Debate: Procurement Rules Hinder Defense Innovation

Small and medium-sized enterprises are often highlighted as important actors for innovation within the defense sector. In this opinion piece, representatives and members of SME-D highlight the obstacles that current procurement regulations create for including these companies in the development of total defense. They call for changes to streamline processes and better harness the innovative power that exists.

Sweden's defense faces significant challenges where the military and civilian total defense must be strengthened. To meet the security challenges ahead, innovative solutions and new technical capabilities are needed. It is therefore gratifying that we increasingly hear about the importance of small and medium-sized enterprises (SMEs) for a strong Swedish defense. Lessons from the war in Ukraine have shown how important it is to have agile, flexible companies that can contribute with innovative solutions. But the question remains: how do authorities move from words to action? How does Sweden harness all the innovative power that Swedish SMEs possess for total defense?

It is time to critically examine the playing field on which public procurement is conducted in Sweden today. The Swedish Armed Forces and the Swedish Defence Materiel Administration (FMV) have the main responsibility for defense procurements, and their processes are, as they should be, strictly governed by laws and regulations. But from an SME perspective, this playing field is a slow, rigid, and inefficient structure, shaped for peacetime logic rather than a world in crisis or conflict. The laws and regulations surrounding defense procurement are inadequate when it comes to quickly and effectively including SMEs that neither have the muscle for large bids nor for collaborating with other companies within the framework of these extensive processes.

Take, for example, the Swedish ecosystem of companies working with drone technology. Here, there are several SMEs contributing with innovative and critical solutions, such as drone manufacturing, image processing, countermeasures, communication, and decentralized control of drone clusters. Each SME contributes its unique piece of the puzzle, but they rarely have the resources to drive large, self-initiated bids or to coordinate with other SMEs to offer comprehensive solutions. At the same time, the Swedish Armed Forces and FMV lack the tools and incentives required to identify and fund these companies' specific competencies in the broader defense context.

Despite facing an increasingly unstable security situation, there is a lack of organizational solutions and procurement models that enable faster integration of SMEs within the defense area.

The result is a gap between words and action, leading to a situation where Sweden misses out on valuable innovation. At the Defense Industry Days (FFD), it has been emphasized that agency leaders must create a climate that supports concrete measures. The solution is that SMEs should not only be mentioned as an important resource—they should also be given the conditions to quickly be put to work for Sweden's defense. Effect should take precedence over perfection!

SME-D, The Industry Organization for Small and Medium-sized Enterprises (SME) within the Swedish Defense Sector (with our members behind us) extends a hand and wants to help in this change effort. It is together that we can achieve this change. A powerful first step would be to revise the regulatory framework for defense procurement. Sweden needs directives and priorities that make it possible for authorities to adapt and streamline procurement models for SMEs, where smaller actors have the same opportunities to contribute with their expertise. The future of Swedish defense innovation is at stake, and we cannot afford to wait.

Jaime Rico, Chairman SME-D
Andreas Nilsson, Vice Chairman SME-D
Stefan Jakab, Secretary General SME-D
Johan Borg, CEO Granit Teknikbyrå AB
Mathias Eriksson, CEO RödSvart
Per Häglund, CEO Accurate Nordic AB
Helena Innergård, CEO, Säkerhetsvärnet AB
Niclas Ivarsson, Business Manager, Actea Consulting AB
Matti Kaikkonen, Chairman EmbeddedArt
Fredrik Knutsen, CEO - Signal Solutions Nordic AB
Andreas Nilsson, Business Development Manager Defense, Knowit Defence Technology AB
Sven-Erik Nilsson, CEO, Alumbra Småland AB
Håkan Rydbergh, CEO, Rybro International AB
Mikael Stern, CEO, I-CONIC Vision AB
Magnus Söderström, CEO, CAG Novus
Rune Thyselius, Chairman of the Board at Öhman & Thyselius AB
Mikael Tönnberg, CEO, Tagnir
Anette Östelius, CEO, NESP AB
Peter Gustafsson, CEO, CAG Syntell AB
Marie Louise Rösiö, CEO, CAG Consoden AB