2009
THE MANAGEMENT OF THE GALILEO  
PROGRAMME’S DEVELOPMENT AND VALIDATION PHASEEUROPEAN COURT 
OF AUDITORS
Special Report  No 7
EN
ISSN 1831-0834

THE MANAGEMENT OF 
THE GALILEO PROGRAMME’S DEVELOPMENT AND VALIDATION PHASESpecial Report  No 7   2009
EUROPEAN COURT OF AUDITORS(pursuant to Article 248(4), second subparagraph, EC)
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase2
EUROPEAN COURT OF AUDITORS
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E-mail: euraud@eca.europa.eu
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Special Report  No 7   2009
More information on the European Union is available on the Internet (http://europa.eu).
Cataloguing data can be found at the end of this publication.Luxembourg: Office for Official Publications of the European Communities, 2009ISBN 978-92-9207-317-6doi: 10.2865/44017
© European Communities, 2009
Reproduction is authorised provided the source is acknowledged.
Printed in Belgium
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase3
CONTENTS
Paragraph
 ACRONYMS
I–XII  EXECUTIVE SUMMARY
1–2 INTRODUCTION
3–29  THE HISTORY OF GALILEO
3–8 EARLY DAYS (BEFORE 1999)
9–12 DEFINITION (1999–2002)
13–26 DEVELOPMENT AND VALIDATION UNDER THE GJU (2003–06)
27–29 DEVELOPMENT AND VALIDATION POST-GJU (SINCE 2006)
30–33  AUDIT SCOPE AND APPROACH
34–74  OBSERVATIONS
35–42 CONCESSION NEGOTIATIONS FAILED
43–50 TECHNOLOGICAL DEVELOPMENT ACTIVITIES DELAYED AND OVER BUDGET
51–57 LIMITED USEFULNESS OF RTD ACTIVITIES
58–65 EGNOS INTEGRATION ONLY PARTIALLY SUCCESSFUL
66–74 INADEQUATE PUBLIC-SECTOR GOVERNANCE
75–86  CONCLUSIONS AND RECOMMENDATIONS
 ANNEX I — THE EUROPEAN SPACE AGENCY
 ANNEX II — EGNOS FACTS, FIGURES AND ILLUSTRATIVE EXAMPLES
 ANNEX III — INTERNATIONAL COOPERATION ON GALILEO
 ANNEX IV —  CRITERIA USED BY THE ECA TO ASSESS THE PUBLIC SECTOR’S MANAGEMENT OF THE GALILEO 
CONCESSION PROCESS, TOGETHER WITH A SUMMARY OF ITS ASSESSMENT
 ANNEX V — GLOSSARY OF TERMS USED IN THIS REPORT
 REPLY OF THE COMMISSION
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase4
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase5
ACRONYMS
ARTES  Advanced research in telecommunications systems
CNES  Centre National d’Etudes Spatiales
CS Commercial service
EC European Communities
EGNOS  European Geostationary Navigation Overlay Service
EOIG  EGNOS Operator and Infrastructure Group
ESA  European Space Agency
FP6  Sixth framework programme of the European Community for research, 
technological development and demonstration activities, contributing to the creation of the European research area and to innovation (2002 to 2006)
GCC  Galileo control centre
GCS  Ground control segment
GDP  Gross domestic product
GIOVE  Galileo in-orbit validation element
GJU  Galileo joint undertaking
GMS  Ground mission segment
GNSS  Global Navigation Satellite System
GPS  Global Positioning System
GSA  European GNSS Supervisory Authority
GSTB  Galileo system test bed
HoT  Heads of terms
Intosai  International Organisation of Supreme Audit Institutions
IOV  In-orbit-validation
JTI Joint technology initiative
NRSCC  National Remote Sensing Centre of China
OS Open service
PB-Nav  Programme board on satellite navigation
PFI Private finance initiative
PPP  Public–private partnership
PRS  Public regulated service
PwC  PricewaterhouseCoopers
RTD  Research and technological development
SAR  Search and rescue
SESAR  ‘Single European sky’ ATM research
SoL  Safety of life
TEN-T  Trans-European transport network
REPLY OF THE 
COMMISSION
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EXECUTIVE SUMMARY
I.
The EGNOS and Galileo programmes were  
initiated in the mid 1990s with the aim of  
establishing a European Global Navigation 
Satellite System (GNSS). EGNOS is a regional 
satellite based augmentation system for  
Europe that improves the signals coming  from existing satellite navigation systems  
such as GPS. Galileo is currently under devel-
opment as Europe’s Global Satellite Naviga-
tion System.
II.
In order to manage the development and  
validation phase of the Galileo programme, the European Commission and the European Space Agency (ESA) set up a dedicated struc-
ture, the Galileo Joint Undertaking (GJU),  
which operated from September 2003 until the end of 2006. In 2007, the activities of the 
GJU were transferred to the GNSS Supervi-
sory Authority, a Community Agency.
III.
The Galileo programme was the first of its  kind in several respects: it was the first close collaboration between the ESA and the Com-
mission on such a large space programme, 
the first industrial programme to be man-
aged at European level and the first time the 
Commission was to participate in a public–private partnership.IV.
Negotiations with the private sector on a  concession agreement stalled in early 2007 
and the Parliament and the Council decided 
to redirect the programme in autumn 2007. 
Technological development has been set  
back five years. As at the end of 2008, no  operational satellites have been launched  
and cost estimates for the development and 
validation phase have almost doubled from 
1,1 to 2,1 billion euro. The Court’s audit of the development and validation phase of the Galileo programme examined:
which factors accounted for the failure (i) 
of the concession process;
which factors accounted for the reported (ii) 
delays and cost overruns of technologi-cal development;
to what extent spending on research and (iii) 
development activities has benefited the 
Galileo programme;
how well the GJU had integrated EGNOS (iv) 
into Galileo;
whether the Galileo programme was  (v) 
adequately governed.
REPLY OF THE 
COMMISSION
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase7
V.
The Court concluded that management of  
the development and validation phase was 
inadequate. The Galileo programme experi-
enced problems at different levels.
The GJU was not a strong programme  (i) 
manager nor was any other body assigned this role. The GJU did not achieve most of its objectives — owing, however, to  factors that were largely outside the  GJU’s control.
The programme lacked a strong strategic (ii) 
sponsor and supervisor: the Commission did not proactively direct the programme, leaving it without a helmsman.
Owing to their different programme  (iii) 
expectations, Member States intervened 
in the interest of their national indus-
tries and held up decisions. The com-
promises made led to implementation  
problems, delays and, in the end, to cost 
overruns.
VI.
The PPP was inadequately prepared and con-
ceived. As a result, the GJU was required to 
negotiate a PPP which was unrealistic.
VII.
The GJU’s task of supervising the techno-
logical development activities was seri-
ously constrained by governance issues, an 
incomplete budget, delays and the industrial 
organisation of the development and valida-
tion phase.EXECUTIVE 
SUMMARY
VIII.
Discontinuities, the inappropriateness of  
the sixth framework programme (FP6) for  
funding market development activities, the 
absence of a comprehensive market devel-
opment approach and delays account for the 
limited usefulness of Galileo RTD results.
IX.
The integration of EGNOS into Galileo was  
only partially successful because the GJU’s mandate was not clear, the decision to  include EGNOS in the concession negotia-
tions held up the achievement of the EGNOS programme, the EGNOS institutional frame-work was not clear and the GJU devoted little effort to market development for EGNOS.
X.
The programme’s governance was inad-
equate. The division of roles between the  
entities involved in the development and  
validation phase of the programme (EU and 
ESA Member States, Commission, GJU and  
ESA) was not clearly defined. The Commis-
sion did not provide adequate leadership in developing and managing Galileo.
XI.
If the mid-2007 redirection of the EGNOS  and Galileo programmes is to succeed, the Commission must considerably strengthen 
its management of the programmes. This  
report includes a number of recommenda-
tions aimed at supporting the Commission 
in this task.
XII.
Finally, should the EU resolve to engage in other large infrastructure programmes, the Commission must ensure it has access to the 
appropriate management tools.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase8
INTRODUCTION
 1.  This audit report is about the European Union’s involvement in satellite 
navigation in the period 2003–06.
 2.  The European Union’s satellite navigation strategy consists of two pro-
grammes: EGNOS1 and Galileo.
EGNOS is a regional system for Europe that monitors and corrects (a) 
the signals emitted by existing satellite navigation systems2 by 
improving their accuracy and assessing their reliability.
Galileo is currently under construction as Europe’s Global Naviga- (b) 
tion Satellite System (GNSS). It is the European counterpart of the 
American GPS and a joint initiative of the European Commission 
and the European Space Agency (ESA) (see Annex I ).1 European Geostationary 
Navigation Overlay Service.
2 GPS (Global Positioning System), 
a GNSS developed and operated 
by the United States Department 
of Defense; Glonass, a GNSS 
developed by the former Soviet 
Union and now operated for the Government of the Russian 
Federation by its Space Forces.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase9
EARLY DAYS (BEFORE 1999)
 3.  The history of Galileo began in 1994, with the European Commission’s 
proposal to engage Europe in satellite navigation3. Based on this pro-
posal, in December 1994 the Council of the European Union invited 
the Commission to initiate the necessary activities4.
 4.  The Commission’s initial strategy for the development of a GNSS com-
prised two stages. The first (GNSS-1) was to develop a complement to the existing GPS and Glonass systems. This stage, known as EGNOS, consists of three transponders on geostationary satellites and a net-work of ground stations covering all of Europe which are used to  improve the accuracy of GPS and Glonass (see footnote 2) and to  assess the reliability of their signals.
 5.  EGNOS was first implemented in 1994 as an ESA programme with financ-
ing from several sources (ESA Member States, the European Commis-
sion, Eurocontrol and a number of national civil aviation operators and other organisations
5). It was initially intended as a demonstrator, 
but gradually it was decided to convert it into a pre-operational and 
then an operational programme (see also Annex II ).
 6.  The second stage (GNSS-2) was to implement a global civil satellite 
navigation system, known as Galileo. This will ultimately consist of 
30 satellites at a fixed altitude of approximately 23 000 km, as well 
as a network of ground stations, and will offer five levels of services (see Box 1 ).THE HISTORY OF GALILEO
3 COM(94) 248 — Satellite 
navigation services: a European 
approach.
4 Resolution of the Council 
of the European Union of 19 December 1994 on the 
European contribution to 
the development of a Global 
Navigation Satellite System (GNSS).
5 Grouped into the EGNOS 
Operator and Infrastructure Group (EOIG).
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase10
 7.  There were three motives underlying the creation of Galileo:
political (Galileo is a declaration of an independent European  (a) 
GNSS capability);
economic (Galileo was seen as commercially viable and was justi- (b) 
fied by predictions of substantial economic and social benefits);
technological (Galileo was to become the most sophisticated navi- (c) 
gation system available).
 8.  The Galileo programme was divided at the outset into four phases (see 
Table 1 ):
technical definition; (a) 
development and validation; (b) 
deployment; (c) 
commercial operation. (d) 
THE FIVE GALILEO SERVICES
The Open service  (OS) will be free of user charges and will provide competitive position and timing 
performance relative to other GNSS systems.
Safety of life  (SoL) will deliver enhanced performance (including an integrity function, i.e. a timely warn-
ing of reduced accuracy) and certification and will be offered with a service guarantee to the critical 
transport community, e.g. aviation and maritime.
The Commercial service  (CS) will provide access to two additional (encrypted) signals, to allow for a 
higher data throughput rate and enable users to improve accuracy.
The Public regulated service  (PRS) will provide position and timing to specific users requiring a high con-
tinuity of service (e.g. emergency services, security forces and the military), with controlled access.
Finally, Galileo will contribute, through its Search and rescue  (SAR) service to the International Satel-
lite System for Search and Rescue (Cospas-Sarsat). Galileo satellites will be able to pick up signals from emergency beacons carried on ships, planes or persons and send them back to national rescue centres, enabling the latter to pinpoint the location of an accident.BOX 1
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase11
PHASES OF THE GALILEO PROGRAMME AS FORESEEN IN NOVEMBER 2000TABLE 1
Phases and main objectives Initial timing Governance structure*
Defi  nition phase
Technical activities
Technical studies• 
Technology pre-developments• 
Other activities
Preparation of governance structures for • 
the next phase
Legal and business development feasibility • 
studiesInternational agreements
• 1999–2000 European Commission and the ESA 
separately plus coordination via PMB (programme management board), GPO (Galileo Programme Offi   ce) 
and GISS (Galileo Interim Support Structure)
Development and validation phase
Technical activities
Detailed defi  nition of space, ground and • 
user segments
Development and construction of • 
prototype satellites and minimal ground segment‘In-orbit’ validation of the system
• 
Other activities
Research grants (FP6)• 
Development business plan• 
Concession negotiations• 
EGNOS integration• 
International agreements• 2001–05 European Commission and the ESA 
through GJU
Deployment phase
Technical activities
Satellite assembly and launch• 
Installation of complete ground segment• 
Other activities
Business development• 2006–07 European GNSS Supervisory 
Authority (GSA) + concession holder
Commercial operation phase
Technical activities
Satellite renewal• 
Operation of the centres• 
Maintenance• 
Other activities
Commercial activities• 2008+ European GNSS Supervisory 
Authority (GSA) + concession holder
* The amendments to the Galileo management structure proposed by recent (2007) Commission 
communications and Council resolutions are not reflected in this table.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase12
DEFINITION (1999–2002)
 9.  The Galileo programme got underway in 1999, when the Council gave the 
go-ahead for the definition phase6. During this phase, both the Com-
mission and the ESA undertook technical studies, pre-developments 
and feasibility studies. Funding from the European Community budget 
was mainly allocated via the fourth and fifth framework programmes 
for research and development7. ESA funding was allocated through 
its GalileoSat programme.
 10.  In November 20008, the Commission presented the European Parlia-
ment and the Council with the results of the definition phase. These 
contained concrete proposals on the definition of the system, its  economic and financial aspects and its management structure. The 
timetable for the next phases of the Galileo programme was estab-
lished as follows (see also Table 1 ):
the development and validation phase would run from 2001 to  (a) 
2005;
the deployment phase would run from 2006 to 2007; (b) 
the commercial operation phase would start in 2008. (c) 
  The communication planned for EGNOS to become operational in  
2003.
 11.  The Commission stated in the same communication that ‘cost/benefit 
studies show Galileo to be cost-effective and sufficiently attractive 
to obviate the need for any further public funding in the form of  
subsidies from 2007.’ The Galileo system was to cost a total of 3,3 bil-
lion euro (see Table 2  for a detailed breakdown). The Commission  
considered the PPP to be ‘an essential factor for the success of the Galileo programme’. The communication also highlighted the urgency 
of taking a political decision to continue the programme at the Nice European Council in December 2000.6 Council Resolution of 
19 July 1999 on the involvement 
of Europe in a new generation of 
satellite navigation services — 
Galileo-definition phase.
7 Decision No 1110/94/EC of 
the European Parliament and of the Council of 26 April 1994 
concerning the fourth framework 
programme of the European 
Community activities in the field 
of research and technological development and demonstration 
(1994 to 1998) (OJ L 126, 18.5.1994, 
p. 1); Decision No 182/1999/EC 
of the European Parliament and 
of the Council of 22 December 
1998 concerning the fifth 
framework programme of the European Community for research, 
technological development and 
demonstration activities (1998 to 
2002) (OJ L 26, 1.2.1999, p. 1).
8 COM(2000) 750 of 
22 November 2000: Commission 
communication to the 
European Parliament and the 
Council — On Galileo.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase13
 12.  As requested by the Council of the European Union in its Resolution of 
5 April 2001, the Commission had several studies made of a business 
plan for Galileo. These studies recommended a ‘concession’-model of PPP
9. The Council confirmed the choice of a concession to fund the 
deployment and operational phases of the Galileo programme and 
agreed in March 2002 ‘to work to secure a cost-share of at most 1/3 
for the Community budget and at least 2/3 for the private sector’ for 
the deployment phase.
DEVELOPMENT AND VALIDATION UNDER THE GJU 
(2003–06)
PURPOSE
 13.  From a technical point of view, the development and validation phase 
consisted of the technological development  of part of the system — an 
initial core satellite constellation of two experimental and four opera-
tional satellites, the associated ground segment and test user seg-
ments, making validation possible through in-orbit and ground-based tests (also called In-Orbit Validation or IOV). The ESA was responsible 
for implementing these technological development activities through 
its GalileoSat programme.
 14.  In parallel with technological development, the Commission focused, 
during the development and validation phase, on other activities  
aiming at bridging the gap between the system and its future users 
in order to prepare for the successive phases of the programme,  through business development and mobilisation of funds. Early devel-opment of user segments was seen as the key to subsequent use of the Galileo system if direct revenue was to be generated. Therefore, the Commission targeted private-sector involvement through a PPP. Additionally, the focus was on funding RTD activities through the  
sixth framework programme for Research (FP6)
10 in order to support 
both technological development and business development and on using EGNOS as a precursor programme to prepare the market for  
Galileo. EGNOS will deliver regional services similar to three of the 
five future Galileo services — OS, SoL and SAR (see Box 1 ).9 A DBFO (design-build-finance-
operate) type of PPP where the 
private party recovers costs 
from user charges or availability payments.
