Brussels, 14/10/2008 (Agence Europe) - The cost of Galileo is expected to increase but not exceed two €2 billion. A German newspaper announced last week that the cost of the first EU satellite navigation programme (Galileo) could rise to as high as €5.4 billion, compared with the €3.4 bn earmarked for the current phase of the programme. To date, the cost of the development phase alone (funded equally by the European Space Agency -ESA - and the European Commission) has overshot the budget of €1.5 bn by €380 million, €180 million of which still remains to be funded by ESA member states (the Commission has already agreed to provide €200 million). The real cost of the second phase of Galileo will be known in July 2009 at the end of the selection process for all the main contractors for the purchase of ground infrastructure and satellites (see EUROPE 9744).
Galileo will also see its costs rise due to delays in getting the programme up and running and companies inflating the cost of services. A high-ranking official described ESA's spending policy as “lacking in transparency”. ESA is directly responsible for negotiating the setting up of the system, adding to the raft of systematic budget overshoots compared with the initial sums earmarked for space programmes. When it comes to Galileo, additional costs now need to be factored in due to fines for breaking the initial contract when the programme was reorganised. The changes in the acquisition structure after the collapse of the public-private partnership in May 2007 have resulted in an ending of the contract with the ESNIS consortium (European Satellite Navigation Industries, comprising France's Thales Alenia Space, joint British and German company EADS Astrium, Italy's Finmeccanica and a group of seven Spanish companies, Galileo Sistemas y Servicio) which had been developing and building satellites and were responsible for the ground navigation systems for the satellites. In the end, ESNIS is expected to sell its satellites to the private consortium hired to ensure funding of the system in the future. In addition to these fines, there will be the price increases being demanded by industry (to be negotiated) for developing each of Galileo's six segments (see EUROPE 9555). At present, all the bids submitted by a shortlist of eleven for getting the system running overshoot the upper financial limits set by the Commission, and this is just the first of the three rounds of negotiation in what is known as a “competitive dialogue” among the shortlisted eleven candidates - the results of which will be known half way through next year. According to close sources, the Commission may look into monitoring these negotiations with ESA in some way. (A.By./trans fl)