the real question then is how do we make sure that the tools that we are developing are answering the right questions and putting the money in the right place?
One of the conclusions I make in the report also is that we need to be a bit more careful about how we dedicate money under the next MFF to make sure that we're not doing a kind of recycling job of existing money, right? So that we get fresh money into innovation, defense innovation for SMEs, and I think that that will be a critically important question. However, and that's a not a inconsiderable footnote in all of this, and I see I'm running out of time as well, even within EU programs we see a replication of some of the challenges that SMEs already face in the market more generally. When we introduce new tools, we also make give SMEs a steeper learning curve. They have to learn how these tools work, they have to learn the administrative aspects of these new tools, they also have to develop new groupings or consortia of SMEs, they have to make relationships or build relationships with mid-caps and primes also to be able to participate in EU programs.
And some of the other questions which are important is what defense projects will you be working on and also for which customer? So these are I would say some of the market access problems that we face.
Very quickly, normally when you look at the literature on defense innovation, it has been quite common for people to speak of a valley of death, a concept I think we borrowed from America. And the valley of death really means that we have this gap between an initial stage of innovation that an SME might have, so develops a technology, and it finds it very difficult at an early stage to get the money, political awareness, and partnerships it needs to have those initial technologies be part of a development program. What I say in the study is that that remains a big problem for SMEs. But there is also a second valley of death, which is that increasingly SMEs are able to overcome the first valley of death. The problem they then face is that when they're engaged in development programs where they mature their technologies, where they test their technologies, they face a second valley of death when it comes to the commercialization.
And that valley of death is not necessarily money, although that's important, but it also rests on questions of do they have access to testing regimes and testing facilities within Europe? If they don't have access to testing facilities, they cannot have a proof of concept of their technology and it becomes almost impossible to certify the technologies to then be integrated into defense programs. So I argue in the study that when we think about defense innovation and the role of SMEs, we do have to focus on these two valleys of death.
And again, very briefly, the Ukraine case gives us a lot of information that we should take on board here. One of the really interesting things that Ukraine have done, and I think many people are aware of that already, and I highlight that in the report, is that Ukraine have tried to condense and adapt the bureaucratic levels in between innovation and what the warfighters need on the battlefield. So they've tried to remove the gap between the sometimes very long bureaucratic procurement processes. Another thing that Ukraine has taught us, and I think that that's a lesson that is getting much more attention from senior politicians within the EU as well, is that we shouldn't always strive for perfection when it comes to innovation. We need to be able to produce technologies that are very quickly bought and fielded for the purposes of defense.
We don't need perfect systems for that. What we need is a procurement system which is much faster and enables us with certain technologies to produce the mass we need to defend to defend Europe. Finally, on on some of the recommendations, I will jump to the recommendations in the interests of time. I have called I've basically put ten recommendations in the report. I won't probably go through each one of them, but let me just stress some of them which I think is important.
From a EU perspective, what we do in Brussels, I think we need to also think about how we streamline some of our initiatives that we've put on the table.
In the report, I'm very clear about all of the acronyms that I mentioned. They all have a bearing on defense innovation. That's very, very good. But we also need those tools to have a lot more direction. And the direction I point to in the report is that we really need to be serving the interest not just of industrial policy, so innovation, how it contributes to the defense market in general, but we also need to be thinking about what our warfighters and what our soldiers need on the front line when it comes to defense.
Luckily, we don't really need to invent the wheel too much. But what we need is much more coherence between the existing tools that we have. Also with the other comment that I made, we need a bit more money as well to make these things a bit more relevant. Some of the other initiatives that I call for, although I know maybe not all of them are very popular, especially when you have an academic calling for more regulation or a directive, but I really do think that we need to have a discussion about how we unlock this problem of testing and certification across the Union.
Because without enough testing facilities and potential, regardless of how much money we pump into innovation and to SMEs, they are simply not going to practically be able to test their technologies and get them certified to a level that armed forces will use them. And we know that armed forces are highly risk-averse, they will not use technologies that they do not think are ready for their purposes. So we need to speed up not only the relationship between innovation, procurement, and end product, but we need to give our SMEs much more open room so they can test and certify across the Union. I know that's very difficult at the moment because we face a capacity issue. We simply don't have enough testing facilities in Europe, so this is something that I think we need to look at very, very carefully.