10 Decision No 1513/2002/EC of 
the European Parliament and 
of the Council of 27 June 2002 concerning the sixth framework 
programme of the European 
Community for research, 
technological development 
and demonstration activities, 
contributing to the creation of the 
European Research Area and to innovation (2002–06) (OJ L 232, 
29.8.2002, p. 1).
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase14
THE GALILEO JOINT UNDERTAKING — THE MANAGEMENT 
VEHICLE FOR THE DEVELOPMENT AND VALIDATION PHASE
 15.  The development and validation phase was to be managed by the GJU, 
a dedicated structure set up by the Commission and the ESA after  
approval by the Council of the European Union and the ESA Council. 
The former Council’s decision to proceed in full with development 
and validation was not taken until March 200211, 15 months later  
than expected. This delay was caused by lengthy negotiations among 
the EU Member States concerning the use of the system for military purposes and private-sector funding and participation in the pro-gramme. The ESA Council’s official go-ahead for development and  
validation was further delayed until May 2003. This was caused by  
lengthy discussions among the ESA Member States on their industrial 
participation in the programme. The GJU was set up by EC regulation in May 2002
12 13, its Foundation Act was signed in June 2003 and it 
became operational in September 2003.
 16.  The main reason for setting up the GJU was the need for a coordination 
platform between the ESA and the Commission. There were several other reasons
14, such as the need to run the programme through a 
single entity and the capacity to attract private funds for develop-
ment and validation. However, although the private sector indicated 
its readiness to contribute up to 200 million euro to the development 
and validation phase15 by signing a memorandum of understanding, 
this intention never materialised.
 17.  As established by its statutes, the GJU was to:
supervise all Galileo programme activities planned for the devel- (a) 
opment and validation phase;
make any necessary adjustments in the light of developments  (b) 
occurring during the development and validation phase;
prepare for the deployment and operational phases. (c) 11 Preliminary approval for some 
activities was given in April 2001.
12 Council Regulation 
(EC) No 876/2002 of 
21 May 2002 setting up the 
Galileo Joint Undertaking (OJ L 138, 28.5.2002, p. 1).
13 Article 171 of the EC Treaty: 
‘The Community may set up 
joint undertakings or any other structure necessary for the 
efficient execution of Community 
research, technological 
development and demonstration 
programmes.’
14 Regulation (EC) No 876/2002; 
European Council conclusions 
of March 2001; COM(2001) 336 
of 20 June 2001 — Proposal 
for a Council Regulation on the 
establishment of the Galileo Joint Undertaking.
15 Whereas 13 of Regulation (EC) 
No 876/2002.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase15
 18.  The GJU’s main tasks, as established by its statutes, were:
management of a tendering procedure resulting in the conclusion (a) 
of a concession agreement;
supervision of the ESA’s technological development activities; (b) 
initiation and management of research activities; (c) 
integration of EGNOS into Galileo. (d) 
 19.  At the start, the GJU consisted only of its two founding members, the ESA 
and the Commission. The National Remote Sensing Centre of China 
(NRSCC) joined the GJU in October 2004, to be followed in September 2005 by the Israeli company Matimop (see also Annex III ). The GJU’s 
governance structure is presented in Figure 2 .
FUNDING
 20.  During the development and validation phase, EU funds (from TEN-T16 
and FP6) were channeled through the GJU while the ESA co-financed 
Galileo through its GalileoSat and ARTES programmes ( Figure 1 ). From 
1999 to 2007, the funds allocated to Galileo came to 1,94 billion  euro.
PROGRESS
 21.  In October 2004, the Commission sent a communication on the pro-
gramme’s progress to the Parliament and the Council17. This com-
munication prepared the ground for a Transport Council meeting in 
December 2004, at which it was decided to move to the programme’s 
deployment phase. The Commission did not present an updated time-table. At that point the technological development had accumulated 
a delay of about three years.16 Council Regulation (EC) 
No 2236/95 of 18 September 
1995 laying down general rules 
for the granting of Community financial aid in the field of 
trans-European networks 
(OJ L 228, 23.9.1995, p. 1); Decision 
No 1692/96/EC of the European 
Parliament and of the Council of 23 July 1996 on Community 
guidelines for the development 
of the trans-European transport 
network (OJ L 228, 9.9.1996, p. 1), 
as amended by Decision 
No 1346/2001/EC 
(OJ L 185, 6.7.2001, p. 1).
17 COM(2004) 636 final: 
Communication from the 
Commission to the European 
Parliament and the Council — 
Moving to the deployment 
and operational phases of the European satellite radio-navigation 
programme.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase16
GALILEO DEVELOPMENT AND VALIDATION PHASE — FINANCING FLOW ( 1999–2007)*FIGURE 1
ESA Member States
902 millionEuropean Commission
946 millionOther
92 million
Galileo Joint Undertaking
892 million
European Space Agency
1 716 million
Infrastructure development
1 716 millionRTD
110 millionGJU operations and
activies 
114 million   92 mio             114 mio
            110 mio
   750 mio
   196 mio
   50 mio
   852 mio   668 mio
   1 716 mioNRSCC
MatimopBelgiumTEN-T
FP6TEN-T GalileoSat
ARTESGalileoSat
FP6
* The Chinese and Israeli contributions consisted of a contribution to the GJU’s base capital (5 million and 
4 million euro respectively) and a contribution to be used to finance the activities of their own national industries 
(through contracts with the ESA). The latter was not mobilised in full.
Source : ECA estimate.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase17
 22.  The communication stated that the GJU had ‘successfully completed the 
procedure for selecting the future concession holder’. However, the 
concession selection phase had just been extended until the end of January 2005. In February 2005, moreover, the GJU did not select a 
preferred bidder between two candidate consortia
18. Instead, the  
tenderers proposed to join into a merged consortium, to which the 
GJU agreed in June 2005, and made a joint bid.
 23.  Between July and December 2005, both the concession negotiations and 
technological development activities were blocked owing to interven-tion by some Member States. Disagreement between Member States focused on the composition of the merged consortium which was  to bid for the concession contract and the location of the system’s activity centres, ground infrastructure and headquarters. Through  mediation
19, an agreement was reached in December 2005. Negotia-
tions with the merged consortium actually started in January 2006.
 24.  On 28 December 2005, the first experimental satellite, called GIOVE-A, 
was successfully launched, thus securing access to the Galileo fre-quencies allocated by the International Telecommunications Union.
 25.  In June 200620, the Commission released an updated timetable for  
 Galileo21. The development and validation phase would now run until 
early 2009, and deployment would take place in 2009 and 2010 (a  
three-year shift with regard to the initial timetable). This communi-
cation also expanded the budget for the development and valida-
tion phase to 1,5 billion euro (400 million euro more than the initial budget). On the concession negotiations, the Commission said: ‘It has become clear that a concession solution is best suited to the specific features of the programme. […] By the end of 2006, the estimated  costs and income and the public sector contribution will have been finalised. In addition, the financial plan will be confirmed and the  
main terms of the contract will be fixed.’
 26.  In November 2006, the negotiators from the GJU and the merged con-
sortium initialled the Galileo PPP heads of terms (HoT) v.1, the first 
draft of a non-contractually binding statement. This document was the GJU’s nearest approach to a concession agreement.18 The Eurely and iNavsat 
consortia. A third pre-selected 
consortium led by Eutelsat 
withdrew from the selection phase in summer 2004.
19 In October 2005, the Vice-
President of the European 
Commission appointed a former European Commissioner 
as mediator — Press release 
IP/05/1345.
20 COM(2006) 272 of 7 June 2006: 
Communication from the 
Commission to the European Parliament and the Council — 
Taking stock of the Galileo 
programme.
21 The first time the Commission 
released this schedule was in the 
‘note to editors’ of press release IP/05/1345 dd. 25 October 2005.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase18
DEVELOPMENT AND VALIDATION POST-GJU 
(SINCE 2006)
 27.  At the end of 2006, the GJU considered that it had ‘successfully con-
cluded the main tasks’22. The GJU was wound up at the end of Decem-
ber 200623 and its activities were transferred to the European GNSS 
Supervisory Authority (GSA), which had been set up in July 2004 to manage the public-interest aspects of the European GNSS programmes and to act as the regulatory authority for the programmes during the Galileo deployment and operational phases
24. This activity transfer 
resulted in a change in the GSA’s role, which was not foreseen at its 
creation.
 28.  The concession negotiations with the merged consortium stalled in early 
2007. In a communication of May 200725, the European Commission 
acknowledged that EGNOS and Galileo had accumulated substantial 
delays (five years with regard to the initial timetable) and cost over-
runs. In 2007, the Council of the European Union26 decided to redirect 
the programme: the system would now be deployed by 2013 with  full funding from the Community budget (see Table 2 ), and with the 
ESA in the role of delegated procurement agent. On this basis, the 
European Parliament and the Council adopted a regulation on the  
further implementation of the GNSS programmes
27. On 1 July 2008 
the Commission published a call for expressions of interest for the 
purchase of infrastructure for the Galileo system, under six headings 
(system support, ground mission segment, ground control segment, space segment (satellites), launch services and operations). After pre-
selection of suitable candidates, preliminary proposals were received at the end of 2008. The competitive dialogue process is expected to be finalised in the course of 2009.22 GJU press release of 
30 November 2006 — Next step in 
the Galileo programme; Handover 
of the management from the Galileo 
Joint Undertaking to the European 
GNSS Supervisory Authority.
23 Council Regulation (EC) 
No 1942/2006 of 12 December 2006 
amending Regulation (EC) 
No 1321/2004 on the establishment 
of structures for the management 
of the European satellite radio-navigation programmes 
(OJ L 367, 22.12.2006, p. 18); Council 
Regulation (EC) No 1943/2006 
of 12 December 2006 amending 
Regulation (EC) No 876/2002 setting up the Galileo Joint Undertaking 
(OJ L 367, 22.12.2006, p. 21).
24 Council Regulation (EC) 
No 1321/2004 of 12 July 2004 
on the establishment of 
structures for the management of the European satellite 
radio-navigation programmes 
(OJ L 246, 20.7.2004, p. 1).
25 Communication from the 
Commission to the European 
Parliament and the Council — 
Galileo at a cross-road: 
The implementation of the 
European GNSS programmes, 
SEC(2007) 624, 16 May 2007.
26 Council resolutions 
and conclusions of 
6–8 June, 1–2 October and 
29–30 November 2007.
27 Regulation (EC) No 683/2008 
of the European Parliament and 
of the Council of 9 July 2008 on 
the further implementation of 
the European satellite navigation 
programmes (EGNOS and Galileo) 
(OJ L 196, 24.7.2008, p. 1).
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase19
 29.  In its communication of May 2007 the Commission analysed the failure 
of the concession negotiations in considerable detail. This document 
aimed to clear the way for redirecting the programme. In that light, it provides a non-exhaustive view of some of the reasons for failure. 
It addresses the fact that the Commission’s assumptions on timing, 
budget and transfer of market risk and design risk ‘may have been optimistic’. The communication also addresses issues such as public governance, private sector governance and the fact that Member  
States’ national interests had prevailed over the programme’s long-
term strategic aims. However, it does not address issues such as the preparation of the PPP (including time and expertise) and reporting, 
factors that are elaborated futher in this report.
GALILEO COST ESTIMATESTABLE 2
Original cost estimate 
in million euro 
(COM(2000) 750)Updated cost estimate 
in million euro 
(COM(2007) 261 and ESA 
documents)
Defi nition phase 80 80
Development and 
validation phase1 100 2 100
Deployment 2 150 3 400
Total3 330
(of which 1 800 million to be 
borne by the public sector)*5 580
(all to be borne 
by the public sector)**
* Annual operating costs, including constellation replacement, were estimated at 
220 million euro.
** Availability payments (fixed part) for operating cost, maintenance and 
replenishment debt interest until 2030 are estimated at 5 300 million euro.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase20
 30.  The Court carried out an audit of the management of the Galileo devel-
opment and validation phase by examining:
which factors accounted for the failure of the concession  (a) 
process;
which factors accounted for the reported delays and cost overruns (b) 
of technological development;
to what extent spending on research and development activities (c) 
has benefited the Galileo programme;
how well the GJU had integrated EGNOS into Galileo; (d) 
whether the Galileo programme was adequately governed. (e) 
 31.  The audit addressed the period during which the GJU managed the devel-
opment and validation phase (September 2003 to December 2006), 
focusing in particular on its mandate, the process of setting it up  
and the management of its tasks. Audit work was performed during 2007 and 2008. The Court followed the programme’s development, 
including its redirection, up to the end of 2008.
 32.  The Court gathered audit evidence through file reviews and interviews 
at the GJU, the Commission and the ESA, and through interviews  with other Galileo stakeholders such as representatives of Member 
States, the GSA (GNSS Supervisory Authority), beneficiaries of research projects, European space industry representatives, companies bidding for the concession, and consultants contracted by the GJU.
 33.  In order to assess the quality of the GJU’s management of research and 
development activities, the Court conducted a survey of 482 benefici-aries of one or more research projects funded under the ‘Aeronautics and space’ thematic priority of FP6.AUDIT SCOPE AND APPROACH
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase21
 34.  The following audit findings cover the different tasks of the GJU during 
the development and validation phase (paragraphs 35 to 65) as well 
as issues related to public-sector governance (paragraphs 66 to 74). Each section describes in detail the GJU’s objectives and uses them 
as a benchmark for its results. Next, the Court assesses the reasons 
why the GJU did not achieve most of its objectives. Where relevant, experience of existing programmes, projects or organisations has  been used as a benchmark. In other cases generally accepted project 
management principles were used. In particular for paragraphs 35 to 
42, the Court has also used a set of audit criteria derived from best practice in establishing PPPs
28 (see Annex IV  for a detailed overview 
of this analysis).
CONCESSION NEGOTIATIONS FAILED
OBJECTIVE
 35.  The GJU’s most important task was to negotiate a PPP under which the 
private sector would invest, in partnership with the European Com-
mission, in the creation and use of the Galileo infrastructure. It was 
initially foreseen that a concession holder (the private companies  
concerned) would be designated before the end of 2004, that the  
GJU would conclude the negotiations in 2005 and that the GSA would 
award a concession contract by the end of 2005.
RESULTS
 36.  As planned, the GJU launched the concession process in steps (pre-selec-
tion, selection, negotiation). It issued an initial set of tender docu-
ments in April 2004, after which it organised a competitive dialogue 
procedure and provided bidders with a draft concession contract and evaluation criteria.
 37.  The GJU was unable to select a preferred bidder, either in October 2004, 
or after the selection phase was extended, in February 2005. Negotia-
tions did not start until January 2006, after the bidders had merged 
into one consortium.OBSERVATIONS
28 Intosai Guidelines on Best 
Practice for the Audit of Public/
Private Finance and Concessions (revised) — November 2007.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase22
 38.  The deadline for awarding the concession contract was postponed twice, 
from December 2005 to December 2006, and then to December 2007. 
Early in 2007, the Commission and the GSA decided to cancel the  negotiations.
REASONS FOR FAILURE
 39.  The PPP was inadequately prepared and conceived. As a result, the GJU 
was required to negotiate a PPP which was unrealistic.
PREPARATION
 40.  There is considerable experience of PPP projects in Member States and 
third countries. Experience indicates that best practice includes the 
following elements.
Proper preparation: the public sector should clearly define project (a) 
requirements, assess private-sector capabilities, evaluate poten-
tial benefits, examine alternative ways of meeting its needs, inves-
tigate the appropriate risk allocation, consider affordability and 
likely value for money, and outline a business case. The choice  
of a particular type of PPP should be preceded by an appropriate risk assessment.
Sufficient time: the experience of other organisations (b) 
29 suggests 
that defining a robust PPP approach and public-sector positions takes more than a year, even with PPP projects that are less com-plex than Galileo.
Appropriate management resources: managing a PPP project  (c) 
requires a dedicated team with appropriate skills, assembled in 
good time.
Maintaining effective competition. (d) 
Regular review of an ongoing PPP project to ensure that it con- (e) 
tinues to offer value for money.29 PPP/PFI practices in the UK.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase23
 41.  A number of these best practices were not observed by the Commission 
during the preparatory phase of the Galileo PPP30:
Proper preparation: Despite the fact that it had several stud- (a) 
ies carried out, the Commission did not investigate traditional  
public procurement and a public sector comparator was never  constructed
31. In addition, the Commission did not investigate in 
advance how risk might realistically be allocated between the pub-lic and private sectors; at what stage in the project or in respect of which part of Galileo’s activities a PPP might be most likely to succeed; or the relative benefits of different PPP models
32. The  
Commission proposed, and the Council adopted, a PPP for the  
deployment and operational phases of Galileo in order to obtain 
a political consensus. Having examined the case for public and 
private sector investment through several studies, the Commission chose a ‘concession’ for the PPP (see paragraph 12). The Commis-sion’s documentation defined the characteristics of a concession, but with arguments based on general statements rather than on 
reasoning specific to Galileo, and an ambitious timetable was  
proposed for procurement. Although several of the risks and dif-
ficulties that would have to be overcome were identified at the 
preparatory stage
33, the Commission did not clearly assess how 
these might affect the feasibility of the deal or how the public  
sector might tackle them effectively.
