A winner between the two consortia in competition for the concession contract to operate the European Union’s (EU) Galileo satellite-based navigation system was supposed to be announced on March 1. However, the Galileo Joint Undertaking (GJU), the organization formed to name the winner, instead announced its plans to extend the review period and continue negatiations between the two consortia.

In a press release issued by the GJU, the organization’s executive director said, “Both consortia substantially improved their original bids from September 2004,” referring to the revised bids submitted by Eurely (the consortium led by Alcatel, Finmeccanica and Hispasat) and iNavSat (the consortium led by EADS Space, Inmarsat and Thales). “That is why it proved valuable to extend the phase. Both consortia demonstrated [the capability] to act as concessionaire. Due to this fact and in order to achieve the best value for the public, I have decided to invite both consortia for parallel negotiations on the concession contract. I am convinced that this decision will prove the most beneficial to the public and I envisage that within the next three months, it will become clear with whom the GJU will continue the final negotiations.”

The release noted that the evaluation of the first offer was based on business and finance, technical compliance and contractual compliance; the evaluation of the last offers was based on risk allocation and financial matters. The release did not state what will be evaluated during the forthcoming negotiations. Officials from the GJU were not made available to Satellite News to discuss the delay.

Mixed Reactions

Following the announcement by the GJU, the Eurely consortium issued a statement saying it “is pleased that the GJU has again recognized the quality of its Galileo concession offer and is confident that its proposal will finally be selected as the preferred solution for the success of it construction, operation and exploitation.”

The statement added, “To be able to completely fulfill the future GJU requirements, the Eurely founding members ask for detailed information about the existing decision process. Of particular interest are the exact evaluation criterion, the technical reports and independent consultant analysis, which led to both GJU decisions in October 2004 and today.” A representative from Alcatel to speak on behalf of Eurley was not available for comment.

iNavSat however, in addition to projecting its confidence, expressed some disappointment that a decision was not made.

An extension of the review process “was not expected,” Christian Erles, spokesman for EADS Space and speaking on behalf of iNavSat, told Satellite News. “We are a little disappointed because we are still convinced we have a very good offer and a great consortium consisting of more than 45 companies from 15 countries around the world. As an industry, we are putting a lot of money in this process, so each delay means more costs.”

Combining The Consortia?

With the delay came speculation as to what maneuvering is going on behind the scenes at the GJU, with theories centering around who will shoulder the burden of the program’s rising price tag or possible combination of the two consortia.

“I would expect the main reason for the delay is the cost of the program,” Patrick French, senior analyst at Northern Sky Research told Satellite News. He said that the cost for the project is rising and “the governments probably do not want to spend more money” and are pushing those rising costs on the private partners. However, “the business people are saying there is not much in terms of the business here, at least not until the future, so how do we divide the expense?”

Benoit Denis, research analyst at Frost & Sullivan, offered a different perspective on the proceedings and suggested the GJU could be pushing to bring the two consortia together.

“With every large project in Europe in the space arena, it is a political issue,” Denis said, noting that pressure is likely being exerted by the home countries that are represented by the companies within the consortia competing for the concession. “It is a big [problem] in space projects in that we do not have unity and each country is trying to bring business into their own country.

Denis said, based on his knowledge of the companies involved in each consortium, there is no clear-cut favorite, as both groups offer compelling reasons for selection, which is why he speculated that the GJU may be using the next three months to try to bring the two consortia together and award the concession to the combined entity.

The GJU “may want to push them to merge as the EU has on other projects, [like it has done] for space exploration for instance,” Denis said.

Denis also noted that the concession award’s impact on the competitive landscape of the European satellite industry also could be a consideration. He noted that if one consortium wins out over the other, it will create a competitive imbalance.

“That is why I would think they are trying to push [the two consortia] to get together. It is such a large contract that it puts one [consortium] so much in front of the other and in Europe, it is not something [the GJU] can afford to do.

Erles said he was not aware that the GJU had approached iNavSat with a proposal that would unite the two consortia.

Denis did not have a clear vision as to whether the consortia would agree to come together or whether they would rather duke it out for sole claim to the concession.

“You want to be the one to win because you win so much more,” Denis said. “But how much are you willing to lose” if you are the consortia left out if the GJU does not push for a unified bid, he asked.

–Gregory Twachtman

(Christian Erles, EADS Space, +33 (0) 1 42 24 27 34; Benoit Denis, Frost & Sullivan, +33 1 482 81 54 50; Patrick French, Northern Sky Researh, [email protected])