Directorate for Industrial Matters and

Technology Programmes

The ESA Industrial Policy

E. Morel
6 November 2002

6 November 2002 ESA Earth Observation Info Day 1

 Directorate for
Industrial Matters and
Technology Programmes

Setting the scene….

6 November 2002 ESA Earth Observation Info Day 2

 Directorate for

Total business of European

Industrial Matters and
Technology Programmes

Total business of Europeane space industry

(space segment only)
Euros in millions
5000
Slow down Consolidation

4000
Build up

3000 Commercial

2000

1000
Institutional

1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
6 November 2002 ESA Earth Observation Info Day 3
Source: © Euroconsult , Market Forecast for ESA study on ESA Member States Equipment Suppliers
 Directorate for

Estimated 2002 Industrial Matters and

Technology Programmes

Estimated 2002 space industry turnover

(Space Systems)
US commercial space industry turnover is only slightly higher than in Europe
Space industry turnover
18B$

16B$
16.60
14B$
The US space industry is less sensitive to
12B$ business cycles in the commercial sector,
10B$ th an its European competitors
8B$

6B$

4B$
3.80 3.80
2B$ 3.00
0B$
US institutional US commercial European institutional European commercial
6 November 2002 ESA Earth Observation Info Day 4
Source: © Euroconsult « colloque Collège Interarmées de Défense Espace: Stratégie et Sécurité 13/02/02
 Directorate for

chain of0 value chain of Industrial Matters and

Technology Programmes
Forecast of the 2010 chain of the commercial space applications (B$)
Satellite
3,2 manufacturing

on
2
a ti
nic

Na
Launches 0,6
23 8,7
u

vig
m
om

a
lec

tio
e

Earth observation
Capacity
T

n
75 30,4 sales 0,9
25

0,6
16
180 54,7 Ground segment

Added value
services 2,6

Benefit to economy (non-commercial)

6 November 2002 Source: © Euroconsult, presentation to Prospace 04/2002 5

 Directorate for
Industrial Matters and
Technology Programmes

ESA system: how does it work

Industrial Policies Procedures
Tools
Convention Measures
Annex V Contract Regulations
Tender Conditions
Ministerial Resolutions
Code of Best Practices
1997-1999-2001
Ombudsman
SME Initiative
For optional programmes:
Procurement for
Project
Programmes Declarations Specific Industrial Implementation
Implementing Rules Categories:
C(1): activity restricted to non-
prime contractors
C(2): a substantial participation
of non-primes is required
C(3): activity restricted to SMEs
and R&D entities
Actual Industrial Scenario C(4): activity subject to the SME
subcontracting clause

6 November 2002 ESA Earth Observation Info Day 6

 Directorate for
Industrial Matters and
Technology Programmes

Industrial Policy Principles

in ESA Convention
Principles defined in Art. VII:
• Meet requirements of the European space programme in a cost-effective manner
• Improve world-wide competitiveness of European industry
• Ensure that all Member States participate in an equitable manner, having
regard to their financial contribution (“juste retour’)
• Exploit advantages of free competitive bidding

Implementing provisions in Annex V:

• Keep under review industrial potential and industrial structure
• Preference to industry and organization of Member States when placing contracts
• Criteria to determine nationality of firms in doubtful cases
• Rules for submission of contracts
• Rules for geographical distribution of contracts
• Interim and formal review of overall return
• Lower limit for cumulative return coefficient

6 November 2002 ESA Earth Observation Info Day 7

 Directorate for
Industrial Matters and
Technology Programmes

Implementing Decisions for I.P.