Sufficient time: Given the ambitious timetable, according to which (b) 
it was to report to the Transport Council in December 2004, the 
Commission did not allow the GJU sufficient time34 to define a  
concession approach. Several bidders also expressed concern that insufficient time was available to prepare a credible business plan 
during the competitive dialogue procedure. As a consequence, the GJU’s initial tender documentation did not set specific objectives. In particular, it failed to address most difficulties inherent in the 
concession model. This resulted in industry bids containing no  firm pricing or commitments, and which were qualified with condi-
tions and caveats to such an extent that they were an insufficient 
basis for comparison and evaluation. For the same reason, the GJU 
had no robust evaluation criteria for a comparative evaluation of incoming bids. The first clear statement of the public-sector posi-tion on a number of issues important to Galileo was the heads of terms agreed with the bidders at the end of 2006.30 A detailed overview of the 
criteria used for auditing the 
public sector’s management of the Galileo concession process, 
together with a summary of the 
assessment for each criterion is 
given in Annex IV .
31 A public sector comparator is an 
estimate of what the project would cost if traditional procurement 
methods were used. This is used 
to help determine whether 
private finance offers better 
value for money than traditional 
procurement.
32 Only the joint venture model 
and the concession model were 
investigated.
33 Several constraints for a 
PPP were highlighted, such as 
revenue uncertainty (market 
risk), technological risks, 
interdependencies between 
development and deployment phases (design risk), and industrial 
concentration in the space 
manufacturing sector.
34 The GJU issued a first set of 
tender documentation less than 
eight months after becoming operational.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase24
Appropriate management resources: the GJU was a new organisa- (c) 
tion, with a novel legal set-up, a newly-assembled team, a new 
chief and no past experience in concession negotiations. External advisors were not called upon until September 2004 (i.e. after the 
issue of tender documentation and the initial stage of competi-
tive dialogue).
Maintaining competition: from autumn 2004 onwards, there were (d) 
two competing industrial consortia. They proposed in May 2005 to 
join forces to present a single bid. The GJU agreed to the merger on certain conditions
35 and in the hope of achieving greater value 
for money. In the absence of a public sector comparator, any  
competitive element in the procedure was lost.
Regular review: the public sector should regularly review an ongo- (e) 
ing PPP project to ensure that it continues to offer value for money. Although the GJU’s reports evaluating the concession identified 
several risks and problems
36, its reporting on the programme’s  
progress was unduly positive. In its regular official statements  
it never questioned the feasibility of the concession but merely 
postponed the deadline for awarding the contract each year for a 
further twelve months. As a consequence, those Member States, which relied on the GJU did not have sufficient information on  
which to request corrective action (see also paragraph 74(f)).
THE PPP MODEL  CHOSEN
 42.  The choice of a PPP in the form of a concession was proposed by the 
Commission and decided upon by the Council as a political consensus between Member States. This PPP concession, based on a cost share of at most 1/3 public and at least 2/3 private contributions which  
the GJU was required to negotiate, differed substantially, in several respects, from any other PPP then in existence
37:
Galileo has a high level of technological risk. It comprises a con- (a) 
stellation of 30 medium earth orbit satellites with new compo-nents (such as a new type of atomic clocks) so far untested in  space.
Revenue generation is difficult to predict as GPS open signals are (b) 
freely available. An exploitation model still has to be defined.35 Compliance with EU 
legislation on public markets and 
competition, a rigid time frame, substantial bid improvements with 
respect to the previous individual 
offers and a commitment by the 
merged consortium to a common 
and adequate legal structure.
36 Evaluation reports of 
October 2004, February 2005 and 
June 2005.
37 Traditional PPP infrastructure 
projects relate for instance to 
tunnels and roads. The most 
comparable PPP, Paradigm/Skynet (UK defence telecommunications 
system), is however different from 
Galileo in many ways: it has a 
lower technological risk, the UK 
Ministry of Defence represents a secure baseline revenue source, an 
existing track record of operations 
is available and the project is 
piloted by a single sponsor with 
PPP experience (UK Ministry 
of Defence).
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase25
The Galileo concession was to start after rather than before sys- (c) 
tem design and partial infrastructure development by the public 
sector. While close to the DBFO (design — build — finance —  operate) concession type, the Galileo PPP differed significantly 
in that a private concession holder was expected to commit itself 
to building, financing and operating a new system that had been conceived and handed over by the public sector ( Box 2 ).
THE MAJOR RISKS OF THE CONCESSION
The three main factors impeding the concession negotiations were the transfer from the public to the 
private sector of market risk, design risk and the third-party liability regime.
To transfer market risk , there was a need for confidence that market revenue could be obtained in 
accordance with an agreed baseline market development scenario. However, market uncertainty, the prospect of revenue being far in the future and the anticipated major role of the public sector in market development made it difficult to transfer this risk to the private sector.
To transfer 
design risk , there was a need for assurance that the design (prepared by the ESA during the 
development and validation phase) had no inherent problems that might result in a faulty or under-
performing system (for which the concession holder would be responsible during operation). It was 
difficult to transfer this risk, not only because of the technical complexity of the Galileo design and the 
outputs expected of the concession holder during the operational phase, but also because of the divi-sion of duties between, on the one hand, design and development (the ESA) and, on the other hand, 
deployment, operation and maintenance (concession holder).
The 
third-party liability regime  concerns extra-contractual liabilities towards potential victims of Galileo 
failures, for which no specific legal or insurance model is available.BOX 2
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase26
TECHNOLOGICAL DEVELOPMENT ACTIVITIES DELAYED 
AND OVER BUDGET
OBJECTIVE
 43.  The second of the GJU’s four main tasks was to supervise the ESA’s 
technological development activities so as to ensure that sufficient 
satellites and ground segment installations were constructed and  made operational to demonstrate the capability and reliability of the 
system, all within the planned time and budget (see paragraph 13).
RESULTS
 44.  By December 2006, only one experimental satellite (GIOVE-A) was opera-
tional and had successfully secured frequency filings for Galileo with 
the International Telecommunications Union. The second experimen-
tal satellite (GIOVE-B) was launched in April 2008, 30 months later  than originally planned. The current schedule
38 has the development 
and validation phase terminating in 2010 — five years late. According 
to the cost estimates produced by the ESA in July 200839, development 
and validation will cost 1 billion euro more than the initial budget of 
1,1 billion euro (see Table 3 ).
COMPARISON OF THE 2001 AND 2008 BUDGET ESTIMATES FOR THE DEVELOPMENT  
AND VALIDATION PHASE (IN MILLION EURO — 2001 PRICES)TABLE 3
Activity Initial budget estimate July 2008 budget estimate
Galileo System Test Bed (GSTB-V2) 85 173
Launchers 90 224In-Orbit-Validation (IOV) 747 1 253ESA cost 110 303
Other 68 151
Total 1 100 2 104
Source : ESA.38 Regulation (EC) No 683/2008.
39 The estimates were earlier 
updated in February 2005 and 
May 2007.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase27
REASONS FOR DELAYS AND COST OVERRUNS
 45.  The GJU’s task of supervising technological development activities was 
seriously constrained by governance issues, an incomplete budget, 
delays and the industrial organisation of the development and vali-dation phase.
 46.  The GJU was given the task of supervising technological development, 
but this task was not further defined. In practice, ESA worked without 
supervision from the GJU but in accordance with its own rules and 
procedures. The GJU’s supervisory role vis-à-vis the ESA was at odds 
with its governance structure. It is further treated as a governance issue in paragraphs 66 to 74.
 47.  The Galileo budget for development and validation, as presented to the 
Council40, was incomplete . It did not contain any explicit contingency 
budget or reserve41. It was lower, at 1,1 billion euro, than the cost 
estimates resulting from the definition phase. Moreover, no allowance 
was made for the Commission’s 50 million euro financial contribu-
tion to the GJU, and security requirements (120 million euro) were 
not factored in42. The overall resource requirements and costs of a 
project should be established at the planning stage, including, where 
needed, change and contingency budgets. The experience of other 
organisations suggests that space programmes typically need a con-tingency budget of between 10 % and 40 %, depending on programme 
complexity, the degree of innovation and the number of unknowns.
 48.  The development and validation phase did not start until May 2003, 
29 months later than planned  (see paragraph 15). According to ESA 
calculations, confirmed by the GJU, some 142 million euro in extra 
costs can be attributed to this delay43.40 COM(2000) 750 of 
22 November 2000.
41 On ESA’s participation in the 
development and validation phase 
(which is half of the total budget) 
a de facto  contingency allowance 
of 20 % applies: if the cumulative 
cost overrun is lower than 20 % 
of the programme’s financial 
envelope, no participating Member 
State is allowed to withdraw from 
the programme.
42 Security requirements were 
considered too late in the 
programme: in 2004 the Galileo 
Security Board announced 
additional requirements worth an estimated 120 million euro in extra 
costs. The resulting 1 000 change 
requests had far-reaching 
consequences on the technical 
baseline and thus on ongoing 
development activities.
43 This sum comprises: 
(a) 41 million euro to develop 
a second test satellite in order 
to mitigate the risk entailed 
in securing frequency filings before June 2006, there being 
too great a risk with only one 
satellite; (b) 15 million euro for 
additional payload developments; 
(c) 40 million euro in extra costs 
incurred by ESA for the major 
change in schedule; (d) 46 million euro in extra labour costs 
for industry due to changing 
economic conditions.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase28
 49.  The industrial organisation  of the development and validation phase, 
characterised by a specific set up based on an ad hoc prime contrac-
tor, led to delays and cost overruns . A competitive environment is  
expected to be beneficial for achieving results on time and within  budget. In 2000, a joint venture of leading European space companies was created
44 to act as industrial prime to develop and deliver the 
Galileo infrastructure. In an oligopolistic environment such as the  European space industry, the creation of the joint venture further  reduced competition. The ESA had no choice but to place several con-tracts with this joint venture between July 2001 and December 2004. 
Several of the contracts suffered from significant delays and cost over-
runs. According to ESA reports, these problems were to be attributed 
to problematic management, non-clarity of reporting and decision 
lines and the fact that the selection of subcontractors was driven  
by ‘self-imposed industrial distribution constraints rather than cost and schedule efficiency’. As a consequence of serious problems in  
the implementation of the main contract of the development and  
validation phase, the ESA decided in December 2007 to modify sub-
stantially the IOV industrial organisation  and contractual framework. 
The ESA took over the tasks and responsibilities of the overall prime 
contractor. This reorganisation will mean that additional costs
45 are 
incurred during the development and validation phase. According  to ESA estimates, this will include 350 million euro for the revised  
industrial framework and 194 million euro for ESA costs
46.
 50.  The stalling of the concession negotiations  in the second half of 2005 
(see paragraph 23) also affected technological development: the  programme was delayed by four and a half months, and extra costs of 103 million euro can be attributed to this delay and to the imple-
mentation of the 5 December 2005 agreement
47.
LIMITED USEFULNESS OF RTD ACTIVITIES
OBJECTIVE
 51.  The GJU’s third task48 was to initiate and manage the necessary research 
activities to support achievement of the key tasks and objectives  
of the Galileo development and validation phase (i.e. technological 
development and early development of user segments — see also  
paragraphs 13 and 14).44 The location and functions of 
the headquarters, the company’s 
management structure and the allocation of work packages to the 
various subcontractors were the 
subject of an agreement between 
different governments.
45 Including termination of the IOV 
contract.
46 Extension of IOV coverage 
until 2010 and preparation of 
procurement responsibilities for 
full operational capability (FOC).
47 The partners in the merged 
consortium agreed to establish 
two identical Galileo Control 
Centres (GCC) composed of a GMS 
(ground mission segment) and a 
GCS (ground control segment), but to cross-implement the GCC 
through the Germany-based GMS 
and the Italy-based GCS, rather 
than having one operational 
and one back-up GCC. It was also agreed to set up a third 
GMS in cold back-up mode and a 
third GCS.
48 The Commission gave this 
mandate to the GJU in its FP6 work 
programme of 9 December 2002 (thematic priority 1.4: ‘Aeronautics 
and space’). It was translated into 
three annual specific support 
action (FP6) contracts with 
the GJU.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase29
RESULTS
 52.  Between September 2003 and December 2006 the GJU selected, negoti-
ated and monitored a total of 70 research projects worth 110 mil-
lion euro and financed from FP6 through several calls for proposals. 
Activities focused on user segment development, which consisted in fostering innovative services and applications of appropriate tech-nology (receivers, local components), and on market development in different user communities. RTD activities also included some techno-
logical development of the Galileo system and EGNOS demonstration 
activities.
 53.  The audit showed49 that the GJU was generally perceived as an efficient 
structure for implementing the Galileo area of the FP6 work pro-
gramme50. The research projects raised interest and awareness in the 
user communities and have succeeded in bringing different organi-
sations and stakeholders together. However, the ultimate use of the 
RTD activities for the Galileo programme is limited. The GJU did not 
sufficiently exploit the project results to formulate a coherent set of user-validated requirements that could serve the ESA as the basis for 
the Galileo system specification. A high number of projects consisted 
in a detailed analysis of the regulatory efforts required both at EU and 
Member State level to foster GNSS applications in a large number of 
economic and social sectors. No follow-up was given to the results of these projects.
REASONS FOR LIMITED USEFULNESS
 54.  Discontinuities, the inappropriateness of FP6 for funding market develop-
ment activities, the absence of a comprehensive market-development 
approach and delays account for the limited usefulness of Galileo RTD 
results.
 55.  When the Commission proposed winding up the GJU, it intended to 
ensure programme continuity  by making a smooth transfer of activi-
ties to the GSA51. However, transferring the task of monitoring more 
than 50 projects from the GJU to the GSA led to delays and caused 
problems in terms of project support, project follow-up, and the dis-semination of project results
52.49 Especially through the survey 
and interviews of FP6 participants.
50 The survey results reveal 
a positive overall view of the 
GJU management, especially 
in the following areas: tender documentation (statements of 
work), contract management, 
monitoring and reviews. The areas 
considered to need improvement 
included: the policy of intellectual property rights and the 
dissemination and use of results.
51 COM(2006) 261 — Proposal for 
a Council Regulation amending 
Regulation (EC) No 1321/2004 on 
the establishment of structures for the management of the 
European satellite radio-navigation 
programmes, 2 June 2006.
52 75 % of the 482 survey 
participants reported a negative 
impact on their project(s).
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase30
 56.  The instrument for granting FP subsidies is inappropriate for funding 
market development activities. FP6 grants (following a call for pro-
posals) essentially follow a bottom-up approach with no centralised exploitation of results. Ideally, the FP6 activities should have been 
supported by consolidating their results in a comprehensive top-down  
market development approach  at the level of the GJU/GSA (see also 
EGNOS — paragraph 65). Without such a pro-active approach, it is dif-ficult to ensure projects’ continued utility for the Galileo programme once they have been completed.
 57.  The survey results also confirmed that the cumulative programme delays 
(in technological development, EGNOS operations and the concession 
negotiations) adversely affected both the execution of FP6 projects (for instance through the unavailability of the EGNOS signal) and the 
future exploitation of project results (due to their impact on GNSS 
business and research development opportunities).
EGNOS INTEGRATION ONLY PARTIALLY SUCCESSFUL
OBJECTIVE
 58.  As Galileo’s precursor, EGNOS has a crucial role in the early development 
of user segments (see also paragraph 14). The GJU’s fourth task was to ‘oversee the optimal integration of EGNOS into Galileo’ (see foot-note12). EGNOS and Galileo being two fully independent systems (see 
Annex II  for a detailed comparison of EGNOS and Galileo), integration 
does not relate to the technical sharing of infrastructure but to the 
following.
Integration into the Galileo governance and management struc- (a) 
tures was considered necessary in order to handle issues such as 
the conclusion of an agreement among the owners of EGNOS53, 
the integration of EGNOS and Galileo financing54 and the timing 
for appointing an EGNOS economic operator.
At market level, the purpose of integration was to prepare the way (b) 
for the market introduction of Galileo, using EGNOS as a precursor 
system, since it will deliver regional services similar to three of 
the five future Galileo services.53 Also called the EGNOS 
framework agreement.
54 This objective arose because 
of the financing problems facing 
EGNOS in January 2006.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase31
RESULTS
 59.  On the political front, EGNOS and Galileo have been integrated into a 
single European GNSS policy. Similarly, from a financial point of view, 
Commission funding for EGNOS has been incorporated into Galileo 
funding.
 60.  However, EGNOS has suffered from delays, and the main challenges of 
the programme, such as market development, certification and the 
role of the different stakeholders, are still unresolved:
Since October 2004 a framework agreement on the ownership and (a) 
future exploitation of EGNOS has been under negotiation. As of 
September 2008, there was still no such agreement. The EGNOS OS 
signal has technically been available since July 2006, but without 
an economic operator it cannot be declared operational55.
The GJU’s market penetration plan was never implemented and a (b) 
certifiable version of EGNOS is not expected until March 2009, at least two years later than expected
56.
