Communication from the Commission to the European Parliament and the Council - Progressing Galileo: re-profiling the European GNSS Programmes {SEC(2007) 1210}
Date: 2007-09-19
Institutions: European Commission
Subjects: administrative structures, financing method, joint venture, management, project management, satellite navigation

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 19.9.2007 
COM(2007) 534 final 

COMMUNICATION FROM THE COMMISSION  
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

PROGRESSING GALILEO: 
RE-PROFILING THE EUROPEAN GNSS PROGRAMMES 

{SEC(2007) 1210} 

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COMMUNICATION FROM THE COMMISSION  
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

PROGRESSING GALILEO: 
RE-PROFILING THE EUROPEAN GNSS PROGRAMMES 

1. 

INTRODUCTION 

The Council, in its Resolution of 8 June 2007, re-affirmed the value of Galileo, concluded to 
stop  the  PPP  concession  negotiations,  agreed1  in  principle  to  a  re-profiling  of  the  European 
GNSS programmes and recognised the need for additional public funding. At its meeting of 
21-22 June 2007, the European Council re-affirmed the value of Galileo as a key project of 
the  European  Union  and  asked  the  Council  to  take  an  integrated  decision  on  the 
implementation of Galileo in autumn 20072. 

In  order  to  allow  it  to  take  such  an  integrated  decision,  including  the  financing  of  the  new 
approach,  the  public  governance  structure  including  the  risk  management  approach,  the 
principles  of  procurement,  and  a  number  of  related  programmatic  decisions,  the  Council 
requested the Commission to submit further analysis and proposals. The Commission hereby 
responds to this request3 and furthermore submits a Modified Proposal for a Regulation with 
regard  to  the  follow-up  of  the  European  GNSS  programmes4  as  well  as  a  Proposal  for  a 
Revision of the financial framework5. 

Through  this  integrated  decision  it  should  be  ensured  that  the  governance  and  contractual 
structures facilitate the effective long-term operation, maintenance, and economic exploitation 
of  Galileo,  based  on  an  integrated,  technology  life-cycle  approach  and  an  appropriate  risk 
management. The urgency of this decision is, inter alia, related to the on-going costs of the 
development phase of the programme and the financial consequences of loss of market share, 
both of which increase significantly with further delays. 

The  Commission  expects  such  decisions  to  be  taken  by  the  end  of  this  year  and  wishes  to 
recall the strategic implications of such decision, beyond the financial and public procurement 
aspects.  European  GNSS  assets  are  vital  for  Europe  and  the  European  economy.  Modern 
society does and will increasingly depend on the use of GNSS applications for vital security 
and  economic  functions.  Moreover,  Galileo  is  a  pillar  of  the  European  Space  Policy6  and 
signifies Europe's ambitions in space, technology, and innovation. 

1 
2 
3 

4 

5 

6 

http://register.consilium.europa.eu/pdf/en/07/st10/st10126.en07.pdf 
European Summit, 21-22 June 2007, 11177/1/07 Rev.1, paragraph 36. 
This  Communication  is  accompanied  by  a  Commission  Staff  Working  Document  -  SEC(2007)  1210, 
19.9.2007. 
Modified Proposal for a Regulation of the European and the Council concerning the putting into place 
of the European GNSS programmes - COM(2007) 535, 19.9.2007. 
Communication concerning the Revision of the Multi-annual Financial Framework and Proposal for a 
Decision of the European Parliament and of the Council amending the Inter-institutional Agreement of 
17  May  2006  on  budgetary  discipline  and  sound  management  as  regards  the  multi-annual  financial 
framework - COM(2007) 549, 19.9.2007. 
Communication on European Space Policy - COM(2007) 212, 26.4.2007. 

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Failing  to  take  the  appropriate  decisions  on  a  European  GNSS  programme,  Europe  would 
decide to rely for the mid to long term on foreign GNSS signals with little to no control over 
quality,  availability  or  price  of  the  latter.  In  addition,  the  ensuing  loss  of  resident  European 
expertise on GNSS would be coupled with a major loss of macro-economic opportunities for 
European  manufacturing  and  service  companies.  There  would  be  no  basis  for  European  led 
space innovation for the foreseeable future. 

2. 

THE SYSTEM INFRASTRUCTURE COSTS 

The  procurement  and  deployment  of  Galileo  commenced  on  a  basis  of  a  two-phased 
approach.  Under  the  In-Orbit-Validation  (IOV)  contract  put  in  place  by  ESA  in  early  2006, 
the  first  4  satellites  and  a  substantial  part  of  the  ground  infrastructure  is  procured.  The 
remainder of the constellation namely 26 satellites and of the ground infrastructure are subject 
of the deployment phase that brings Galileo to its Full Operational Capability (FOC).  

