PARIS — The European Commission is expected to propose May 16 that the Galileo satellite-navigation project be financed by government funds instead of a mixed public-private partnership and that an industrial consortium assembled to build the satellites be split in two in the interests of competitive bidding, European government and industry officials said.
The decision to scrap the approach adopted years ago to have the private sector finance two-thirds of the cost of deploying the 30-satellite constellation — and 100 percent of a replacement constellation in 12 years — validates the argument against that approach that was made early in Galileo’s life by the French and Italian governments. The move also is a blow to the most ardent backers of public-private partnerships, notably Britain, Germany and the Netherlands.
“We have evaluated all the options and concluded that the way to get Galileo into operations as quickly as possible, and as inexpensively as possible, is to have it built entirely with public investment,” one government official said. “We believe that if the decision is accepted quickly, we can have Galileo in operation by the end of 2012. If we continue along the same track we have been on for the past couple of years — with the endless negotiations with [industry] on the Galileo concession — we would not be in operation before 2014.”
The immediate next question for Galileo is how and when the commission will receive authorization to proceed with a project that now will cost European taxpayers an estimated 10 billion euros ($13.6 billion) over 20 years.
This figure is several billion euros more than would have been spent had the private sector been as enthusiastic about the project as European governments had hoped and assumed would be the case.
Exactly how much more expensive Galileo will be now for European taxpayers is impossible to evaluate, government and industry officials agreed.
“With the complicated dealings over the private-public partnership, the project was getting substantially more expensive by the month, in part because of the complications of having the private sector on board as an owner,” a government official involved in the satellite-manufacturing negotiations said. “Going back to a classic procurement regime will cost taxpayers more, it’s true. But money will be saved as well, so the net additional cost is not easy to estimate.”
The European Commission’s May 16 recommendation is expected to be reviewed by European Union transport ministers June 7. Assuming that the recommendations are approved, the European Parliament will then be consulted, as will individual European governments.
As a face-saving measure to those who have insisted on private-sector involvement in Galileo ownership, the European Commission is likely to propose that, once it is built and tested in orbit, the Galileo system be handed over to a private consortium to operate it as a business.
But even this idea is viewed by some as dubious given the lack of a clear market for Galileo signals — one of the principal reasons for the collapse of the original cost-sharing model.
The commission’s move to abandon the public-private partnership for Galileo has been gradual but has accelerated since January, when Germany assumed the six-month revolving presidency of the European Union.
The German presidency ends June 30. One official said there is a slight chance that the European heads of state would be asked to endorse the new Galileo approach when they meet in late June. If this occurs, this official said, the delays to the program will be minimal.
The European Space Agency (ESA) has financed half of the 1.5 billion euros spent on Galileo thus far, with the European Commission’s transport budget providing most of the rest.
One Galileo test satellite is in orbit, with a second, more-sophisticated spacecraft scheduled for launch late this year. This second satellite will carry a payload, including two types of atomic clocks, that is more representative of the entire Galileo constellation.
Four more Galileo satellites are under construction as part of a billion-euro contract already signed with an industry consortium. This Galileo In-Orbit Validation contract also includes initial investment in the elaborate network of ground facilities needed for Galileo to operate.
The In-Orbit Validation contract is being managed by a consortium of companies, including Europe’ s biggest satellite manufacturers, that has had trouble working as an integrated unit with a recognized hierarchy.
If the commission has its way, this group will be split in two to open the Galileo manufacturing contract to competitive bidding. This decision likely will run into opposition from some European governments who fear their national industries may lose out in a competitive bid.
Officials said one solution might be to borrow from the U.S. government’s experience with the GPS positioning, navigation and timing constellation. For GPS, the U.S. Air Force alternates between two prime contractors, Boeing and Lockheed Martin.
