ARTICLE 1: - emits - ESA

ESA/REG/001, rev.2
Annex I,rev.1
Page 5
Preface
The Procurement Regulations’ Article 10.8 states that “At the discretion of the
Director General, industrial cost* and rates audits may be carried out at any time prior
or subsequent to the award of a contract by the Agency. The conditions under which
these audits shall be carried out shall be established by means of an implementing
instruction.”
This implementing instruction explains the conditions and processes necessary to carry
out the audits, which will be mainly oriented to the major suppliers in the area of space
and ground segment.
Article 1 Rationale and Scope of ESA audits
The objective of ESA cost audits is to obtain evidence that the costs to be recovered,
based on rates, overheads and other direct costs, are both reasonable and allowable, in
accordance with the principles set forth in Annex 1 as amended by subsequent
revision(s) of the General Clauses and Conditions for ESA Contracts (GCC).
Article 1.1 Industrial rates and overheads
The aim of the ESA audits related to industrial manpower, facility and other overhead
rates such as the General Administrative and Subcontractor overheads is to reach an
agreement with the audited company on fixed rates for a two to three year forwardlooking
period (hereafter referred to as “rates”). The audit process ensures that costs
included in the rate calculation are not double-counted by inclusion in other non-labour
charges recorded as direct costs against contract cost.
The establishment of rates is not a pre-requisite for doing business with ESA. However
for the major suppliers dealing with ESA on a regular basis it is an important step in the
industrial bidding process for ESA tenders, facilitating ESA and industry, at any time
and in advance of any individual tender, to contribute to an efficient and smooth
procurement process, reducing questions on rates each time the company participates in
a tender process. The approved rates are also taken into account for cost claims and for
post calculation in the framework of a cost reimbursement contract.
* in accordance with the provisions of article 4.1