Another point as well, and I'll end on that, I made the point earlier about how we can combine different tools as well. I think one of the main conclusions that I make in the report, which I stress again, is we really need to close, even within the EU, at the EU level, we need to close the procurement gap that we have between seeing innovation as something we do maybe on an alien planet and then procurement and the use of technologies on other different planets. We need to shorten the gap we have between initial innovation and our warfighters and armed forces using them. If we manage to do that with the tools that we have, for example, maybe bringing Agile and HEDI together a bit more, if we manage to do something like this, we will make a much more compelling case for the technologies that SMEs are developing.
They'll become much more attractive to armed forces. The armed forces will not have to rely on very burdensome procurement processes waiting for many years for a perfect system which when it's developed may be already out of date. That's the other challenge. So we have a number of these issues I think which are highlighted in the report and I'm happy to take any questions that you may have.
Marie-Agnes Strack-Zimmermann
Thank you very much Daniel. I will now give the floor to members for a first round of questions starting with the coordinators in a ping-pong format for two minutes each so you can answer immediately and we start with Nicolas Pascual de la Parte.
Nicolás Pascual de la Parte
Thank you chair. Thank you very much for your for your read out of this report and recommendations especially. I cannot agree more with most of them. I don't have many questions. I have only perhaps to add something to your to your assessment.
I mean, I think that here we agree that the great advantage of SMEs are that they are innovative, they are adaptable and they're flexible, which is something that the big ones, the big the big elephants don't have. Remember when the the US under Clinton administration they consolidate the industry into only five big ones.
The result was that they merge and closed a lot of SMEs, and now nobody produces ammunition. Nobody produces ammunition in the US and they are running out of ammunition very quickly when they engage in a conflict like in Iran. Something we have to learn, lessons learned in Europe. The second point is that perhaps we should start thinking about changing our mindset. For our industry of defense and security, the objective for many years and decades was to build up to last.
Now we have to build up to adapt. I mean to have a platform, a general basic platform with different modules to be adapted according to the needs of the battlefield, as the war in Ukraine has taught us to do. We have to learn also this lesson, to build up to adapt. The second one is, or the third one is that we have to help the SMEs to come to Brussels and to have some leverage. When they approach me, they complain that only the big contractors in Europe, whether in Germany, France, Spain, Italy, have leverage and clout here in the Commission.
They get the information before anybody else. They influence the drafting of the legislative acts, and they have the capacity to deliver quickly because they have already been involved in the decision-making process. The SMEs don't. That's why it's so important what you have proposed, to have a kind of digital platform centralized for SMEs to get information in due course, because otherwise you are out of the play here in Brussels, because they have decided already the specificities of the product or the service, which only can be addressed by the big ones. Thank you very much indeed, and I think that I have helped you as well a little bit.
Thank you.
Daniel Fiott
Yeah, thank you. That's, I agree with all of the points, especially the mindset challenge, but also your first point about experiences from the US, which I don't think in Europe, and I said that in the report, we should not replicate, especially more and more consolidation. There's a lot of economic evidence which shows the costs of doing that. And in defense, there's also the political dimension, which relates to your third point about how much influence primes have. If we're serious about unlocking innovation in defense, we definitely need a new mindset, but we also need to learn the lessons from elsewhere.
Ukraine is a good start to see what is happening there with innovators, but also not replicating what the US did at the end of the 80s and 90s, I think is a critically important lesson for us to learn in Europe. Thank you.
Sven Mikser
Sven.
Yes, thank you very much for the presentation, and also particularly for the study.
Regarding the two valleys of death that you described, of the plethora of different acronyms that you had on the screen, which do you think are best placed, best suited to to help the SMEs to overcome each of those two valleys of death? And and then we spent here in this committee and in this house a lot of a big part of the last year discussing and negotiating the simplification of EDIPUS. Do you think that this what we achieved actually has any tangible impact on the on the on the SMEs' access to the defense market? And then with regard to testing, yesterday one of our speakers pointed out the great imbalance when it comes to the increases in defense budgets of member states between what what goes for procurement, obviously the bulk of money, and then what what is left for personnel and infrastructure. Do you see any ways of incentivizing the the member states in in creating more testing opportunities for for SMEs, but not only SMEs, obviously if there's a lack of facilities that affects not only SMEs but but all also also other other defense companies.
And then finally, when it comes to scaling up, there's obviously the issue of access to finance, but there's also the issue of predictable demand. So when we are putting together the budget for the upcoming period, what do you think is more important, or what should be the balance between creating SME-specific financing instruments as opposed to trying to create more aggregated demand for the products?