REASONS FOR LIMITED SUCCESS
 61.  The GJU’s success in attaining its fourth objective was hampered by a 
number of factors:
the GJU’s role and mandate vis-à-vis EGNOS was not clear; (a) 
the decision to integrate EGNOS into Galileo was detrimental for (b) 
EGNOS;
the EGNOS institutional framework is very complex; (c) 
the GJU devoted too little effort to market development activities. (d) 55 Due to liability issues and 
uncertainty about the future of 
EGNOS financing and governance.
56 In the absence of clear 
milestones and planning 
for EGNOS, this is only a conservative estimate.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase32
 62.  The GJU’s role and mandate vis-à-vis EGNOS was not clear . The GJU stat-
utes stated only that the GJU would ‘oversee the optimal integration 
of EGNOS in Galileo’. According to the Tripartite Agreement57, ESA 
was responsible, through its ARTES-9 programme, for the technical development and operation of EGNOS. But these legal texts do not make clear who was the overall EGNOS programme manager. In the absence of a programme manager , EGNOS clearly lacked a long-term 
strategic vision
58, which led to uncertainty, delays and cost overruns 
(Annex II ).
 63.  Even though the decision to integrate EGNOS into the concession nego-
tiations  secured continued Community funding, it at the same time 
held up the achievement of the EGNOS programme because:
delays in the concession negotiations put back the EGNOS tech- (a) 
nological development deadlines; and
all activity in connection with the appointment of an economic (b) 
operator for EGNOS was stopped because this was the responsi-
bility of the Galileo concession holder.
  In addition, the need to conclude a framework agreement for EGNOS 
made the concession negotiations more complex.
 64.  The EGNOS  institutional framework is very complex . The various financial 
stakeholders in EGNOS all have different priorities. As the owner of 
EGNOS assets for the duration of the ARTES-9 programme, the ESA acts 
on behalf of the countries with a financial stake in that programme. 
Any transfer of ownership is conditional on their consent59. The Com-
mission has no ownership rights to EGNOS, but through the GSA,  according to Regulation (EC) No 1321/2004, it should become the  
owner of EGNOS assets. The absence of a clear mandate for the GJU as 
EGNOS programme manager resulted in doubts as to whether the GJU 
was empowered to negotiate a framework agreement for EGNOS.57 Agreement between the 
European Community, the 
European Space Agency and the European Organisation for 
the Safety of Air Navigation 
on a European contribution 
to the development of a 
global navigation satellite 
system (GNSS), signed in 1998 
(OJ L 194, 10.7.1998, p. 16).
58 For instance: long-term financial 
commitment, stable technical 
baseline, clear path towards future 
governance, prioritisation of objectives with regard to EGNOS 
extension outside Europe, clear 
vision on complementarity of 
EGNOS and Galileo.
59 According to the bilateral 
agreements between ESA and eight national air traffic 
(management) service providers 
and other agencies.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase33
 65.  In addition, the GJU‘s attention was dominated by institutional, financial 
and international cooperation issues and  limited time and resources  
were devoted to the early development of a set of service enablers for 
EGNOS: the GJU did not exploit FP6 market development results in a centralised way (paragraph 56) and did not implement the EGNOS market penetration plan.
INADEQUATE PUBLIC-SECTOR GOVERNANCE
 66.  The following sections focus on the division of roles and on how the 
Commission fulfilled its role as the key promoter of the Galileo  
programme.
UNCLEAR DIVISION OF ROLES
 67.  The division of roles between the entities involved in the development 
and validation phase of the programme (EU and ESA Member States, 
Commission, GJU and ESA) was not clearly defined.
 68.  The GJU’s ability to manage the programme effectively was constrained 
by:
Its governance structure ( (a) Figure 2 ) 
The GJU statutes gave it a supervisory role vis-à-vis the techno-
logical development work to be done by the ESA. However, the 
ESA was both a founding member of the GJU (and thus represented on the Executive Committee and the Administrative Board) and a 
’contractor’ (recipient of funding and responsible for implemen-
tation under the ESA/GJU agreement). Thus, in practice, the GJU 
was not in a position to supervise the ESA effectively due to this 
conflict of interest for the ESA within the GJU.
Its temporary nature (b) 
Closing down the GJU before the end of the development and  validation phase undermined its authority
60.60 The Commission acknowledged 
in its communication of May 2007 
that ‘the timing of the hand-over of activities from the GJU to the 
GSA on 1 January 2007 has proven 
to be suboptimal (…). The GSA was 
still in the process of being built 
up and its relationships with the 
Commission and ESA not settled.’
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase34
 69.  The ESA/GJU agreement on implementing technological development 
activities in the development and validation phase (negotiated by the 
Commission before the GJU became operational61) was not specific 
enough (a better model would be the ESA–Eumetsat agreements62, 63). 
This resulted in a lack of clarity regarding the rules governing the  
placing of contracts64, transfer of ownership, reporting and implemen-
tation65. The agreement did not clarify the roles of the different actors. 
In the spirit of the framework agreement between the ESA and the European Community
66, these roles should have been complementary: 
the ESA as the competent technical body, the Commission addressing the political dimension and the GJU addressing user requirements  
and certification.
 70.  The ESA was both involved in programme management (through the GJU) 
and responsible for the day-to-day management of the technological development activities of both Galileo and EGNOS.
 71.  The unclear division of roles resulted in unclear lines of accountability. 
Many decisions relating to Galileo were affected by the fact that  
no one actor (Commission, GJU, ESA, Member States) assumed full  
responsibility: the decision in favour of separate development and 
deployment phases, the choice of a PPP, acceptance of the bidders’ 
merger proposal, the ESA/GJU agreement, incomplete budgeting,  
delays to EGNOS technological development and the IOV industrial 
organisation.
 72.  Management of the programme was also made more difficult by interven-
tions by Member States in the management of individual programme components (paragraphs 23 and 49).61 Later formally adopted by the 
GJU Administrative Board and 
signed by the Executive Director.
62 Eumetsat (the European 
Organisation for the Exploitation 
of Meteorological Satellites) is an 
intergovernmental organisation, 
formed to service a total of 
21 Member and nine Cooperating States.
63 The ESA is responsible for the 
development of the space segment 
of Eumetsat programmes, and 
Eumetsat is responsible for the 
overall system. The ESA–Eumetsat agreements are more elaborate on 
aspects such as:
financial liability, its breakdown • 
into industrial price and ESA 
costs, and procedures to ensure that limits of financial liability 
are respected;
the use of a management • 
margin and approval 
procedures;
the establishment of clear • 
communication lines;clear procedures for dealing • 
with change notices that are 
not covered by the work initially 
envisaged;
ownership of physical and • 
intellectual property.
64 ESA applies the ‘fair-returns’ principle as part of its industrial policy. In other words, a country paying a contribution to ESA will 
receive, within a certain margin, industry contracts of a value equivalent to that contribution. In theory, this principle appl ies to only 
50 % of the budget for development and validation. In practice, it is not possible to apply such rules to 50 % of an activity t hat is 
managed as being one and indivisible.
65 For example, on the implementation and financing of certain change notices, such as authentication, data exchange, high 
precision positioning service and the 5 December agreement.
66 Framework agreement between the European Community and the European Space Agency (OJ L 261, 6.8.2004, p. 64).
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase35
GOVERNANCE STRUCTURE OF THE GJUFIGURE 2
GJU Supervisory Board
(EU Member States)ESA PB-Nav
(ESA Member States)Galileo Security Board
GJU Administrative Board
GJU Executive Director GJU Executive Committee
ESA Industry Consultants Other contractorsESA-GJU agreement RTD grants Study contractsGalileo Joint Undertaking
The GJU was governed by an Executive Director, four Boards and an Executive Committee. All issues 
on the agenda of the Administrative Board were prepared at Executive Committee meetings and 
were first discussed at the level of the EU Member States by the Supervisory board and at the level of the ESA Member States at the PB-Nav (Programme Board on Satellite Navigation). The ESA and the Commission had an equal number of votes on the Administrative Board, which required a consensus for all decisions.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase36
THE PROGRAMME LACKED A STRONG STRATEGIC SPONSOR 
AND SUPERVISOR
 73.  Between 1999 and 2004, the Commission actively played its role of initi-
ating the programme and getting it started. Delays and cost overruns became apparent in the course of 2005, but no significant corrective action was taken until March 2007.
 74.  Throughout the programme, the Commission, as the programme’s key 
promoter, did not observe a number of management principles, such 
as:
Setting clear, realistic and acceptable objectives: the programme (a) 
has multiple objectives, which resulted in a diverse range of stake-
holder expectations. In addition to its political, economic and  
technological motives (paragraph 7), Member States have seen  
Galileo as a means of consolidating the European space industry. 
For some Member States, the possible military or defence use of 
the system has been an equally important objective. The Commis-sion did not prioritise the programme’s objectives.
Defining appropriate strategies and instruments to pursue them: (b) 
the Commission has not pursued a long-term strategic vision for 
the EGNOS and Galileo programmes
67 but has focused on short-
term goals and decisions. This is illustrated by:
the absence of a roadmap for EGNOS and Galileo. Issues relat- (i) 
ing to, for instance, the future exploitation model for Gali-leo and EGNOS, the implementation of system priorities (e.g. which service to implement first) or the development of non-
civil aviation markets for EGNOS still had to be resolved at  the end of 2008;
the problems encountered in negotiating a framework agree- (ii) 
ment for EGNOS. As part of European satellite navigation pol-icy, the Commission proposed uniting the EGNOS and Galileo programmes under a single umbrella: the European satellite navigation programmes. However, this was done without  
the prior agreement of the other EGNOS stakeholders (para-
graphs 5 and 64) and with little thought for the complexity 
of the institutional framework. The GJU (and later the GSA)  
was charged with negotiating such an agreement, but at the 
end of 2008 no progress had been made. As a result, technical issues (managed by the ESA) apart, no entity was empowered 
to take key decisions concerning EGNOS and to direct the  
programme;67 Such as the complementarity of 
the two programmes, models for 
the future exploitation of EGNOS 
and Galileo or the implementation 
of system priorities.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase37
the Commission’s preoccupation with navigating the pro- (iii) 
gramme from one Council meeting to the next (see for example 
paragraphs 21 and 22 on the Commission’s communication of 6 October 2004).
Setting up a future (permanent) organisation: between July 1999 (c) 
and December 2006 the Commission charged six different tem-porary structures with providing technical support for Galileo  programme management or with the actual management task.  
The GJU was the fifth such initiative. As a flexible and dedicated organisation with an entrepreneurial mindset, it could have been 
an effective programme manager. However, its position was  
undermined by its temporary nature
68, its governance structure 
(Figure 2 ) and its lack of expertise.
Securing the appropriate skills to perform all programme compo- (d) 
nents managed and supervised by the public sector: when setting 
up the GJU, the Commission did not pay sufficient attention to 
the fact that it was a new organisation and that it had insuf-
ficient experience and expertise to perform its tasks (see also  
paragraph 41(c)).
Providing for risk management: at the programme’s outset, the (e) 
Commission did not adequately address the risks related to the 
Galileo concession (e.g. market risk, design risk and technological 
risk) (see also paragraph 41(a) and Box 2 ) and thus launched the 
concession process without the necessary preparation.
Taking timely decisions on all programme features: the Commis- (f) 
sion did not sufficiently critically review or monitor the GJU’s  progress reports. Commission communications consistently ech-oed the positive tone of official GJU statements. As a consequence, 
the Commission did not request or take significant corrective  
action until March 2007, even though the concession deadline  was postponed annually for a further twelve months.68 Even before the GJU became 
operational, the Commission 
published a proposal for a Council Regulation setting up the GSA as 
its successor (COM(2003) 471 final 
of 31 July 2003).
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase38
CONCLUSIONS AND 
RECOMMENDATIONS
 75.  The management of the development and validation phase was inad-
equate. The Galileo programme experienced problems at different  
levels:
The GJU was not a strong programme manager nor was any other (a) 
body assigned this role. It did not meet most of its objectives — owing, however, to factors that were largely outside the GJU’s  control.
The programme lacked a strong strategic sponsor and supervisor: (b) 
the Commission did not proactively direct the programme, leaving it without a helmsman. The programme’s management suffered a number of shortcomings: an absence of realistic objectives, an appropriate strategy and skills; insufficient preparatory work; and the long reaction time before the taking of corrective action.
Owing to their different expectations for the programme, Mem- (c) 
ber States intervened in the interest of their national industries 
causing decisions to be held up. The resulting compromises led 
to implementation problems, delays and, in the end, to cost  
overruns.
WHICH FACTORS ACCOUNTED FOR THE FAILURE 
OF THE CONCESSION PROCESS?
 76.  The PPP was inadequately prepared and conceived. As a result, the GJU 
was required to negotiate a PPP which was unrealistic (paragraphs 35 to 42).
WHICH FACTORS ACCOUNTED FOR THE REPORTED 
DELAYS AND COST OVERRUNS OF TECHNOLOGICAL DEVELOPMENT?
 77.  The GJU’s task of supervising technological development activities was 
seriously constrained by governance issues, an incomplete budget, delays and the industrial organisation of the development and vali-dation phase (paragraphs 43 to 50).
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase39
TO WHAT EXTENT HAS SPENDING ON RESEARCH 
AND DEVELOPMENT ACTIVITIES BENEFITED 
THE GALILEO PROGRAMME?
 78.  The RTD results were of limited usefulness because of discontinuities, the 
inappropriateness of FP6 for funding market development activities, the absence of a comprehensive market development approach and delays (paragraphs 51 to 57).
HOW WELL HAS THE GJU INTEGRATED EGNOS 
INTO GALILEO?
 79.  The integration of EGNOS into Galileo was only partially successful 
because the GJU’s mandate was not clear, the decision to include  
EGNOS in the concession negotiations held up the achievement of  
the EGNOS programme, the EGNOS institutional framework was not 
clear and the GJU devoted little effort to market development for  
EGNOS (paragraphs 58 to 65).
WAS THE GALILEO PROGRAMME ADEQUATELY 
GOVERNED?
 80.  The programme’s governance was inadequate. The division of roles 
between the entities involved in the development and validation  phase of the programme (EU and ESA Member States, Commission, GJU and ESA) was not clearly defined. The Commission did not pro-
vide adequate leadership in developing and managing Galileo (para-graphs 66 to 74).
LESSONS FOR THE FUTURE
 81.  The Galileo programme organisation has changed markedly since 2007. 
But many of the lessons learned from the GJU are of relevance both 
to the continuing Galileo programme and to further possible joint  
undertakings and industrial programmes.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase40
 82.  The Commission has proposed itself as programme manager , a ch alle nging 
role for which it has little experience. While this may be an expedient 
solution for the short term, the Commission should consider whether this would be the most appropriate long term arrangement. The Court 
has the following recommendations.
RECOMMENDATION 1
To gain authority as a programme manager, the Commission should adapt its resources and its legal and financial instruments to the 
specificities of the development and management of an industrial 
programme:
the quantity and expertise of its human resources should be (a) 
commensurate with its task as programme manager;
an appropriate EU–ESA cooperation framework should be  (b) 
established;
the Commission should ensure it has the financial instruments (c) 
to fund infrastructure (other than via grants) and to commit  
itself to bearing the yearly operating and replenishment costs 
of this infrastructure over a long time horizon;
programme governance should be such as to enable the pro- (d) 
gramme manager to perform its tasks coherently (define expec-tations, grant powers and verify performance).
 83.  Galileo needs a clear direction to be successful. Decisions on its future 
cannot be taken by the Commission alone but clear leadership is  
paramount.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase41
RECOMMENDATION 2
The Commission should urgently clarify the programme’s political 
objectives and translate them into strategic and operational objec-
tives  that will provide Galileo with a solid roadmap from now until 
beyond full deployment. For example:
How should Galileo be positioned as a commercial system? Is it (a) 
required to break even financially or will it require continuing 
public-sector support? Is it about maximising revenue genera-tion, or maximising macroeconomic benefits and serving the 
whole Galileo value chain through services and goods gener-
ated by its applications?
How will EGNOS and Galileo relate to each other once Galileo (b) 
is fully operational? Will they exist side by side thus ensur-ing useful redundancy in service provision, or will EGNOS be 
dismantled?
 84.  The failure of the concession negotiations does not imply that there is no 
basis for a Galileo concession in the future. But any future attempts to 
involve private finance need to be based on a more realistic assess-
ment of what is marketable and if the case for a PPP really exists. It 
should be noted that successful exploitation models exist for other 
international satellite projects, such as Inmarsat, Intelsat, Eutelsat 
or Eumetsat.
RECOMMENDATION 3
The Commission should take sufficient time to prepare the com-
mercial operation phase, drawing on best practice in the Member 
States, considering various models for private-sector initiative and 
taking account of experience in comparable sectors.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase42
 85.  Depending on the decision of how Galileo should be positioned as a 
commercial system (see recommendation 2), the European Union will 
either have to engage in fostering early market development of Gali-leo/EGNOS revenues (for generating direct revenues to offset against 
costs) or accept to fund Galileo’s total potential costs (potentially  
10 billion euro over the coming 20 years). In the former case, an  appropriate framework for users should be created.
