The Procurement Gap: Structural Misalignment Between Defence Innovation and Procurement Allocation in Europe
Why European defence procurement continues to concentrate capital in incumbent suppliers while battlefield-relevant technologies increasingly originate from emerging firms
European defence spending has entered a phase of sustained expansion, driven by geopolitical pressure, operational requirements, and the need to restore industrial capacity after decades of underinvestment. At the same time, the locus of technological innovation relevant to contemporary warfare has shifted toward a broader ecosystem that includes startups, scale-ups, and non-traditional suppliers, particularly in domains such as unmanned systems, autonomy, electronic warfare software, and AI-enabled operational functions. This structural divergence raises a central analytical question: whether procurement systems, designed around long-cycle platforms and incumbent integrators, are capable of absorbing and deploying rapidly evolving technologies produced outside the traditional defence-industrial perimeter. The issue is not one of innovation scarcity but of allocation: whether procurement flows, as the dominant channel of capital and industrial validation in defence markets, are aligned with the actual sources of operationally decisive technological change.
The report is structured to address this question through a sequence of analytically distinct steps. It begins by establishing a measurable baseline of procurement concentration, using the most authoritative available institutional data to assess how procurement value is distributed across supplier categories. It then examines the structural mechanisms that shape access to first contracts, focusing on qualification timelines, security-clearance fragmentation, contract design and supplier lock-in, and the configuration of the financing ecosystem. A comparative section analyses the institutional transition mechanisms in the United States, isolating the specific features that enable faster conversion of innovation into procurement. The report then evaluates current European instruments, including EUDIS, FAST, and equity-based facilities, to determine whether they reduce or bypass the procurement barrier. A dedicated methodological section introduces the Time-to-First-Contract metric as a tool for measuring ecosystem performance over time. The analysis concludes by integrating these elements into a coherent assessment of whether the procurement gap is structurally embedded and what its implications are for industrial policy, defence readiness, and capital allocation.