Special Report No 7/2009 #The management of the Galileo programme’s development and validation phase
Date: 2009-05-14
Institutions: European Court of Auditors
Subjects: EU control, EU financing, EU programme, audit, management audit, satellite navigation

EUROPEAN COURT 
OF AUDITORS

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THE MANAGEMENT OF THE GALILEO 
PROGRAMME’S DEVELOPMENT 
AND VALIDATION PHASE

EN

 
 
 
 
Special Report No 7  

 2009

THE MANAGEMENT OF 
THE GALILEO PROGRAMME’S 
DEVELOPMENT AND 
VALIDATION PHASE

(pursuant to Article 248(4), second subparagraph, EC)

EUROPEAN COURT OF AUDITORS

2

EUROPEAN COURT OF AUDITORS
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Tel. +352 4398-45410
Fax +352 4398-46410
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, 2009

ISBN 978-92-9207-317-6

doi: 10.2865/44017

© European Communities, 2009

Reproduction is authorised provided the source is acknowledged.

Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase

Printed in Belgium

CONTENTS

3

Paragraph

I–XII 

1–2 

3–29 

3–8 

9–12 

13–26 

27–29 

ACRONYMS

EXECUTIVE SUMMARY

INTRODUCTION

THE HISTORY OF GALILEO

EARLY DAYS (BEFORE 1999)

DEFINITION (1999–2002)

DEVELOPMENT AND VALIDATION UNDER THE GJU (2003–06)

DEVELOPMENT AND VALIDATION POST-GJU (SINCE 2006)

30–33 

AUDIT SCOPE AND APPROACH

34–74 

35–42 

43–50 

51–57 

58–65 

66–74 

OBSERVATIONS

CONCESSION NEGOTIATIONS FAILED

TECHNOLOGICAL DEVELOPMENT ACTIVITIES DELAYED AND OVER BUDGET

LIMITED USEFULNESS OF RTD ACTIVITIES

EGNOS INTEGRATION ONLY PARTIALLY SUCCESSFUL

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 phase

 
 
 
 
 
 
 
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Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase

ACRONYMS

5

Centre National d’Etudes Spatiales
Commercial service
European Communities

ARTES  Advanced research in telecommunications systems
CNES 
CS 
EC 
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 
PB-Nav  Programme board on satellite navigation
PFI 
PPP 
PRS 
PwC 
RTD 
SAR 
SESAR 
SoL 
TEN-T 

Private finance initiative
Public–private partnership
Public regulated service
PricewaterhouseCoopers
Research and technological development
Search and rescue
‘Single European sky’ ATM research
Safety of life
Trans-European transport network

Open service

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EXECUTIVE 
REPLY OF THE 
SUMMARY
COMMISSION

IV.
N e g o t i a t i o n s   w i t h   t h e   p r i v a t e   s e c t o r   o n   a 
concession agreement stalled in early 2007 
and the Parliament and the Council decided 
to redirect the programme in autumn 2007. 
T e c h n o l o g i c a l   d e v e l o p m e n t   h a s   b e e n   s e t 
b a c k   f i v e   y e a r s .   A s   a t   t h e   e n d   o f   2 0 0 8 ,   n o 
o p e r a t i o n a l   s a t e l l i t e s   h a v e   b e e n   l a u n c h e d 
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:

(i) 

which  factors  accounted  for  the  failure 
of the concession process;

(ii) 

which factors accounted for the reported 
delays and cost overruns of technologi-
cal development;

(iii) 

to what extent spending on research and 
development activities has benefited the 
Galileo programme;

(iv) 

how well the GJU had integrated EGNOS 
into Galileo;

(v) 

w h e t h e r   t h e   G a l i l e o   p r o g r a m m e   w a s 
adequately governed.

I.
T h e   E G N O S   a n d   G a l i l e o   p r o g r a m m e s   w e r e 
i n i t i a t e d   i n   t h e   m i d   1 9 9 0 s   w i t h   t h e   a i m   o f 
establishing  a  European  Global  Navigation 
Satellite System (GNSS). EGNOS is a regional 
s a t e l l i t e   b a s e d   a u g m e n t a t i o n   s y s t e m   f o r 
E u r o p e   t h a t   i m p r o v e s   t h e   s i g n a l s   c o m i n g 
f r o m   e x i s t i n g   s a t e l l i t e   n a v i g a t i o n   s y s t e m s 
such as GPS. Galileo is currently under devel-
opment as Europe’s Global Satellite Naviga-
tion System.