RECOMMENDATION 4
The Commission should ensure that the following issues are  
addressed:
analysis, consolidation and validation of relevant and stable  (a) 
user requirements;
development of enabling actions (such as the necessary legal (b) 
and regulatory framework);
promotion of EGNOS as a showcase for Galileo, by certifying (c) 
EGNOS’ SoL service and making the EGNOS and Galileo exploi-
tation models compatible;
development of a clear and compatible pricing policy or rev- (d) 
enue model for Galileo and EGNOS services, and a third-party 
liability policy.
 86.  The Commission has since created other joint undertakings (SESAR, ITER 
and several Joint Technology Initiatives (JTIs)). Experience of Galileo suggests that the approach to these new ventures should be well  
planned and realistic.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase43
RECOMMENDATION 5
For any future joint undertakings and industrial programmes  in which 
the EU resolves to engage, the Commission should:
ensure that there are clear and compelling reasons for creating (a) 
a joint undertaking;
ensure that all realistic options on private-sector cooperation (b) 
have been properly considered;
endeavour to establish a governance structure that does  (c) 
not impede proper programme management by the joint  
undertaking.
  This report was adopted by the Court of Auditors in Luxembourg at its 
meeting of 14 May 2009.
For the Court of Auditors
o t eC o u to u dt o s
Vítor Manuel da Silva Caldeira
President
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase44
THE EUROPEAN SPACE AGENCY
The ESA is an intergovernmental organisation, created in its current form in 
1975 from the merger of two existing agencies, ELDO (European Launcher Development Organisation) and ESRO (European Space Research Organi-sation). The ESA has 18 Member States: Austria, Belgium, Czech Republic, 
Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the 
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. The national bodies responsible for space in these countries sit 
on the ESA’s ruling Council.
The ESA’s purpose is to provide for and to promote, for exclusively peace-
ful purposes, cooperation among European States in space research and technology and their space applications, with a view to their being used for scientific purposes and for operational space applications systems.
The ESA’s activities fall into two categories — ‘mandatory’ and ‘optional’. Pro-
grammes carried out under the General Budget and the Science programme 
budget are ‘mandatory’; they include the Agency’s basic activities (studies 
on future projects, technology research, shared technical investments, infor-mation systems and training programmes). All Member States contribute to 
these programmes on a scale based on their GDP. The other programmes, 
known as ‘optional’, involve a reduced number of Member States which are 
free to decide on their level of participation. Both ARTES-9 and GalileoSat 
are optional programmes. The ESA’s budget spending for 2006 amounted to almost 3 billion euro.
The ESA and the European Community are mutually independent organisa-
tions. They have different Member States and are governed by different rules and procedures. The ESA is not bound by EU regulations.
A framework agreement between the ESA and the European Community (in 
force since May 2004) formalises cooperation between the two institutions. 
The European space policy, signed in May 2007, unifies the ESA’s approach 
with those of the individual EU Member States and creates, for the first time, 
a common political framework for space activities in Europe.ANNEX I
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase45
EGNOS FACTS, FIGURES AND ILLUSTRATIVE EXAMPLES
COMPARISON BETWEEN EGNOS AND GALILEOANNEX II
EGNOS Galileo
Link with other GNSSs Augments the GPS and Glonass signals Fully independent from other GNSSsServices 3: OS, SoL, SAR 5: OS, CS, PRS, SoL, SARCoverage Regional (Europe) Global
Space segment3 transponders on geostationary (GEO) 
satellites orbiting at 36 000 km30 medium earth orbit (MEO) satellites 
orbiting at 23 000 km
Ground segment4 MCCs (Mission Control Centres)
34 RIMS (Ranging and Integrity 
Monitoring Stations)
6 NLES (Navigation Land Earth Stations)3 GCCs (Galileo Control Centres)
20 GSSs (Galileo Sensor Stations)
5 S-band up-link stations
10 C-band up-link stations
Financed byESA, European Commission, Eurocontrol, 
EOIG, GJU stakeholdersESA, European Commission, China, Israel
EGNOS FUNDING SOURCES
EGNOS funding sources (Total 630 million euro, 2001 prices) 
Funds allocated between 1995 and 2007
EOIG
26 %Eurocontrol
2 %GJU
staholders
7 % European
Commission 
(TET + FP7)
28 %
ESA Member
States
(ARTES)
37 %
Source : ECA estimate.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase46
EGNOS LACKED A LONG-TERM VISION
The EGNOS objectives were gradually adapted during the programme’s trans-
formation from a demonstrator to a fully fledged operational programme. It suffered from the absence of a long-term strategy and political commitment. The following are some examples.
EGNOS grants from the European Commission were paid in annual (a) 
tranches and systematically arrived late. Contributions from ESA Mem-
ber States were also late. Some programme activities were therefore 
delayed, giving rise to uncertainty about the programme’s deployment planning.
Mid-term, changing requirements, evolving standards and new ideas on (b) 
the certification of the system caused delays and extra costs.
As of September 2008, there was still no roadmap for EGNOS. (c) 
Although the EGNOS OS signal became available in July 2006, as of Sep- (d) 
tember 2008 the system had still not been declared operational due to 
issues of third party liability, uncertainty about the programme’s future 
in terms of financing and governance and the Commission’s reluctance 
to accept the system technically.
Despite the ESA’s and the GJU’s efforts to demonstrate the capabilities (e) 
of EGNOS overseas (e.g. in Africa, China and South America), there is no real strategy to support EGNOS outside Europe.
In the GJU’s organisational structure EGNOS was assigned to the tech- (f) 
nical division rather than treated as a fully fledged, cross-sectoral pro-gramme. Until 2006 the GJU did not receive the financial means from 
the Commission to devote to specific EGNOS-related studies.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase47
INTERNATIONAL COOPERATION ON GALILEO
The EU has entered into several international agreements related to 
Galileo.
Cooperation agreements have been signed with the United States (2004) 
and with Russia (2006) in order to ensure interoperability and compatibility 
between Galileo and existing GNSSs such as GPS and Glonass.
Cooperation agreements with China (2003) and Israel (2004), respectively, 
brought GJU membership of the NRSCC and Matimop.
General cooperation agreements have been signed with Ukraine (2005), 
India (2005), Morocco (2005), and South Korea (2006) but have never led to a concrete participation or GJU membership.
The purpose of all these agreements was to minimise the technological 
and political risks, promote and reinforce industrial and political know-how, 
stimulate the provision of system applications, offer third-country market 
penetration, promote Galileo as an international standard and prepare the ground for the installation of terrestrial-segment components in different 
regions of the world.
Relations with the Chinese and Israeli undertakings were damaged when 
the GJU was wound up and problems arose with transferring the relevant agreements to the GSA. Discussions on cooperation with further other coun-
tries such as Brazil, Mexico, Chile, Canada, Argentina and Australia were also discontinued after the GJU was closed down.ANNEX III
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase48CRITERIA USED BY THE ECA TO ASSESS THE PUBLIC SECTOR’S MANAGEMENT  
OF THE GALILEO CONCESSION PROCESS, TOGETHER WITH A SUMMARY OF THE ASSESSMENTANNEX IV
Criteria (based on Intosai 
guidelines on best practice 
for the audit of public/private 
fi nance and concessions)Body 
responsibleHave criteria 
been met?Summary of assessment
A. Scoping the project
A.1 Selection of the project
How did the audited body prioritise 
potential projects? Did it implement them in that priority order?Commission 
(Council)Not assessed
(political 
choice)Galileo was a unique project and the decision to implement it was of a political nature. Following a Commission 
initiative launched in the early 1990s, the Council approved the Galileo programme and entrusted the European Commission with its management.
Subsequently, at the Commission’s proposal, and in order to launch the development phase, the public–private 
partnership / concession was decided upon as a political consensus between Member States. It was envisaged that the management and fi  nancing of the subsequent phases would use this scenario. See successive Commission 
communications, Commission studies and Council conclusions from 1994 to 2003.
A.2 Defi  nition of project requirements
Did the audited body state its 
requirements clearly from the start and express them in output terms making clear any particular constraints to which the private sector will be subject?Commission 
(Council)Partly As can be derived from the Commission’s preparatory work and decisions taken by the Council, the European public 
sector stated its requirements in very broad terms. The proposed concession was supposed to cover the fi  nancing 
and management of deployment and operation — including replenishment — of the Galileo system. To that end, the concession holder would procure, launch, operate, exploit and maintain the system and its components during the concession period so as to deliver the fi  ve Galileo satellite services and to serve the subsequent development of 
downstream applications. Consideration was also given to including the management of EGNOS and the provision of EGNOS services in the contractual arrangements for the Galileo concession.
The Commission’s preparatory work for the concession left a good deal of uncertainty on crucial issues, such as the 
underlying revenue model and the transition path between the development and deployment phases. While it identifi  ed briefl  y some of the constraints facing the private sector’s participation in the project, it did not outline a 
public-sector strategy that could be proposed to the private sector.
The Commission’s preparatory work thus failed to provide the private sector with clear requirements and constraints 
for the proposed Galileo concession.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase49A.3 Private-sector capabilities
Did the audited body make a 
preliminary assessment of the private sector’s capabilities for delivering the requirements?Commission Partly The Commission’s preparatory work concluded positively, if in broad terms, on the feasibility of a concession a s 
opposed to the alternative joint venture model (which took the form of capital shares in the GJU). The private sector was judged reluctant to participate and invest in the latter owing to uncertainty about the expected fi  nancial returns 
and the potential for confl  icts of interest in the development and validation phase.
It also concluded positively that the European private sector had the necessary capabilities to deliver the Galileo 
system and services through its established technical know-how and its proven experience in fi  nancing and 
managing large projects.
However, as stated in A.2, the project requirements were not suffi   ciently clear. Consequently, the assessment of the 
private sector’s capabilities for delivering these requirements remained overly general.
The Commission was therefore not in a position to make a preliminary assessment of the private sector’s capabilities.
A.4 Evaluation of potential benefi  ts
Did the audited body make a 
preliminary evaluation of the benefi  ts 
it sought?Commission 
(Council)Partly The rationale for implementing Galileo through a PPP included the following arguments (cf. Commission 
Communication of 10 February 1999): complementary fi  nance, improved project design, overall value for money, 
better take-up of the service, central importance given to users’ needs and better management of costs.
One study carried out at the Commission’s behest produced a list of objectives: to achieve full operational capability 
as soon as possible, ideally by early 2008 in order to meet windows of opportunity in the GNSS market, to obtain a signifi  cant proportion of the deployment cost through private funding (with an indicative 2/3 share), to obtain 
value for money (by optimising the technical solution and system, optimising procurement competition and effi  ciency, achieving an appropriate degree of risk transfer and creating fi  nancial incentives for performance), to 
involve European industry so that it could benefi  t from the contracts to build the system and manufacture user 
equipment, to give the private sector responsibility for ensuring that system performance and specifi  cations met 
the performance requirements of the market as well as the public sector, to optimise revenue generation from the market, to reduce the need for public expenditure and spread the public contribution over a longer period, and to optimise whole life costs by introducing private-sector effi   ciencies. The study recognised that a project with such a 
multitude of objectives would require trade-off  s.
However, the Commission’s preparatory work presented no trade-off  s. What is more, these general objectives were 
not specifi  c enough for the proposed Galileo concession. The Commission should have outlined a strategy stating, 
for instance: (i) the public sector’s preferences for Galileo’s commercial exploitation; (ii) the public sector’s strategy for ensuring a practical transition path to resolve interdependencies between the development and deployment phases.
Such elements could have subsequently served as meaningful evaluation and selection criteria against which to 
judge the bids submitted during the competitive tender process.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase50Criteria (based on Intosai 
guidelines on best practice 
for the audit of public/private 
fi nance and concessions)Body 
responsibleHave criteria 
been met?Summary of assessment
A.5 Wider policy objectives (incl. regulatory aspects)
Did the audited body assess the 
impact any wider policy objectives might have on the project?Commission 
(Council)Partly The Galileo project is hemmed in by strategic considerations (e.g. the potential for military use). The Member States 
disagree among themselves on such issues. Nevertheless, approximately one third of Galileo’s potential revenue is expected to come from the use of the PRS (public regulated service) by e.g. emergency services, security forces, the millitary.
The development of GNSS applications also depends heavily on regulatory measures to be introduced at both 
Member State and EU level. Again approximately one third of potential revenue was judged to depend on legislative support from the public sector, without which the private sector cannot anticipate revenue. However, the Commission did not present a plan to boost Galileo’s chances of success by regulatory measures.
A.6 Selection of the most suitable form of partnershipDid the audited body examine a 
range of alternative ways of meeting its needs, such as traditional public-sector procurement or privatisation, before choosing the public/private fi  nance and concessions option?Commission 
(Council)No A traditional public procurement was not investigated as part of the Commission’s preparatory work. The 
Commission limited itself to examining (i) the development of a business plan for the Galileo programme and (ii) the appropriate structure for a PPP. The Commission’s preparatory work proposed a PPP in the form of a concession model as opposed to a joint venture model.
Contrary to one of the recommendations of two studies executed by PricewaterhouseCoopers (November 2001 
and January 2003), no public-sector comparator was subsequently built to provide a benchmark against which the overall benefi  t of private-sector bids for the PPP could be measured, with a view to improving the public sector’s 
negotiating position.
A.7 Innovation
Did the audited body identify the 
scope for innovation in advance in areas such as design and construction, operation and project fi  nancing?Commission Partly The Commission’s preparatory work recognised the need for innovation in the proposed Galileo concession, but di d 
not precisely identify where or how innovation was possible.
The Commission did not conduct any further preparatory work. At the outset of the concession selection process, 
the tender documentation encouraged bidders to propose innovative solutions by authorising them to present variant bids.
However, the lack of clear requirements for the Galileo concession (see A.2) made it impossible for innovation to be 
considered up front during the selection process.
A.8 Risk assessmentDid the audited body investigate in 
advance the appropriate allocation of project risks between the public-sector and private-sector parties aff  ected by 
the project?Commission No No examination of the risk allocation at the preparatory stage took place. This would have been possible if clear 
requirements had been established for the private sector.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase51A.9 Aff  ordability and likely value for money
Before starting the procurement 
process, did the audited body consider the extent to which the project was likely to be aff  ordable and off  er value 
for money?Commission No Although risks and diffi   culties that would need to be overcome before establishing a concession with private 
partners were identifi  ed at the preparatory stage, there was no assessment of the extent to which these 
uncertainties might aff  ect project feasibility. The potential benefi  ts of the Galileo project were examined, but the 
arguments for and against the concession approach were not fully developed.
The aff  ordability and likely value for money of the Galileo concession were not considered before starting the 
procurement process.
A.10 Outline business caseDid the audited body prepare a proper 
business case to support the decision to begin the project’s procurement?Commission Partly At the Council’s request (Council Resolution of 5 April 2001), the Commission undertook some preparatory work 
to support the development of a business plan for the Galileo programme and investigate an appropriate model (business case) for the PPP.
Although this work made the case for public-sector support, citing the strong cost/benefi  t ratio, it did not clearly 
present the merits and drawbacks of using the concession model.
B. Project management
B.1 Project team
Did the audited body assess the skills 
it would need to deliver the project successfully? Where could the audited body obtain these, e.g. from in-house staff   or external advisers? Did the 
audited body then assemble its project team in good time?Shared 
Commission — GJUPartly The GJU became operational in September 2003 when it took over existing staff   from GISS. There were additional 
recruitments, but the GJU failed to recruit staff   with prior direct experience of managing the process of setting up 
PPPs and concessions.
The GJU appointed external advisors only at a late point in time in the selection process (i.e. after the issue of tender 
documentation and the competitive dialogue).
B.2 Market investigation
Did the audited body investigate the 
market prior to beginning the formal procurement in order to establish that there were suppliers who were willing to tender for the project?Commission Partly On 22 February 2003, the Commission launched a call for expressions of interest (OJ C 43, 22.2.2003, p. 12) fro m 
undertakings for the ‘Galileo concession’. This call aimed at constituting a database of interested companies and allowing them to prepare for the tender process. 85 companies expressed an interest and were registered in the database. Although an information day was organised for interested parties, no eff  ort was made to assess their 
understanding and perception of the proposed concession requirements.
In general,the interest of potential suppliers existed for a Galileo project, but they needed more precise 
requirements before entering into a concession.
B.3 Contractual mattersDid the audited body identify the 
contractual issues that were likely to arise during the procurement and drew up a draft contract, setting out initial proposals on each issue?GJU Partly A draft contract was prepared during the selection phase and the competitive dialogue.
However, the draft contract was still very premature given the existence of numerous uncertainties, not the least of 
which was the lack of any preference for an applicable law.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase52Criteria (based on Intosai 
guidelines on best practice 
for the audit of public/private 
fi nance and concessions)Body 
responsibleHave criteria 
been met?Summary of assessment
B.4 Tender strategy
Did the audited body prepare a 
tendering strategy covering the number of tender rounds to be held, the number of bids to be invited at each tender stage, the body’s approach to communicating with bidders and a realistic timetable for the tender process?Shared 
Commission — GJUPartly The Commission’s preparatory work produced an indicative procurement plan for selection and negotiation by way 
of a call for expressions of interest, a call for concessions, a pre-selection phase and a selection phase. The contract award was envisaged within 14 months of the start of the process. Despite the delayed start of GJU operations, the Commission and the GJU initially kept to the plan of organising selection and negotiation over a short period in 2003 and 2004 (concession notice OJ 2003/S 200 — 179789).