Further  analysis  and  the  evaluation  have  now  provided  the  necessary  confidence  that  these 
cost estimates are indeed realistic and resilient7.  

The estimates for FOC include the management costs of the procurement agent, the costs for 
the  exploitation  and  operation  of  EGNOS  until  2013,  and  the  costs  of  support  to  the 
programme manager, are estimated at 3 B€ nominal. Based on the assessment of design and 
deployment  risks,  a  contingency  reserve  of  around  14%  of  the  nominal  costs  completes  the 
estimation8. 

Item 

Estimated costs in millions of Euros 

Galileo FOC 
  Satellites + launchers 
  Ground control infrastructure 
  Operations 
  Systems Engineering 
  Procurement Agent management costs 
EGNOS 
  Exploitation and operations (2008-2013) 
Support to the Commission 
  Project management support and advisory services 
Contingencies9 
Grand Total 

1600 
400  
275 
150 
195 

330 

27 
428 
3,405 

These  estimates  are  based  on  an  immediate  implementation  of  the  procurement  actions 
following an integrated EU political decision by the end of 2007.  

7 

8 
9 

Data  from  ESA,  previous  PPP  concession  bids,  and  the  IOV  contract;  evaluation  by  ESA,  GSA  and 
independent  consultants  PriceWaterhouseCoopers  and  Satel  Conseil  International;  and  a  verification 
meeting with experts from national space agencies. 
Contingency reserves on space programmes are normally in the order of 10-20%. 
Possible cost overruns of the IOV phase will be covered by the current financial arrangements and/or 
the Contingencies Reserve. 

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Of course, all figures represent a best estimate of the expected procurement costs in a nominal 
case  of  competitive  supply,  effective  contract  negotiations,  and  adherence  to  the  foreseen 
timetable.  The  prices  offered  by  the  private  sector  however,  and  therefore  the  costs  to  the 
Community,  will  only  emerge  during  procurement  negotiations.  In  order  to  ensure  that  the 
Community obtains the best value-for-money and that prices come down to costs, it will be 
necessary to put the Community (and its procurement agent) in a good negotiating position by 
means of a competitive bidding procedure based on appropriate principles agreed as part of 
the procurement policy.  

The  choices  made  in  the  procurement  policy  are  therefore  expected  to  have  considerable 
impact  on  the  final  costs  to  the  Community.  Moreover,  in  case  of  delays  in  political  and 
programmatic decisions, extra costs are anticipated caused by a pro rata increase of costs of 
current  contracts  (the  In-Orbit-Validation  contracts10),  and  loss  of  market  opportunity  as  a 
result of the arrival of competing systems. 

The Commission recommends the Budgetary Authority to proceed with its decisions on the 
basis of estimated costs of procurement of the Full Operational Capability (FOC) of Galileo 
of 3.4 B€ for the period 2007-2013, including the costs for EGNOS, the procurement agent, 
programme management costs, and a contingency reserve.  

3. 

GALILEO PROGRAMME RISKS AND THEIR MANAGEMENT 

The EU, as owner of the system resulting from the Galileo programme, will need to identify 
and,  in  case  they  are  accepted,  eventually  manage  the  risks  associated  with  the  European 
GNSS programmes. Details of these risks are provided in the Annex and in the Commission 
Staff  Working  Document.  The  most  important  risks  for  the  procurement  phase  are  design 
risks and deployment risks.  

The  design  risks  relate  to  Galileo  not  achieving  its  targeted  performance  as  a  result  of 
eventual  design  problems.  These  design  risks  and  their  likelihood  are  typical  to  a  space 
programme.  They  need  to  be  monitored  and  controlled  closely  but  are  not  reason  for 
particular concern at this stage.  

Galileo programme delay risks are linked to technical, managerial, financial or political issues 
that  cause  schedule  delays  and  cost  overruns  and,  as  a  consequence,  a  late  time-to-market. 
Most  of  these  programme  delays  should  be  mitigated  by  specific  actions,  by  the  proposed 
public governance measures, by disciplined programme management and oversight decisions, 
and  by  timely  political  decisions.  In  addition  to  the  specific  one-off  costs  related  to  these 
risks,  the  largest  impact  of  delays  is  the  increase  of  deployment  costs  and  a  loss  of 
exploitation revenues. 

The foreseen contingency reserve for the procurement is set in relation to the cost impact and 
the likelihood of risk events linked to design and deployment.  