Daniel Fiott
Yeah, thank you, great set of questions, actually. On the first one about the valleys of death, I mean, at the EU level, we've been trying to address both valleys, but at different times and with different intensity. I mean, when the EDF was created and a lot of the tools that derive from the EDF or were combined with the EDF are very much focused primarily on the first valley of death, right? So they're trying to get initial technologies and innovations already into the development phase, so to integrate them to some degree within the market. Where we come on the second valley of death is rather late, I would say, although we are moving that.
Agile is a very good example of where we get to a stage where we're thinking about the second valley of death, where technologies can then be really integrated into usable defense capabilities, military capabilities.
Of course, we're still at a very low level of ambition there financially. In the next MFF, I think, as I said, it's not just the financial question, but it is a very important part of it, that if we have tools where we can finance them, where technologies meet the interface of what our armed forces need, and there's a question on demand there as well, then we will already be solving some of the problem, but not all of it. We should also keep in mind that, at least to my mind, some of the glue or the kind of value between the two valleys is the EDEP, is the defense industrial program, which in that program, I think there are a lot of positive elements there that can help us bridge the gap between both of those valleys. You need money, but then you also need, I think, the regulatory side. How do we make sure that the processes that we put in place are not stifling SMEs?
And we should have something in our mind which is very important: the more of a burden we put on these defense actors, the more costly it becomes. And we at the moment probably have the luxury of thinking that we have a lot of money, but we don't know how long that will last. We don't know how long the geopolitical situation will change and what impact that will have on defense.
On the Omnibus, I say in the report very specifically, it's very good that we managed to have certain things on speeding up and reforming some of the elements of EU programs, but it doesn't combat the elephant in the room, which is that we still have 27 different procurement national defense procurement systems which are still not speaking very coherently with one another. They're adapted to different periods of time, different national interests. That is a really challenging aspect in all of this. Then on the testing facilities. I mean, when we say in Europe that we lack capabilities, everyone normally thinks it's military capabilities, planes, vessels, etc.
But actually it's in the infrastructure as well that we miss capabilities. And we're at risk of facing a big glut between having much more money, much more demand, but not having the testing facilities we need for all of these technologies. So either we design new ways of testing and we also think about revising how we certify defense products in the first place. I think that that's a debate. But I think more realistically, we also need to be thinking about some degree of financial support for testing facilities, either in the form of financial support to access existing testing facilities in the first place or enabling the construction of new testing facilities.
It's not an easy thing to do. We should have already been doing this 10 years ago, but that's the case with most things when it comes to defense. And on scaling up, yeah, as I said at the beginning, we need to avoid a situation where we're simply recycling a smaller pot of money. We need to be thinking in a much more integrated way.
I think it was mentioned, we need a mindset shift. We need to be, you know, we need to adapt to the current situation. That also goes with the programs and the finances that we have at the EU level.
Petras Auštrevičius
Petras.
Thank you, Chair. Thank you for your study. I mean, it will take some time, I mean, to go through, but thank you indeed, I mean, for your right focus on the right time. Indeed, you mentioned rightly that Omnibus has failed to meet its promise of accelerating reform in the harmonization of licensing and defense procurement, key areas, key areas. So, will we need another Omnibus for Omnibus?
Probably it's kind of continuous process, I mean, it's we are simply bound, I mean, to do it because we didn't finish our job in this regard. So, would be any anything from your side, I mean, to be told more about this?
Then, European Union-Ukraine cooperation in starting up testing and so on and so forth. I mean, to my mind, I mean, it's an important and very efficient way forward, cutting costs, getting, I mean, first-hand experience, alright, testing ground, because it's a battle, battle-led testing. How much, I mean, this kind of the concept, so to say, made in Europe restricts embracing and inviting partner countries like Ukraine, maybe more countries alike, to get into this kind of cooperation in order to open, open really better ways for, for us, I mean, to get our best possible capacities.
Daniel Fiott
Yeah, thanks very much, very interesting points and questions. I mean, one of the other things I say in the, in the report is that we're still also waiting for the communication on the single market as well, right, which, which is on the way. But, but ultimately, I mean, as I said, I'm but a humble academic in all of this. Taking the horses to water to drink is extremely difficult because each national system has its own procurement system.
