Government changes defense procurement rules: business has reservations

Lithuania's government is proposing to significantly increase the threshold for mandatory industrial cooperation in defense procurement, raising it from 5 million to 20 million euros. This adjustment aims to reduce administrative burdens and accelerate the acquisition of military equipment by focusing industrial cooperation requirements on more strategically important projects.

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We are speeding up arms procurement procedures. Practice has shown that some industrial cooperation provisions adopted in 2024 worked contrary to what was intended: strategically important procurements got stuck in coordination procedures, and foreign suppliers increased the final price due to uncertainty.

The Ministry of National Defence argues that the current rules, implemented in 2024, have sometimes hindered strategic procurements and increased costs due to foreign suppliers' uncertainty. By raising the threshold, the ministry believes industrial cooperation will be concentrated on projects with the highest potential for long-term value creation for Lithuania's defense industry, including joint production, technology transfer, and direct orders from local firms.

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First of all – we will apply industrial cooperation only where it creates real long-term value. We are raising the threshold for applying the requirement from 5 to 20 million euros so that it applies only to strategic projects, and does not slow down and increase the cost of every smaller value purchase. At the same time, we are abandoning excessive coordination steps with the Ministry of Foreign Affairs.

Robertas Kaunas, the minister, stated that the goal is to apply industrial cooperation only where it generates real, long-term value. He emphasized that the change will prevent smaller procurements from being slowed down or made more expensive, while also streamlining coordination processes with the Ministry of Foreign Affairs.

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We do not think that merely increasing the minimum contract value to 20 million euros will in itself reduce the opportunities for Lithuanian companies to engage in international supply chains.

The Lithuanian Defense and Security Industry Association (LGPSA) views the effort to reduce bureaucracy positively. However, LGPSA's senior advisor, Vincas Jurgutis, expressed that simply increasing the minimum contract value to 20 million euros might not be enough to enhance Lithuanian companies' participation in international supply chains. He suggested that a more flexible model would better leverage opportunities for creating greater value for the state and local industry, advocating for the Ministry of National Defence to retain discretion in specific cases.

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However, according to him, a more flexible model would allow better use of those opportunities in cases where industrial cooperation can create greater value for the state and local industry.