10 

Under the IOV contract are procured: 4 satellites and their launches, the first satellite control centre, and 
around the half of required uplink, tracking, and monitoring stations. 

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The  Commission  proposes  to  the  Council  and  the  European  Parliament  to  note  that  the 
identified  risks  seem  commensurate  with  the  ambitions  and  scope  of  the  European  GNSS 
programmes and that, over and above the contingency reserve foreseen, there is no need for 
specific budgetary measures at this stage. However, should risks materialise the Commission 
will provide a detailed analysis and will, if appropriate, provide comprehensive proposals to 
the Budgetary Authority. 

The  Commission  commits  to  the  implementation  of  an  integrated  programme  risk 
management approach on all phases and levels of the programme and to structural measures 
to  identify,  control,  mitigate  and  monitor  risks,  as  well  as  to  regular  reporting  to  the 
Budgetary Authority.  

4. 

GALILEO ECONOMIC BENEFITS AND EXPLOITATION REVENUES IN THE WORLD-WIDE 
SATELLITE NAVIGATION MARKET  

4.1.  World-wide, downstream markets for satellite navigation services  

Overall, the world-wide market for satellite navigation has grown spectacularly over the last 
ten years. The value of this market in terms of applications and equipment is considerable and 
it is one the fastest growing high technology markets. This year there is an expected sale of 10 
million GNSS receiver units in the EU alone and should reach around 230 million units in the 
year 201111.  

The  GNSS  market  will  become  a  substantial  driver  in  the  global  economy  after  2010  and 
Europe  can  not  afford  to  be  absent  as  an  important  player  in  this  field,  hence  the  strategic 
importance of the European GNSS programmes. It is obvious that the GNSS system providers 
will have an important influence over all essential decisions affecting the GNSS users, such as 
defining  or  updating  the  standards,  ensuring  the  continuity  of  access  locally,  defining 
industrial  export  control  policy,  serving  the  future  needs  of  the  users  through  system 
modernisation. The EU cannot rely solely on foreign policies for all these important decisions 
affecting  an  important  share  of  the  European  economy.  Completing  Galileo  is  therefore  an 
indispensable infrastructure investment for the EU. 

Inevitably, the development of Galileo will also need to be accompanied by a specific effort 
to  develop  applications  and  services  (see  section  on  user  needs),  which  helps  European 
industry to achieve a strong position, develop know-how, and serve niche applications. This 
boosts the creation and the growth of SMEs and generates high-end employment. Galileo and 
EGNOS should therefore be seen as investments allowing Europe to penetrate, develop and 
maintain a substantial share of the GNSS market.  

Galileo  will  increase  the  public  benefits  that  can  be  generated  from  GNSS,  such  as 
employment, environment (reduced road congestion, shorter and more direct routes reducing 
fuel  consumption),  social  benefits  (enhanced  safety),  increased  efficiency  of  public  services 
(in  search-and-rescue,  fire  and  ambulance  services,  security)  and  economic  sectors 
(agriculture, fisheries, transport), and the management of scarce public resources (in aviation). 

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Source: ABI Research 2006. 

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Moreover,  the  additional,  direct  benefits  of  Galileo  are  numerous.  Not  only  will  satellite 
navigation  availability  in  larger  cities  increase  significantly  by  combined  use  of  GPS  and 
Galileo,  but  Galileo's  system  design  also  foresees  indoor  positioning  capabilities.  Satellite 
navigation accuracy will increase and the 'competition' between GPS and Galileo will bring 
about further innovations in satellite navigation for users worldwide, e.g improved accuracy 
and indoor positioning capability of Galileo over GPS-II, and improved mass-market signals 
common  to  both  GPS-III  and  Galileo.  Galileo  is  furthermore  optimised  for  civilian  use  by 
means of 5 functional services. This provides a basis for addressing new market needs in the 
road,  maritime,  and  aviation  markets  that  are  not  served  by  existing  technology.  Galileo 
furthermore ensures that any risks from single source dependencies are mitigated. This is of 
importance  in,  for  example,  the  use  of  timing  signals  for  the  synchronisation  of  electronic 
communication  networks  and  of  electricity  grids.  Lastly,  the  legal  framework  within  which 
Galileo is being built provides a clear and unambiguous liability scheme. Liability is of key 
importance  for  operators,  whether  public  or  private,  when  implementing  new  services  to 
citizens and/or commercial customers. There are therefore substantive arguments for users to 
use Galileo. 

4.2. 