Principles: Edinburgh 2001
a) Space Technology:
• Need of strong technology base as key to world wide
competitiveness
• Central role of ESA in co-ordination and harmonization of
European strategy and policy for space technology
• Special emphasis on fostering prospective research and
technology innovation
• Importance of technology transfer
Actions:
• Pursue programmatic co-ordination and harmonization of technology
programmes in Europe (European Space Technology Master Plan - ESTMP)
• Define roadmaps and harmonized implementation schemes for critical
technologies involving industrial funding
• Consistency between ESTMP and ESA’s industrial policy is to be ensured

6 November 2002 8
 Directorate for
Industrial Matters and
Technology Programmes

b) Industrial
Policy
• Priority of supporting world wide competitiveness and
fostering balanced European space industry
Actions:
– Support to industry-driven R&D and opportunities for operational
services (PPP)
– Monitoring trends in industry (activity put on permanent foot)
– Support to all categories of firms
– Pursue of implementation of measures in technology programmes
(review by end 2003)
– Ensure that technology programmes support world-wide
competitiveness
– Reinforce actions for SMEs (important role in growth and
employment, in particular in developing downstream services)
– Exploit synergies with European Union and national agencies

6 November 2002 ESA Earth Observation Info Day 9

 Directorate for
Industrial Matters and
Technology Programmes

• Priority of enhancing cost-effectiveness of Agency’s

programmes and activities and ensuring fairness in the access
for all firms
Actions:
– Overall procurement phasing management
– Use of EMITS (also for Primes!)
– Use of Code of Best Practices
– Possible recourse to Ombudsman
• Priority of ensuring equitable participation by each Member
State, commensurate with its investments in ESA programmes
Decisions:
– Five-year duration between two formal reviews of overall return (first period:
2000-2004)
– Lower limit for overall return coefficient: 0.90 for the period 2000-2004

6 November 2002 ESA Earth Observation Info Day 10

 Directorate for
Industrial Matters and
Technology Programmes

Implementing Edinburgh
in Earth Observation….

6 November 2002 ESA Earth Observation Info Day 11

 Directorate for
Industrial Matters and
Technology Programmes

Supporting world-wide competitiveness…

• EOEP concept:
– Core Missions in competition
– Accrued competitive capacities: Opportunity Missions (no
quantitative return targets)
– Specific technology effort: Development/Exploitation
Component
• Earth Watch concept:
– Support to initiatives initiated by industry and Member States
(Infoterra/TerraSar, FuegoSat, …)
– Proper answer to new institutional market needs (GMES)
– Fostering the raise of a new class of actors in space: service
operators, added value industry (including SMEs)

6 November 2002 ESA Earth Observation Info Day 12

 Directorate for
Industrial Matters and
Technology Programmes

Fostering balanced participation…

• Approach for new Opportunity Mission
phases A: parallel studies, with one study
for non-Primes
• Specific ITTs for added value industry
(e.g. Market Development in EOEP,
GMES)

6 November 2002 ESA Earth Observation Info Day 13

 Directorate for
Industrial Matters and
Technology Programmes

Enhancing cost-effectiveness and fairness

in the selection of subcontractors…
• New phasing approach (e.g. GOCE, ADM)
• Best practices (implemented in main
missions):
– Control by ESA of ITTs issued by Primes
– Minimum bidding preparation time guarantee
– ESA evaluating in case of vested interest by the
Primes
– Senior Joint Procurement Board
6 November 2002 ESA Earth Observation Info Day 14
 Directorate for
Industrial Matters and Technology Programmes

Prime Contractor S election in Competition

Open competitive Binding commitment of the
ITT for the ITT for the prime contractor Procurement
definition phase implemental -
ton phase Award contract Completion of process:
selection of sub - Industry / ESA
contractors

Contractor A
Contractor B Prime Contractor A or B
(Definition Phase) ( Consolidation phase ) (Development phase ) (Exploitation phase)

Definition Phase Implementation Phase

Use of Best Practices

6 November 2002 ESA Earth Observation Info Day 15

 Directorate for
Industrial Matters and
Technology Programmes

Ensuring equitable participation by all

Member States….
• Flexible approach to geographical return (Rules
presently under the review):
– EOEP:
• No georeturn targets in Opportunity Missions
• Targeting approach for each Core Mission, allowing to recover
imbalances of past missions (allowed flexibility of +/-20%)
• Flexibility also at Development/Exploitation Component level (+/-
20%)
– Earth Watch:
• Overall flexibility of +/-10 or +/- 20%, with retroactive adjustment of
contributions at end of each programme element (Infoterra/TerraSar,
FuegoSat, GMES)
6 November 2002 ESA Earth Observation Info Day 16