Preparedness, Procurement and Defence Governance in Central and Eastern Europe

Good governance – inclusive, responsive, transparent and accountable – is particularly important in the sector that constitutes one of the most significant areas of government activity and holds the legitimate monopoly on the use of force: defence and security. Defence institutions need efficient procedures and strong civilian oversight to ensure effective spending and maintain legitimacy in the societies they are intended to protect.

Good governance is also significant to operations. Military operations, from stabilisation missions and peace operations to security assistance, frequently take place in fragile states where corruption is widespread. As Afghanistan and Iraq clearly showed, corruption, whether in mission forces or in host country institutions, undermines mission effectiveness. From diversion of resources to abuse of civilians, corruption corrodes popular trust and provides resources to malign networks.

In Central and Eastern Europe (CEE), strong defence governance has been key to successful democratic transitions and has supported extensive modernisation of the region’s armed forces. New Transparency International Defence and Security research, however, suggests that democratic backsliding and the deterioration of the rule of law and the quality of public life extend to the defence sector. According to our 2020 Government Defence Integrity Index (GDI), governance gaps affect the functioning of civilian oversight, transparency and access to information, and weaken procurement processes. Lack of appreciation for corruption as a key operational issue also renders CEE militaries less prepared for international operations and less capable of contributing to providing security.

Governance gaps increase corruption risks just as defence budgets are on the rise, authoritarian governments roll back democratic institutions and new security threats emerge. Out of seven NATO states that met the Alliance’s recommended threshold of 2% of GDP being spent on defence in 2018, four were CEE states: Estonia, Latvia, Lithuania and Poland. Motivated by perceived threats from Russia, Lithuania and Latvia increased military spending by 232% and 176% respectively between 2010 and 2019, and Poland by 51% over the same period. Armenia and Azerbaijan spend close to 4% of GDP on defence and rank among the most militarised countries in the world, while Ukraine’s defence budget has increased twofold since 2014.

Rising defence budgets will not deliver better capabilities, more resilience or greater legitimacy if they are not spent well. Public procurement is a key area of corruption risk: the EU’s losses from corruption have been pegged at between 14% and 25% of each contract, adding up to about 3.5% of the EU’s overall GDP. Unless these risks are mitigated in defence, the exposure can be even higher, due to the sector’s greater opacity, reduced oversight, and specific needs.

As more than half the countries in the CEE sample are either NATO members or candidate countries, their ability to spend defence funds effectively matters not only internally, but also for the Alliance. Fostering open competition can reduce costs, mitigate corruption risks and result in more effective and more compatible armed forces. At the same time, appreciation of corruption as an operational issue can contribute to better mission preparedness.

In CEE countries, defence procurement remains one of the two most significant risk areas, with considerable gaps in many states’ procurement processes. Only a minority of states have publicly available acquisition planning processes that explicitly link requirements to a defence strategy.

Despite the EU’s efforts to increase open competition in defence and push for exemptions to usual processes to be narrow and well-justified, most countries frequently exempt defence procurement processes from the provisions of the country’s procurement laws, conduct the majority of defence procurement through single-sourcing or secret procedures, and decrease oversight of these procedures.

Only Estonia and Latvia conduct between 75–80% (Estonia) and around 90% (Latvia) through open competition. In Georgia, secret procurement accounted for 51% of total procurement procedures from 2015–17. This limits open competition, as secret procurement procedures are usually conducted either through negotiation or through single-sourcing. In Ukraine, that figure is 45%, including 38.2% of single-sourcing, and in Poland it reaches 70%. In Lithuania, open competition accounted for as little as 0.5% of procurement procedures, with upwards of 93% of defence procurement conducted through restricted tenders and negotiated procedures. In some cases, even when governments set out to promote competition, the market does not support it. In Serbia, open competition is initiated for approximately 35% of defence procurement, but with a low number of bids received per tender – 1.74 bids per tender in 2017 – some bids end up being de facto single-sourced.

Short-Sighted Exemptions

Governments tend to use national security exemption clauses to justify decisions to resort to procurement procedures with limited competition, claiming either that the procurement is too sensitive to be done openly or that the equipment needed is of such specificity that only one or two companies can provide it. However, secrecy does not necessarily equal effectiveness. As Ukraine found in 2014, secrecy can just as easily be a cover for rampant corruption and ultimately result in armed forces with supply lines that do not function and troops who cannot access equipment. A lack of competition in defence increases corruption risks and exposes governments to imbalanced contracts, with suppliers holding all the cards and the ultimate ability to respond to threats diminished.

Operational preparedness is the highest risk category in the 2020 GDI. None of the countries assessed has a comprehensive doctrine that could enable the armed forces to understand and plan for mitigating corruption. Most have very limited anti-corruption training and are not prepared to deploy specialist staff to the field. Many would argue that for small states, operational preparedness is of secondary importance as they are likely to deploy as part of a larger contingent. However, their officers could still find themselves in key positions, from contracting to civil–military interaction, where the ability to detect and mitigate corruption is key.

Our GDI results suggest an urgent need to implement anti-corruption mechanisms that will protect CEE budgets internally, and ensure that the region can make a meaningful contribution to international security and stability. Prioritising good governance internally and projecting it externally is a good place to start.

Natalie Hogg is the director of Transparency International Defence and Security.

The views expressed in this Commentary are the author’s, and do not represent those of RUSI or any other institution.