Exploitation revenues and direct benefits of the European GNSS programmes 

Galileo direct exploitation revenues represent a tiny portion of the Member States returns and 
an  even  tinier  portion  of  the  worldwide  and  European  GNSS  markets.  The  Galileo 
exploitation revenue stream that is expected to be generated is large and well diversified but is 
however subject to uncertainties. 

Based  on  previous  studies,  data  provided  in  the  various  bids  of  the  previous  phase, 
independent  verifications,  analysis  performed  for  the  GJU  and,  over  the  last  time,  by  the 
GSA, the following, direct Galileo exploitation revenue estimates (including uncertainties)12 
are now available for the provision of the EGNOS and Galileo signals-in-space. 

The uncertainty of the exploitation revenues13 are estimated at plus one-third and minus half 
of the base case of 9.1 B€, thereby providing a range between 4.6 and 11.7 B€ over the 20 
years  period.  Risk  mitigation  actions  and  creation  of  revenues  opportunities  however  will 
have a positive impact. 

The estimated split of these exploitation revenues14 is as follows: 

Split of Galileo/EGNOS exploitation revenues 
per service 
Open Service – normal use 
– special use 

PRS 
Safety of Life 
Commercial Service 
Search and Rescue 

per charging mechanism 
0%  terminal manufacturing 
54%  governmental clients 
29%  service providers 
10%  receiver manufacturing 

7%  end-users 
0%   

per sector 
46% road transport 
29% PRS 
14% mobile telephony 
7% professional services 
4% aviation 

others 

30%
29%
17%
9%
5%
10%

12 
13 

14 

Sources: GSA based on Ovum 2006, ABI Research 2006, Berg Insight 2006, ESYS 2006 
It  was  this  uncertainty  that  did  not  allow  the  private  sector  to  accept  the  market  risk  in  the  PPP 
concession negotiations. 
Sources: Ovum 2006, bids during the PPP negotiation phase. 

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The actual exploitation revenues will be highly dependent on the time-to-market of Galileo, 
the  success  of  public  sector  action  in  preparing  markets  and  putting  into  place  a  regulatory 
framework that takes away any barriers to market development, the take-up rate of the PRS 
service by the EU public authorities, the success of competing GNSS systems, and the EU's 
ability  to  find  private  sector  partners  that  have  the  capacity  to  address  global  satellite 
navigation markets in a successful fashion. Particularly the high dependency of exploitation 
revenues  on  special  uses  of  the  Open  Service,  such  as  authentication  services  and  public 
emergency  services,  requires  careful  consideration  such  as  adaptations  to  the  regulatory 
framework so that it foresees the use of authenticated signals for road-tolling applications. 

Galileo exploitation revenues should therefore be seen as an additional benefit and not as the 
single  driver  of  the  European  GNSS  programmes.  Namely,  it  is  the  promise  of  these 
exploitation revenues that may be of interest to the private sector. Hence, their importance for 
the EU public sector to be able to transfer risks to the private sector and to obtain the benefits 
of private sector participation in the programme.  

In conclusion, there is a strong case for Galileo driven by its potential exploitation revenues 
but, to an even larger extent, by the impact of Galileo on the European GNSS industry and the 
economy in general.  

The Commission proposes that the Council and the European Parliament in their decision to 
re-profile  the  European  GNSS  programmes  take  note  of  the  macro-economic  and  public 
merits of the programmes; the direct benefits of Galileo in terms of new services and markets, 
increased  performance,  and  complementarity  to GPS; and  the fact that there is a reasonable 
basis for the expected Galileo exploitation revenues.  

5. 

THE FINANCING OF THE EUROPEAN GNSS PROGRAMMES 

The  proposed  scenario  requires  financing  totalling  €3.4  billion  for  the  period  2007-2013. 
However,  only  an  amount  of  €1  billion  has  actually  been  foreseen  by  the  Community 
financial framework for 2007-2013. It is therefore necessary to examine the other possibilities 
in order to identify additional financial resources up to €2.4 billion, during the period 2008-
2013.  To  this  end,  it  is  important  to  initially  distinguish  2  options:  financing  through  the 
Community budget and inter-governmental financing, outside the community budget. 

Community funding 

Points 21 to 23 of the interinstitutional agreement on budgetary discipline and sound financial 
management  (IIA)  define  the  modalities  according  to  which  the  Budgetary  Authority  can 
decide  on  a  revision  of  the  multi-annual  financial  framework  in  the  event  of  unforeseen 
circumstances.  The  failure  of  the  negotiations  of  the  concession  contract  with  the  private 
consortium constitutes such an unforeseen situation.  

