ESA industrial policy Industrial policy and geographical distribution play an important role in the European Space Agency's (ESA) procurements. One of the main elements in ESA 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 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 level is the small and medium-sized enterprise (SME) initiative. Its aim is to foster the participation of SMEs in ESA procurements. This is achieved through a set of special measures such as, but not limited to, restricting some actions to SMEs only, or 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. About 90% of ESA's budget is spent on contracts with industry. Equal opportunities and fairness are guaranteed by a common set of rules and procedures to be followed both by companies and the Agency. Procurement policy on fair access for SMEs To guarantee fair access to its programmes for all categories of companies, ESA has designed and implemented a set of clauses, known as "the C1-C4 clauses", which are applied for certain types of procurement. In the following text, the wording "Primes" refer to the companies AIRBUS Defence & Space, THALES ALENIA SPACE and OHB. Actions Reserved for Non-Primes and SMEs (C1 & C3 Clauses) The aim of these 2 clauses is to foster competitiveness of equipment suppliers and SMEs (C1 Clause), and of SMEs and research institutes (C3 Clause), in areas where the concerned organisations have recognised expertise and capabilities. Procurements where the C1 and C3 clauses are used include those for technology research activities and for the development of equipment, components, or instruments - where SMEs and their partners have the necessary expertise, and where favoring these entities would result in a more efficient use of funds. Open Competition with encouragement of subcontracting to Non-Primes and SMEs (C2 & C4 Clauses) These types of actions are open to all, but the main contractors are requested (under C2 clause) to include an adequate participation (in terms of quantity and quality) of Non-Primes and SMEs - or under C4 clause, uniquely SMEs - in their teams. Offers must provide an analysis of the proposed participations. If no SMEs are included in the offer, the bidder must provide evidence of efforts made, and the reasons for lack of success in including SMEs. Procurements where the C2 and C4 clauses are used include those for innovative technology activities issued as open competitive tenders, where capabilities are available at Non-Primes and/or SMEs, and generally, which have a budget greater than or equal to €250,000 (some procurements of lesser value may also be subject to these clauses). Best practices In the frame of its major procurements, ESA has persistently been driven by the objective of ensuring fairness of competition at all levels and in particular between prime contractors and subcontractors. This resulted in a number of different procurement schemes set up by ESA in order to adapt to the various constraints put on it by each individual programme and its specific environment. The reorganisation of space industry in Europe brought the attainment of this objective as one of the top priorities to be achieved by the ESA Executive. It was therefore decided to merge under a unique document the existing rules applied up to now to various procurement activities and concerning the fairness of the selection of subcontractors in ESA Major Procurements. This document establishes a unique set of rules to be known as the "Best Practices for the Selection of Subcontractors by Prime Contractors in the frame of ESA Major Procurements". Its declared objective is to establish the minimum best practices requirements to be implemented by a contractor (Prime Contractors together with their Major Subcontractors) in order to achieve a fair and equitable treatment of non-primes in the frame of any given Agency programme. Although specifically targeted at major procurements such as space and/or ground segment, these may be applied in the frame of any competition, independent of its nature or magnitude, should the Agency feel it adequate in order to achieve the fairness of competition.