What I would say on this front is that there is a lot more scope, I think, of member states themselves as they adapt their own procurement systems, which they're having to do, by the way, themselves because of the experiences of the war, that we need to be able to have a system where we can complement those types of processes together. The worst thing we can have is again a whole process of redoing our procurement systems without any coordination whatsoever. It would be a big missed opportunity. On EU and Ukraine, there's not, for me, there's not really a contradiction between the made in Europe and working with Ukraine. The one thing I would say, I put that in the study and I put that in many other publications that I write, I still think that in the EU we are still too timid when it comes to engagement with Ukraine on technologies.
Many of you have probably seen in this room also the reports this week of how far companies like Palantir have, you know, just gone without any risk whatsoever, having integrated themselves within the Ukrainian system. We need a lot more of that, I think. I would say as a footnote to this as well, always with the proviso that we in the EU, when it comes to defense planning, should not automatically see the war in Ukraine as the only context in which we see war and conflict in Europe. Because we will have a very different set of constraints, a very different set of circumstances.
So it's always about learning the best things we can from Ukraine, but again, adapting them for a European Union perspective and context based on our needs as well. But we can go much, much further with our Ukrainian friends, for sure.
Mārtiņš Staķis
Martins.
Thank you, Chair. Thank you for your presentation. And, you know, during my work on my report, and my report is exactly about this topic, we heard the same thing again and again and again. So people told us the real problem is not the money or rules, but the culture inside armed forces and culture inside the ministries. So officials just prefer to do the things in old way, and they are just afraid to take risks because if technology is failed, they are the ones to blame.
And you also, in your study, you also say this: the procurement systems were designed to avoid risk, and changing them means changing how people think and behave. Laws and funding instruments cannot do that on their own. I know you are just the humble academic, but do you have any ideas how to change that culture?
Daniel Fiott
Yeah, it's for me the what is it, one million, one billion, one trillion question in all of this.
It unlocks everything in this debate. Yeah, it's true that it's very difficult to get military actors who have been ingrained in a way of thinking for many generations. And this risk question, in the short term at least, it doesn't seem to me that we can get past it. I don't know if new generations of generals and military personnel coming in will have a different view, but in a way it's also not just about the military. The military are very good at following what they've been told to do.
So we also need a lot more political will at the central government level, pushing down into the system to say that when we think about procurement systems, if you adapt the procurement system, you're not adapting a procurement system to reduce risk even further. Warfare is inherently risky anyway, right? So the starting logic is always that you adapt your procurement process in the current period, you will have to accept much more risk. Then the question becomes how can you deal with risk within the procurement system, and that is for me a much more fundamental question in the context that we're in today. I'm not sure how to get these risk behaviors changed.
So maybe a bit more time. Again, as you rightfully said, it's not a money question. We can put more money into this, but as long as the attitude towards risk and changing procurement systems doesn't change, we will be left with a very, very, very big problem when it comes to defense procurement and innovation in Europe.
You would imagine that a war in Europe would be enough to change the way people think, but evidently that's not been the case.
Hannah Neumann
Hannah.
I was fast. Thank you first of all for the study. I think it's quite timely. We are also waiting for the internal market communication, internal defense market communication. I think everyone on the industry side is, because I mean, it's absurd that for example, it seems to be easier to import and export components to Australia than to France at the moment or other countries.
So we are actually making our lives unnecessarily difficult because we are just not using the benefits of the single market for defense, also because no one wants to talk about joint arms export control because that's the other side of the coin everyone's shying away from. And I'm afraid this is one of the reasons why we continue to be stuck. I have one question on an additional barrier that a lot of the defense industry shares with me that I didn't find reflected in your study.
So I was, my question is why? This is that in a lot of member states, there is either, let's say, military production, so you do development for military goods, you have the security standards, you have the privacy standards, you have certain standards for testing that are very different from civilian production. Even the actual people that are allowed in one room or another room, even if they produce the same thing, if it's for the military or the civilian side. And the primes, especially the military primes, they have the whole system built up. When we have a small medium enterprise that has so far done civilian production and now want to engage at least in having components or taking components and thus become part of the military production chain, it's almost impossible to meet all the standards and barriers and whatnot.
Is this the case only in Germany, for example, or is this the case across the European Union? I would expect that. What can we do more to decrease this barrier and why is that not in your report?