Given  the  amounts  at  stake,  the  Commission  considers  that  the  multiannual  financial 
framework  needs  to  be  revised.  The  other  options  offered  in  principle  by  the  IIA  do  not 
provide viable alternatives to such a revision: 

–  The  estimated  margins  maintained  under  the  ceiling  of  heading  1A  under  the  terms  of 
Point  13  of  IIA  are  not  suitable  for  a  long-term  financing  of  this  magnitude.  The  same 
applies  to  the  mobilisation  of  the  flexibility  instrument  that  is  not  foreseen  for  recurrent 

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uses.  The  Galileo  programme  needs  a  strong  and  sustainable  political  and  legal 
commitment, in view of the importance at stake, to fill the accumulated delays and regain 
the confidence of the private sector – whose collaboration is indispensable. 

–  Point 37 of the IIA makes it possible to depart by up to 5% from the amount laid down in 
the  legal  acts  concerning  a  multiannual  programme  adopted  under  codecision  procedure. 
On  this  basis,  a  considerable  amount  could,  in  principle,  be  transmitted  to  the  Galileo 
programme  by  means  of  a  re-deployment  of  the  resources  within  heading  1A.  However, 
such  a  re-deployment  at  the  beginning  of  the  programming  period  would  not  be 
appropriate. At this stage, no advantage could be taken from an under-execution of these 
programmes, since their implementation is only just starting.  

Inter-governmental financing 

An inter-governmental financing could take the following forms: 

The  European  Space  Agency  (ESA)  finances  half  of  the  development  phase  of  the 
a) 
Galileo programme. This model of financing could in theory be extended to the deployment 
phase. The implementation of this solution presents nevertheless a number of disadvantages: 

•  Not all of the EU Member States, notably the new Member States, are member of 
ESA. Similarly, not all ESA Member States are member of the EU. This poses a 
problem of material and immaterial property rights within the programme; 

•  ESA financing conflicts with the Community character of the programme as the 
Budgetary Authority exercises no control over the part financed directly by ESA 
Member States15. 

•  Co-financing  seriously  affects  the  public  governance  of  the  programme,  as  the 
financing role of ESA is difficult to reconcile with its role as maitre d’œuvre. 

b) 
Direct  contributions  from  the  Member  States  to  the  Galileo  programme  could  come 
from  a  similar  instrument  used  by  the  European  Development  Funds.  Regarding  the 
possibility  of  direct  loans  to  the  programme,  without  the  Member  States  standing  as 
guarantors, it must be recalled here that, unlike the Member States, the European Community 
is not allowed to borrow. The possibility of setting-up such contributions needs to be studied 
in much detail as no easy transferable precedent exists. 

However,  for  legal,  institutional  and  programmatic  reasons,  the  Commission  considers  that 
only  the  European  Union,  as  owner  of  the  system,  should  provide  the  additional  financial 
resources.  Yet,  international  participation  could  also  be  envisaged  subject  to  acceptable 
conditions  for  activities  such  as  facilitating  access  to  services  of  the  European  GNSS 
worldwide. 

In conclusion, the Commission submits in parallel to this Communication a proposal16 for a 
decision  of  the  European  Parliament  and  of  the  Council  concerning  the  revision  of  the 
multiannual framework with the aim of providing the required public financing of €3.4 billion 

15 
16 

At several occasions has the European Parliament therefore expressed its opposition to this solution 
Communication concerning the Revision of the Multi-annual Financial Framework and Proposal for a 
Decision of the European Parliament and of the Council amending the Inter-institutional Agreement of 
17  May  2006  on  budgetary  discipline  and  sound  management  as  regards  the  multi-annual  financial 
framework - COM(2007) 549, 19.9.2007. 

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for the period 2007-2013, as well as to give the Union the necessary means to continue both 
with  the  EGNOS  and  the  Galileo  programmes  for  which  the  three  institutions  have  just 
reaffirmed the utmost importance.  

An amount of 1.005 B€ has already been foreseen in the current financial framework (2007-
2013) under the heading of the Commission's legislative proposal17 for the implementation of 
the  deployment  and  exploitation  phase  of  the  Galileo  programme.  It  is  proposed  to  add  an 
additional amount of 2.100 B€ to the amount aforementioned. The release of this amount will 
be subject to a revision of the current financial framework (2007-2013). The funds will come 
from  the  non-exploitable  margins  of  headings  2  and  5  under  the  years  2007  and  2008. 
Consequently,  the  text  of  the  Modified  Proposal  will  fix  at  3.105  B€  the  amount  to  be 
foreseen  in  the  community  budget  for  the  period  2007-2013  under  the  European  GNSS 
programmes. An amount of €300 million is available under the 7th framework programme for 
research and development for the European GNSS programmes to contribute to the financing, 
bringing the total to 3.4 B€. 

