Weapon systems procurement in France is managed by the DGA (Délégation générale pour l’armement). DGA takes all the contractual decisions regarding selection of contractors, negotiation and drawing-up of contractual terms and any renegotiation that may arise. These decisions stem from the procurement policy of the DGA, which is itself determined by technical, economic and political considerations. This article aims to identify the interactions between these three areas, and their consequences on procurement policy and performance. To do this, the conditions for operating 48 contracts entered into between the DGA and 18 French or European industrial concerns between 1994 and 2005, with an average value of around e135 million, have been closely studied.

Whilst any examination of purchasing conditions is bound to reveal a number of limitations in the procurement procedure, some of these can be explained by political considerations. DGA’s somewhat delicate position within the overall procurement process is explained in particular: such interweaving of politics and economics gives rise to some particular challenges for organisations involved in the production of weapon systems.

An Economic Analysis of Defence Contracts

Economic analysis shows up the overwhelming importance of the cost formula chosen. This can be either of the controlled spending, or ‘cost-plus’ type (where DGA pays the contractor real costs plus a margin), or the fixed-price type (where the price to be paid is fixed on signature of the contract and later revised as a function of certain cost variables).