An online information session for industry about ESA's new Profit Policy took place on 12 April 2023. This e-learning module contains the recording.
During the webinar representatives from ESA's Procurement Department and Industrial Audit Services Office provided an overview of the new policy in place, outlining its implementation modalities, including the selection and calculation of the profit rate for an ITT (based on contractual risk and complexity risk which will be explained in detail) as well as the enhanced contractual risk sharing provisions in space projects, i.e. the Management Reserve which consists of the Basic Management Reserve (BMR) and the Subcontractor Management Reserve (SMR). The presenters outlined the purpose of the BMR and SMR, what the reserves cover, how they are calculated as well as which entities are entitled to include BMR and SMR as part of their price and who controls the funds. Examples about the new management reserve scheme were provided, in particular the SMR.
In June 2022, the ESA Council approved the Agency's new Profit Policy which outlines a standard methodology for the determination of a fair and reasonable profit linked to risk, providing transparency and understanding to all stakeholders. The Profit Policy is now in force and applies, in principle, to all activities unless indicated otherwise in the procurement package (it does not apply to General Procurements).
The policy allows to:
- reward contractors fairly and reasonably commensurate with risk;
– treat all contractors equitably and in a consistent manner;
– incentivise and sustain the European space industry in a competitive environment and;
– achieve value for money in ESA procurements.
It introduces varying profit levels depending on the specific risk linked to the contract type and complexity of the activities, as well as a way to handle supply chain considerations through a further improvement of contractual risk sharing provisions.
The complete text of the profit policy can be found at: https://esastar-publication-ext.sso.esa.int/supportingDocumentation/details/34