Daniel Fiott
It's there indirectly when I talk about security clearances, because this is one of the big issues that indeed if you're an SME that's been operating in the civilian sector, you will probably not have a security clearance and also the costs and investment it takes you to to procure one or to attain one can also be very, very difficult. So indeed you have structures and I can confirm it is not only in Germany, it is in many, many countries in the EU where you have this, sorry for the expression, but a kind of Chinese wall position where it's very difficult for civilian actors to to break through. Sometimes some good and innovative SMEs can break that cycle by having a technology or a product that is so compelling that you attract the military dimension towards the civilian element, if I can put it that way, which then does open doors and it does encourage, you know, the acquisition of a of a security clearance so that you can be involved in these types of discussions. But it is an it is on the cost sheet, it's always there, you know, along with so many other costs that SMEs face that they don't even get a foothold into the door. And and to make it even more complicated, by the way, when we say the civilian and the military dimensions in all of this, don't forget that we're not just talking about primes.
Yeah, thanks for the question.
In many cases, SMEs are having to mediate themselves with other SMEs who may have already got some kind of market position. And then there are mid-cap firms. So the number of actors that SMEs are engaged with in the defense sector more generally makes it much more complicated.
And I think the point was raised also about the reliability and access of information to SMEs. One of the chapters in the study is about the asymmetry of information. SMEs simply don't have access to the information and therefore they cannot act on that market information either. They cannot combine it with their innovation efforts. They don't they're not even aware sometimes of where they're the possibilities are of integrating their technologies into supply chains.
So we're we're faced with a system which is very information poor when it comes to to SMEs, which also then feeds into the question of security clearances, getting a foot in. And by the way, that's rather important. I don't need to tell you that, but it's rather important because also one of the points of integrating SMEs is that we have a dual-use civil-mil innovation effect on top of this. So it is it is an incredibly important part of it, yes.
Pekka Toveri
Thank you, Chair, and thank you for the great report. I love it if nothing else, first of all, you have the list of abbreviations. Helps a lot. But I totally agree with the conclusions here. And and I worked 35 years in the military and doing procurement and all that.
And and I know well very well the problems you described.
It's a zero-mistake policy. You can't endanger life of your soldiers in any way by taking even a test use of something which hasn't been really, really thoroughly inspected and approved for testing even. And the manual for the procurement officer in the Finnish Defence Forces is about this thick. If there's a war, the war will end before he's gone through all the list how to procure. I could say that the easiest way to solve the problem is let's have a war, because then people tend to scrap the manuals and start to use their brains and they can take risks.
But I think the key is politicians. We need to have politicians who dare to go and tell public that yes, we have to take some risks. Yes, the Defence Forces have done some testing and they used 20 millions for a procurement which actually didn't, testing which doesn't work, but we learned a lot. Now we are looking something else. It's not waste of taxpayers' money, but you know, we have to take this, you know.
We did one of those. Finnish Navy spent 20 million testing an armed hovercraft, didn't work, scrap it. We still are hearing about it, that you spent an unnecessary throwaway taxpayers' money.
The key is the politicians. Politicians have to come and said that, hey, we have to take risks, we are standing behind you when you are taking this these risks in procurement, in testing and everything. And I know that finding a politician who risks his his political career on this is not very easy to find. And yes, I I was one of the reporters on the defense omnibus and it's it's as nice as having your teeth pulled and not easy. Thank you.
Daniel Fiott
Yeah, no, thanks very much for that. I would just, I mean, agree with the points. I would also just echo the fact that at least for me, there are many there are many parts of defense investment that you can say can be wasteful, but one of the important things when it comes to innovation is that there we have to be careful with the word waste because if we also spend and invest money in technologies that we see do not have proof of concept, that is also a strategic advance for Europe because it means if we cannot develop it, maybe our adversaries are not going to also be able to develop it. Yes, exactly. So we have to think also about the investment that we place into technologies that don't actually become pertinent from a from a defense point of view.
Bart Groothuis
And on that last point, Professor, I'd like to ask this question. On the 35th anniversary of Ukraine's independence, many European leaders came to Kyiv, and many did so just for a photo opportunity. But there was one leader who actually did something concrete, and that was the UK Prime Minister. He gave the intellectual property of the Stormy Shadow missile to Ukraine to produce it themselves. But what I found interesting even more is that he made a deal.
Bart Groothuis
Thank you very much, Chair.
He said, I give you this opportunity to produce these long-range deep-strike capability in order for my defense industrial base to take knowledge of battlefield raw data. That enables our industry to make the best products out there. My question is this, like you said, can our adversaries use that data too? I hope not. What kind of deal could Europe make to get that information, that battlefield data?
What kind of deal could the EU make that we and our SMEs, that our industrial base has access to that data in order for us to include and to get their place inside the European industrial base too?
