Industrial Policy and Geographical Distribution play an important role in ESA procurements. One of the main elements, in ESA's Industrial Policy, is the set of rules relating to geographical distribution or fair return.

According to the ESA Convention, one of the major objectives of ESA procurements is to increase the competitiveness of European industry on the international market.

The whole ESA procurement approach aims at developing the capacity of European industry to enable it to react to the market demands in the most efficient and the most economical way.

An objective of ESA constantly reaffirmed since 1997 by its Council at Ministerial is the SME initiative, the aim of which is to foster the participation of SMEs in ESA procurements. This is achieved trough a set of special measures such as, but not limited to, restricting some actions to SMEs only, encouraging non SMEs participating in ESA procurements to team up with SMEs, in the later case the inclusion of SMEs in the industrial team becomes an integral part of the evaluation process (refer to “How to participate to ESA procurements”). Should a procurement action fall under the SME initiative clear indications to that effect are given in each individual ITT, such classification can be found on EMITS (refer to “Presentation of SME Initiative of ESA”).

It is further one of the Agency's essential industrial policy activities to perform a number of co-ordination and harmonisation tasks between European and national space activities.

The co-ordination and harmonisation of ESA's technological and research activities with those of the EU, which increasingly developed since 1994 have also expanded into other more application, oriented domains such as navigation.

From the outset, the ESA (and its preceding organisations) applied a principle of 'fair return' which has been constantly evolving. The main rule adopted by the Agency since its Council at Ministerial level in March 1997 is that the ratio between the share of a country in the weighted value of contracts, and its share in the contribution paid to the Agency, must be of X per cent (e.g 0,98%) by the end of a given period. That ratio is called the industrial return coefficient.

The achievement of geographical return continues to be looked upon globally over determined periods. Nevertheless, particular geographical return constraints may be imposed on optional programmes and on mandatory activities, to ensure that they cannot contribute to an unbalancing of the overall return situation.

ESA devotes much time and effort in trying to meet all these requirements while still maintaining technical excellence and economy.

This can only be achieved by a number of preparatory actions at the programme- and budget- preparation stage, and by deciding on an appropriate procurement procedure within the Contracts Regulations.

Tenderers should acquire a reasonable knowledge of the industrial policy environment of procurements, and carefully observe any specific requirements, especially with respect to subcontracting elements of the work, contained in many ITTs/RFQs.

Whereas ESA's calculation and verification of geographical distribution data was essentially based on the currency used for payment, tenderers and contractors had to ensure that such currency reflected as accurately as possible the currency of the country where the work was actually being done. ESA officials involved in the procurement process had to verify and to ascertain that this was really the case. Since the introduction of the EURO as the ESA currency for the placing of its contracts such requirements are even more stringent.

Extracts from Convention of the European Space Agency relating to Industrial Policy

ARTICLE VII

The industrial policy which the Agency is to elaborate and apply by virtue of Article II d. shall be designed in particular to:

1. meet the requirements of the European space programme and the co-ordinated national space programmes in a cost effective manner;

2. improve the world-wide competitiveness of European industry by maintaining and developing space technology and by encouraging the rationalisation and development of an industrial structure appropriate to market requirements, making use in the first place of the existing industrial potential of all Member States;

3. ensure that all Member States participate in an equitable manner, having regard to their financial contribution, in implementing the European space programme and in the associated development of space technology; in particular the Agency shall for the execution of the programmes grant preference to the fullest extent possible to industry in all Member States, which shall be given the maximum opportunity to participate in the work of technological interest undertaken for the Agency;

4. exploit the advantages of free competitive bidding, except where this should be incompatible with other defined objectives of industrial policy.