II.
I n   o r d e r   t o   m a n a g e   t h e   d e v e l o p m e n t   a n d 
validation phase of the Galileo programme, 
the European Commission and the European 
Space Agency (ESA) set up a dedicated struc-
t u r e ,   t h e   G a l i l e o   J o i n t   U n d e r t a k i n g   ( G J U ) , 
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.
T h e   G a l i l e o   p r o g r a m m e   w a s   t h e   f i r s t   o f   i t s 
kind in several respects: it was the first close 
collaboration between the ESA and the Com-
mission  on  such  a  large  space  programme, 
t h e   f i r s t   i n d u s t r i a l   p r o g r a m m e   t o   b e   m a n -
aged at European level and the first time the 
Commission  was  to  participate  in  a  public–
private partnership.

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EXECUTIVE 
REPLY OF THE 
SUMMARY
COMMISSION

VIII.
D i s c o n t i n u i t i e s ,   t h e   i n a p p r o p r i a t e n e s s   o f 
t h e   s i x t h   f r a m e w o r k   p r o g r a m m e   ( F P 6 )   f o r 
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.
T h e   i n t e g r a t i o n   o f   E G N O S   i n t o   G a l i l e o   w a s 
only  partially  successful  because  the  GJU’s 
m a n d a t e   w a s   n o t   c l e a r ,   t h e   d e c i s i o n   t o 
i n c l u d e   E G N O S   i n   t h e   c o n c e s s i o n   n e g o t i a -
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.
T h e   p r o g r a m m e ’ s   g o v e r n a n c e   w a s   i n a d -
e q u a t e .   T h e   d i v i s i o n   o f   r o l e s   b e t w e e n   t h e 
e n t i t i e s   i n v o l v e d   i n   t h e   d e v e l o p m e n t   a n d 
validation phase of the programme (EU and 
E S A   M e m b e r   S t a t e s ,   C o m m i s s i o n ,   G J U   a n d 
ESA)  was  not  clearly  defined.  The  Commis-
sion did not provide adequate leadership in 
developing and managing Galileo.

XI.
I f   t h e   m i d - 2 0 0 7   r e d i r e c t i o n   o f   t h e   E G N O S 
and  Galileo  programmes  is  to  succeed,  the 
C o m m i s s i o n   m u s t   c o n s i d e r a b l y   s t r e n g t h e n 
i t s   m a n a g e m e n t   o f   t h e   p r o g r a m m e s .   T h i s 
r e p o r t   i n c l u d e s   a   n u m b e r   o f   r e c o m m e n d a -
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.

V.
T h e   C o u r t   c o n c l u d e d   t h a t   m a n a g e m e n t   o f 
the  development  and  validation  phase  was 
inadequate. The Galileo programme experi-
enced problems at different levels.

(i) 

T h e   G J U   w a s   n o t   a   s t r o n g   p r o g r a m m e 
manager nor was any other body assigned 
this  role.  The  GJU  did  not  achieve  most 
o f   i t s   o b j e c t i v e s   —   o w i n g ,   h o w e v e r ,   t o 
f a c t o r s   t h a t   w e r e   l a r g e l y   o u t s i d e   t h e 
GJU’s control.

(ii) 

The programme lacked a strong strategic 
sponsor and supervisor: the Commission 
did not proactively direct the programme, 
leaving it without a helmsman.

(iii) 

O w i n g   t o   t h e i r   d i f f e r e n t   p r o g r a m m e 
expectations, Member States intervened 
i n   t h e   i n t e r e s t   o f   t h e i r   n a t i o n a l   i n d u s -
t r i e s   a n d   h e l d   u p   d e c i s i o n s .   T h e   c o m -
p r o m i s e s   m a d e   l e d   t o   i m p l e m e n t a t i o n 
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.
T h e   G J U ’ s   t a s k   o f   s u p e r v i s i n g   t h e   t e c h n o -
l o g i c a l   d e v e l o p m e n t   a c t i v i t i e s   w a s   s e r i -
ously constrained by governance issues, an 
incomplete budget, delays and the industrial 
organisation of the development and valida-
tion phase.

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INTRODUCTION

8

1. 

2. 

This audit report is about the European Union’s involvement in satellite 
navigation in the period 2003–06.

1  European Geostationary 

Navigation Overlay Service.

The European Union’s satellite navigation strategy consists of two pro-
grammes: EGNOS 1 and Galileo.

(a) 

EGNOS is a regional system for Europe that monitors and corrects 
the  signals  emitted  by  existing  satellite  navigation  systems 2  by 
improving their accuracy and assessing their reliability.

(b) 

Galileo is currently under construction as Europe’s Global Naviga-
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).

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.

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THE HISTORY OF GALILEO

9

3. 

4. 

5. 

6. 

EARLY DAYS (BEFORE 1999)

The history of Galileo began in 1994, with the European Commission’s 
proposal to engage Europe in satellite navigation 3. Based on this pro-
posal,  in  December  1994  the  Council  of  the  European  Union  invited 
the Commission to initiate the necessary activities 4.

