Frictions among prime contractors, subcontractors and the space agencies that provide most of their revenue were the subject of three days of occasionally sharp-edged talks organized by the European Space Agency (ESA).
This year’s Industry Space Days, held May 29-31 at ESA’s Estec technology center in Noordwijk, The Netherlands, gave industry and agency representatives an opportunity to air long-standing grievances with no sugar coating.
Subcontractors complained that agencies and prime contractors are late in paying their bills, and that prime contractors often change specifications without consulting the companies whose hardware is most directly affected.
Prime contractors — mainly Alcatel Alenia Space and Astrium Space — responded that their subcontractors are too often uncompetitive and unwilling to share in the financial risks, including post-launch liabilities, that are inherent in many satellite manufacturing awards.
Industry Space Days, held every two or three years, often fills Estec’s auditorium and this year was no exception. Michel Courtois, director of Estec, said in a presentation to the meeting that the agency received 1,200 registrations but limited entry to 700 non-ESA participants “to have more efficient encounters.” About 6,000 meetings between smaller companies and prime contractors were organized in advance, Courtois said.
This year’s meeting occurred as Europe’s space sector appears to be emerging from a period of several years when the outlook of global commercial space markets was gloomy and government budgets in Europe were stagnant.
Pascale Sourisse, president of Alcatel Alenia Space and the current president of Eurospace, a space-industry association, said space-sector employment in Europe has fallen by 20 percent in the past 10 years. In 2005 alone, the industry’s prime system integrators shed 13.5 percent of their work force, meaning 2,400 jobs were lost. Sourisse said in her presentation that the prime contractors were the source of 90 percent of the staff cuts in 2005.
Sourisse’s comments would appear to lay to rest small companies’ concerns that the prime contractors had used the market downturn to scoop up work that once went to subcontractors. But Eurospace Secretary- General Alain Gaubert said June 8 that what happened in 2005 is not necessarily representative of the past decade.
Gilles Maquet, Astrium’s vice president for institutional relations, said in a presentation to the meeting that Astrium has reduced its employment by 3,300 people since 2003. He said concern for technological and financial competitiveness is a high priority for government programs as well, not just in the commercial sector.
“There is no ‘ESA world’ separated from the rest of the world,” Maquet said. “The need for constantly improved competitiveness is everywhere.”
Maquet said that Astrium subcontracts about two-thirds of its commercial work to other companies, a figure that rises to up to 70 percent for ESA contracts.
Pascale Garnero, procurement manager for Alcatel Alenia Space, said Alcatel’s Spacebus telecommunications satellites are built 40 percent inside the company. Another 40 percent is given to subcontractors working to Alcatel Alenia specifications, and the remaining 20 percent is made up of more generic components purchased on the open market.
For Earth observation and science satellites, Garnero said, 70 percent is subcontracted with prearranged specifications, 25 percent is built internally and just 5 percent is purchased off the shelf from other companies.
Rocket-motor builder Snecma Motors of Paris said it is outsourcing more and more of its contracts. Michel Muszynski, the company’s director of communications, said in a presentation that just 17 percent of Snecma’s HM7B Ariane 4 upper-stage engine, designed in the 1970s, was subcontracted to other companies.
The Ariane 4 main-stage Vulcain engine, which was designed in the late 1980s, was 41 percent subcontracted. Of the work to be done on Snecma’s restartable Vinci engine, which is still being designed, 59 percent will be subcontracted, Muszynski said.
Eurospace’s Gaubert cited a Eurospace survey of small and mid-sized companies who protested that prime contractors often agree to change technical specifications without consulting their second-tier manufacturers. Gaubert also cited concerns that neither the prime contractors nor ESA paid its bills on time.
ESA came prepared for the critique. Erfried Erker of the agency’s finance department brandished a study of some 40,000 invoices paid by ESA in 2005, saying that the average time between bill submission and payment was 28 days. That’s not bad, Erker said, adding that some companies submit bills before contracts are signed, and others insist on mailing their invoices instead of using ESA’s faster electronic invoicing system.
Gaubert said Eurospace was surprised to learn of Erker’s study and could not confirm or refute the results.
Klaus-Peter Hillerich, Astrium’s director of sourcing management, said in a presentation that some smaller contractors have not kept pace with the changes in the industry, especially in ESA programs.
Whereas Europe’s prime contractors have merged into two main players, the subcontractor network remains dispersed, Hillerich said. He also criticized subcontractors’ “obsolete risk-sharing strategies” and urged them to accept “more risks, shorter development cycles, less development and more production activities.”
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