Editorial: A Troubling Precedent


The settlement of the dispute over the industrial work share on Europe’s next generation of geostationary-orbiting weather satellites is welcome news in that it allows the program to move forward, but the entire episode was unsettling.

Officials in Germany’s Transport Ministry were so indignant that a French company, Thales Alenia Space, beat out the German division of Astrium Satellites for the Meteosat Third Generation (MTG) space segment prime contract that they effectively blocked the start of work on the program for nearly six months. As Europe’s largest economy, Germany is the biggest contributor to the European Meteorological Satellite Organization (Eumetsat) and thus to the 3.3 billion-euro ($4 billion) MTG program. Without Germany’s approval, it was virtually impossible for the European Space Agency (ESA), which managed the MTG competition, to award the contract. Transport Ministry officials were not mollified by the fact that Thales Alenia Space’s MTG bidding partner, OHB Technology of Germany, was assigned a large share of the work; nor did they budge when an independent evaluation panel confirmed that ESA made the correct decision in selecting Thales Alenia Space’s 1.18 billion-euro bid over the 1.34 billion-euro offer from Astrium Satellites.

The impasse was resolved only when ESA agreed to carve out a role for Astrium Satellites in developing the MTG sounders, a move that will add some 60 million euros to the cost of the program. OHB’s Kayser-Threde division will remain lead contractor on the sounders, which will take vertical profiles of atmospheric humidity and temperature. ESA officials suggested that this change strengthens the program since the agency’s bid evaluators had identified the sounders as a potential development challenge for OHB, which is rapidly expanding to fulfill its contract to build 14 satellites for Europe’s Galileo navigation system.

As compromises go, this is not an unreasonable one. Even with the added cost of the Astrium work, the price of the MTG space segment is still well below what Astrium originally proposed for the prime contract and, according to ESA officials, within the agency’s budget guidelines.

The German Transport Ministry, which oversees Germany’s participation in Eumetsat, saves face while the country gets a wider geographic spread of its MTG work: Astrium Satellites — the losing bidder for the Galileo contract — is located in southern Germany while OHB is in the north.

Most importantly, the integrity of the ESA procurement process remains intact; reversing the selection of Thales Alenia Space to placate Germany would have completely undermined the agency’s ability to run multinational programs.

But it’s unfortunate that it came to this. Germany has every right to expect an industrial return commensurate with its national investment in MTG, but this was a competition that Thales Alenia Space apparently won fair and square. Eumetsat is funding 75 percent of MTG, with ESA responsible the rest. ESA’s policy of assigning work to its members in proportion to their contributions to a given program led Germany and France to try to outbid one another for the lead role on MTG. They later agreed to contribute equal sums to ESA’s portion of the program — 34 percent each — thus giving ESA the freedom to award the prime contract based on value for the money. Germany might have assumed Astrium would prevail in the competition given the fact that, unlike Thales Alenia Space, Astrium has major facilities in France and Germany. But if the outcome of a competition is predetermined then there’s little benefit to holding it in the first place.

The question now is whether Germany, in throwing up obstructions when things didn’t go its way, and ESA, in granting concessions to Germany to get MTG moving, haven’t set a bad precedent. ESA’s geographic return policy, for all its flaws, tends to preclude conflicts of this sort, but Eumetsat and the European Commission — and the latter has taken on a much larger role in space development programs in recent years — have no such policy. Will the MTG example encourage similar contract challenges on future European Commission-led programs whenever a country feels its industry has been shortchanged? That remains to be seen, but it now seems more likely.