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).

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-
w o r k   o f   g r o u n d   s t a t i o n s   c o v e r i n g   a l l   o f   E u r o p e   w h i c h   a r e   u s e d   t o 
i m p r o v e   t h e   a c c u r a c y   o f   G P S   a n d   G l o n a s s   ( s e e   f o o t n o t e   2 )   a n d   t o 
assess the reliability of their signals.

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).

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).

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7. 

There were three motives underlying the creation of Galileo:

(a) 

p o l i t i c a l   ( G a l i l e o   i s   a   d e c l a r a t i o n   o f   a n   i n d e p e n d e n t   E u r o p e a n 
GNSS capability);

(b) 

economic (Galileo was seen as commercially viable and was justi-
fied by predictions of substantial economic and social benefits);

(c) 

technological (Galileo was to become the most sophisticated navi-
gation system available).

8. 

The Galileo programme was divided at the outset into four phases (see 
Table 1):

(a) 

technical definition;

(b) 

development and validation;

(c) 

deployment;

(d) 

commercial operation.

B O X   1

T H E   F I V E   G A L I L E O   S E R V I C E S

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.

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TA B L E   1

P H A S E S   O F  T H E   G A L I L E O   P R O G R A M M E   A S   F O R E S E E N   I N   N O V E M B E R  2000

Phases and main objectives

Initial timing

Governance structure*

Defi nition phase

1999–2000

Technical activities
• 
Technical studies
• 
Technology pre-developments

Other activities
• 

Preparation of governance structures for 
the next phase
Legal and business development feasibility 
studies
International agreements

• 

• 

Development and validation phase

2001–05

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

• 

• 

European Commission and the ESA 
separately plus coordination via PMB 
(programme management board), 
GPO (Galileo Programme Offi  ce) 
and GISS (Galileo Interim Support 
Structure)

European Commission and the ESA 
through GJU

Other activities
• 
• 
• 
• 
• 

Research grants (FP6)
Development business plan
Concession negotiations
EGNOS integration
International agreements

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

2008+

Technical activities
• 
Satellite renewal
• 
Operation of the centres
• 
Maintenance

Other activities
• 

Commercial activities

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.

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9. 

10. 

11. 

DEFINITION (1999–2002)

The Galileo programme got underway in 1999, when the Council gave the 
go-ahead for the definition phase 6. 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  development 7.  ESA  funding  was  allocated  through 
its GalileoSat programme.

In November 2000 8, the Commission presented the European Parlia-
ment and the Council with the results of the definition phase. These 
c o n t a i n e d   c o n c r e t e   p r o p o s a l s   o n   t h e   d e f i n i t i o n   o f   t h e   s y s t e m ,   i t s 
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):

(a) 

t h e   d e v e l o p m e n t   a n d   v a l i d a t i o n   p h a s e   w o u l d   r u n   f r o m   2 0 0 1   t o 
2005;

(b) 

the deployment phase would run from 2006 to 2007;

(c) 

the commercial operation phase would start in 2008.

T h e   c o m m u n i c a t i o n   p l a n n e d   f o r   E G N O S   t o   b e c o m e   o p e r a t i o n a l   i n 
2003.

The Commission stated in the same communication that ‘cost/benefit 
studies  show  Galileo  to  be  cost-effective  and  sufficiently  attractive 
t o   o b v i a t e   t h e   n e e d   f o r   a n y   f u r t h e r   p u b l i c   f u n d i n g   i n   t h e   f o r m   o f 
subsidies from 2007.’ The Galileo system was to cost a total of 3,3 bil-
l i o n   e u r o   ( s e e   T a b l e   2   f o r   a   d e t a i l e d   b r e a k d o w n ) .   T h e   C o m m i s s i o n 
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.

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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).

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.

13. 

14. 

DEVELOPMENT AND VALIDATION UNDER THE GJU 
(2003–06)

PURPOSE

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.

In parallel with technological development, the Commission focused, 
d u r i n g   t h e   d e v e l o p m e n t   a n d   v a l i d a t i o n   p h a s e ,   o n   o t h e r   a c t i v i t i e s 
aiming  at  bridging  the  gap  between  the  system  and  its  future  users 
i n   o r d e r   t o   p r e p a r e   f o r   t h e   s u c c e s s i v e   p h a s e s   o f   t h e   p r o g r a m m e , 
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. 
A d d i t i o n a l l y ,   t h e   f o c u s   w a s   o n   f u n d i n g   R T D   a c t i v i t i e s   t h r o u g h   t h e 
sixth framework programme for Research (FP6) 10 in order to support 
both  technological  development  and  business  development  and  on 
u s i n g   E G N O S   a s   a   p r e c u r s o r   p r o g r a m m e   t o   p r e p a r e   t h e   m a r k e t   f o r 
Galileo.  EGNOS  will  deliver  regional  services  similar  to  three  of  the 
five future Galileo services — OS, SoL and SAR (see Box 1).

