Three-sided Galileo talks continue

GPS World, April, 2005

The Galileo Joint Undertaking (GJU) has decided to continue negotiating with both consortia competing for the Galileo concession contract rather than naming a primary bidder as expected.

"We have received two great offers," Rainer Grohe, GJU executive director, said of the bids by iNavsat (a team led by EADS, Thales, and Inmarsat) and Eurely (led by Alcatel, and the Italian group Finmeccanica, along with Spain's Aena and Hispasat). "Both are so great that they deserved a serious negotiation."

The Galileo concessionaire will be responsible for completing the Galileo constellation and ground segment, now being built under the auspices of the European Space Agency (ESA), and for running the system over the next 20 years. The European Union (EU) has set a goal that two-thirds of the investment in Galileo will come from the private sector, which both teams' bids have reportedly met.

Representatives of iNavsat and Eurely expressed surprise at the decision and said they believed that their team's bids had been preferred by the GJU. Speculation immediately arose that the European Commission (EC), the most influential stake-holder in the Galileo concession process, had intervened in the decision and hoped to create a "fusion" proposal combining elements of the two teams' proposals and balancing the geographic membership in the concession.

In March 9 remarks at the Munich Satellite Navigation Summit, Heinz Hilbrecht, director for land transport and Galileo for the EC's directorate of transport and energy, refuted such speculation. "We would have loved to have had a winner on the first of March," Hilbrecht said. "The EC has not lobbied the Galileo Joint Undertaking. We are not talking of a merger. We from the EU [European Union] want a decision; we want a leader; we want competition to play its full role."

Although a losing or secondary bidder would almost certainly have been kept in the picture to bring pressure on the primary concession candidate during final negotiations, the GJU and EC officials appear to believe that keeping both teams would elicit greater concessions from the private sector. Jacques Barrot, EC Vice-President, said, "Opening simultaneous talks on the concession agreement will also make it possible to improve the two candidates' proposals, to the greater benefit of the Galileo project."

Representatives of iNavsat and Eurely indicated that parallel negotiations might well keep both teams in full competitive mode, rather than create a situation where one team would negotiate details of a "merged" proposal from a position of strength.

Grohe and Hilbrecht indicated that both remaining consortia's bids had been much improved during negotiations in the past three months and that they hoped similar progress would occur over the next three months. "I am convinced that this decision will prove the most beneficial for the public and I envisage that within the next three months, it will become clear with whom the GJU will continue the final negotiations," Grohe said.

"Both bids have confirmed the commercial viability of Galileo," Hilbrecht said, although a similar conclusion had already been reached by the Transport Council in December. "Mr. Grohe can now turn to the other leading issues, especially the risk-sharing between public and private side." The EC and GJU still are aiming for a final concession contract by the end of 2005.

The concession process was launched in October 2003 and four groups initially submitted bids. One team subsequently withdrew from the competition and the GJU dropped the other candidate from its list of prospects last year.

Delays in negotiating various aspects of the program have already put Galileo about two years behind schedule, although EC and GJU officials are still holding out hope for beginning full operations in 2008. In its December communication, the Transport Council underlined "the need to do the utmost, in the negotiations for the concession contract, to catch up after the delay in the start of the development phase with a view to beginning operation as from 2008."

The program faces a deadline of June 2006 for at least one spacecraft to be launched to claim the frequencies allocated to Galileo under international agreements.