OHB To Build 8 More Galileo Satellites

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PARIS — The European Commission has selected OHB AG of Germany over Astrium to build eight more Galileo positioning, navigation and timing satellites following a replay of a competition for the first 14 spacecraft that OHB won in 2009, according to industry officials.

The contract, valued at around 200 million euros ($267 million), will give Bremen-based OHB and its main partner, payload supplier Surrey Satellite Technology Ltd. (SSTL) of Britain, an uninterrupted production cycle as they continue work on the 14 satellites already under contract and then move on to the eight nearly identical spacecraft now being added.

The European Commission, which is the executive arm of the 27-nation European Union and is owner of the Galileo project, is expected to announce its selection of OHB the week of Feb. 1.

The commission is also expected to sign a contract with the Arianespace launch consortium of Evry, France, to provide a heavy-lift Ariane 5 rocket for a launch of four Galileo satellites. Up to now, the commission has elected to use only the Europeanized version of Russia’ Soyuz rocket for Galileo. This vehicle can carry two Galileo satellites at a time into medium Earth orbit.

One industry official said the contract would include options for two more Ariane 5 vehicles.

It is unclear whether the commission will immediately contract with Arianespace to undertake the Ariane 5 modifications needed for the Galileo launches. Government officials have estimated that these modifications to the Ariane 5 structure would cost about 50 million euros.

In the 2009 Galileo satellite competition, OHB bested Astrium Satellites of Germany, which was then allied with Thales Alenia Space of France and Italy, for a 14-satellite contract valued at 566 million euros. For the second order for six to eight satellites, the commission had demanded the bidders to offer prices reflecting the design work that has already been invested in the first order.

The problem for Astrium was that the new contract called for satellites that resembled those being built by OHB and not the four Galileo in-orbit-validation satellites Astrium and Thales Alenia Space have built. As such, Astrium officials said they were at a disadvantage in this fresh competition with OHB.

Astrium Chief Executive Francois Auque conceded as much in Jan. 19 comments to journalists, saying the disadvantages to Astrium inherent in the competition were so formidable that the company might not have bid at all were it not for its “sporting nature.”

What is more, Auque said, Astrium’s ownership of SSTL means Astrium generates more profit if OHB wins the competition and uses Surrey to build the payloads than it would if Astrium won the bidding as prime contractor.

Industry officials have estimated that Astrium, through SSTL, takes home about 50 percent of the total Galileo satellite contract revenue for OHB-built Galileo satellites.

What Auque did not say was that Astrium had decided on a new approach in seeking to win the second round of Galileo satellite construction. Instead of using an Astrium-built satellite skeletal structure, or bus, it would use a platform developed by SSTL for that company’s planned entry into the geostationary satellite telecommunications market. The platform would also borrow from SSTL’s work on the Giove-A satellite, which was launched in December 2005. Giove-A’s main mission was to secure radio spectrum for Galileo, which is designed as a 30-satellite constellation in medium Earth orbit.

The 660-kilogram Giove-A, built in 30 months for 28 million euros, was designed to last for little more than two years in orbit. It is now in its seventh year and is still functioning.

For the payload, Astrium decided, apparently recently, to replace Thales Alenia Space’s electronics with a payload suite built by SSTL using the same basic design that SSTL is providing to OHB — the same design OHB incorporated into both its Galileo bids.

But to employ these SSTL-based elements in its bid, Astrium was forced to make educated guesses about costs based on public domain information about SSTL’s product line. Astrium’s ownership of SSTL had obliged the two companies to create firewalls between their operations with respect to all Galileo work.

The legal propriety of Astrium using SSTL hardware as the core of an Astrium Galileo bid is a subject of debate. To avoid any conflicts, SSTL had refused to join Astrium’s bid and did not provide price quotes for the Astrium to include in its bid to the European Commission, citing its agreement with OHB.

This produced the unusual situation in which Astrium was making a firm, fixed-price contract bid for up to eight satellites without the participation, or cooperation, of the company designated as the provider of most of the hardware.

One industry official said the Astrium move was “a clear conflict of authority that could have faced legal challenge under European law” if the commission had selected it. Another disagreed, saying that nothing prohibited Astrium from incorporating SSTL into its bid, so long as Astrium accepted responsibility for the bid specifications and costs, no matter what it ultimately negotiated with SSTL.

“As long as Astrium had no direct knowledge of SSTL’s bid with OHB, I am not sure there is any legal constraint that would prevent Astrium from doing this,” this industry official said.

The company clearly left out in the cold was Thales Alenia Space, whose officials until recently had assumed they were the payload provider for the Astrium-led bid. As such, they said, Thales Alenia Space, whose work on non-geostationary-orbit satellites includes the Globalstar and Iridium mobile communications constellations and the O3b Networks broadband project, did not make its own bid.

Including the new eight-satellite order, the commission will have contracted for 26 Galileo spacecraft — four In-Orbit Validation satellites, two of which are in orbit; and 22 satellites from OHB.

The commission is expected to order six more spacecraft in 2014, once its new seven-year financial cycle starts and it has available cash.