With Galileo Contracts at Stake, Disagreement Over Way Forward

LE BOURGET, France — European government and industry officials continue to dispute the best way to contract and deploy the 30-satellite Galileo navigation and timing constellation even as final bids are prepared for the satellites and launch services.

In what may be a sign that the European Commission, as Galileo’s paymaster, is succeeding in its goal of using a competitive Galileo procurement to shake up
Europe
‘s space sector, government and industry representatives openly disagreed about Galileo’s direction here June 15-19 during the Paris Air Show.

The European Space Agency (ESA) said its current thinking is that all 28 of the Galileo satellites to be contracted late this year would be launched, two at a time, by Russian Soyuz rockets operated from
Europe
‘s
Guiana
Space
Center
in
French Guiana
.

“It’s simple economics,” said Rene Oosterlinck, ESA’s director of navigation. In a June 16 interview, Oosterlinck said
Europe
‘s heavy-lift Ariane 5 rocket would be reserved as a backup in the event of a Soyuz problem.

The current Ariane 5 ES version that would be used for Galileo can carry just three 750-kilogram Galileo satellites, with a four-satellite capability possible only after a modification of its upper stage that would cost up to 50 million euros ($70 million).

But Alain Charmeau, chief executive officer of Astrium Space Transportation – Ariane 5’s prime contractor – said it is all but certain that several Ariane 5 vehicles will be used for Galileo to reduce European dependence on Russian hardware for a program meant to showcase European strategic autonomy.

In a June 17 press briefing, Charmeau said the Ariane 5 ES version’s upgrade has little to do with changing hardware and mainly concerns designing a Galileo payload dispenser and studies on mission optimization to place the four satellites into Galileo’s medium Earth orbit.

Similarly, Jean-Yves Le Gall, chief executive of the Arianespace launch consortium that markets Ariane 5 and will market Soyuz, said he has a written request from the European Commission asking that Arianespace – the sole company bidding for the work – make a proposal featuring both Soyuz and Ariane 5 rockets.

ESA and the European Commission appear to favor dividing the satellite construction contract into two stages to permit a later modification of the design, as needed. In addition, the two government agencies have given indications that they may divide the first satellite contract between the two bidders – consortia led by Astrium Satellites and by OHB System.

On June 15, ESA awarded contracts to begin development of long-lead satellite components – those whose development takes longest – to both consortia. Astrium Satellites received a contract valued at 7 million euros, with OHB receiving 10 million euros.

Oosterlinck
said awarding two contracts should not be seen as an indication that ESA will be dividing the Galileo contract between the two bidders; rather, it is meant as an insurance policy to reduce the possibility of further development delays. The hardware produced by the contracts will belong to ESA and likely will find some use elsewhere if one of the two contractors is not selected for final construction, he said.

Evert
Dudok, chief executive of Astrium Satellites, urged ESA and the European Commission not to divide the satellite construction contract, whose budget is 840 million euros

“Don’t change the rules in the middle of the game,” Dudok said during a June 16 press briefing. “If it’s a competition, let’s have one winner and one loser. It has to be winner-take-all or we will be in a real mess.”

ESA and the European Commission are considering three scenarios: Ordering all 28 satellites from one of the two bidders; ordering 16 satellites from one bidder, with 12 to be competed later to stretch out the budget and permit rapid modifications to the satellites if need be; and a third option in which each bidder gets an order for eight satellites, with the final 12 to be competed at a later date.

“It is not a budget issue, it is a question of design flexibility,” Oosterlinck said.

Dudok
said the most financially efficient solution is to order all 28 satellites from a single contractor. Giving Astrium and OHB eight satellites each would raise the total cost of the satellite procurement by as much as 35 percent because neither contractor could generate scale economies. If one consortium is selected to build 16 satellites, with 12 to be competed later, the satellite price tag would go up by 15 percent, he said.

Dudok
sharply criticized what he said was a political desire in some government circles to “create a third satellite prime contractor” in Europe alongside Astrium Satellites and ThalesAlenia Space, which is on Astrium’s Galileo team and may be on OHB’s team as well.

Dudok
did not mention the German government by name, but it is Germany that has been most active in promoting OHB as a prime contractor, saying OHB is fully German, whereas Astrium is at least as French as it is German, in addition to Astrium’s substantial operations in Britain and Spain.

Marco Fuchs, chief executive of OHB Technology, which owns OHB System, dismissed Dudok’s remarks. “No one can know what price penalties you pay by contracting with two bidders until they have seen the actual bids,” Fuchs said June 18. “Astrium doesn’t know our bid price, and we don’t know theirs. And even if you suppose that non-recurring engineering costs will be relatively higher if you use two contractors, you get the advantage of maintaining a competitive environment for future orders.”