However, this timetable was very ambitious. PPP/PFI practice in the United Kingdom suggests that it takes 
considerably longer (a period of 18 months is not exceptional) to defi  ne specifi  c and coherent objectives even for 
an average, not particularly complex PPP project. Well-established ESA procurement practices also suggest that defi ning a robust approach in the European space industry landscape requires much more than a year, even for an 
experienced organisation.
B.5 Project timetableDid the audited body prepare a 
credible project timetable which identifi  ed milestones against which progress could be measured, and points within the process at which the body was to review the project’s continued viability?Shared 
Commission — GJUPartly The initial overall timetable for the Galileo programme was communicated on several occasions between 2000 and 
2004 (see Table 1 ).
The timetable was, however, very general and did not contain intermediate milestones to be used for reviewing the 
programme’s viability. Updates to the timetable were offi   cially notifi  ed in 2006 and 2007.
Intermediate milestones relating to the concession process were postponed on several occasions, but with no 
comment on the project’s continued feasibility.
B.6 Cost and benefi  t comparison
Did the audited body assess costs 
and benefi  ts of the public/private fi  nance option against an alternative procurement option?Shared 
Commission — GJUNo The Commission’s preparatory work included a cost/benefi  t analysis of the Galileo project, but there was no such 
analysis of its proposed concession approach against an alternative procurement option.
As indicated under A.6, studies by PricewaterhouseCoopers recommended the preparation of a robust public sector 
comparator. However, this recommendation was never taken up.
B.7 Tender listDid the audited body succeed in 
creating a good tender list?Shared 
Commission — GJUPartly Pre-selected consortia (see also B.2) included a good range of European industrial capabilities to deliver the Galileo 
system.
However, operators and downstream industries were marginalised by space manufacturing companies. This 
situation was further exacerbated after one of the three pre-selected consortia decided to withdraw from the selection process during summer 2004.
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase53B.8 Specifi  cation of requirements
Did the audited body set out a clear 
specifi  cation of the requirements?GJU No The GJU tender documentation served mainly to help bidders structure their proposals. However, while it gave 
general principles it did not refl  ect specifi  c objectives, clear risk positions or preferred approaches endorsed by 
the GJU as public-sector representative. In particular, the tender documentation did not address design fl  aws and 
inherent diffi   culties of the proposed concession scheme. For instance, the GJU did not spell out its preferred option 
(or alternative options) for market development, but merely asked bidders to submit their proposed approaches. In addition, while the GJU asked bidders to describe their strategy on taking over the results from the IOV and with regard to the topic ‘third-party liability’, it did not establish the applicable law of the concession contract, although this could have served bidders as a basis for their analysis. The only exception related to launch options, where the GJU clearly indicated its preference for Ariane 5 and Soyuz.
As a consequence, bidders did not have suffi   cient details on the position and preferences of the public sector, 
and they were left to their own judgment when submitting bids, with no guidance for their proposals and no opportunity to respond precisely to clear requirements.
B.9 Maintaining competitionDid the audited body succeed in 
maintaining competitive tension to contract award and manage the negotiations with the preferred bidder well?GJU No Inasmuch as it was unable to select a preferred bidder on two occasions and approved the merger, the GJU failed to 
maintain competitive tension.
B.10 Regular reviews
During procurement, did the audited 
body regularly assess whether the project continued to off  er value for 
money?Shared 
Commission — GJUNo In its communications, the GJU regularly showed its fi  rm commitment to reaching an agreement with the private 
sector, but it failed to assess feasibility and potential value for money (see also B.5).
B.11 Budgets for project costs
Did the audited body set and control 
realistic budgets for all project costs, including internal and external resources?Shared Yes The GJU relied on the approval of annual budgets for each of its tasks.
However, the Commission and the GJU did not estimate the level of expenditure by both the public and the private 
sectors for the entire selection and negotiation process. The private sector presented an estimate of 24,5 million euros in October 2005.
B.12 Appointment of advisersDid the audited body appoint good 
quality external advisers after competition?Shared Partly The GJU selected experienced external advisors by competitive tender, but it appointed them at a late point in time  
in the selection process (i.e. after the issue of tender documentation and the competitive dialogue).
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase54Criteria (based on Intosai 
guidelines on best practice 
for the audit of public/private 
fi nance and concessions)Body 
responsibleHave criteria 
been met?Summary of assessment
B.13 Cost management
How did the audited body monitor 
and manage its project costs, including internal and external resources?Shared Partly The GJU employed external advisors and consultants through framework contracts concluded following calls for 
tender. Costs were kept under control through the placement of individual work orders.
However, the GJU had no long-term policy regarding the costs of external advisors.
C. Bids and contract
C.1 Bidders’ proposals
Was a good range of solutions proposed by bidders? Partly The bids received by the GJU refl  ected the bidders’ expertise and experience as the European leaders in the industry.
However, as the public sector gave no precise specifi  cations (see B.8), the bidders lacked guidance for their 
proposals and had no opportunity to respond precisely to clear requirements.
This problem was identifi  ed by one pre-selected bidder which accurately predicted the outcome of the concession 
process in spring 2004 (minute of a ‘Competitive Dialogue’ meeting):
‘The GJU’s tender documentation contains many good instructions, and the decision to hold bilateral 
fortnightly meetings (i.e. through competitive dialogue meetings) is wise, but signifi  cant concerns remain. 
There is far too little time to analyse the GJU’s requirements, plan the Galileo Operating Company business plan and present a bid by 1 September this year. Bids written in the time available will have to resort to guesswork on a grand scale. Verbal statements to bidders to do the best they can contradict the written instructions to create and present a legally binding off  er. The GJU does not have the means to make a valid 
bid comparison based on public sector value. The GJU is not creating a public sector business plan with which it can make these comparisons, and cannot do so in the timescale of the competition. In particular, bid measurements will be inconsistent because of: (i) the need for bidders to heavily qualify their bids with conditions, conditions which will diff  er between the bids and which the GJU will not be able to evaluate; (ii) the 
GJU requiring bidders to create their own key output commitments, again which will diff  er between the bids 
and which the GJU will not be able to evaluate. As a consequence, bidders face a procurement risk quite out of order with the accepted principles of PPPs.’
As predicted, the submitted bids did not contain fi  rm pricing and commitments and the GJU was compelled to 
extend the selection phase. A technical note from a GJU advisor in December 2004 confi  rmed the above judgement:
‘In a number of respects, the lack of developments in the bidders’ proposals refl  ected the uncertainty about 
the GJU’s requirements. As a consequence of this uncertainty, there were singifi  cant structural diff  erences 
between the bids (making direct comparison diffi   cult) and both bidders off  ered only indicative pricing.’
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase55C.2 Bid assessment
Did the audited body carry out a broad-ranging 
assessment of the bids?Partly The GJU assessed and marked the bids received in accordance with its pre-established general evaluation criteria 
(fi nancial, technical, management).
However, in February 2005 the GJU ultimately gave the competing bids an equal overall assessment (see also C.1).
C.3 Choice of bidderDid the audited body assess the results of the evaluations 
so as to select the bid off  ering the best value?Partly The GJU evaluated the bids by applying its formal tender evaluation criteria. However, it did not possess detailed 
and robust evaluation criteria refl  ecting precise requirements against which to judge and compare competing bids 
(see also A.4).
The GJU declared itself unable to select a preferred bidder on two occasions: in October 2004 and, after having 
extended the selection phase, February 2005.
C.4 Changes during negotiations with successful bidderDid the audited body minimise changes to the terms of 
the deal during the fi  nal negotiations with the successful bidder?No After the approval of the merger and the submission of a joint bid, the GJU lost its ability to drive the negotiation 
process. It was unable to compel the merger conditions to be observed, and the negotiations suff  ered from the 
composition of the merged consortium and its inability to reach consensus (owing to the number of shareholders, their diverse interests, PPP experience, etc.).
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase56
GLOSSARY OF TERMS USED IN THIS REPORT
Availability payment : A periodic payment made to a concessionaire by a 
public authority for providing an available facility.
Business case : Information that describes the justification for setting up 
and continuing a project. It provides the reasons and answers the question 
‘Why?’ for the project.
Business plan : A formal statement of a set of business goals, the reasons why 
they are believed attainable, and the plan for reaching those goals.
Concession agreement : An agreement between public and private partners 
according to the latter the exclusive right to operate, maintain and carry out investment in a public utility.
Conflict of interest : Situation in which a certain person or organisation is 
acting in two capacities, the goals or interests of which are opposed.
Competitive tension : Situation in which competitors are forced to make their 
offers of goods/services/bids as attractive to the procuring organisation as 
possible so as not to lose their position to rival competitors, resulting in a 
better deal for the awarding authority.
Galileo user segment : In contrast to the space segment and ground segment 
of the system, the user segment translates the signals into services for the 
final users. It consists of different types of user receivers.
Governance structures : The system of oversight in place to enable man-
agement to maintain control over the project, including the allocation of 
management responsibilities and the processes and systems for reporting 
to management.
Public–private partnership : A government service or private business venture 
which is funded and operated through a partnership of government and one or more private sector companies.ANNEX V
Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase57
Public sector comparator : An estimate of what the project would cost if 
traditional procurement methods were used. This is used to help deter-mine whether private finance offers better value for money than traditional procurement.
Risk allocation : The agreement between the parties to a public/private 
finance deal or concession which defines which parties or party is responsi-
ble for bearing the financial or other consequences of that event occuring, 
minimising the chance that a particular adverse event should arise, and for mitigating the impact of that event.
Risk transfer : The passing of risk normally borne by the procuring organisa-
tion to the private sector service provider.
Tender process : The practice of advertising for, then receiving and evaluat-
ing offers or bids from different private sector companies to operate the 
services under the public private finance and concessions deal, with a view 
to achieving the greatest value for money.
Traditional procurement : A contract in which the customer simply pays the 
contractor for the provision of an asset as work in developing this asset 
progresses. Such assets are fully paid for on their completion. The mainte-nance of these assets are dealt with in separate contracts, while their opera-
tion remains the responsibility of the public sector.
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REPLY OF THE COMMISSION
EXECUTIVE SUMMARY
I.-V.
Galileo and EGNOS are two path-breaking  
programmes aiming at establishing a Euro-
pean Global Navigation Satellite System.  The European Space Agency and the Com-mission started these two programmes as  
a joint initiative, and obtained from their  
respective Member States strong support for the programmes.
ESA took charge of the technological devel-
opment and the Commission was responsible for policymaking. Together they set up the Galileo Joint Undertaking as a coordination platform to oversee the implementation of the development and validation phase.
For the deployment and operations phase, 
on the Commission’s proposal, the Council 
set up a regulatory agency (the GSA) to rep-resent the interests of the public sector in 
the public private partnership (PPP).
Member States and the European Space  
Agency played a key role since its inception. After having experienced difficulties in find-ing private source financing, the integrated Galileo/Egnos programme became in 2008  an EU programme fully financed from the EU budget. From that point in time, the Com-mission has taken on the role of programme manager. With the new set-up responsibili-ties have been clarified and the Commission today considers that it is on the right track towards achieving its objectives. The Com-mission acknowledges that there were delays and cost overruns, but given the innovative nature and the technical sophistication of  the pre-project the Commission considers  the Court’s evaluation of the management of the development and validation phase  overly negative. With the benefit of hind-sight, it appears that more could have been done to address some of the encountered  problems at an earlier stage.
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V.
(i)
The GJU was set up to act as an interface  between ESA, responsible for carrying out  the technological development activities  (IOV or in-orbit validation phase), and the  European Commission in charge of the pol-icy aspects.
(ii)
The Commission constantly supervised the 
programme, without interfering with ESA’s 
responsibility, especially as regards tech-nical and industrial matters. The Commis-sion stepped in whenever needed to avert  blockages and propose adaptations of the  programme.
VI.
The choice of the PPP was a political deci-
sion taken by the Council. The Commission 
received a clear political mandate to prepare a PPP, within a limited timeframe, and pre-
pared it on the basis of information available 
at the time in this very specific and innova-
tive sector. The industry came up with seri-ous and realistic proposals in reply to the  
call for a PPP concession.
VIII.
Through the GJU and then GSA, the Com-mission has used FP6 funds to fund tech-
nological development activities, and  
application-related RTD. These RTD projects, and especially application-related RTD are to 
bear fruits in the medium/long run (2009–15) and exploitation of such work is to be  included in the forthcoming ‘GNSS Applica-
tion Action Plan’.IX.
The Commission proposal to integrate EGNOS into Galileo effectively saved the EGNOS  programme, and ensured availability of the 
funding necessary to continue this project. 
The Commission maintained this integrated approach both during and after the conces-sion negotiation.
X.
The statement of the Court does not fully  
take into account the reality of the environ-
ment at that time. The programme involved a large number of public sector stakehold-ers (EU and ESA member states, ESA, third  countries, Commission) with different insti-tutional roles and responsibilities, and the Commission worked actively to find the tools 
to properly take on board these stakehold-
ers. The Commission achieved real progress 
in the field of international cooperation. The 
creation of the GJU and of the GSA, as well as the proposals to redirect the programme 
that culminated in the adoption of Regula-
tion (EC) No 683/2008, are illustrations of  
the leadership exercised by the Commission with due regard to the respective roles of  
the stakeholders.
XI.
The Commission has received a clear man-date to take over the programme manage-
ment of the deployment phase, and as a  
consequence has started to adapt its man-agement capacity, both in-house and with  
the support of qualified external advisors.
XII.
The lessons learned through Galileo are  shared with Member States and other stake-
holders to improve the management of large infrastructure programmes.
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INTRODUCTION
2.
The European Space Agency and the Com-
mission started EGNOS and Galileo as a joint 
initiative, and obtained from their respec-tive Member States strong support for the  programmes.
ESA took charge of the technological devel-
opment and the Commission was responsible 
for policy making. Together they set up the 
Galileo Joint Undertaking as a coordination platform to oversee the implementation of the development and validation phase.
For the deployment and operations phase, 
on the Commission’s proposal, the Council 
set up a regulatory agency (the GSA) to rep-
resent the interests of the public sector in 
the public private partnership (PPP).
THE HISTORY OF GALILEO
15.For the implementation of the development 
phase of the Galileo programme the GJU was 
created to ensure the unity of the administra-
tion and the financial control of the project 
for the research, development and demon-
stration phase of the Galileo programme,  
and to this end mobilise the funds assigned 
to that programme (Article 1 of Regulation (EC) No 876/2002). The technical responsi-
bility of this phase was entrusted to ESA in the framework of its GalileoSat programme. The approval of the GalileoSat programme 
by ESA member countries triggered the start 
of the industrial activities. The Galileo Joint 
Undertaking was the coordination platform between ESA and the Commission for the  
development and validation phase.17–18.
In accordance with Article 2 of the GJU stat-
utes the main tasks are to:
(1)  ove rsee the integration of EGNOS into  
Galileo as well as the implementation of 
the Galileo development and validation 
phase;
(2)  launch through ESA the industrial activi-
ties of the development phase;
(3)  prepare, in cooperation with the Com-
mission and ESA, the deployment and  operational phases by managing the  tendering procedure resulting in the  conclusion of a concession agreement;
(4)  supervise the carrying out of all pro-
gramme activities.
21.
The purpose given by the March 2004 trans-port Council to the Commission’s communi-
cation of October 2004 was not to report on 
the progress of the development and valida-
tion phase, but on the start of the deploy-ment and operational phases.
The delay in the technological development 
(IOV or in-orbit validation phase) at that  
time was considered not incompatible with 
the start of the activities for the deployment 
phase of the programme in 2006.
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22.
Information available at the time was sup-
porting the idea that expecting a favour-
able outcome of the procurement process  was not unreasonable. The Communication indicated that the procedure so far was suc-
cessful and requested the Council’s confir-
mation in order:
—  to enable the joint undertaking to com-
plete the negotiation of the concession contract due to be signed in the course of 2005, and
—  to enable private-sector stakehold-
ers to confirm their bids and financial  commitments.
23.
The Commission, fulfilling the political  
responsibility assigned to it, created the  conditions for agreement between Member 
States by asking former Commissioner Van 
Miert to mediate. The Commission managed 
to unblock concession negotiation and that part of the development and validation  
phase activities that had been stalled by dis-
agreements among Member States between 
July and December 2005.
26.
Over 2006, and more particularly in the sec-
ond half of 2006, with the strong support of the Commission and the European Invest-
ment Bank, the GJU narrowed down the dif-ferences with the merged consortium to the few substantial issues that were remaining 
intractable. The result of these negotiations, 
together with the negotiating team, and the 
other activities of the GJU, were transferred to the GSA at the end of 2006.27.
At the end of 2005, the Commission prepared 
the grounds for the deployment phase by  
initiating the steps to ensure the handover from the GJU, created for the development phase, to the GSA, created for managing  
public sector interests in the PPP scheme  
for the deployment and operations phase.
Two assumptions were driving these actions 
from Commission: (1) that concession nego-tiation could be completed by end 2006,  something that the status of negotiations  after the merging of the consortia was giving some credibility to, and (2) that the delays now apparent on the IOV phase meant that 
the IOV phase would outlive GJU.
