MUNICH, Germany

Europe’s Galileo satellite navigation program,

which narrowly avoided collapse in November when it received a commitment of 3.4 billion euros ($5 billion) in funding from the European Commission, is entering a new period of tension

concerning its budget, schedule, government oversight and commercial perspectives, European government and industry officials said.

Galileo, a 30-satellite constellation beaming positioning, navigation and timing signals in three frequency bands covering five separate services, received its European Commission commitment following guarantees that, for 3.4 billion euros, the system could be financed and in service by 2013.

But at the Munich Satellite Navigation Summit, held here Feb. 19-21, officials said the system is too sophisticated to be built for that amount of money, and the government oversight too onerous to permit contracts to be signed and the work completed by 2013.

“It’s the elephant in the room: Everyone knows it’s there, but no one dares to mention it because it might throw the whole project into question again,” said one industry official whose company is bidding for Galileo work. “We in industry are in a difficult spot. If we say something, we are accused of making exaggerations to line our pockets. But if we don’t say anything, when the reality hits we will be accused of underestimating costs to avoid the project’s cancellation.”

The European Commission, on orders from European transport ministers and from the European Parliament, is having none of this.

“We have made this very clear: This budget is it for the period,” said Paul Verhoef, director of the satellite navigation unit at the commission’s Transport and Energy Directorate. “Budget reshuffles like the one we got [to fund Galileo] are rare. It is unlikely that the council will agree to another topping up.”

European Transport Commissioner Jacques Barrot, who is also vice president of the commission, said the 3.4-billion-euro figure has been validated by numerous outside experts. Barrot told reporters Feb. 21 that he is hiring an outside consultant to track Galileo financing.

The European Commission

now is financing Galileo by itself, and is transferring contract oversight to the European Space Agency (ESA). But Verhoef said it will be at least several weeks, and perhaps longer, before the legal instruments are in place to permit the transfer of the funds to ESA. Until the funds are transferred, ESA does not have full authority to manage Galileo.

Giuseppe Viriglio, ESA’s director of navigation, said here Feb. 21 that ESA expects to issue an invitation to tender to industry for the main Galileo system components by July. Industrial proposals will be due by late October, with construction contracts signed by late December.

conceded that a 2013 in-service date will be a challenge, even if ESA keeps to this schedule. If the schedule slips, then Galileo will not be ready in 2013.

said 3.4 billion euros remains the best estimate of what it will cost. “It is a good speculation but it remains a speculation. We need to have quotes from industry on what they propose.”

Government and industry officials also expressed concern that the commission’s full ownership of Galileo will slow the project down as the European Parliament, the commission and Europe’s council of transport ministers all assume oversight roles.

One example: The European Parliament has ordered the commission to present, in 2010, a plan for how Galileo will be operated as a commercial business once it is built in 2013. The plan must include an assessment of the market for the prospective Galileo system operator.

The commission was forced to step in to save Galileo in November when it became clear that the private sector would not assume the risk inherent in building and operating Galileo as a business. But the European Parliament still wants Galileo to be managed for profit, under a so-called Public-Private Partnership (PPP), once government funds have been used to build the infrastructure.

Barsi-Pataky, the European Parliament designated lead member for Galileo, made it clear that the parliament, which approved Galileo’s budget, expects to keep a firm hand on developments.

“Galileo is financed by the European Union budget,” Barsi-Pataky said. “That means taxpayer money. As budgetary authority, we are responsible for financing beginning this year. We need to know that in 2013, for 3.4 billion euros and no more, the system will be in place. We have to know what we should plan to the end of the program. I am for a PPP in the operational phase. We have produced a ton of paper for this project. Now we need to start it under very strong controls.”