Daniel Fiott
Yeah, thanks for the question. I mean, as a good academic, all I can do is make it make the response even more complicated, which is I think in the example that you highlight, which is indeed very, very interesting and also in some respects reflects a bit what the Americans were attempting to do just prior to that, our challenge is even bigger than that because we're not just talking about licensed production for end products that have already been tested, certified, and ready for use. Our challenge is also to engage with Ukrainian counterparts at the earliest stages of innovation, so much earlier within the procurement process. And even there, just to reinforce your point actually, we still don't have the level of political incentive to engage genuinely with our Ukrainian counterparts. About a year or a year and a half ago, I also wrote a study looking at each of the individual member states and how they deal with Ukraine.
And I will give you the very obvious conclusion, which there is only a handful of governments in Europe that have been very proactive in already going to Ukraine, not necessarily also with the idea of, well yes, learning from what Ukraine is doing on the battlefield, not even necessarily about what we can sell to the Ukrainians, but what we can procure from them. That's another element in all of this which is rather important given that we're having some very interesting discussions about air defense, for example, and all sorts of, you know, defense projects that we want to develop. So we may also be importers of certain Ukrainian technologies in future as well. But there has not been a coherent push on that front.
Credit where credit is due, I think at the EU level we recognize that relations with Ukraine are very, very important. We have the Kyiv office, we have a whole bunch of initiatives which help with financing to bring EU operators and Ukraine together, and that should be applauded. But it's the tip of the iceberg when it comes to the level of cooperation that we can have with Ukraine. Thank you.
Marie-Agnes Strack-Zimmermann
Any other questions? Thank you very much. It was really helpful. It was a good idea, the coordinators, to ask for your... So thank you very much and I'm sure, I hope we will see us again.
Daniel Fiott
Absolutely. Thank you very much. Thank you. Thank you. It's really good.
Marie-Agnes Strack-Zimmermann
So colleagues, if it's okay for you because we are a little bit faster, so we could continue with from prototypes to capabilities, enabling new defense actors to scale up. So the next point on this agenda is the INI report from prototypes to capabilities, enabling new defense actors to scale up, how I said. So the rapporteur for this is Martins. So Martins, the floor is yours.
Mārtiņš Staķis
Thank you, Chair. So dear colleagues, first thank you to everyone who submitted amendments. We received 354 on a very broad spectrum. Many goes further than my draft did and report is better for it. So on process, we have a technical meeting today.
Next one is scheduled next week and I would like to hold a shadow meeting during the Strasbourg on 17th of September. So hopefully we can finalize everything by then. So let me highlight some ideas from amendments received. The first is demand.
A company can win every EU grant there is, build a working product and then find nobody to buy it. The amendments ask member states to commit budgets and targets, ask EU itself to step in on the first orders and bring in ways of buying that armies really use, like from milestone payments to brigade buying directly from the marketplace, as Ukraine does every day. They also ask for the money to reach companies faster. A startup waiting six months to be paid does not survive the scale. The second is speed.
Today a drone tested in one member state is tested again in the next one. We do not yet agree on how far the EU can go towards single certification, but we all agree something has to happen. The same goes for the testing. More ranges, yes, but above all iterations, a soldier using the product and company fixing it again and again. And not everything needs the full approval chain before the soldier can try it.
An initial operational capability phase, let us put the product into limited use, learn and then design. And third is production.
We fund the research and then leave companies without the supply chains to actually build. Components, second sources, spare production lines and money for tooling decides whether prototype ever scales. There were many other good ideas in amendments that I did not have time to cover, but I am happy to hear from anyone else. Just one request before I hand over to the other shadows. This is very specific report about very specific problem.
How company gets from the working prototype into product that is in hands of the armed forces. And then onto product line, of course. Europe has many other challenges for defense readiness and there will be other reports for them. My ask is to keep this one focused on the problem in front of us as much as possible. This is also the main dimension we will use when assessing the amendments.
And this is how we will make this report useful and relevant. Thank you and I am looking forward also to hear the remarks from the other shadows and looking forward for the fruitful cooperation.
Marie-Agnes Strack-Zimmermann
Thank you Martins and before giving the floor to the shadows, let me remind you to the timetable for this report.
The deadline of tabling amendments closed on the 30th June at 5 o'clock. So it's the past. The shadows meeting will take place just as said on the 17th September. The report will be voted in SEDE on the 28th September and the vote in plenary should take place during the November session in Strasbourg. And now I give the floor to the rapporteurs and we start with Željana.