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15. 

16. 

THE GALILEO JOINT UNDERTAKING — THE MANAGEMENT 
VEHICLE FOR THE DEVELOPMENT AND VALIDATION PHASE

The development and validation phase was to be managed by the GJU, 
a   d e d i c a t e d   s t r u c t u r e   s e t   u p   b y   t h e   C o m m i s s i o n   a n d   t h e   E S A   a f t e r 
approval by the Council of the European Union and the ESA Council. 
The  former  Council’s  decision  to  proceed  in  full  with  development 
a n d   v a l i d a t i o n   w a s   n o t   t a k e n   u n t i l   M a r c h   2 0 0 2 1 1,   1 5   m o n t h s   l a t e r 
than expected. This delay was caused by lengthy negotiations among 
the  EU  Member  States  concerning  the  use  of  the  system  for  military 
p u r p o s e s   a n d   p r i v a t e - s e c t o r   f u n d i n g   a n d   p a r t i c i p a t i o n   i n   t h e   p r o -
g r a m m e .   T h e   E S A   C o u n c i l ’ s   o f f i c i a l   g o - a h e a d   f o r   d e v e l o p m e n t   a n d 
v a l i d a t i o n   w a s   f u r t h e r   d e l a y e d   u n t i l   M a y   2 0 0 3 .   T h i s   w a s   c a u s e d   b y 
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.

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 phase 15 by signing a memorandum of understanding, 
this intention never materialised.

17. 

As established by its statutes, the GJU was to:

(a) 

supervise all Galileo programme activities planned for the devel-
opment and validation phase;

(b) 

m a k e   a n y   n e c e s s a r y   a d j u s t m e n t s   i n   t h e   l i g h t   o f   d e v e l o p m e n t s 
occurring during the development and validation phase;

(c) 

prepare for the deployment and operational phases.

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.

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18. 

The GJU’s main tasks, as established by its statutes, were:

16  Council Regulation (EC) 

No 2236/95 of 18 September 

(a) 

management of a tendering procedure resulting in the conclusion 
of a concession agreement;

1995 laying down general rules 

for the granting of Community 

(b) 

supervision of the ESA’s technological development activities;

trans-European networks 

financial aid in the field of 

(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.

(c) 

initiation and management of research activities;

(d) 

integration of EGNOS into Galileo.

19. 

20. 

21. 

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

During the development and validation phase, EU funds (from TEN-T 16 
and FP6) were channeled through the GJU while the ESA co-financed 
Galileo through its GalileoSat and ARTES programmes (Figure 1). From 
1 9 9 9   t o   2 0 0 7 ,   t h e   f u n d s   a l l o c a t e d   t o   G a l i l e o   c a m e   t o   1 , 9 4   b i l l i o n 
euro.

PROGRESS

In October 2004, the Commission sent a communication on the pro-
g r a m m e ’ s   p r o g r e s s   t o   t h e   P a r l i a m e n t   a n d   t h e   C o u n c i l 1 7.   T h i s   c o m -
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.

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F I G U R E   1

G A L I L E O   D E V E LO P M E N T   A N D  VA L I DAT I O N   P H A S E   —   F I N A N C I N G   F LO W   ( 1999 – 2007 ) *

ESA Member States
902 million

European Commission
946 million

Other
92 million

GalileoSat
ARTES

8
5
2
m
o

i

GalileoSat

5
0
m
o

i

TEN-T

1
9
6
m
o

i

7
5
0
m
o

i

TEN-T
FP6

9
2
m
o

i

NRSCC
Matimop
Belgium

Galileo Joint Undertaking
892 million

6
6
8
m
o

i

1
1
0
m
o

i

FP6

1
1
4
m
o

i

European Space Agency
1 716 million

1
7
1
6
m
o

i

Infrastructure development
1 716 million

RTD
110 million

GJU operations and
activies 
114 million

*  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.

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17

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.

22. 

23. 

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 
p r e f e r r e d   b i d d e r   b e t w e e n   t w o   c a n d i d a t e   c o n s o r t i a 1 8.   I n s t e a d ,   t h e 
tenderers  proposed  to  join  into  a  merged  consortium,  to  which  the 
GJU agreed in June 2005, and made a joint bid.

