Last weeks news were not very good for Thales Alenia Space. The french media Latribune publish an article revealing a incoming redundancy plan. The article points out the lack in R&D investment at Thales Alenia Space. In my opinion this situation is mainly created by the public tendering context prevailing in the European space world.

Public tendering VS products and services

For those who are familiar with the space industry, it's not a surprise. For the others, you must realize that projects are created the governments. They found the money and they select industrials to realize. This is referred as B2G, or business-to-government. Governments or institutions publish tenders and industrials submit proposals. Tenders are evaluated by awarding points using both technical and financial criteria. Tenders often contains a list of requirements or at least a statement of work. Within traditional business the key point to succeed is having the best products or the best services. With B2G the crucial points are:

• being referenced by institutions and governments so as to be allowed to submit tenders with restricted procedure
• being experienced with public tendering. Submit a tender for big contract is really hard and it requires an experienced bid team.
• having a good credibility. Politicals don't like the change and don't like the risk. If you are a new comer, your chances to succeed are very low.

You will notice that you can be really good in B2G without having good products or good services. The downside of this approach is that some company decrease the R&D part to a very low level in order to maximize profits.

Public tendering VS agility

Agility is the thing that make you avoid "tunnel effect" and maximize the value delivered to end-users. Few public tenders deliberately exclude agility but in most of the case it's just impossible. Some public tenders contain a fine-grained design and high-level of details for requirements. In this conditions, you cannot change the design. If you recommend a major change in the design, it is rarely accepted by the end user because it means that he must invalidate the original contract. I have already seen the following situations:

• Industrial recommend that the design must change to minimize the risk. But the end user refuses it. It argues that changing design could create political problem because it means that wrong choice has been done during the tendering phase. Sometimes industrials are just too fearful to ask for the change.
• Industrial recommend that we cancel a requirement because it's a non-sense or it's not technically possible but end user refuses. It argues that buying team may reclaims money if the feature is not present.
• Industrial warns that he need more resources (financial or humans) but end user say that it's not possible because no more money is available. This situations can cause a bogus system or an incomplete system.
• Industrial discover that the original design is not functional but he continue to realize it. The idea is that if you respect the contract you will be paid, even if you deliver non-functional systems. Some industrials hope they will receive additional money after end user realize the error.

Geographical return policy

Furthermore some public institutions have a geographical return policy (like ESA). Even if the idea sounds good, i.e. having a fair rewarding according to the level of financial contribution, this is really difficult to achieve. It's hard for the submitter to respect the geographical return policy. If the return policy includes countries where your company have no contact, it means that you have to select, evaluate and sign an agreement during the bid phase. Some companies choose to disrespect the geographical policy even it will result in a bad evaluation. Some companies use workaround by giving minor and not risky parts to fulfil the geographical policy.

With the new space, and the globalization, space business is under pressure. Bad habits created by public tendering context are definitely not good for the business. To prepare the future, you must invest and take risk. Once the market sanction is here, it's too late.