The floor is yours.
Željana Zovko
Thank you very much chairwoman and I would like to thank rapporteur on this very good first draft. As a shadow rapporteur for my group European People's Party and as somebody who has experience a great joy that we have a first self-starting company Orca that just made a great deal with American company and it is example of successful SMEs. I think that we we will work as rapporteur has mentioned towards practical arrangement and practical way in making this report useful for for all the startups and SMEs. Our amendments support the overall objective of this report.
Europe must become much better at turning successful defense innovation into operational capabilities. In particular, we want to strengthen the link between EU-supported innovation, existing capability planning and actual procurement by member states. Rather than creating new mechanism where instruments already exist, we should make better use of the tools we have, simplify procedures and provide innovative companies with a clearer path towards first contracts, operational validation and wider procurement. We also believe that the transition from prototype to capability requires greater attention to industrial scale-ups. SMEs, mid-caps and specialized suppliers need access not only to funding, but also to testing, certification, production capacity and European defense supply chains.
EU defense investment should strengthen the European defense technological and industrial base as a whole, allowing competitive companies from across all member states to participate while preserving fair competition and protecting intellectual property. Finally, the experience of Ukraine remind us that innovation is not only about developing entirely new technologies.
The ability to rapidly test, adapt and upgrade existing solutions in response to operational needs is equally important. Our objective is therefore simple: fewer barriers between innovation and procurement, better use of existing European instruments and stronger pathway from European technology to production and operational capability. And can I please ask the rapporteur to take into account the study just presented by Dr. Fiott? This will help to get compromises more relevant, and I think that we should also use our time and these studies to make towards the same goal. And finally, this arrangement that we have shadows in Strasbourg does not suit me well, but we will have to adjust to rapporteur's timetable because it's not very usual that we have it in Strasbourg.
Thank you.
Sven Mikser
Yes, thank you. First, congratulations to the rapporteur Martins. Our shadow Lucian Ceata could not be here today, so she asked me to say the following on her behalf.
Europe can no longer afford to think of defense as a collection of 27 separate national markets. The lessons emerging from Ukraine are clear. Military effectiveness today depends not only on industrial capacity but also on the ability to innovate rapidly, scale new technologies and bring them into service without delay. While the European Union has significantly increased support for defense innovation through programs such as EDIP, SAFE and the future European Competitiveness Fund, many innovative companies still struggle to move from successful prototypes to operational capabilities. The problem is not access to research funding but to procurement contracts.
The upcoming revision of the European defense procurement framework represents a strategic opportunity and should not be postponed. Public investment must be matched by common European demand. If innovative European companies can develop cutting-edge technologies but cannot secure contracts... Okay. Okay, I'm just afraid that I'm not able to deliver Lucia's remarks quite as quickly as she would have, so...
Anyway, if innovative European companies can develop cutting-edge technologies but cannot secure contracts from member states, Europe risks losing talent, technologies and industrial capacity to competitors outside the Union.
Shared procurement, common testing infrastructures, and coordinated capability development can reduce duplication, strengthen interoperability, and ensure that public resources are used effectively. Building a genuine defense union requires more than increasing budgets. It requires creating a common market for defense innovation where new actors can grow, compete, and deliver capabilities for Europe's security. Shared investments, coordinated procurement, and a stronger European industrial base are essential if Europe is to remain both secure and technologically sovereign in an increasingly unstable world. We represented 25 amendments.
The first draft version of the compromise amendments includes almost all of them. Our amendments were presented with the main goal of underlining the necessity of an European harmonization of procurement procedures and industrial partnerships across the EU, and to invest more in testing, a step in the process that is necessary to enable technological validation and provide credibility of the products, especially in a time when tactical and technological changes are occurring rapidly. Finally, we presented amendments on the necessity to include universities, tech centers, and innovation hubs to support the EU defense industry. We are happy that these things are included in the compromise amendments. Thank you.
Reinis Pozņaks
Thank you, Chair. First of all, I want to congratulate my colleague on a very insightful report that addresses the key challenges faced by many of the innovative companies in defense space today, namely how to get from prototypes to the battlefield. The report covers many of our group political priorities, integrates the overwhelming majority of the amendments we tabled, and addresses in the practical and tactical manner steps that the EU can take to better integrate and retain the innovative companies needed to address today's modern challenges. We look forward to negotiations and hope to ensure that the key issues such as third country collaboration, particularly with Ukraine, and supply chain resilience are better reflected. Thank you.