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 
f o c u s e d   o n   t h e   c o m p o s i t i o n   o f   t h e   m e r g e d   c o n s o r t i u m   w h i c h   w a s 
to  bid  for  the  concession  contract  and  the  location  of  the  system’s 
a c t i v i t y   c e n t r e s ,   g r o u n d   i n f r a s t r u c t u r e   a n d   h e a d q u a r t e r s .   T h r o u g h 
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, 
w a s   s u c c e s s f u l l y   l a u n c h e d ,   t h u s   s e c u r i n g   a c c e s s   t o   t h e   G a l i l e o   f r e -
quencies allocated by the International Telecommunications Union.

25. 

I n   J u n e   2 0 0 6 2 0,   t h e   C o m m i s s i o n   r e l e a s e d   a n   u p d a t e d   t i m e t a b l e   f o r 
 Galileo 21. The development and validation phase would now run until 
e a r l y   2 0 0 9 ,   a n d   d e p l o y m e n t   w o u l d   t a k e   p l a c e   i n   2 0 0 9   a n d   2 0 1 0   ( a 
three-year shift with regard to the initial timetable). This communi-
c a t i o n   a l s o   e x p a n d e d   t h e   b u d g e t   f o r   t h e   d e v e l o p m e n t   a n d   v a l i d a -
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 
f e a t u r e s   o f   t h e   p r o g r a m m e .   [ … ]   B y   t h e   e n d   o f   2 0 0 6 ,   t h e   e s t i m a t e d 
costs  and  income  and  the  public  sector  contribution  will  have  been 
f i n a l i s e d .   I n   a d d i t i o n ,   t h e   f i n a n c i a l   p l a n   w i l l   b e   c o n f i r m e d   a n d   t h e 
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.

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27. 

28. 

DEVELOPMENT AND VALIDATION POST-GJU 
(SINCE 2006)

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  2006 23  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.

The concession negotiations with the merged consortium stalled in early 
2007.  In  a  communication  of  May  2007 25,  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 Union 26 decided to redirect 
t h e   p r o g r a m m e :   t h e   s y s t e m   w o u l d   n o w   b e   d e p l o y e d   b y   2 0 1 3   w i t h 
full funding from the Community budget (see Table 2), and with the 
ESA  in  the  role  of  delegated  procurement  agent.  On  this  basis,  the 
E u r o p e a n   P a r l i a m e n t   a n d   t h e   C o u n c i l   a d o p t e d   a   r e g u l a t i o n   o n   t h e 
f u r t h e r   i m p l e m e n t a t i o n   o f   t h e   G N S S   p r o g r a m m e s 2 7.   O n   1   J u l y   2 0 0 8 
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).

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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 
g o v e r n a n c e ,   p r i v a t e   s e c t o r   g o v e r n a n c e   a n d   t h e   f a c t   t h a t   M e m b e r 
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.

TA B L E   2

G A L I L E O   CO S T   E S T I M AT E S

Original cost estimate 
in million euro 
(COM(2000) 750)

Updated cost estimate 
in million euro 
(COM(2007) 261 and ESA 
documents)

80

1 100

2 150

80

2 100

3 400

3 330
(of which 1 800 million to be 
borne by the public sector)*

5 580
(all to be borne 
by the public sector)**

Defi nition phase

Development and 
validation phase

Deployment

Total

*  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.

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AUDIT SCOPE AND APPROACH

20

30. 

The Court carried out an audit of the management of the Galileo devel-
opment and validation phase by examining:

(a) 

w h i c h   f a c t o r s   a c c o u n t e d   f o r   t h e   f a i l u r e   o f   t h e   c o n c e s s i o n 
process;

(b) 

which factors accounted for the reported delays and cost overruns 
of technological development;

(c) 

to what extent spending on research and development activities 
has benefited the Galileo programme;

(d) 

how well the GJU had integrated EGNOS into Galileo;

(e) 

whether the Galileo programme was adequately governed.

31. 

32. 

33. 

The audit addressed the period during which the GJU managed the devel-
opment  and  validation  phase  (September  2003  to  December  2006), 
f o c u s i n g   i n   p a r t i c u l a r   o n   i t s   m a n d a t e ,   t h e   p r o c e s s   o f   s e t t i n g   i t   u p 
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.

The Court gathered audit evidence through file reviews and interviews 
a t   t h e   G J U ,   t h e   C o m m i s s i o n   a n d   t h e   E S A ,   a n d   t h r o u g h   i n t e r v i e w s 
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.

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.

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OBSERVATIONS

21

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, 
e x p e r i e n c e   o f   e x i s t i n g   p r o g r a m m e s ,   p r o j e c t s   o r   o r g a n i s a t i o n s   h a s 
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).

28  Intosai Guidelines on Best 

Practice for the Audit of Public/

Private Finance and Concessions 

(revised) — November 2007.

