First Eight Galileo Spacecraft Said to Go to Germany’s OHB Technology

by

PARIS — The European Commission has selected OHB Technology of Germany to build at least eight Galileo navigation and positioning satellites for about 350 million euros ($525 million) in a decision that postpones any award to competitor Astrium Satellites pending further negotiations with Astrium, industry officials said.

The commission is expected to inform European Union member states of its decision the week of Dec. 9, officials said.

One industry official said the decision, which was not expected, already has provoked a strong negative reaction in southern Germany, where Astrium had planned to perform much of its Galileo work, and that political pressure will be applied to reverse the ruling in the coming days.

The OHB- and Astrium-led consortia have been negotiating with the commission and its technical adviser, the European Space Agency (ESA), for some 15 months on the Galileo contract. The commission had set a contract ceiling of 840 million euros to build 28 Galileo satellites before deciding recently to limit the total order to 22 satellites.

The commission and ESA asked the two consortia each to submit priced bids for eight, 14 and 22 satellites. The widely held assumption among European government and industry officials was that the OHB-led consortium, which includes small-satellite specialist Surrey Satellite Technology Ltd. of Britain, did not have the industrial depth to build all 22 satellites. But a strong predisposition at the commission to maintain competition in the Galileo program would make it difficult to select the Astrium consortium to build all 22 satellites, they said.

Government and industry officials had said the most likely outcome was for OHB to win eight satellites and the Astrium team, which includes ThalesAlenia Space, to be given the order for 14 satellites. The two would then battle for the next Galileo order expected in a couple of years to complete the constellation.

Industry officials said they still view that scenario as the most probable outcome, and that the situation remained confused as of Dec. 4. But they said they were surprised to learn that the commission had decided to withhold any award to Astrium for what two officials said was Astrium’s noncompliance with the commission’s bidding guidelines.

These officials said committing to remain within the price ceilings for the three potential order sizes — around 400 million euros for eight satellites, 650 million euros for 14 satellites and 840 million euros for all 22 spacecraft — was viewed as indispensable by the commission. Any caveats or qualifiers to the bid price could be considered as noncompliant, they said.

The chief executives of Astrium and ThalesAlenia Space on Dec. 4 declined to address the status of their Galileo bid. But at a conference here organized by the French Aeronautics and Astronautics Association (AAAF), they questioned whether the competitive procedure organized for Galileo was in the best interests of taxpayers.

“If we are going to be in a competitive situation, it should begin at the start of a program and not in the middle,” ThalesAlenia Space Chief Executive ReynaldSeznec said. “The jury is still out” on whether the Galileo selection process ultimately will be viewed as a valuable undertaking, he said. “I believe the competition has added not much value. At any rate, it’s debatable.”

Astrium Chief Executive François Auque, in what he described as “an understatement,” said: “When we look at the results, I am not sure the 

Galileo program should be held up as an example to be followed. As far as the outcome — we’ll see in 2020.”

Fritz Merkle, a member of the executive board of OHB, addressed the same issue differently: “It has been good for the taxpayers,” Merkle told the conference, referring to the Galileo competition.

Under current planning, the Galileo system is expected to be at least partially operational by 2014.

Astrium and ThalesAlenia Space both invested in Galileo plant and equipment several years ago when their companies had been given sole charge of the program by ESA and the European Commission. It was a period during which Galileo’s commercial potential was viewed as so promising that a private-sector operator would invest in the system in return for a concession to operate Galileo as a business.

That business model subsequently collapsed as Galileo’s risks were viewed as too high for the private sector to invest. The consortium of Europe’s biggest space-hardware builders that had been given the early Galileo work was broken up by European governments unhappy with the consortium’s early work and hungry to reintroduce competition into what had become a more conventional government procurement.

Astrium and ThalesAlenia Space officials say some of the investments they made in early Galileo development were financed on the assumption of a contract to build the full constellation.