As concerns EGNOS, it was initially foreseen that its financing would be ensured through the 
overall  integration  into  Galileo  and  availability  of  budget  before  the  end  of  2007.  As  the 
deployment  phase  of  EGNOS  is  nearing  completion,  ESA  intends  to  qualify  the  EGNOS 
software version compliant with aviation requirements. It is therefore foreseen that the current 
financial arrangements continue to cover this pre-qualification phase until March 2009.  

6. 

MEETING  USER  NEEDS,  PREPARING  MARKETS,  AND  INCREASING  REVENUE 
OPPORTUNITIES 

As  the  ultimate  purpose  of  EGNOS  and  Galileo  is  to  provide  global  satellite  navigation 
services  that  meet  the  requirements  of  users  world-wide,  it  is  essential  to  have  both  a  good 
understanding  of  these  requirements  and  to  try  and  meet  them  through  the  continuous 
development and innovation of the systems.  

Following the consultation of the Green Paper, the Commission will publish an Action Plan in 
the  near  future  of  which  the  main  objective  is  to  put  in  place  a  framework  that  allows  the 
development of applications and services based on EGNOS and Galileo by means of targeted 
action in each application and market domain. 

The introduction of this Action Plan is of considerable importance as public sector action will 
also contribute towards a structural reduction of the market and revenues risk for the systems.  

The GSA, in coordination with Commission services, should contribute to this important task, 
coordinating  its  activities  also  with  public  authorities  at  national,  regional,  and  local  levels, 
and working closely with all actors in all relevant sectors and markets.  

On  the  basis  of  this  work,  and  where  appropriate,  the  Commission  will  make  the  necessary 
regulatory and other proposals that remove barriers to the development of community policies 
which may profit from the use of satellite navigation, notably in the areas of inter-operability 
of  services  and  systems  that  foresee  the  use  of  satellite  navigation,  the  inter-operability  of 
road-tolling  systems,  emergency  communications,  safety  operations,  monitoring  of  critical 
infrastructure,  transport  of  animals  and  dangerous  goods,  and  others.  The  Commission 

17 

COM(2004) 477 final/2. 

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proposes that the Council and the European Parliament take note of the need of the EU public 
sector to prepare the GNSS markets and take all relevant actions, including awareness raising, 
provision  of  technical  information,  assistance  to  all  private  and  public  sector  players  in  all 
interested  economic  sectors,  preparation  of  standardisation  and  certification,  and  the 
consolidation of market requirements.  

The  Commission  therefore  proposes  to  strengthen  the  role  of  the  GSA  and  provide  it  a 
coordinating  and  key  role  in  the  preparation  of  European  GNSS  markets,  and  to  review  its 
mission, staffing, and functioning. 

7. 

PUBLIC SECTOR GOVERNANCE 

Programme oversight and management is an integral part of a programme like Galileo. Clear 
roles and responsibilities and efficient decision-making processes contribute to avoidance of 
cost-overruns and programme delays. The Commission therefore proposes a simplification of 
the  public  governance  structure  and  a  structural  division  of  roles  on  the  basis  of  a  clear 
separation of programme oversight and programme management, based on EU financing and 
rules.  It  furthermore  intends  to  take  a  number  of  concrete  measures  that  reinforce  the 
programme management.  

Political oversight

Programme oversight and 
Programme Management

Independant
advisors

Execution

European 
Space Agency

IOV 
contracts

FOC 
contracts

Council and
European Parliament

European GNSS
Programme Committee

European 
Commission

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Assistance tasks to EC

Tasks delegated by EC

GNSS Supervisory
Authority

Market
preparation

Research

Accreditation

Others

(1) 

Role of the Council and the European Parliament: 

The oversight role belongs to Council and Parliament and takes form of: 

•  political oversight, exercised directly by the Council and the European Parliament, and 

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•  programme  oversight  in  the  form  of  a  “European  GNSS  Programme  Committee”18  in 
which  representatives  from  the  Member  States  assist  in  the  implementation  of  the 
programme and provide overall guidance on all important aspects of the programme.  

(2) 

Role of the European Commission 

As  the  institution  that  is  directly  accountable  to  Council  and  Parliament,  the  European 
Commission needs to have overall programme management responsibility. 

