European Weather Satellite Contract Dispute Appears Resolved

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PARIS — The 18-nation European Space Agency (ESA) is expected to signal final approval June 30 of a contract valued at 1.25 billion euros ($1.5 billion) to build six meteorological satellites, likely ending an extraordinary six-month standoff over program leadership.

The dispute threatened to do lasting damage to ESA, and at times appeared to pit Germany against France, northern Germany against southern Germany and the German Economics Ministry against the German Transport Ministry.

At stake was the leadership, however vaguely defined, of the Meteosat Third Generation (MTG) program, which will deploy satellites with imagers and sounders starting around 2015.

Germany and France vied for leadership and engaged in a bidding war in November 2008 that could have unhinged ESA’s long-term spending plan. A compromise was reached in which each agreed to limit its ownership stake to 34 percent.

ESA is financing about 25 percent of the total MTG program, valued at some 3.3 billion euros, with the 25-nation Eumetsat organization of Darmstadt, Germany, paying the rest. ESA also is responsible for managing the satellite construction contract.


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The German Economics Ministry was responsible for the November 2008 compromise, which left it to ESA to select the MTG prime contractor. Germany at the time believed that Astrium Satellites, as the only major satellite builder with a substantial presence in both Germany and France, was a shoo-in to get the prime contractor’s role.

The German government was so certain of an Astrium victory that it refused an Astrium proposal that the company make a bid with longtime Eumetsat prime contractor Thales Alenia Space of France and Italy, industry officials said.

What was not known at the time was that Thales Alenia Space would strike a deal with Germany’s OHB Technology of Bremen, in northern Germany, for an MTG bid that respected the equal work shares in Germany and France but gave the French company the prime contractor’s role.

Allied with OHB, the Thales Alenia Space bid was substantially less expensive than Astrium Satellites’ offer. ESA selected the French-German team. The Thales-OHB final bid was valued at 1.18 billion euros, with Astrium’s final bid at some 1.34 billion euros, according to government and industry officials.

The German Transport Ministry, which oversees Germany’s Eumetsat membership, refused to accept the decision, blocking the MTG program at Eumetsat, which requires a consensus decision before beginning the program approval process.

ESA agreed to an audit of the award process by an independent committee, which validated the ESA decision.

Still, the German Transport Ministry refused to accept the award, sending a letter to ESA Director-General Jean-Jacques Dordain that demanded a German prime contractor and minimized the work to be done by OHB in the Thales Alenia Space-led bid.

One Astrium official said the company’s opposition to the contract was only to ensure that Germany received what it thought was agreed to at the November 2008 ESA ministerial meeting. “A leading role is what was promised, and when we look at the Thales-OHB bid we do not see that leading role,” this official said. “Making a metal shell is not taking a leading role. A leading role means avionics.”

ESA and other European government and industry officials, meanwhile, began to worry that if the agency bowed to German demands, it would open its contract award procedures to attack from nations just as interested as Germany in protecting their national industrial bases.

“Where is ESA’s credibility if it agrees to start from zero on MTG and annul the decision for the Thales-led team?” one European government official said.

The compromise that was reached the week of June 14 leaves the prime contractor’s role with Thales Alenia Space of France, but assures Astrium of Germany a greater share of some of the work on the satellites’ sounder instrument |payloads.

The agreement resulted in Germany’s ending its MTG objections at a June 21-22 meeting of Eumetsat’s ruling council in Rome, and prepared the way for ESA’s Industrial Policy Committee to approve the Thales-OHB contract on June 30.

Adding Astrium into the mix will result in an increase of about 60 million euros, to 1.25 billion euros, to the contract’s final price. Volker Liebig, ESA’s director of Earth observation, said the final cost is still within the original budget.

Liebig said ESA’s evaluation of the bid already had raised questions about whether OHB, a fast-growing company that recently bested Astrium Satellites for the role of prime contractor for 14 European Galileo navigation satellites, had the resources to manage the development of the sounder.

Liebig said OHB and its Kayser-Threde division of Munich, Germany, will remain prime contractor for the sounder instrument, as well as for the six MTG satellite platforms.

In addition, Thales Alenia Space will transfer some of its avionics expertise, acquired over more than two decades of work as prime contractor for Europe’s Meteosat satellites, to its German partners to ensure that Europe maintains two viable bidders for future programs requiring precise instrument pointing.

“But this was going to be done in any event,” Liebig said of the avionics transfer.