Marie-Agnes Strack-Zimmermann
Thank you very much, and now I give the floor to any other member who would like to speak for one minute each. Okay, that's not. So I would now like to invite the... sorry. Ah, excuse me. Please, the floor is yours, excuse me.
Marta Wcisło
I will be speaking Polish. Dziękuję bardzo za ten raport i wszystkim osobom, które nad nim pracowały. Jedna rzecz wybrzmiewa z niego szczególnie mocno: małe i średnie przedsiębiorstwa nie są dziś dodatkiem do europejskiego przemysłu obronnego. Są jednym z jego najważniejszych źródeł innowacji. To właśnie w MŚP, w tych firmach powstają rozwiązania w zakresie dronów, sztucznej inteligencji, systemów autonomicznych, cyberbezpieczeństwa.
Marta Wcisło
Ale moje pytanie dotyczy zakresu wdrażania. Po pierwsze, jak można realnie ograniczyć biurokrację, aby dostęp do zamówień publicznych dla MŚP był prostszy?
Po drugie, współczesne pole walki pokazało, że technologia musi być testowana, więc w związku z tym moje pytanie: jak przenieść tę kulturę szybkiej adaptacji do europejskiego procesu testowania i zakupów? I po trzecie, co należy zrobić, aby firmy, które stworzyły dobry produkt, miały realną drogę do kontraktów, do zamówień publicznych, aby nie zginęły, nie utknęły w biurokracji, aby mogły wykorzystać swoje technologie, swoją pracę i swój potencjał. Thank you.
Marie-Agnes Strack-Zimmermann
Thank you very much. So I would, yes, I would now like to invite the Commission to make any comments. So Christine, the floor is yours.
Christine
Thank you. First of all, we would like to thank the rapporteur and the shadow rapporteurs. The Commission of course welcomes this report and the broader debate on defense innovation that this report fosters. Supporting new actors to scale up is a shared priority for the Commission and for the Parliament clearly. And this dialogue also comes in the right time as the Commission continues to put emphasis on supporting new defense players, reinforcing existing instruments still in this MFF and also preparing the new ones.
The Commission already has taken concrete steps to help the new entrants to scale up, among them is EDF or European Defense Fund funded actions like EUDIS, Defense Equity Facility and Brave Tech EU that focuses very much on testing that was also just discussed. And the scope also of the EIC has been broadened this year to cover dual-use and defense. And more is coming. For equity financing, we're planning to launch a Defense Equity Facility 2.0 still this year to build on the first facility to widen access to capital, particularly to the growth capital, which you, which has been rightly pointed out as an important gap. On rapid development, testing, adaptation and demonstration, we are launching Agile, hopefully very early in '27.
And for innovative procurement, there is an upcoming revision of the procurement directive also still this year. And looking ahead, the ambition to scale up these efforts in the next MFF, we want to create a more coherent ecosystem for the new defense players, SMEs, like Mr. Viot also just called for that. That would be the system that would be easier for these companies to navigate. And this means building a genuine, genuine defense innovation journey from very early research to procurement.
And of course, we are also cooperating strongly with colleagues in NATO to support defense innovation. Thank you.
Marie-Agnes Strack-Zimmermann
Thank you very much. And finally, I give the floor to the rapporteur, Martins. The floor is yours.
Mārtiņš Staķis
Thank you very much. And yes, this study is very timely, I have to say, and I'm very happy that all the recommendations in this study attributes to also to our conclusions. Thank you. And yeah, this we are very lucky to have that. And as well, it's this report, I think, is also very timely just before the ASAP and before the procurement directive was mentioned.
I think it will help us also to understand what to improve into these new files. About the shadow meeting in Strasbourg, I do agree, this is a challenge indeed, but unfortunately, this is the only way we can be on time and to get the vote on 28th of September in Security and Defense Committee. And I also very glad that we are on the same page on what is really important. All of you mentioned about the first contracts, about the testing and certification, Ukrainian experience, as well better use of EU funds. This is indeed the main conclusions into this report.
So hopefully we will, we will have a good compromises into this report. Thank you and see you soon in Strasbourg.
Marie-Agnes Strack-Zimmermann
Thank you very much. So, ladies and gentlemen, colleagues, any other business? That is not so. Thank you very much. Okay, the next, the, sorry, the next meeting will take place on the 28th of September.
Thank you.
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