The European Union and European Space Agency (ESA) did not bargain for a 400 million-euro ($483 million) cost overrun on the In-Orbit Validation phase of the Galileo satellite navigation project, but now that they are faced with it they need to bite the bullet and cover it before the program bogs down worse than it has already.
ESA, whose ruling council balked at committing to pay its 50 percent share of the overrun during a June 22 meeting, will have another opportunity in late July. ESA should take care of business at that opportunity, and the European Union should follow suit. Delays will at minimum prolong negotiations on a contract with the broad-based industry consortium that was selected June 27 to operate the satellite system as a business.
Galileo, Europe’s civilian answer to the United States’ hugely popular but military-operated GPS satellite navigation system, is a tremendously ambitious and challenging undertaking. Although by no means easy from a technical point of view, the biggest challenges are political. It requires consensus not only among the 25 members of the European Union, but also among the 17 ESA member states. Further complicating matters, national representatives to ESA and the European Union tend to come from different government ministries, each with its own agenda.
The Galileo work has to be divvied up in a way that makes all the major contributors happy, regardless of whether such arrangements are the most efficient, economical or are likely to result in the best technical approach to building and maintaining the 30 Galileo satellites and related infrastructure. The fact that the Galileo Joint Undertaking, the governmental organization overseeing the program, felt compelled to select both consortia that were competing for the Galileo operating concession is a perfect case in point. It will be interesting to see how the final work share is allocated among the companies in the merged consortium.
But tortuous work-sharing arrangements are a fact of life on major international undertakings like Galileo. So are disagreements, which seem to have cropped up at nearly every turn on the Galileo program. Although European governments are sufficiently committed to Galileo to have resolved these disputes, the result in many cases has been lost time. And that translates into wasted money.
Unfortunately, cost overruns resulting from technical difficulties and programmatic changes are another fact of life on big space development projects. The recent 400 million-euro Galileo overrun may be the first of any real significance on the program, but it probably won’t be the last.
Securing Galileo contributions from non-European countries such as China and Israel, while helping to spread the burden of Galileo’s financing, will not solve the cost-growth problems. It may even exacerbate them. Integrating new partners, each with its own technical standards and interfaces, into complex space projects tends to generate costs that are not anticipated at the outset.
Further, contributions from outside Europe will come with expectations in terms of industrial participation, and this already is a source of concern among some European companies.
Meanwhile, the Galileo program plan calls for negotiations with the industrial concessionaire to be completed by the end of 2005 or very early in 2006. ESA has estimated that for each working day the negotiations drag into next year, Galileo’s cost will rise by about 1 million euros.
There can be little doubt that these negotiations will be lengthy and difficult. The British Skynet 5 military satellite communications program, which is similar in some respects to Galileo but not nearly as complex, offers a notable example. The British Defence Ministry selected Paradigm Secure Communications in February 2002 to manage the Skynet 5 satellite system under a quasi-commercial arrangement, but the final contract was not signed until some 18 months later.
Negotiations on the Galileo concession contract cannot even begin in earnest until there are firm government commitments in place to cover the cost overrun on the In-Orbit Validation phase of the program. It will be difficult enough for the industry consortium to turn a profit on the 20-year program given the investments it is expected to make in the Galileo’s full deployment, maintenance and operation. The group simply cannot accept the possibility that it also will be saddled with costs associated with the In-Orbit Validation phase of the program.
The European Union, ESA and industry have a tough road ahead of them on Galileo. Stalling on paying the cost overruns, or holding out in hopes of gaining some relatively minor national accommodation, will only make the program more difficult — and expensive — for everybody in the long run.