28.
In a parallel development, over 2006 and  2007, ESA continued to experience seri-
ous difficulties in its management of both  
EGNOS and Galileo. On EGNOS the difficul-
ties were mostly technical. On Galileo the  industrial set up and its management by ESA 
was experiencing substantial delays and cost 
overruns. ESA embarked in a major reshuf-
fling of the contractual relationships it had 
created for the GalileoSat programme.
Faced with these difficulties and the stalling 
of the concession process, the Commission proposed to Council and Parliament to redi-
rect the programme, fund the deployment  phase from the Community budget, act as  programme manager and use ESA as pro-
curement agent for the deployment phase. 
Regulation (EC) No 683/2008 on the further 
implementation of the GNSS programmes  was adopted on 9 July 2008.
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29.
The scope of the communication of May 2007 was not to describe in details the reasons of the failure of the concession negotiations, but rather to take stock of the results of the negotiations and propose a way forward.
AUDIT SCOPE AND APPROACH
31.In the period audited by the Court (Sep-tember 2003 to December 2006), the GJU  was established to ensure the unity of the  administration and the financial control of the project for the research, development  and demonstration phase of the Galileo pro-gramme, and to mobilise the funds assigned to that programme.
OBSERVATIONS
39.The PPP’s conception was based on stud-ies and reports elaborated in the course  of the Galileo definition phase, which had  
shown the viability of delivering the Gali-
leo deployment, operation and commercial 
exploitation under a PPP structure entail-
ing private financing. The choice of the PPP 
has been encouraged and finally endorsed 
by the Council. The preparation of the PPP 
was constrained by the limited time avail-able. The industry came up with serious and 
realistic proposals in reply to the call for a PPP concession.
41.
As shown by the studies available to the  
Commission, best practices in the PPP  domain were definitely taken into account. 
Nevertheless these best practices have  been developed with established industries and services (motorways, hospitals, power  plants…), where risks are already relatively well identified and cost comparators easy  
to build based upon existing cost data. This was and still is far from being the case for 
the Galileo deployment, operation and com-
mercial exploitation.(a)
The unprecedented nature of the Galileo  Project made it extremely difficult to apply PPP best practices, such as developing a  reliable public sector comparator for lack  of data.
The material difference in scope between  
the IOV and FOC (full operational capabil-
ity) made it impossible to apply the data  coming from the IOV to develop such a  
comparator.
The studies commissioned by the Commis-
sion and the GJU clearly indicated the risks at stake for the deployment, operation and commercial exploitation of the infrastruc-ture proposed and assessed their efficient  
allocation as achievable under a PPP/conces-
sion scheme.
(b)
In view of the time pressure, and the dif-
ficulty to find enough precedents to build  
upon, the Commission and GJU opted for a 
competitive dialogue process for the pro-curement, in order to enable for a gradual 
fine tuning of the tender specifications.
The competitive dialogue procedure exists 
to handle complex cases such as the Galileo 
PPP given its technical, financial and legal 
set up.
The unknown elements characterising the  
Galileo PPP were indeed supposed to be  tackled through this procedure by interac-tions with extremely serious and dedicated 
bidders.
The procedure was extended in time so as  
to allow the candidates precisely to put  
forward refined and more credible business plan and financial models.
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The extension of the dialogue process and 
the interactions between the GJU and the  candidates, even after their merger, pro-duced important results, which were incor-porated in the heads of terms.
(c)
The GJU staff encompassed professionals  
having accrued specific experience in the  space domain and projects, having specific 
management experiences in relation to pub-
lic sector infrastructure projects and project financing. There was no ‘knowledge gap’  when compared to industry teams.
Experienced advisors were involved in the  
conception phase of the programme (see in 
particular the inception study). As from the 
start of the active phase of the competitive 
dialogue, experienced advisors (Pricewater-
houseCoopers, Lovell’s,…) and European  Investment Bank senior staff were assisting 
the GJU in negotiations either before or after 
the merging of the candidates and in the  
context of the merger process itself.
(d)
The merger of the two offers was not encour-
aged nor supported neither by the GJU nor 
by the Commission. To mitigate the effects 
on the process described by the Court  
(essentially loss of competition), the Com-
mission imposed conditions on the merger approval.
After careful scrutiny of the joint proposal, 
the GJU, with the assistance of highly quali-
fied advisors, assessed that the joined pro-
posal delivered better value for money with 
respect to the individual bids.(e)
The Member States did not have to rely  on GJU’s official reporting only since they  were represented at the Supervisory Board of the GJU which was debriefed extensively on the progress of the negotiations and  regularly updated on the progress of the  programme.
They were also represented in specific work-
ing groups, notably the PPP expert meeting, 
to follow more closely the negotiation proc-
ess and were given full visibility over the dif-ficulties faced during negotiation, precisely on matters related to the concession.
Though complex, the negotiations were  
structured and conducted in a serious and 
professional manner by the two parties, and 
offered not sufficient ground for the GJU  
to question the feasibility of the conces-
sion. GJU reports were targeting a broader public than Member States, and as such had 
to keep certain commercial information  
confidential.
42.
The PPP model proposed by the Commis-
sion differed from other PPP models then  
in existence. The very specific nature of  
the activities and risks at stake meant that 
other existing projects could not be taken as 
a reference for the Galileo Project for what 
regards the sharing of risks and financing  between public and private sector.
(a)
The technological complexity of the Galileo 
Project is a fact well understood by all the 
stakeholders involved and especially by the 
private sector.
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(b)
Inception studies clearly indicated that rev-
enue generation was difficult to predict, but did not consider it as a show stopper for the 
delivery of the PPP scheme.
Availability payments by the public sector  
were considered a suitable instrument to  ensure financial viability.
The heads of terms included a possible avail-
ability payment structure upon which a high 
level agreement was achieved with the pri-
vate sector.
(c)
The fact that the design has been developed 
under the responsibility of the public sector 
through the development phase was known 
to the private sector and was highlighted  
as an element of complexity for the rele-
vant risk allocation within the concession  scheme.
Nevertheless reports by experts in the field 
never outlined this as a major blocking point 
for the viability of the concession scheme.
It is to be recalled that the industry, having 
developed the design during the develop-ment phase, was largely represented in the candidates for the concession contract.
Box 2Market risk, design risk and to a lesser extent 
third party liability risks were the more con-
tentious areas during negotiations.Nevertheless progress was achieved in the 
course thereof at least for what concern lia-bility risk and market risk allocation.
Moreover it is probable that failure of the  
concession negotiation can also be attrib-uted to other factors, for instance industry’s realisation of more advantageous financing 
options.
The difficulty to transfer 
market risk  was  
identified and acknowledged, and as a con-
sequence heads of terms were clearly point-
ing to a possible agreement where the risk transfer would be minimal at a first stage,  
with mechanisms for a gradual increase in  
the degree of market risk transfer during the 
course of the contract.
The transfer of 
design risk  has been the most 
controversial issue of the PPP negotiation.
The IOV phase originally conceived to reduce 
design risks was perceived by the private  
sector as a major constraint to the under-
taking thereof.
The attitude of industry to refuse any under-
taking of design risk on the basis of lack of visibility, involvement and validation capa-bilities of the IOV phase has been strongly 
challenged during negotiation given that  
the potential concession holder was com-posed mainly of the same industrial actors 
who had a visibility on their own perform-
ance at the design stage.
The founding elements for a 
third party lia-
bility  mitigation structure were agreed at  
head-of-terms level.
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43.
The GJU was instructed by its regulation to 
‘charge to [ESA] the carrying-out of activities required during the development phase with 
regard to the space and the earth segment 
associated with the system’.
These activities were carried out by ESA  
in the framework of the GalileoSat pro-
gramme, jointly funded by ESA member  states on a voluntary basis and the European 
Communities.
45.
ESA was responsible for carrying out the Gal-ileoSat programme and reported to GJU on its actions. GJU supervision as stated in Art 2 paragraph 4, was limited to ensuring that  
all phases of the programme dovetailed cor-
rectly, and was not conceived as a replace-
ment of ESA technical expertise.
47.
The Galileo budget for development and  
validation was established based on stud-
ies commissioned by the Commission and  
was accepted by ESA in the GalileoSat  
declaration.
The GalileoSat declaration foresaw a stand-
ard ESA 20 % flexibility on its contribution, creating a de facto 10 % contingency on the total budget, which proved insufficient due 
to the programme complexity.
48.
Late start of the GalileoSat programme  
by ESA Member States resulted in upstart  delays and increased costs, which were  never recovered.49.
The procurement of the IOV phase was per-
formed by ESA following its own procure-ment system.
ESA chose in favour of an industrial organi-
sation led by a single prime contractor, but still ensuring, at least on the part of the  programme funded by ESA Member States, 
a geographical return to subcontractors.
Galileo was the first and only GNSS pro-
gramme actually opened for European space 
industry participation. As a result, the prime 
contractor chosen was likely to enjoy a  definitive competitive advantage for future 
competitions (primarily for the deployment 
phase). This had major repercussions for the 
industrial policy furthered by ESA.
As a consequence of this and of the actions 
of several interested member states, the  prime contractor eventually elected was a  
joint venture of antagonistic companies,  
which never managed to work efficiently  
together.
Faced with increased costs and delays, ESA 
finally decided to opt in December 2007, for a different industrial organisation and con-tractual framework, whereby it would take direct prime responsibilities and contract  out directly to subcontractors the different 
work packages.
53.
Research activities funded by the FP6  
were focused on all the main user sectors,  addressing research on applications and  other aspects (standardisation, legal and  service provision aspects, market…) that  will enable the future use of Galileo. The  
research projects in the various user sectors have generally included development, tests 
and demonstration activities.
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Exploitation of such work is to be included 
in the forthcoming ‘GNSs application action plan’.
The definition of the services, which were  
the basis for the system specifications, had been performed earlier, with FP5 funds.
54.
The aim of the FP is to foster the develop-ment of technologies and services, although leaving the market actors freedom to choose in which domain such developments shall  take place. This approach has demonstrated its validity in the sense that several compa-
nies, notably SMEs, have acquired knowledge 
and experience which has positioned them 
as leaders on the market, such as Ifen and  
Septentrio for dual Galileo/GPS receptors,  
Polestar for indoor positioning solutions and 
Telesys for location-based services.
As in any research activity, the outcome of 
projects is not guaranteed, and depends on 
several factors which are beyond the remit 
of the Commission. The use of the results  on the commercial market has to remain a  
decision to be taken by the project consortia themselves.
55.
The follow up of the projects by GSA was  
ensured mostly by personnel having previ-ously worked for GJU on these projects. The 
GSA fostered the dissemination of project  
results by setting up an Internet-based data-
base of project results, organising two suc-cessful ‘Growing Galileo’ events taking stock of these results, and publishing a compen-dium of such results.A number of FP6 projects have experienced 
delays, but a project-by-project analysis  points to various causes not necessarily  
linked to the transfer.
56.
The activities funded with FP6 include the development of new applications, evaluation of related market potential, investigation of possible business models, and research on business plans suitable for their commercial-isation. Experience of market development and technological innovation shows that  most of market innovations are created by the market, and not by a top-down approach. 
This is especially true in non mature markets 
such as this one, where the GJU/GSA would 
have had difficulties in devising comprehen-
sive development strategies.
57.
The delays on the Galileo/EGNOS programme 
may explain part of the delays in some FP6 
projects.
60.
EGNOS has suffered from delays that are  mainly due to technological issues not in  the control of the Commission, which imply development delays.
(a)
The conclusion of the EGNOS agreement  proved to be very difficult due to intrin-
sic difficulties proper to the relationship  
between the different parties involved in  
EGNOS. Finally the agreement was finalised by the end of 2008 and signed on 31 March 2009. Moreover, the ESA’s programme for  EGNOS (ARTES9) under which EGNOS is cur-
rently operated, is ending on 31 March 2009 
time when the system should be compliant 
with the technical specifications needed for 
its exploitation by an economic operator.
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(b)
In March 2009 the system will effectively be 
certifiable, and it is planned to certify the  operator by 2010 in accordance with Single 
European Sky regulation.
61.
(b)The integration of EGNOS into Galileo though affirmed as an objective at political level has always been the source of problems from a contractual standpoint.
For this reason the candidates for the con-
cession contract were required to address  the EGNOS integration into Galileo as an  
optional scenario.
The bids received were clearly showing the 
benefits of integrating the two systems, and 
the negotiations of the concession contract 
after the merger of the two candidates were carried out on an integrated scenario.
(c)
The EGNOS institutional framework is com-
plex due to historical reasons on how the  programme was set up.
(d)
The GJU has commissioned the preparation of several business plans for EGNOS and  studies on the possible commercialisation  
of its services which outlined a fairly limited potential in terms of EGNOS revenue genera-
tion capabilities.
Discussions held with the aviation sector  
have shown the difficulty of establishing  a revenue generation mechanism for the  EGNOS signal itself which is open and acces-sible to any user for free.In this respect it is to be underlined that  
from a technical standpoint EGNOS OS and SoL are not different in terms of accessibility 
by users. They only differ from a certification 
standpoint.
These assumptions justified the GJU attitude 
not to invest in market development activi-
ties for EGNOS.
62.
The EGNOS programme was run as an ESA  
programme (ARTES 9) principally funded by 
ESA member states and EOIG. Funding from the EU was limited.
Delays and cost overruns have been experi-
enced in the framework of the ARTES 9 pro-
gramme for various technical reasons.
63.
(a)
Independently from the concession process, 
EGNOS faced a series of technological issues, 
under the control of neither the Commission 
nor GJU, which also resulted in program-matic delays.
(b)
It is very difficult to appoint an operator  for an infrastructure which is not completed from a technical standpoint. Moreover it  
would have been impossible for the Commis-sion to entrust an operator without having 
rights on the assets to be operated.
The appointment of an EGNOS eco-
nomic operator is now under finalisation  under the responsibility of the European  Commission.
The need to conclude a framework agree-
ment had a limited impact on the concession 
negotiations.
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64.
The GJU received a clear mandate to inte-
grate EGNOS into Galileo which made it  necessary to negotiate a framework agree-
ment with the various EGNOS stakeholders, 
to clear the path for the ultimate transfer of ownership of EGNOS.
The framework agreement negotiations led 
by GJU were ultimately not successful due to the complex institutional framework rec-
ognised by the Court itself, but have served 
as a sound basis for the current finalised  
agreement with the Commission.
65.
Due to the delays experienced by the pro-
gramme, the GJU did not implement the  
EGNOS market penetration plan.
67.
The allocation of tasks between the parties during the development phase was inspired 
by the principle of cooperation between the 
parties in order to create a joint platform for 
the development of the programme.
This approach has been readdressed for the 
purposes of the deployment phase by the  GNSS regulation which clearly provides for 
a strict division of roles and responsibilities between the involved parties.
68.
(a)
Regarding GJU main tasks see Commission’s 
position under point 17.
The Commission notes that this governance 
structure, and notably the dual role of ESA were clearly identified in the founding regu-lation of the GJU.(b)
The winding up of the GJU does not have  
any impact on the role of GJU in that phase of the programme.
On the other hand closing down the GJU  
was necessary to avoid duplication of roles between GJU and GSA.
69.
The ESA/GJU agreement was intended to  set forth a partnership between the par-ties co-financing the project whereby ESA  would have applied its own rules for placing contracts.
Implementation and reporting arrangements 
were not detailed as in standard contrac-
tual relationships due to the cooperative  
nature of the agreement. The specific report-
ing modalities were established by the GJU 
executive committee when payment obliga-tions to ESA started to fall due.
The delegation agreement between the Com-
mission and ESA signed on December 2008 
for the deployment phase, provides for strict 
monitoring and reporting obligations.
70.
ESA was responsible for both the IOV Phase and EGNOS through two ESA programmes  GalileoSat and ARTES 9.
71.
The Commission is of the opinion that ESA 
is clearly accountable for the results of the 
technological development activities it is  conducting. The Commission has clearly  taken its political responsibilities in the pro-gramme. Every decision can be traced back 
to the body entrusted to take it.
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73.
The Commission exercised a key promoter  
role for the GNSS programmes.
In 2005–07 the concession negotiations were 
in process and delivered in December 2006 the expected heads of terms.
Corrective actions were taken at the time  
when evidence of the failure of the conces-sion negotiation became clear.
Difficulties experienced in the negotiations 
up to the end of 2006 were not sufficient to 
conclude on the impossibility of delivering the Galileo infrastructure under a PPP con-cession scheme.
Only by the beginning of 2007 did the Com-
mission have the elements to assess that  
the concession process prolongation would 
not have delivered good value for the pub-lic sector and therefore to terminate the  
negotiations.
The Commission also refers to its reply to  
point 23.
74.
The difficulties experienced in the develop-ment phase were due to reasons which were largely outside the Commission’s control  
and mostly not influenced by the manage-
ment principles guiding its actions.
(a)
The Commission managed to get clear object-
ives for the European GNSS programmes,  endorsed by Council and Parliament.A programme of this magnitude is likely to 
raise a diverse range of stakeholder expecta-tions, and notably Member States may have 
held and promoted different objectives but 
this has not changed the objectives set at  the outset of the programme.
