The following paragraphs outline a certain number of features of ESA's procurement approach and they should help potential tenderers to better understand the ESA procurement approach.
1. The different types of contracts phased approach
The different types of contracts placed by the Agency can be classified according to their economic and technical importance, to their nature, and to their type of price.
The simpler procurements at standard prices and for off-the-shelf items are handled by purchase orders. As the borderline between important purchase orders and small contracts is sometimes difficult to define precisely, the Procurement services and local Purchase Offices in ESA establishments work closely together to decide which procedure should be applied.
ESA places a wide range of contracts: study contracts, research and development contracts, supply contracts for hardware and software, maintenance contracts, operations contracts, Maintenance and Operations (M&O) contracts, technical assistance contracts, etc.
In order to manage demanding high-technology, long duration major development contracts, the Agency systematically applies a phased contracting approach which generally follows the approach described below:
A major procurement is always preceded by a Feasibility Study (Phase A) the purpose of which is to assess the programmatic, technical and financial feasibility of a given project before it is submitted to the relevant committee (e.g Programme Board) and becomes an official ESA programme.
During the following phase known as the Study Phase (Phase B1) the originally limited industrial nucleus, in charge of the 'System Study and System Design', is progressively reinforced by the addition of sub-system, assembly and equipment sub-contractors, so that the complete industrial structure is normally fully established by the end of the phase. It is throughout this process that competition is used wherever possible and under the control of the Agency to ensure fairness among all economic operators in the competitions organised by the prime contractor(s).
Whenever possible, Phases A and B1 are contracted to 2 competing industrial teams.
Based on the result of the work performed during Phase B1, the Prime Contractor for the selected industrial team will then submit (on behalf of the established consortium), a full committing proposal for the phase B2 and for the Development and Manufacture (Phase C/D) as well as the Operations (Phase E) based on the result of the work performed during Phase B1.
It should be noted that budgetary constraints have led the Agency to ask Prime Contractors to submit offers covering Phases B,C/D and E either for a "Maximum Ceiling Price" or for a "Firm Fixed Price". Taking into account the fact that none of the Agency's requirements be it for geographical distribution or for ensuring fairness among all industrial firms in the competitions are waived, this approach requires from the Prime Contractors an in depth assessment of the risks involved (financial, programmatic, etc.) before submitting their proposals.
The General Clauses and Conditions for ESA Contracts in their Annex II (“Classification of prices”) describe the different kinds of contract price types and contract types used by the Agency. The following types of contract prices are found:
- fixed-price contracts (firm fixed price, fixed price with price variation, fixed unit price),
- ceiling price contracts to be converted into fixed-price contracts,
- cost reimbursement contracts (cost - plus fixed fee, cost- plus- incentive- fee, time and material).
Even if most of these price-types and their definitions are standard, potential tenderers are invited to make themselves familiar with the detailed provisions of Annex II. Important information is also found in (ESA/REG/002) Annex I “Determination of Industrial Rates and Cost Control”.
In order to take in consideration the multitude of similar procurements placed sometimes with the same company or group of companies, ESA has developed an alternative procurement approach known as “frame contract”.
A frame contract is a global agreement with a company, or group of companies, with which the Agency is likely to have an important and continuous amount of business, on the largest possible set of standard contract terms, management and even financial conditions, so that each new individual action can be contracted with a minimum of formality and procedure i.e. via a system of work order.
2. The control of the execution of the contracts
The procurement process is not finished when the contract has been signed by both parties. The Agency has developed and implements a number of control and monitoring techniques to ensure that the contract is executed in full compliance with its agreed terms (technical specifications, time schedule, price, etc.).
The first and most important element which a contract should have achieved is the establishment of a complete and clear contractual baseline. Any change to this baseline has to be subject to a formal change procedure, the modalities of which are defined in the contract.
The responsibility for following the timely and - in the case of cost reimbursement contracts - economical progress of the work, lies with the Project Controllers.
The Agency expects contractors to have similar techniques and organisation - in particular qualified Project Controllers - to meet the project control requirements both in-house, and for the work subcontracted to other companies.
Whatever the value of the contract, the Agency contractors and their lower-tier subcontractors should process all their invoices to the Agency through an electronic system (“esa-p for suppliers”).
The ESA contracts may contain a Penalty Clause (Clause 7 of the General Clauses and Conditions), or Delivery Incentive Provisions for contracts related to major projects.
Should penalties be applicable to the contract, proper advance notice of a potential delivery slippage should be given to the Agency representatives in order to initiate discussions on way forward. It is important to remind that an agreement to extend a contractual delivery date is not valid unless made in writing by the Agency representatives nominated in the contract under a formal amendment to the contract, and in any case before the date of the current penalised delivery.
3. Intellectual property rights
The intellectual property rights policy at ESA is an important element of its policy in developing and promoting European industry.
The Part II of the General Clauses and Conditions for ESA Contracts defines the “Conditions Concerning Intellectual Property Rights for ESA Study, Research and Development Contracts”. The potential tenderers should become familiar with such Part II.
The ITT draft contract shall define which of the options defined in such Part II is applicable (Option A “General Regime” or Option B “Special regime for partly funded contracts”) together with any specific amendment or addition required for the purpose of the intended contract.
In case it is intended to claim the existence of background intellectual property rights, specific conditions are contained in such Part II, however the claim of such background intellectual property rights needs absolutely to have been made in the presented offer at the latest.