CONCESSION NEGOTIATIONS FAILED

OBJECTIVE

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 
i n i t i a l l y   f o r e s e e n   t h a t   a   c o n c e s s i o n   h o l d e r   ( t h e   p r i v a t e   c o m p a n i e s 
c o n c e r n e d )   w o u l d   b e   d e s i g n a t e d   b e f o r e   t h e   e n d   o f   2 0 0 4 ,   t h a t   t h e 
GJU would conclude the negotiations in 2005 and that the GSA would 
award a concession contract by the end of 2005.

RESULTS

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.

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.

34. 

35. 

36. 

37. 

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38. 

39. 

40. 

22

The deadline for awarding the concession contract was postponed twice, 
from December 2005 to December 2006, and then to December 2007. 
E a r l y   i n   2 0 0 7 ,   t h e   C o m m i s s i o n   a n d   t h e   G S A   d e c i d e d   t o   c a n c e l   t h e 
negotiations.

29  PPP/PFI practices in the UK.

REASONS FOR FAILURE

The PPP was inadequately prepared and conceived. As a result, the GJU 
was required to negotiate a PPP which was unrealistic.

PREPARATION

There is considerable experience of PPP projects in Member States and 
third countries. Experience indicates that best practice includes the 
following elements.

(a) 

Proper preparation: the public sector should clearly define project 
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 
l i k e l y   v a l u e   f o r   m o n e y ,   a n d   o u t l i n e   a   b u s i n e s s   c a s e .   T h e   c h o i c e 
of a particular type of PPP should be preceded by an appropriate 
risk assessment.

(b) 

29 suggests 
Sufficient time: the experience of other organisations
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.

(c) 

A p p r o p r i a t e   m a n a g e m e n t   r e s o u r c e s :   m a n a g i n g   a   P P P   p r o j e c t 
requires  a  dedicated  team  with  appropriate  skills,  assembled  in 
good time.

(d) 

Maintaining effective competition.

(e) 

Regular  review  of  an  ongoing  PPP  project  to  ensure  that  it  con-
tinues to offer value for money.

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23

41. 

A number of these best practices were not observed by the Commission 
during the preparatory phase of the Galileo PPP 30:

30  A detailed overview of the 

criteria used for auditing the 

(a) 

P r o p e r   p r e p a r a t i o n :   D e s p i t e   t h e   f a c t   t h a t   i t   h a d   s e v e r a l   s t u d -
i e s   c a r r i e d   o u t ,   t h e   C o m m i s s i o n   d i d   n o t   i n v e s t i g a t e   t r a d i t i o n a l 
p u b l i c   p r o c u r e m e n t   a n d   a   p u b l i c   s e c t o r   c o m p a r a t o r   w a s   n e v e r 
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 
s u c c e e d ;   o r   t h e   r e l a t i v e   b e n e f i t s   o f   d i f f e r e n t   P P P   m o d e l s 3 2.   T h e 
C o m m i s s i o n   p r o p o s e d ,   a n d   t h e   C o u n c i l   a d o p t e d ,   a   P P P   f o r   t h e 
deployment and operational phases of Galileo in order to obtain 
a   p o l i t i c a l   c o n s e n s u s .   H a v i n g   e x a m i n e d   t h e   c a s e   f o r   p u b l i c   a n d 
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 
r e a s o n i n g   s p e c i f i c   t o   G a l i l e o ,   a n d   a n   a m b i t i o u s   t i m e t a b l e   w a s 
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 
t h e s e   m i g h t   a f f e c t   t h e   f e a s i b i l i t y   o f   t h e   d e a l   o r   h o w   t h e   p u b l i c 
sector might tackle them effectively.

(b) 

Sufficient time: Given the ambitious timetable, according to which 
it  was  to  report  to  the  Transport  Council  in  December  2004,  the 
C o m m i s s i o n   d i d   n o t   a l l o w   t h e   G J U   s u f f i c i e n t   t i m e 3 4  t o   d e f i n e   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 
c o n c e s s i o n   m o d e l .   T h i s   r e s u l t e d   i n   i n d u s t r y   b i d s   c o n t a i n i n g   n o 
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.

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.

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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).

(c) 

Appropriate management resources: the GJU was a new organisa-
t i o n ,   w i t h   a   n o v e l   l e g a l   s e t - u p ,   a   n e w l y - a s s e m b l e d   t e a m ,   a   n e w 
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).

(d) 

Maintaining competition: from autumn 2004 onwards, there were 
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 
f o r   m o n e y .   I n   t h e   a b s e n c e   o f   a   p u b l i c   s e c t o r   c o m p a r a t o r ,   a n y 
competitive element in the procedure was lost.

