The SME Initiative at the European Space Agency
Fernando Doblas & Nora Bougharouat Industrial Policy Office Directorate of Industrial Matters & Technology European Space Agency
Why an SME Initiative at ESA?
Active encouragement to small and medium-size enterprises (SMEs) to become involved in the activities of the European Space Agency is a new development in the Agency’s industrial policy. Proposals along these lines began to take shape in the course of preparations for the March 1997 ESA Council meeting at ministerial level, at which the ministers called upon the Director General to set aside a special place for SMEs in the Agency’s activities, with balanced access to its technology activities, by:
- making firm provision for involving them in definition of the Agency’s technology development work plan;
- tailoring the rules on cofinancing to the size of enterprises;
- offering SMEs technical support from ESA experts and laboratories as necessary to develop their particular specialties.
ESA has set up its SME initiative with the matching aims of enabling ESA and the European space industry to tap the potential of innovative SMEs and opening up opportunities for SMEs in turn to work more extensively with ESA and space contractors. Every precaution is being taken to avoid further fragmentation of the European space equipment supplier industry. The initiative was approved by the IPC in March 1998 for a two-year trial period, with funding of 5 million euros. A decision is to be taken at the end of this period on whether to continue with the initiative as it is or to make changes in the light of results achieved and benefits expected. In order to derive maximum advantage from synergy with other European programmes for SMEs, the definition of these enterprises applied in the ESA initiative is the same as that proposed by the European Commission in its Recommendation 96/28O/EC of 3 April 1996, which can be summarised as follows:
SMEs are defined as enterprises which have fewer than 250 employees and annual turnover not exceeding ECU 40 million and are independent of enterprises falling outside the defmition of an SME (the definition of the independence criteria is too long to be repeated here).
The initiative is directed towards two types of SME: high-technology SMEs (normally small firms with close links to universities or research laboratories) and subcontractors to large groups.
For high-tech SMEs, the initiative aims in particular to facilitate access to ESA’s work plans and procurement plans. This reflects a conviction that they are able to bring an alternative perspective and offer potential for considerable improvement in synergy between space activity and other technical activities. Clear cases in point are: system engineering, software development, signal and image analysis, electronics, and software engineering. High-tech SMEs, especially recent start-ups, can make very valuable contributions to the generation of new ideas and concepts. They have a readiness to take an iconoclastic view which is not to be underestimated, since their ideas might well prove to be valid alternatives worth considering alongside the preferences and options proposed by large groups. With its specific features, both technical and political or strategic, space activity has a certain tendency towards isolation. The SME initiative is seeking, with the very limited resources at its disposal, to help remedy that.
For SMEs in general, the initiative includes various arrangements designed to improve theconditions under which they operate (access to information, access on preferential terms to ESA technical facilities, opportunities for networking with other companies that might become customers or partners, etc.). As will be seen below, many of these general arrangements are beneficial not only to SMEs but to all enterprises working with ESA, although especially to the smaller ones (not necessarily,SMEs as such), for obvious reasons.
Main Components of the SME Initiative
The main components of the initiative are outlined below:
Programme to encourage participation by high-tech SMEs in definition of certain Agency technological activities (LET-SME)
This programme has been organised along lines similar to those of the “exploratory awards” set up by the European Commission under the fourth R & D framework programme, and continued under the fifth. The aim is to give SMEs the opportunity to carry out feasibility studies or preliminary validations demonstrating application of their technologies, products or procedures to the solution of technical problems encountered in space programmes. Particular encouragement is given to cooperation by SMEs with research centres. Contracts are awarded after evaluation of proposals by the relevant technical departments; the maximum amount is 30 000 euros and the duration of a contract is generally limited to six months.
The arrangements for this programme were partially tested during 1998. In the cases where new SMEs were assisted and introduced to ESTEC technical departments, their capabilities were found to be remarkable and their technologies proved most interesting. The idea of feasibility studies, during which SMEs would be brought into contact with companies already working in the space sector, was therefore very well received by the technical departments concerned.
