Galileo project is on the rocks

Stalled: the Galileo satellite navigation system.

The European Transport Commissioner Jacques Barrot last week called upon the current Germany presidency to re-invigorate the project in a letter that was published by the European Commission.

In the letter Barrot complains that his efforts over the past year to move the project forward have failed because the companies involved in the consortium want the public side of the project to accept more of the risk.

There has been progress on the development side, with the European Space Agency launching the first of four development satellites GIOVE-A in December 2005. However, the launch of the second experimental satellite has now been delayed until the beginning of next year because of technical problems.

Private sector plan

The plan is for the private sector consortium to take over the project in 2009 after two experimental and four operational satellites have been launched in the development phase. But as yet no formal contract has been awarded for building and launch the remaining 26 satellites, and, subsequently, exploiting the system for a period of 20 years.

Four different initial bids for the deployment and exploitation phase of the project were submitted in December 2003. One bid was eliminated during the pre-selection phase and during summer 2004 one of the remaining bids was withdrawn.

Then in May 2005 the two remaining consortia proposed to merge their bids. The Commission accepted on condition it got a better offer and the merged group set up a single entity with the power to act for all partners.

These conditions were accepted by the eight companies involved in the merged bid, AENA, Alcatel, EADS, Finmeccanica, Hispasat, Immarsat, TeleOp and Thales in October 2005.

But as Barrot woefully recounted, “As I write this letter, there is no single company structure that regroups the eight partners, nor is there a single negotiator representing such [a] single company in the negotiations.”

He added, “Furthermore, there is no evidence that the merged bid would improve [on] either of the two initial bids.” Although a preliminary heads of agreement was signed on 23 November 2006 it left major issues unresolved.

No signature this year

Barrot said he does not expect the full contract to be signed until the end of 2008. “I consider that the delay so far accumulated and the absence of any sign of progress on the negotiation of the concession contract must now be considered as risk for the delivery of the project in the timeline that we envisaged. Moreover, we have to fear significant cost increases which could go well beyond the foreseen budget.”

The transport commissioner called on the German presidency to use its influence to force through the incorporation of the Galileo Operating Company by 10 May 2007 and to appoint a chief executive with the power to speak on behalf of the company, without being vetoed by one of shareholders.

Barrot offered also to review the project and look for alternative routes to deliver the Galileo system. Unless he can get the timetable to stick, EU money earmarked for the project in 2007 may be lost.

The next decision point is the Transport Council’s June meeting. Barrot concluded, “Galileo is one of the most ambitious industrial projects Europe ever gave itself…. More than ever we have a responsibility to make this project succeed, ensuring at the same time Europe's independence and excellence in a sector critical to our future competitiveness.”