(e) 

Regular review: the public sector should regularly review an ongo-
ing PPP project to ensure that it continues to offer value for money. 
Although  the  GJU’s  reports  evaluating  the  concession  identified 
s e v e r a l   r i s k s   a n d   p r o b l e m s 3 6,   i t s   r e p o r t i n g   o n   t h e   p r o g r a m m e ’ s 
p r o g r e s s   w a s   u n d u l y   p o s i t i v e .   I n   i t s   r e g u l a r   o f f i c i a l   s t a t e m e n t s 
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, 
w h i c h   r e l i e d   o n   t h e   G J U   d i d   n o t   h a v e   s u f f i c i e n t   i n f o r m a t i o n   o n 
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 
o f   a t   m o s t   1 / 3   p u b l i c   a n d   a t   l e a s t   2 / 3   p r i v a t e   c o n t r i b u t i o n s   w h i c h 
the GJU was required to negotiate, differed substantially, in several 
respects, from any other PPP then in existence 37:

(a) 

Galileo has a high level of technological risk. It comprises a con-
s t e l l a t i o n   o f   3 0   m e d i u m   e a r t h   o r b i t   s a t e l l i t e s   w i t h   n e w   c o m p o -
n e n t s   ( s u c h   a s   a   n e w   t y p e   o f   a t o m i c   c l o c k s )   s o   f a r   u n t e s t e d   i n 
space.

(b) 

Revenue generation is difficult to predict as GPS open signals are 
freely available. An exploitation model still has to be defined.

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(c) 

The  Galileo  concession  was  to  start  after  rather  than  before  sys-
tem design and partial infrastructure development by the public 
s e c t o r .   W h i l e   c l o s e   t o   t h e   D B F O   ( d e s i g n   —   b u i l d   —   f i n a n c e   — 
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).

B O X   2

T H E   M A J O R   R I S K S   O F  T H E   CO N C E S S I O N

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.

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43. 

44. 

TECHNOLOGICAL DEVELOPMENT ACTIVITIES DELAYED 
AND OVER BUDGET

OBJECTIVE

The  second  of  the  GJU’s  four  main  tasks  was  to  supervise  the  ESA’s 
technological  development  activities  so  as  to  ensure  that  sufficient 
s a t e l l i t e s   a n d   g r o u n d   s e g m e n t   i n s t a l l a t i o n s   w e r e   c o n s t r u c t e d   a n d 
made operational to demonstrate the capability and reliability of the 
system, all within the planned time and budget (see paragraph 13).

38  Regulation (EC) No 683/2008.

39  The estimates were earlier 

updated in February 2005 and 

May 2007.

RESULTS

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-
t a l   s a t e l l i t e   ( G I O V E - B )   w a s   l a u n c h e d   i n   A p r i l   2 0 0 8 ,   3 0   m o n t h s   l a t e r 
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 2008 39, development 
and validation will cost 1 billion euro more than the initial budget of 
1,1 billion euro (see Table 3).

TA B L E   3

CO M PA R I S O N   O F  T H E  2001  A N D  2008  B U D G E T   E S T I M AT E S   F O R  T H E   D E V E LO P M E N T 
A N D  VA L I DAT I O N   P H A S E   ( I N   M I L L I O N   E U R O   —  2001  P R I C E S )

Activity

Initial budget estimate

July 2008 budget estimate

Galileo System Test Bed (GSTB-V2)

Launchers

In-Orbit-Validation (IOV)

ESA cost

Other

Total

Source: ESA.

85

90

747

110

68

1 100

173

224

1 253

303

151

2 104

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45. 

46. 

47. 

REASONS FOR DELAYS AND COST OVERRUNS

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.

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.

The Galileo budget for development and validation, as presented to the 
Council 40, was incomplete. It did not contain any explicit contingency 
b u d g e t   o r   r e s e r v e 4 1.   I t   w a s   l o w e r ,   a t   1 , 1   b i l l i o n   e u r o ,   t h a n   t h e   c o s t 
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  in 42.  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 delay 43.

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.

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49. 

