European Policies and the Space Industry Value Chain (Note 1)

Abstract

The economics of contracting have received rather limited attention insofar as the implications for efficiency from the selection of types of contracts employed in the aerospace and defence sector are involved. The paper analyzes the challenges confronting the cost-plus/cost-reimbursement type of contracts of European Commission and intergovernmental organizations like the European Space Agency (ESA), who are involved in security and defence projects with significant multiplier effects within defence and security networks. The analysis indicates how institutional limitations result in contractual choice inefficiencies and anti-competitive practices that may affect the whole of the aerospace industrial base, including subcontractors. The paper concludes with policy implications and further research recommendation.