Tuesday, March 20, 2007

"Very Alarming Indeed"

Whilst hanging around the Commission press briefing today I picked up a rather odd document. Titled, "Didactic synthesis on the Galileo concession contract" it was an almost unmarked document, and unlike the normal press statements that surrounded it was unreferenced, unsigned, with no contacts and so on. But there was a pile of them there nestled between Ollie Rehn’s speech on “Europe’s Frontiers: a Dynamic concept” and the normal stuff about takeovers and so on.
Interested in Galileo, and dumfounded by the document’s titled I picked up a copy. And it makes devastating reading.

It appears to be an anonymous comment, given to the press but not mentioned about the parlous state of the Galileo program. The important section of the paper talks about “current difficulties”. Some of these were mentioned in the perceptive piece in the FT last week, in which Gerard Batten described the Galileo satellite system as beginning to resemble “Airbus in Space”. Indeed Paul Verhoef, Galileo programme manager at the EU commission thinks likewise. "Galileo is now being compared with the Airbus situation," he says. "Unfortunately that analysis is correct."
My suspicion is that this paper was either written by, or with the knowledge of Mr Verhoef.
The key problem seems to be this,
“International competition does not await Europe. The United States are currently working to improvement (sic) the GPS which should become operational around 2013-2014. Russia is working on their GLONASS constellation. The Chinese have just launched a new navigation satellite, the Japanese are working at a regional improvement system of the GPS, etc. The window of opportunity for Galileo is not extensible ad infinitum”.

And it is this competition that is beggining to scare the people at the centre.

The current difficulties lie in the internal problems within the candidate consortium regarding the reparation of tasks: some have a different interpretation of the content of the agreement reached on 5 December 2005 under Mr Van Miert’s mediation. Moreover, the consortium is reticent to commit itself on a firm and fixed costs before the conclusion of several important stages of the programme (certainty that needs are well met before deployment phase). Finally, the lack of certainty on the amount of the expected revenues does not incite the concessionaire to accelerate the process.

Firstly internal disagreements within the eight companies of the candidate consortium (“Merged Consortium”) made it impossible for them to set up an adequate common legal entity necessary for the negotiations of the concession contract. This means first, al decisions need to be unanimously taken by all 8 companies and on the other hand, the CEO of the entity has still not been nominated. The solidity of the issues already agreed upon is therefore is weaken.
The situation, originating from the grouping of large European industries, seems inescapable since the problems encountered earlier with Galileo Industries are happening now with the candidate consortium. However the lack of agreement is becoming, at this stage, very alarming indeed.
b) Conception risks (“design risks”)
Secondly, the private sector still expresses some doubts regarding the technical design of certain elements. Let’s recall that satellite navigation represents a challenge for Europe.
c)Confirmation of the costs
The private sector will only be ready to definitively confirm the overall costs once it has received proposals from its calls for tenders for all the systems and subsystems and when industrial offers will have been negotiated and lead to the conclusion of the contracts. However, this procedure takes time and will not be able, in any case, to be finalised in 2007. It is today highly possible for the signature of the concession contract, with a firm and final commitment to costs, only to occur around mid-2009.
d) Responsibilities to third parties
Discussions are still on-going regarding the treatment of the risks vis-à-vis third parties. It is difficult to evaluate the damages potentially created to users in case Galileo cannot provide its services. In this event, the damages claims from users could reach amounts which would be very difficult to insure. Consequently, the intervention of the public sector might be necessary.

At this point they don’t even mention political interference… I have rarely read any Commission document as pessimistic about one of their own projects. Good Lord they are even more positive about the possibilities of restoring the Constitution. The thing is is that end users will be charged, unlike the American system which is free, and if the updated GPS system comes online before Galileo, than the European system is dead in the water.

For a decent brief as to the background to this story please go here over at EUReferendum

Oh yes I would like to point out that the Government’s marvellous road pricing scheme requires this system to be operational. Which suggests that that will be a long way off.

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