A number of the technical departments have already made “technology monitoring” standard practice. What is being proposed under the SME initiative is an extension of this practice into new areas, combined with structured access for high-tech SMEs.
Special treatment for SMEs in announcements of opportunity restricted to “non-primes” for (cofinanced) commercially-oriented technological development
A first announcement of opportunity, funded out of the TRP, for (cofinanced) commercially-oriented technological development was launched in 1998 under the pilot phase of the adaptation of ESA’s industrial policy as defined in the March 1997 ministerial Resolution. The response from industry was impressive (7.5 proposals received, 36 of them from SMEs).
Under this announcement of opportunity, proposals from SMEs have two chances of being selected; first in the competition reserved for SMEs, for which there is specific funding, and then, if unsuccessful at that stage, in the open competition for all “non-primes”.
A new announcement of opportunities, will be issued around May 1999, and will call for proposals on innovative technologies. The A/O will be funded under TRP, for a total amount of 2.5 MEUROs, from which 500 KEUROs will be reserved for proposals from SMEs.
ESA technology transfer programme - increased support to SMEs
High-tech SMEs have been observed to be well placed to exploit the benefits of technology transfer, being dynamic and naturally present in several fields of activity. A technology transfer component has therefore been included in the SME initiative, with the aim of bringing out the best of these enterprises’ capabilities.
The distinctive feature of the technology transfer component incorporated into the initiative is that it encourages diversification into sectors other than space (technology transfer within enterprises, in other words). The aim is therefore to assist space SMEs in diversifying into other areas of activity.
Training and technical assistance to SMEs
This component of the initiative has been included in response to an explicit request made by the ministers to the Director General in their Resolution of March 1997. Its content, which is currently being defined, could take two complementary forms:
- On receipt of a justified request, ESA would make technical facilities available to an SME to assist in solving technical problems (for instance, an electronics firm in need of specific support in structural or electromagnetic compatibility analyses or validations). ESA’s main contribution would be to make experts in various disciplines available on an ad hoc basis to SME when they needed them. Since ESA basic activities take priority in the use of its technical facilities, this assistance, although it would be important to some SMEs, would be limited in scale by the availability of the facilities.
- SMEs are welcome to send staff to ESA technical facilities for short periods oftraining and familiarization with ESA procedures and techniques such as quality control, testing, preparation of bids, use of different equipment available in laboratories, etc. The procedure here will be relatively simple: the SME identifies its needs in terms of training or use of equipment, and send sends a request to the SME Unit. After approval, the SME Unit makes the necessary arrangements for the coordination with other ESA services and the planning of actions.
Preferential access for SMEs to ESA facilities and laboratories
This component breaks down into two parts:
- Access for SMEs to ESA technical facilities at preferential rates. A policy on preferential rates to be charged to SMEs for the use of ESA facilities and laboratories is currently being proposed to the relevant delegate bodies (AFC and Council) in the framework of new rules on third-party use of ESA facilities. It is proposed to charge SMEs at a rate corresponding to the “marginal cost” for all services supplied to them by Agency experts and laboratories to complement the technical capacities they need to develop their specialties.
- Improved supply of information about facilities available. Early action is being taken to improve the supply of information about facilities available (descriptive brochures).
Clause to encourage subcontracting to SMEs
In certain technological procurements conducted on the basis of competitive bidding, the Agency encourages potential suppliers to submit proposals including a significant proportion of industrial work to be subcontracted to SMEs. The key feature is that, when evaluating proposals, the Executive will be looking for an appropriate level of subcontracting to SMEs as a criterion to be taken into account alongside technical quality (as reflected in marking) and price. This is being made clear to bidders in invitations to tender. This measure is being backed up by a new application in EMITS, the electronic mail system used to send out invitations to tender on the Internet, so that potential bidders are informed of SMEs that have relevant capabilities and are interested in subcontract work.
