The 14 terms at a glance
Open a term for the quoted texts, what is usually negotiated and what lenders and buyers ask.
| Term | United Kingdom | United States | EU and NATO |
|---|---|---|---|
| Award route and challengeHow the contract was awarded decides whether it can be challenged, and when it is safe to rely on. | Procurement Act 2023, in force from 24 February 2025, with a defined category of defence and security contracts. An eight working day standstill applies before most contracts are signed. | FAR and DFARS for procurement contracts. Prototype Other Transaction agreements under 10 U.S.C. 4021 and 4022 sit outside the FAR, with written approvals above US$100m. | Directive 2009/81/EC, as implemented in each member state. NSPA and OCCAR use their own procurement regulations. |
| Termination for convenienceThe government can end the contract when it suits it. What it pays when it does decides how much debt the contract can carry. | MOD standard terms give a break right on notice (20 business days in the Innovation Standard Contract), with an indemnity for unavoidable loss capped at the contract price. The Act adds an implied right to terminate on exclusion grounds. | FAR 52.249-2 (fixed price) and 52.249-6 (cost reimbursement). Costs plus a reasonable profit on work done, capped at the contract price. | Not harmonised by the Directive. Set by national law and the contract. |
| Pricing and profitSingle source defence work is priced under rules that cap the margin and give the government audit rights. | Qualifying single source contracts are priced at allowable costs plus a contract profit rate under the Defence Reform Act 2014 and the Single Source Contract Regulations 2014, starting from the SSRO's baseline profit rate. | Certified cost or pricing data (Truthful Cost or Pricing Data rules) above US$2.5m, with Cost Accounting Standards on larger contracts. | National cost and profit rules. NSPA and OCCAR price under their own regulations. |
| IP and technical dataWho owns what the contract produces, and what the government may do with it, decides much of a defence business's value. | MOD's research and technology condition (DEFCON 705) leaves results with the contractor and gives the Authority use rights. DEFCON 703 vests results in the Authority and is used only exceptionally. | DFARS 252.227-7013 and -7014: unlimited rights where development was funded by the government, limited rights where it was at private expense, and government purpose rights for mixed funding. | Set by each contract or grant agreement and national law. |
| Liability and indemnitiesCaps, carve-outs and government indemnities decide how much of a disaster lands on the contractor. | MOD sets caps contract by contract. The Innovation Standard Contract caps most contractor liability in aggregate, with indemnities carved out of the cap. | No general cap in the FAR. Government indemnity for unusually hazardous or nuclear risks under Public Law 85-804 (FAR 52.250-1), and liability protection for approved anti-terrorism technology under the SAFETY Act. | Set by national law and the contract. |
| Export controlControls on military goods, software and technology decide who may see the data room, own the shares or take the assets on enforcement. | Export Control Order 2008: no export of military goods, or electronic transfer of military software or technology, without a licence. | ITAR (22 CFR 120 to 130) for defense articles and services, the EAR (15 CFR 730 to 774) for dual-use and 600-series items. ITAR registrants must notify changes in ownership or control. | Dual-use Regulation (EU) 2021/821 for dual-use items. Military exports are licensed nationally under Common Position 2008/944/CFSP. |
| Security and classified workClassified contracts bring facility clearances, personnel vetting and limits on who can control the company. | Classified information is defined in the Procurement Act. Contractors holding it work under the Government Security Classifications and security conditions in the contract, with List X clearance for higher classifications. | NISPOM (32 CFR Part 117) facility clearances, with foreign ownership, control or influence (FOCI) mitigated by board resolutions, security control agreements or proxy agreements. | Directive 2009/81/EC lets authorities set security of information requirements. Member states recognise equivalent security clearances. |
| CyberDefence contracts now carry cyber standards that flow down the supply chain, with incident reporting deadlines. | DEFCON 658 requires compliance with Def Stan 05-138 at the contract's cyber risk profile, flowed down to sub-contractors, with immediate incident notification. | DFARS 252.204-7012 requires safeguards and reporting of cyber incidents within 72 hours. The CMMC programme (32 CFR Part 170) adds certification. | No EU-wide defence cyber clause. National requirements apply through the contract. |
| Assignment and financing consentsWhether the contract, and the money owed under it, can be assigned or charged to lenders. | MOD standard terms prohibit assignment without the other party's prior written consent. Lenders usually rely on security over proceeds, or seek consent for larger contracts. | Assignment of Claims Act (31 U.S.C. 3727, 41 U.S.C. 6305) and FAR 52.232-23: payments can be assigned once, to a financing institution or an agent for a syndicate. | Set by national law and the contract. Consent of the contracting authority is the norm. |
| Change of control and novationSelling the company, or the business, needs the government's consent or at least its tolerance. | MOD terms require notice of any change of control and let the Authority terminate within six months. The NSI Act requires a mandatory notice for acquisitions in the defence and military and dual-use sectors. | Contracts cannot be transferred without a novation agreement (FAR 42.12), though a share purchase needs none. CFIUS reviews foreign acquisitions, and ITAR registrants must notify ownership changes. | National foreign investment screening, coordinated under Regulation (EU) 2019/452, and consent rights in the contract. |
| Government remedies and debarmentGovernments can exclude suppliers, prioritise their own orders and step in, and those rights can rank ahead of a lender's. | The Procurement Act creates exclusion grounds and a public debarment list, and lets authorities terminate where a supplier becomes excluded or excludable. | Suspension and debarment under FAR 9.4 exclude a contractor across government. DPAS rated orders (15 CFR Part 700) must be accepted and take priority. | Mandatory exclusion grounds in Article 39 of Directive 2009/81/EC, applied through national law. |
| Payment and milestonesWhen the government pays, and how much before delivery, drives working capital and borrowing needs. | The Procurement Act implies a 30-day payment term for valid invoices into every public contract. Milestone payment plans are set contract by contract. | Progress payments on costs incurred (customarily 80%, 85% for small businesses) or performance-based payments, plus Prompt Payment Act interest on late payment. | Set by national law and the contract. EU funding (EDF grants, SAFE loans) pays member states and consortia on its own schedules. |
| Disputes and governing lawWhere a claim against the government is heard, and whether work continues meanwhile. | English law and the exclusive jurisdiction of the English courts, after a contract dispute resolution procedure. | Contract Disputes Act claims go to the contracting officer, then a board of contract appeals or the Court of Federal Claims. The contractor must keep performing. | National law and courts, or arbitration where the contract provides for it. |
| Industrial participation and offsetExport contracts often come with obligations to invest or source in the buyer's country, which survive a sale. | The UK seeks industrial participation on some overseas purchases. UK exporters take on offset obligations under foreign governments' rules. | The US government does not commit US firms to offsets on Foreign Military Sales. Offsets are agreed between the company and the foreign buyer. | EU law restricts offsets in procurement between member states. They remain common in exports outside the EU. |
By jurisdiction
United KingdomUK defence procurementSince 24 February 2025 the Procurement Act 2023 governs new UK public procurements, with its own category of defence and security contracts.United StatesUS defense procurementUS defense contracts are awarded under the Federal Acquisition Regulation (FAR) and the Defense Federal Acquisition Regulation Supplement (DFARS), with standard clauses incorporated by reference.EU and NATOEU and NATO defence procurementIn the EU, Directive 2009/81/EC sets the award rules for defence and sensitive security contracts, implemented in each member state's law.
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General information on public law and standard terms as at 28 Oct 2026, not legal advice on any contract or transaction. Quoted wording is checked against the official text linked to it.