The  Commission  considers  that  it  is  essential  to  have  a  single  Programme  Manager  on  the 
side  of  the  public  sector  that  is  accountable  for  the  entire  Galileo  programme,  that  has 
management  and/or  contractual  control  over  all  the  subordinate  implementation  levels,  that 
has access to both financial resources and to the political authorities, and that can provide the 
necessary  arbitrage  between  all  elements  of  the  programme.  A  split  responsibility  with 
different  reporting  and  accountability  lines  will  cause  fractures  in  the  programme  and  have 
structural, negative impacts.  

The  European  Commission  acts,  inter  alia,  as  the  maître  d’ouvrage  (or  "sponsor")  of  the 
programme,  overseeing  all  development,  procurement,  operations  and  maintenance,  and 
exploitation contracts related to the system infrastructure.  

(3) 

The role of the GNSS Supervisory Authority (GSA) 

It is to be noted that ending the PPP concession negotiations has caused a legal vacuum on the 
role of the  GSA  that, in  accordance with the current Regulation19 that sets it up,  was  based 
entirely on the putting into place of a concession holder. 

It  is  therefore  important  that  the  GSA  shall  now  be  strengthened  in  relation  to  all  relevant 
actions with respect to the preparations of the markets in order to allow the EU to step up its 
commitment to Galileo. It furthermore acts as the Accreditation Authority, and is responsible 
for organising certification. In addition, the GSA advises and assists the Programme Manager 
on all aspects of the programme.  

In order to provide a coherent framework for public governance, the Commission will submit 
a proposal for a Revision of mentioned Regulation as soon as the EU's political decisions on 
the programme are taken. 

(4) 

The role of the European Space Agency 

As  the  co-initiator  of  the  European  GNSS  programmes  and  the  technical  architect  of  these 
programmes,  ESA is in an excellent position to take on the tasks of procurement agent and 
maître  d’œuvre  (or  "prime  contractor").  Moreover,  the  ESA  technical  expertise  and 
experience accumulated over the last 10 years on the European GNSS programmes is unique 
and can not be reproduced without major delays, costs, and risks to the programme 

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19 

See  Modified  Proposal  for  a  Regulation  of  the  European  Parliament  and  the  Council  concerning  the 
putting into place of the European GNSS programmes - COM(2007) 535, 19.9.2007. 
Council Regulation (EC) No 1321/2004 of 12 July 2004. 

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ESA  will  act  on  the  basis  of  a  detailed  ESA-EC  GNSS  Agreement  that  will  set  out  the 
respective obligations, the procurement policy, the reporting and interaction arrangements, the 
limits  of  ESA  autonomous  decision-making,  and  the  procedures  by  which  decisions  are 
obtained  from  the  Commission  and,  in  appropriate  cases,  the  Council  and  European 
Parliament.  

As far as the role of design authority is concerned, it needs to be ensured that the European 
public sector, as owner of the systems, retains crucial knowledge of, and involvement in, the 
detailed  technical  definition  of  the  European  GNSS  programmes.  This  is  essential  in  the 
letting  of  future  contracts  for  the  European  GNSS  programmes.  The  ESA-EC  GNSS 
Agreement will address this matter in detail. 

The  Commission  foresees  regular  and  detailed  reporting  to  the  Council  and  the  European 
Parliament,  including  on  progress,  risks,  finances,  the  appropriateness  of  the  governance 
arrangements, and all other relevant matters. 

The Commission proposes that the Council and the European Parliament agree to the above 
package of proposals for public governance of the European GNSS programmes, in particular: 

1) 

the creation of a European GNSS Programme Committee; 

the role of the Commission as the  European  GNSS Programme Manager and maître 

2) 
d’ouvrage; 

strengthen  the  role  of  the  GSA  in  market  preparation  and  as  advisor  to  the 

3) 
Commission and assist in programme management; 

the  role  of  ESA  as  the  maître  d’œuvre,  acting  on  the  basis  of  an  ESA-EC  GNSS 

4) 
Agreement; 

5) 

regular and transparent reporting to Council and European Parliament. 

8. 

THE PRINCIPLES OF THE GALILEO PUBLIC PROCUREMENT 

The Commission strongly believes in the need to introduce robust and fair competition in the 
programme on the basis of dual-sourcing and regular competitive tendering in all elements of 
the programme, wherever possible, in order to improve efficiency and decrease dependencies 
and  foremost  to  control  costs  and  mitigate  risks.  However  the  procurement  of  Galileo,  now 
and in the future, also needs to benefit from a diversified and competitive European industry 
as well as from a broad distribution of competences. Therefore bottleneck supplies and single-
sourcing at any level needs to be minimised as far as possible. However, certain past decisions 
and achievements resulting from, notably, the IOV contracts with the private sector need to be 
taken into account in the next phase. Moreover, achieving competitive supplies and double-
sourcing may come at a cost and cause delays as a result of additional overheads and the need 
to qualify the design and production of additional suppliers. 