The contract actions envisaged here are those that cover innovative technological activities in which it is considered worthwhile involving SMEs already working in related fields so as to benefit from potential synergy.
A first list of activities was proposed to the IPC in the 1998 TRP work plan. It was unanimously approved by the Committee, which also asked the Executive to identify those in the 1999 plan to which the SME subcontracting clause might be applied. The activities identified by the Executive in the 1999 plan represent 30% of all activities scheduled under the TRP for the year; subcontracting to SMEs could amount to some 8%. Immediately after the IPC approved the plan at its January meeting, industry (and SMEs in particular) were notified via EMITS.
The issue of an Administrative Instruction laying down the procedure for taking the SME subcontracting clause into account in the selection of proposals from industry is pendind.
Improved supply of information: creation of a specific “ESA industry homepage” on the ESA website
The ESA industry homepage, will serve &o main purposes:
- to give industry in general (and SMEs in particular) access to the information they need in order to take part in ESA activity under the best possible conditions and to expand their involvement; to this end, the information available on the various ESA servers, both internal and external, which is of interest to industry has been drawn together to provide a single source;
- to give entities that have worked for ESA (industrial firms and research centres in general) opportunities to advertise their products and capabilities, set up links with their own websites, set up forums for discussions among themselves and with the Executive, look for potential partners, etc.).
Organisation by ESA of workshops bringing European SMEs into contact with potential customers
The idea is for ESA to organise events, drawing attendances from across Europe, at which SMEs will be able to meet potential customers (space agencies and firms, prime contractors or equipment suppliers) interested in making contact with smaller enterprises offering innovative approaches that could help them improve their competitiveness.
During the course of 1998 representatives of the Executive attended a number of events of this type, on such themes as signal and image analysis and software engineering. Their impressions were extremely positive, having had the opportunity in a single working day of finding out about technologies and products available from small enterprises which in some cases exceeded the performance standards required for space systems. This experience confirmed yet again that, in certain technical fields, setting up links (via SMEs) with non-space sectors is a way to tap very interesting potential for synergy.
A first workshop is to be held at ESTEC in May 1999, in conjunction with Eurospace (the association of the European space industry) and with technical support from the European Federation of High-Tech Small Businesses, through its French representative, the Comite' Richelieu.
Creation of an SME Coordination Unit at ESA
For the organisation of SME initiative activities, an SME Coordination Unit has been set up in the Industry Liaison Section of the Industrial Policy Office in the Directorate of Industrial Matters and Technology Programmes. The Unit is responsible for coordinating the activities described above and also for providing a “one-stop” service to SMEs, giving them more effective access to the Agency’s various activities and the specific arrangements being made for themunder the SME initiative. It can be contacted at the following e-mail address:SME-UNIT@hq.esa.fr
The SME initiative at ESA is a first step. Resources are very limited, but this is still an opportunity not to be missed. The initiative will generate new momentum in the direction of standardisation and exposure of the space sector to practice in other sectors, helping SMEs to develop their capacity for innovation and synergy with other technological fields. It adds a valuable new dimension to the Agency’s industrial policy. It also adds a persuasive new argument to the case justifying government funding for ESA activities. The role to be played by SMEs in policy on technological development is an extremely important issue. We entirely agree with the very interesting comment on the subject made by Mr Claude Allegre, the former French Minister for Education, Research and Technology:
“We give too much support to research by large enterprises and not enough to research by SMEs. As was pointed out in a report to President Clinton by the US Academy of Science, when private research by large groups is finded by the State it also takes its direction from the State, ji-om technocrats in other words, whereas it ought to take its direction from the market, Except in the case of very large projects, in aircraft design and construction for instance, it is preferable to channel public finding for research into innovative SMEs, with large groups coming in at the subsequent stage to perform the essential role of selecting and developing the results of research by SUES. ”