(b)
The choice of a PPP concession model capa-ble to capture different phases of the project 
(deployment, operation, commercial exploi-
tation) corresponds indeed to a long term  
strategic vision and planning.
The lack of success of this process does not 
affect the long term approach adopted by  
the Council.
(i)
Under a PPP concession scheme the exploi-
tation model and roadmap is supposed to  be delivered by the private sector.
One of the reasons for choosing this model 
lays exactly in the fact that the private sec-
tor has been judged to be in the position  
to do so.
Following the GNSS regulation the Commis-
sion will be in charge to define such roadmap for Galileo in parallel with the deployment of the infrastructure.
As far as EGNOS is concerned the establish-
ment of the roadmap will be a matter for  
negotiations in the context of the selection 
of the future EGNOS operator.
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(ii)
The problems encountered in negotiating a 
framework agreement for EGNOS depended largely on the dynamics between the EGNOS stakeholders.
The negotiation of the agreement has been 
taken over by the GSA and concluded by  the Commission without any discontinuity  or gap of negotiating power.
The EC–EOIG agreement was final-
ized by December 2008 and signed on  31 March 2009.
(iii)
Taking into account the political and stra-
tegic nature of the programme the Commis-
sion has taken care to regularly inform and check the consensus at Council meetings.
(c)
Due to the provisions of the Treaty, the Com-
mission had to create two legal structures: 
the GJU (under Article 171) to serve as a  
cooperation vehicle with ESA on the devel-opment and validation phase, and the GSA 
(under Article 308) to pilot the deployment and operations phase. To pave the way for these two structures, support activities were 
performed under four different contracts,  but these did not involve the creation of  
legal structures.
(d)
See the Commission comments under  point 41(c).(e)
The risk matrix for the concession has been 
developed in a comprehensive form during the dialogue phase and with the assistance of experienced advisors by the GJU.
An extensive set of documents on the iden-
tification and possible allocation of such  risks have been produced during the course of the negotiations with the concession  candidates.
The nature of the project, as described  
above, did not allow a thorough identifica-
tion and appreciation of the magnitude of 
these risks up front.
(f)
The Commmission exercised a key promoter role for the GNSS programmes. Corrective  
actions were taken at the time when evi-
dence of the failure of the concession nego-
tiation became clear.
Difficulties experienced in the negotiations 
up to the end of 2006 were not sufficient to conclude on the impossibility of delivering 
the Galileo infrastructure under a PPP con-cession scheme.
Only by the beginning of 2007 did the Com-
mission have the elements to assess that  
the concession process prolongation would 
not have delivered good value for the pub-
lic sector and therefore to terminate the  negotiations.
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CONCLUSIONS AND 
RECOMMENDATIONS
75.
Given the innovative nature and the techni-
cal sophistication of the project the Com-mission considers the Court’s evaluation of the management of the development and  
validation phase overly negative.
(a)
The GJU was not conceived as a strong oper-
ational programme manager. Regulation  
(EC) No 876/2002 clearly states that: ‘For the 
implementation of the development phase of the Galileo programme, a joint undertak-ing within the meaning of Article 171 of the Treaty is hereby set up for a period of four 
years. The aim of the joint undertaking shall 
be to ensure the unity of the administration 
and the financial control of the project for 
the research, development and demonstra-tion phase of the Galileo programme, and to 
this end mobilise the funds assigned to that 
programme.’ It also requires from the GJU  
to ‘charge to [ESA] the carrying-out of the 
activities required during the development 
phase with regard to the space segment  
and the earth segment associated with the system,’ effectively recognising ESA respon-
sibility for carrying out the technological  development activities.
(b)
The Commission, within the limits of its  
responsibility, constantly supervised and  
guided the programme. The Commission  
stepped in whenever was needed to avert  blockages, provide additional funds and  adapt the structures of the programme.The realignment of the programme proposed 
by the Commission in 2008 clearly assigned the role of programme manager to the Com-mission, to address the issue to which the  
Court has given prominence.
76.
The PPP was prepared with the level of infor-
mation available at the time, based on pre-
paratory work having recourse to state of  
the art external advice.
The PPP’s conception was based on studies 
and reports elaborated in the course of the 
Galileo definition phase, which had shown 
the viability of delivering the Galileo deploy-
ment, operation and commercial exploita-
tion under a PPP structure entailing private financing. The choice of the PPP has been  
encouraged and finally endorsed by the  
Council. The preparation of the PPP was con-
strained by the limited time available. The 
specific challenges of the Galileo PPP, linked 
principally with technical and market spe-
cificities explain in a large part the inability to conclude the concession process.
77.
ESA encountered technical and program-
matic difficulties, which explain the delays and cost overruns.
78.
RTD activities have been instrumental in  helping define the Galileo mission and per-formances, focus on all the main user sec-tors, addressing research on applications  
and other aspects that will enable the future 
use of Galileo.
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Those activities have raised significant  
interest in the users’ communities and have developed technologies and knowledge that 
will be exploited in a later commercialisa-
tion phase.
79.
The integration of EGNOS into Galileo has  
been essential to ensure the continuity  of the EGNOS programme, and secure the  
needed financing.
In spite of the technological difficulties, and 
thanks to the clarification of the institutional framework at the initiative of the Commis-sion, EGNOS will be the first European GNSS programme in operation.
80.
The Commission had to exercise its promot-
er’s role over the duration of the programme, taking into account all stakeholders, espe-
cially ESA as partner in this joint initiative. 
The Commission actively managed the situ-
ation, and regularly took the initiative to  
unblock and foster the programme.
81.
The Commission has overhauled the man-agement of the programme, taking on board many recommendations of the Court of  
Auditors.
82.
The Commission decided to propose to take 
over the programme management of Gali-
leo at a decisive time for the programme.  Council and EP endorsed this proposal by  adopting the Regulation (EC) No 683/2008. It is part of the remit of Commission to pro-
pose the most appropriate solution over the 
long term.Recommendation 1
The Commission has already made very con-
crete steps to adapt its resources and its  legal and financial instruments to act as a  
programme manager. In order to facilitate  
this process a Galileo Interinstitutional Panel (GIP) has been set up.
(a)
The Commission has secured the transfer of 30 experienced staff from GSA (some with  
experience dating back to GJU) and com-
pleted internal recruitments to set up a  
dedicated Galileo team.
(b)
Regulation (EC) No 683/2008 is clarifying the 
respective roles and responsibilities of ESA 
and the Commission. In application of this 
regulation, the Commission has entered into 
the delegation agreements with ESA for the 
performance of FOC procurement activities and EGNOS further development activities.
(c)
Regulation (EC) No 683/2008 provided the  
Commission with a dedicated Galileo budget 
line to fund the infrastructure. The Commis-
sion is using public procurement to purchase the infrastructure.
As regards the operations and replenish-
ment costs, the Commission is preparing  
the next financial framework to ensure ade-quate budget coverage. It will also review  
the financial instruments made available  
under its financial regulation to make sure 
they are adequate for the funding of the  programme.
(d)
The governance framework created by Reg-
ulation (EC) No 683/2008, clearly allocates 
roles and responsibilities.
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83.
Regulation (EC) No 683/2008 has clearly  
tasked the Commission to exercise lead-ership and to propose to Council and Par-
liament scenarios for Galileo beyond the  
deployment phase. In addition a Galileo  Interinstitutional Panel is set up.
Recommendation 2
Regulation (EC) No 683/2008 has reiter-ated the programme’s political objectives  
that have remained constant over the past 
years. It has also provided the programme  
with a solid roadmap for the deployment  
phase, and has requested the Commission  to come up in 2010 with a communication  on the future of Galileo beyond the deploy-ment phase.
(a)
The Commission’s communication will  
cover, inter alia, the strategic and opera-tional objectives of Galileo. It will address 
the question of the model for the operations 
of the system taking into account market  
realities, desirable positioning of the sys-
tem on the value chain, and will clearly  
highlight the consequences of models pro-
posed in terms of budget and public sector responsibilities.
(b)
The Communication will tackle the issue of 
the integration of EGNOS into Galileo.
84.
The Commission has already started to work 
with the various stakeholders to draft this  Communication and has sought the support of external advisers to help it take stock of the wealth of information gathered over  
the years, notably thanks to the concession 
negotiation experience.Recommendation 3
In order to be ready in time for the end of 
the deployment phase, the Commission has started the work for the preparation of the 
operational phase. It will take into account 
the experience available.
85.
The Commission will analyse the options as 
required by Regulation (EC) No 683/2008 and present its conclusion in 2010.
Recommendation 4
(a + b)
In the framework of the communication,  the Commission is compiling user require-ments and mapping out the enabling actions that are needed to foster the use of GNSS  
technology. This will enable the Commis-
sion to propose an appropriate regulatory  
framework.
(c)
The Commission has taken steps to ensure 
that an operational EGNOS meets the needs 
of its users, particularly in the aviation sec-
tor, and for that purpose has selected an  
experienced operator with strong aviation  
background.
86.
The Commission has set up and may set up other joint undertakings. Each of those are thoroughly planned and assessed against  the criteria relevant for their activity, on a case-by-case basis.
Recommendation 5
The Commission carefully examines, on  a case-by-case basis, the rationale and  the optimal governance of any new joint  undertaking.
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ANNEX II
The EGNOS programme was conducted under 
an optional ESA programme (ARTES 9) under 
ESA programme management. As the first  
ESA programme in navigation, it suffered  
from numerous technical difficulties.
(b)
This research programme has been run for more than 10 years, during which technical 
requirements changed and the certification 
environment evolved.
(c)
Due to the failure of the concession nego-
tiation the roadmap for EGNOS had to be  
redrafted in accordance with the new gov-
ernance established in July 2008 by Regula-
tion (EC) No 683/2008.
(d)
One of the main reasons for EGNOS not being 
operational has been the difficulties expe-
rienced by ESA to keep the signal available 
with the level of quality and reliability that 
may enable its certification.
Technical acceptance by ESA only started  
at the beginning of March 2009. This is a  
prerequisite for handover of the system to EC, which will, at that time, and not before accept the system if it meets the objectives that ESA has set for itself in the ARTES 9  
programme.(e)
ESA’s and GJU’s efforts to demonstrate the capabilities of EGNOS overseas have been  coordinated and funded by the Commis-sion. Based on these preparatory studies,  the Commission will decide whether to pro-pose or not the extension of EGNOS outside Europe.
(f)
The GJU received from the Commission TEN-T 
2004 and TEN-T 2005 funds specifically tar-
geted at EGNOS, as well as funds from DG  
AIDCO in 2005. In addition, several FP6  projects were dealing with EGNOS. Finally, 
the GJU benefited from a discretionary stud-
ies budget approved on a yearly basis by  
its Board, that could have been used, if GJU 
management had so decided, to fund spe-
cific EGNOS-related studies.
ANNEX III
The agreements with NRSCC and Matimop  
and the GJU were transferred to the GSA.  The winding up of GJU was agreed with Mati-
mop and NRSCC at management board level. 
Third country discussions were held by the 
Commission, not by the GJU, and therefore the closing down of the GJU had no impact on such discussions.
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ANNEX IV
The Commission refers in general to the  
replies provided above to the text of the  
Court’s report, in particular paragraphs 39, 
41 and 42.
A.2.
Due to the unprecedented nature of the  project it was not possible to reach the  level of maturity on requirements and con-straints that can be found in projects with 
established industries and services (motor-
ways, hospitals, power plants…), where  
risks are already relatively well identified  and cost comparators easy to build based  
upon existing cost data. In view of the time 
pressure, and the difficulty to find enough 
precedents to build upon, the Commission 
and the GJU opted for a competitive dia-
logue process for the procurement, in order 
to enable a gradual fine tuning of the tender specifications.
The competitive dialogue procedure exists 
to handle complex cases such as the Galileo 
PPP given its technical, financial and legal set up.
The unknown elements characterising the  
Galileo PPP were supposed to be tackled  through this procedure by interactions with extremely serious and dedicated bidders.
The extension of the dialogue process and 
the interactions between the GJU and the  
candidates, even after their merger, pro-
duced important results, which were incor-
porated in the heads of terms.A.3.
See the reply to A.2.
A.4.
See the reply to A.2.
A.5.
In all its recent relevant regulatory activi-ties, the Commission has included provisions fostering GNSS applications (see for instance the European Electronic Toll System).
The Commission has however been careful 
not to distort competition in favour of Gali-leo or EGNOS.
The respective shares of revenues depend-
ing directly or indirectly on the public sector 
were estimated by the prospective conces-
sionaire at the time of negotiations. The  
communication on the future of Galileo will reassess these figures and propose adequate 
regulatory measures.
A.6.
The choice of the PPP has been encouraged and finally endorsed by the Council.
Developing a reliable public sector compa-
rator was not a realistic option for lack of  relevant data, contrary to what exists for  more mainstream industries.
Even data coming from the IOV (in-orbit vali-
dation) could not be used to develop such 
a comparator, because of the material dif-
ference in scope between the IOV and FOC 
(full operational capability).
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Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase76
A.7.
Through the competitive dialogue, inno-
vative solutions have been generated  and proposed by bidders, and thoroughly  
discussed.
Particular care was given to assess those  
innovative commercialisation solutions that the bidders had identified. Through this  process the Commission was able to gain  insight into new applications and markets.
A.9.
These topics were covered under the pre-
liminary studies conducted by Pricewater-houseCoopers, and the conclusion of those studies were supporting the value for money of the PPP option.
B.1.
The GJU staff encompassed professionals  
having accrued specific experience in the  space domain and projects, having specific 
management experiences in relation to pub-
lic sector infrastructure projects and project 
financing. There was no ‘knowledge gap’  
when compared with industry teams.
Experienced advisors were involved in the  
conception phase of the programme (see in particular the inception study). As from the start of the active phase of the competitive 
dialogue, experienced advisors (Pricewater-
houseCoopers, Lovell’s,…) and European  Investment Bank senior staff were assisting 
the GJU in negotiations either before or after 
the merging of the candidates and in the  
context of the merger process itself.B.2.
Throughout the competitive dialogue phase, 
full attention was given to the assessment and fostering of the understanding of all  
parties as to the requirements for entering 
into a concession.
This was one of the reasons for the choice of 
the competitive dialogue procedure.
B.3.
During the competitive dialogue phase,  
the draft contract was further refined and  
expanded, and extensive discussions on the 
choice of applicable law were held.
B.4.
The planning was ambitious, and the GJU  
amended it to take account of the fact that 
negotiations were more complex than ini-
tially expected.
B.5.
The continued feasibility of the project was 
regularly reviewed and commented upon,  
notably in successive communications from 
the Commission.
B.6.
See the reply to A.6.
B.7.
As noted by the Court, the tender process  
managed to attract a diverse range of Euro-pean companies, strongly dedicated to the 
project. It is only natural that for an innova-
tive and challenging space project, space  
industry took a prominent role in the con-sortia. Operators were nevertheless present in all competing consortia.
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B.8.
See the reply to A.2.
B.11.
Private sector bid costs were not assessed  
as there was no intention to fund them from public money.
B.12.
See the reply to B.1.
B.13.
The costs of external advisors were con-
stantly monitored.
C.1.
See the reply to B.2.
C.2.
The bids were thoroughly assessed and  
compared.
C.4.
In spite of the merger, the GJU managed to 
drive the negotiation process and achieve  
convergence on many topics, which was  
reflected in the heads of terms signed at the 
end of 2006 with the merged consortium.

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Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase79
European Court of Auditors
Special Report No 7/2009
The management of the Galileo programme’s development and validation phase
Luxembourg: Office for Official Publications of the European Communities2009 — 77 pp. — 21  
/H11003 29.7 cm
ISBN 978-92-9207-317-6doi: 10.2865/44017

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THE GALILEO PROGRAMME WAS INITIATED IN THE MID- 1990s WITH THE 
AIM OF ESTABLISHING A EUROPEAN GLOBAL NAVIGATION SATELLITE SYSTEM. IT HAS SEEN SERIOUS DELAYS AND COST-OVERRUNS. IN 
THIS SPECIAL REPORT THE COURT AUDITED THE DEVELOPMENT AND 
VALIDATION PHASE OF THE GALILEO PROGRAMME LOOKING AT WHICH FACTORS ACCOUNTED FOR THE FAILURES. THE COURT CONCLUDED THAT MANAGEMENT OF THE DEVELOPMENT AND VALIDATION PHASE WAS INADEQUATE. IF THE MID- 2007 REDIRECTION OF THE EGNOS AND 
GALILEO PROGRAMMES IS TO SUCCEED, THE COMMISSION MUST CONSIDERABLY STRENGTHEN ITS MANAGEMENT OF THE PROGRAMMES. THIS REPORT INCLUDES A NUMBER OF RECOMMENDATIONS AIMED AT SUPPORTING THE COMMISSION IN THIS TASK. FINALLY, SHOULD THE EU RESOLVE TO ENGAGE IN OTHER LARGE INFRASTRUCTURE 
PROGRAMMES, THE COMMISSION MUST USE THE APPROPRIATE 
MANAGEMENT TOOLS.
EUROPEAN COURT OF AUDITORSQJ-AB-09-006-EN-C
ISBN 978-92-9207-317-6