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Therefore,  a  proper  balance  needs  to  be  found  between  all  these  elements  whereby  overall 
programme efficiency, past decisions, and the need for diversified supply under competitive 
conditions are weighted. The Commission therefore proposes the application of the following 
principles:  

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

The application of the Community's public procurement rules;  

Implementation of an open competitive procurement architecture in order to achieve: 

•  open  access  and  fair  competition  throughout  the  overall  industrial  supply  chain, 
offering a chance to balanced participation of private sector players at all levels, 
including SME's, across the Member States; 

•  a proper control of the overall programme cost and schedule;  

Due  account  needs  to  be  taken  of  existing  achievements  and  investments,  of 
agreements  as  far  as  relevant,  and  of  lesson  learned  from,  the  definition  and 
development phases of the European GNSS programmes; 

Parallel,  double-source  procurement  wherever  possible,  aiming  at 
reducing 
technological and industrial risks as well as dependencies, and better overall control of 
programme cost and schedule; 

Incremental  implementation  of  the  system  infrastructure  from  In-Orbit-Validation 
(IOV) to Full Operational Capability (FOC) in order to control risks and with a view 
to early introduction of services; 

Due  account  to  be  taken  of  the  strategic  nature  of  the  European  GNSS  programmes 
and of the security and export control requirements. 

9. 

CONCEPTS FOR THE OPERATIONS AND EXPLOITATION PHASES 

The  Commission  remains  committed  to  the  early  involvement  of  the  private  sector  in  the 
European GNSS programmes, including in the operations and exploitation phases. In practice, 
a limited number of different options or a combination thereof, is available, such as various 
variants of PPP's, service contracts, or publicly owned corporate entities. 

However, much more analysis will be required that the Commission has commenced already 
with  assistance  of  the  GSA.  The  timing  of  the  decisions  relative  to  the  various  steps  is  of 
importance in order to ensure the overall coherence of the programme approach. 

The  Commission  considers  that  decisions  on  the  operational  and  exploitation  phase  of  the 
European  GNSS  programmes  can  only  be  taken  after  a  phase  of  detailed  technical, 
commercial,  financial,  and  programmatic  studies.  The  Commission  will  come  forward  with 
proposals at the appropriate moment. 

10. 

TIMETABLE  FOR THE DEPLOYMENT OF THE EUROPEAN GNSS PROGRAMMES 

As  set  out  in  the  documents  the  Commission  submitted  in  May,  the  contract  for  the  full 
deployment phase commences at the earliest one year after the EU political decision on the re-
profiling is taken and under the assumption that the relevant legal decisions regarding budget 
and financing are taken within months afterwards. Subject to an early procurement of the long 
leads items at least 6 months beforehand, Full Operational Capability (FOC) can be reached 4 
and half years after the start of this contract.  

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In view of the time needed for the decisions on the European GNSS programmes, if a positive 
political decision is taken by the end of 2007, the FOC can be realised by the middle of 2013.  

The  above  considerations  lead  to  a  timetable  for  the  deployment  of  the  European  GNSS 
programmes  as  follows,  of  which  a  related  list  of  key  dates  and  milestones  is  in  the 
Commission Staff Working Document. 

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ANNEX 

Overview of Galileo programme risks 

risk category 

causes 

impact 

likelihood 

cost range per event 

Procurement/Deployment phase 
Design risks 

Atomic clocks, orbit 
behaviour, SOL service 
performance, implementation 
security requirements, scaling 
up from IOV to FOC 

Deployment risks 

Technical, managerial, 
financing, political issues 
Launch risks 

Operations/Exploitation phase 
Market/revenues 
risks 

Market underperformance or 
revenue impact of 
design/deployment risks 

Re-design 

Unlikely 

~ 250 to 500 M€ 

Delays 

Unlikely 

Up to 250 M€ 

Revenue loss 

Probable 

Up to half of the 
annual baseline 
revenues 

3rd party liability 

Claims 

Claims pay-out 

Very remote 

> 1 B€ 

Un-insurability 

Insufficient market capacity 

Direct financing  Remote 

> 1 B€ 

Supervening 
events 

Causes outside control of the 
programme 

- 

Remote 

~ 250 to 500 M€ 

Further details can be found in the Commission Staff Working Document. 

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