European Commission Picks Underdog To Build 14 Galileo Navigation Satellites

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PARIS — The European Commission’s Jan. 7 selection of a team led by OHB Technology of Germany to build 14 Galileo timing and navigation satellites is the second time in a decade that upstart OHB has delivered a blow to its larger competitor, Astrium Satellites, which came away empty-handed in this first round of Galileo contract awards.

Astrium, with major operations in Germany, France and Britain, teamed with ThalesAlenia Space of France and Italy to form a consortium that by almost any measure — revenue, production capacity, satellite manufacturing experience, engineering depth — is several times the size of OHB and its partner, small-satellite specialist Surrey Satellite Technology Ltd. (SSTL) of Britain.

The size difference made it easy to portray the OHB-SSTL Galileo consortium as an underdog in the selection process.

That was certainly the case in 2001, when an even smaller OHB bested Astrium’s German division in a contest to build Germany’s first dedicated military satellite system, the SAR-Lupe radar reconnaissance constellation. The five SAR-Lupe satellites are now in orbit and operating as planned, according to German military officials.

The Brussels, Belgium-based commission said Bremen-based OHB would be awarded a contract valued at 566 million euros ($810 million) to build 14 satellites to be launched starting in October 2012.

Officials said the Astrium-led team’s bid was substantially more expensive. One government official said “it was clear” that OHB was the winner after an evaluation by the commission and the European Space Agency (ESA) of technical merit and price.

Eighteen more Galileo satellites are to be ordered as part of the first-generation Galileo system, with each new tranche to feature fresh competition between the OHB and Astrium consortia. In its Jan. 7 announcement, the commission said the winner of each tranche would be selected based on “which company provides the most advantageous offer.”

But it added: “The Commission intends to follow a strategy of double sourcing to lower risks, particularly in terms of delivery timings, and increase flexibility.”

The Astrium-led consortium is already under contract to build four Galileo in-orbit system validation satellites, scheduled for launch on two Soyuz vehicles in late 2010 and early 2011.

The commission announced a separate contract with Arianespace of Evry, France, to provide five Arianespace-operated Russian Soyuz rockets from Europe’s Guiana Space Center in French Guiana. Two Galileo satellites will be carried on each Soyuz under the contract, valued at 397 million euros.

The commission has a firm, fixed-price option to purchase two additional Soyuz launches but expects instead to purchase one heavy-lift Ariane 5 vehicle that will carry four Galileo spacecraft to complete the initial 14-satellite order.

European Commission Vice President Antonio Tajani said the five Soyuz launches would occur at three-month intervals, and that initial Galileo services — in

cluding the encrypted Public Regulated Service for government agencies and the search-and-rescue service — would be available starting in early 2014. The commercial and safety-of-life services, however, will await deployment of the full 30-satellite constellation.

Paul Verhoef, head of the Galileo office at the commission, said Galileo program managers would like to use two launch vehicles for the program to reduce risk, and expect to contract for an Ariane 5 launch for the last four satellites in the 14-satellite order.

In a Jan. 7 interview, Verhoef said ESA in the coming weeks is expected to sign a contract with Astrium Space Transportation — the Ariane 5 prime contractor — to adapt the Ariane 5 launcher for Galileo. Until that work has started, he said, the commission wants to keep its options open.

“Our contract with Arianespace includes an option to purchase two more Soyuz rockets instead of an Ariane 5 if we need to,” Verhoef said. “The option expires at the end of April. So we are protected. But we do need a backup launcher and we expect to sign for an Ariane 5 once work is under way to adapt the vehicle to Galileo.”

The commission’s contract includes fixed-price options for up to eight additional Soyuz vehicles beyond the five firm orders, and up to three Ariane 5 launches, to cover the requirements of the full constellation. These options expire in 2012.

The per-launch price of 79.4 million euros for the Soyuz vehicles is substantially higher than what the commission had expected to pay.

Verhoef said the rise in launch prices in the past year or two is one of two unanticipated factors putting stress on the commission’s Galileo budget. The other is a charge of about 375 million euros in cost overruns for Galileo’s in-orbit validation program, which includes much of the system’s ground infrastructure and the four test satellites to be launched in 2010 and 2011.

Galileo contractors won their argument with the commission that the additional charges were the result of customer changes in contract specifications and not due to contractors’ padding their accounts with unnecessary purchases. The result is that the commission is reimbursing industry for the entire sum.

“It may be that we made our estimates when launch prices were unreasonably low,” Verhoef said. “But the fact is that taken together, the in-orbit validation charges and the difference between what we expected to pay for launches and what we now will have to pay is about 1 billion euros. This is the reality that we are faced with, and we have little choice but to accept it.”

At a Jan. 7 press briefing on the Galileo awards, Tajani acknowledged that Galileo’s system costs may rise above what the commission and the European Parliament have set as a limit.

“I don’t want to hide from this,” Tajani said. “There may be a problem with the total cost. But I can’t say today that this is the case. We have asked our experts and the European Space Agency to make an updated evaluation and when it is made we will communicate it.”

A third Galileo contract, valued at 85 million euros, was awarded to ThalesAlenia Space Italy for Galileo system support services and system validation with the European Space Agency. ThalesAlenia Space said in a Jan. 7 announcement that the contract value covers the period from 2010 to 2014, while the overall work package continues to 2016. The final two years will be financed at a later date.

The three remaining principal Galileo contracts — for ground mission infrastructure, the ground control infrastructure and operations — will be awarded in mid-2010, the commission said.