he European Commission and the European Space Agency (ESA), the two government bodies overseeing Europe’s Galileo project, are battling about the degree to which they should open up the contract bidding on the satellite navigation system
– especially to U.S. and other non-European companies.


The issue has led some government officials to raise the specter that Europe’s flagship space endeavor could end up being farmed out to U.S., Russian or Chinese companies in the interests of getting the best value for money.


“Do we have to open it up to worldwide competition?” asked Jean-Jacques Dordain, director-general of the 17-nation ESA, which is overseeing Galileo contract awards using funds provided by the commission of the 27-nation European Union.


“ESA will evaluate the contract bids and look for the best value,” Dordain said here June 5 during a space policy conference organized by the Parliamentary Space Group of France. “But we are still debating this issue with the European Commission. If the result of our evaluation is the selection of a U.S. satellite platform carrying a Russian payload and launched by a Chinese rocket, there is certainly a way to build Galileo less expensively – just continue to use GPS.”


Galileo is a 30-satellite constellation resembling
the U.S. GPS network. It is scheduled to be in service starting in 2013, a date that many question but one that is forcing the selection of Galileo satellite contractors by late this year. To keep to that schedule, ESA must send out bid requests this summer in time to perform a detailed evaluation, then negotiate final terms in time for contract signatures by next spring.


But with the decision by the European Commission to finance Galileo’s deployment, ESA’s role has dropped from co-sponsor to one of prime contractor to the commission. Unlike ESA, the commission does not operate on the geographic-return principle guaranteeing each national government that its industry will receive contracts proportionate to the government’s financial contribution. The European Commission, backed by its government members, has insisted that its rules, not ESA’s, be used for Galileo.


In an April 4 policy document that affirmed the commission’s decision to finance Galileo on its own, the European Council – the commission’s governing body – underlined that Galileo contracts “should aim, first and foremost, to attain value for money, control costs, mitigate risks and improve efficiency and decrease dependencies on single sourcing.”


The policy says further: “European industries should have the possibility to rely on non-European sources for certain components and services in case of demonstrated substantial advantages in terms of quality and costs, taking account of the strategic nature of the European [satellite navigation] programs and of the EU security and export control requirements.”

It is this language that has Dordain concerned, and he is not alone. The German government, which is the European Union’s biggest financial contributor, is arguing that Galileo should be contracted under ESA’s rules despite the fact that the commission is paying the bill.


“Space is not just another market,” said Johann-Dietrich Woerner, chairman of the German aerospace center, DLR, during the June 5 conference here. “Space has its own rules.”


Woerner said in a May 28 interview at the Berlin air show, ILA 2008, that Germany is concerned that a Boeing or a Lockheed Martin might be permitted to bid for major Galileo work packages.

Some European industry officials
also are worried about the consequences for Galileo if it were thrown wide open to competition. “We see a collision between ESA and the EU” on Galileo, said Denis Ranque, chief executive of Thales Group. Thales owns 67 percent of satellite builder Thales Alenia Space. “We know that ESA’s geographic-return rules need to be modified. But the EU imposes competition. This is an error. Galileo is unique in Europe – it is the first [all-European] infrastructure program that Europe is building. We can’t apply rules that were designed for other things.”


Asked to comment on the Galileo procurement issue, Paul Verhoef, head of the Galileo unit at the European Commission, said June 6: “We are bound by the EU procurement rules that are based, in part, on our [World Trade Organization] commitments that cannot be ignored. The Council and European Parliament have imposed the use of the EU procurement rules and ESA has accepted to act for us as procurement agent on that basis.”