Controversy Deepens Over European Weather Satellite Contract

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MUNICH, Germany — German government officials are blaming their own tactical error during negotiations with France for the controversy that has blocked approval of Europe’s $1.7 billion next-generation weather satellite program since the beginning of the year and now threatens to cause lasting damage to the 18-nation European Space Agency (ESA), German government and industry officials said.

ESA’s ruling council is scheduled to meet March 17 in Paris to attempt to forge a compromise that would permit the German government to save face while at the same time approving a Meteosat Third Generation (MTG) contract valued at about 1.25 billion euros ($1.7 billion) with a consortium led by Thales Alenia Space of France and Italy, and OHB Technology of Germany.

That winning bid, in which Thales Alenia Space’s French division would be prime contractor, bested a bid by Astrium Satellites of Germany.

An ESA Technical Evaluation Board met three times before concluding that the Thales Alenia-OHB bid, which came in about 150 million euros lower than Astrium’s offer, should be favored for negotiations in view to a contract.

The decision to favor a French prime contractor — even one teaming with a German partner — has struck a raw nerve in Germany, particularly at the German Transport Ministry, which funds Germany’s contributions to Europe’s Eumetsat meteorological satellite organization.

Darmstadt, Germany-based Eumetsat is funded through contributions based on its member states’ gross domestic product, making Germany the biggest supporter.

Eumetsat is paying about 75 percent of the total MTG program, valued at about 3.3 billion euros, with ESA paying only a portion of the satellite work but charged with overseeing the satellite development.

Previous Meteosat satellites have been built under French leadership. But in November 2008, Germany decided to make the MTG contract a priority. During an ESA ministerial meeting at The Hague, Netherlands, the German delegation made clear it would not let France purchase a larger share of the MTG work, which would have automatically led to France being given the satellite prime contractor role under ESA’s geographic-return rules.

A French-German bidding war ensued, ending with a compromise under which each nation would take a 34 percent share of ESA’s portion of the MTG program. German officials then and now say they could have gone higher, outlasting France, but that the compromise finally reached — involving other ESA programs and other ESA governments — was in the general interest.

But here, German officials say, is where they committed a tactical error that has now come back to haunt them. During negotiations at The Hague, Germany did not insist that, in exchange for not taking a higher share than France, Germany be given the MTG prime contractor’s role.

“I am not sure why we didn’t but we didn’t,” one German government official said. “We should have. This is causing us problems now.”

Another German government official defended the compromise, and said the German government officials now blocking the MTG contract award are not the same ones who represented Germany at the ESA ministerial meeting in 2008.

The German space agency, DLR, which is part of the German Economics Ministry, is Germany’s lead ESA delegation. The Transport Ministry is a rare player in space affairs — except for Eumetsat programs.

European government and industry officials said the Transport Ministry is furious that Germany will not be prime contractor for a program in which, due to its place as Europe’s leading economy, it is paying the largest share.

Eumetsat’s ruling council had been scheduled to meet in December to open the process of soliciting MTG contribution approvals from Eumetsat member governments. That meeting then was delayed to March 15 to give ESA time to resolve the satellite contract problem.

It was recently delayed again, to March 26, as it became clear that ESA, despite two months of effort by ESA Director-General Jean-Jacques Dordain, has been unable to win German backing for ESA’s MTG contractor choice.

“What we are faced with now is something that could be disastrous for ESA if the agency agrees to change its decision based on political pressure,” one German government official said. “It is a very delicate issue.”

Another German government official said: “The question here goes to the heart of whether we should favor ESA as a channel for our space investment, or favor national and bilateral projects done outside ESA in which we are sure to have a control that corresponds to our investment. That is what this issue has caused us to think about.”

Even industry officials who are backing the Astrium MTG bid concede that if ESA were to buckle to pressure and reject its evaluation board’s recommendation, it would compromise its credibility for future contract tenders.

“This would be catastrophic for ESA, no one doubts that,” said one industry official whose company is not involved in the Thales Alenia-OHB bid. “Once you open the door to political pressure, the system collapses.”

Several government and industry officials said the situation has been complicated by the fact that Dordain, who has said he would be leaving ESA when his term expires in 2011, may agree to stay on for another four years.

Germany has been informally promised that its candidate will succeed Dordain, who is French. But the German government has not yet settled on a candidate, raising the possibility that Dordain will be asked to serve another term.

Also complicating matters is the fact that ESA Finance Director Ludwig Kronthaler informed the agency the week of March 8 that he would not be seeking a new four-year term and will be leaving the agency in a year’s time. Kronthaler, who is German, has been a key ESA bridge to Germany on the MTG issue.

It remains unclear whether ESA’s March 17 council meeting will be able to resolve the issue to Germany’s satisfaction.

In a brief interview here March 9 during the Munich Satellite Navigation Summit, a high-ranking German Transport Ministry official said a few months’ delay would not endanger MTG.

“There is no urgency to this,” said Klaus-Dieter Scheurle, permanent state secretary at the Federal Transport Ministry. “We are not saying we disagree with [the ESA board] evaluation, we are just saying we would like to verify certain elements of the evaluation. If we needed to wait to the end of the year to decide the issue, that would not be dramatic. I am not saying that is what we will do, but only that it would not be dramatic.”