The industrial organisation of the development and validation phase, 
characterised by a specific set up based on an ad hoc prime contrac-
t o r ,   l e d   t o   d e l a y s   a n d   c o s t   o v e r r u n s .   A   c o m p e t i t i v e   e n v i r o n m e n t   i s 
e x p e c t e d   t o   b e   b e n e f i c i a l   f o r   a c h i e v i n g   r e s u l t s   o n   t i m e   a n d   w i t h i n 
budget. In 2000, a joint venture of leading European space companies 
was  created 44  to  act  as  industrial  prime  to  develop  and  deliver  the 
G a l i l e o   i n f r a s t r u c t u r e .   I n   a n   o l i g o p o l i s t i c   e n v i r o n m e n t   s u c h   a s   t h e 
E u r o p e a n   s p a c e   i n d u s t r y ,   t h e   c r e a t i o n   o f   t h e   j o i n t   v e n t u r e   f u r t h e r 
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 
l i n e s   a n d   t h e   f a c t   t h a t   t h e   s e l e c t i o n   o f   s u b c o n t r a c t o r s   w a s   d r i v e n 
by  ‘self-imposed  industrial  distribution  constraints  rather  than  cost 
a n d   s c h e d u l e   e f f i c i e n c y ’ .   A s   a   c o n s e q u e n c e   o f   s e r i o u s   p r o b l e m s   i n 
t h e   i m p l e m e n t a t i o n   o f   t h e   m a i n   c o n t r a c t   o f   t h e   d e v e l o p m e n t   a n d 
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 
i n c u r r e d   d u r i n g   t h e   d e v e l o p m e n t   a n d   v a l i d a t i o n   p h a s e .   A c c o r d i n g 
t o   E S A   e s t i m a t e s ,   t h i s   w i l l   i n c l u d e   3 5 0   m i l l i o n   e u r o   f o r   t h e   r e v i s e d 
industrial framework and 194 million euro for ESA costs 46.

50. 

The stalling of the concession negotiations in the second half of 2005 
( s e e   p a r a g r a p h   2 3 )   a l s o   a f f e c t e d   t e c h n o l o g i c a l   d e v e l o p m e n t :   t h e 
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 task 48 was to initiate and manage the necessary research 
a c t i v i t i e s   t o   s u p p o r t   a c h i e v e m e n t   o f   t h e   k e y   t a s k s   a n d   o b j e c t i v e s 
of  the  Galileo  development  and  validation  phase  (i.e.  technological 
d e v e l o p m e n t   a n d   e a r l y   d e v e l o p m e n t   o f   u s e r   s e g m e n t s   —   s e e   a l s o 
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.

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52. 

53. 

RESULTS

Between September 2003 and December 2006 the GJU selected, negoti-
a t e d   a n d   m o n i t o r e d   a   t o t a l   o f   7 0   r e s e a r c h   p r o j e c t s   w o r t h   1 1 0   m i l -
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.

The audit showed 49 that the GJU was generally perceived as an efficient 
s t r u c t u r e   f o r   i m p l e m e n t i n g   t h e   G a l i l e o   a r e a   o f   t h e   F P 6   w o r k   p r o -
gramme 50. 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.

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).

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 GSA 51. 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.

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56. 

57. 

58. 

30

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.

53  Also called the EGNOS 

framework agreement.

54  This objective arose because 

of the financing problems facing 

EGNOS in January 2006.

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

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.

(a) 

Integration  into  the  Galileo  governance  and  management  struc-
tures was considered necessary in order to handle issues such as 
t h e   c o n c l u s i o n   o f   a n   a g r e e m e n t   a m o n g   t h e   o w n e r s   o f   E G N O S 5 3, 
the  integration  of  EGNOS  and  Galileo  financing 54  and  the  timing 
for appointing an EGNOS economic operator.

(b) 

At market level, the purpose of integration was to prepare the way 
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.

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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.

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.

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:

(a) 

Since October 2004 a framework agreement on the ownership and 
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 operational 55.

(b) 

The GJU’s market penetration plan was never implemented and a 
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:

(a) 

the GJU’s role and mandate vis-à-vis EGNOS was not clear;

(b) 

the decision to integrate EGNOS into Galileo was detrimental for 
EGNOS;

(c) 

the EGNOS institutional framework is very complex;

(d) 

the GJU devoted too little effort to market development activities.

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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 
o f   E G N O S   i n   G a l i l e o ’ .   A c c o r d i n g   t o   t h e   T r i p a r t i t e   A g r e e m e n t 5 7,   E S A 
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:

(a) 

delays  in  the  concession  negotiations  put  back  the  EGNOS  tech-
nological development deadlines; and

(b) 

all  activity  in  connection  with  the  appointment  of  an  economic 
operator  for  EGNOS  was  stopped  because  this  was  the  responsi-
bility of the Galileo concession holder.

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 

In addition, the need to conclude a framework agreement for EGNOS 
made the concession negotiations more complex.

(management) service providers 

and other agencies.

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 consent 59. The Com-
m i s s i o n   h a s   n o   o w n e r s h i p   r i g h t s   t o   E G N O S ,   b u t   t h r o u g h   t h e   G S A , 
a c c o r d i n g   t o   R e g u l a t i o n   ( E C )   N o   1 3 2 1 / 2 0 0 4 ,   i t   s h o u l d   b e c o m e   t h e 
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.

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65. 

66. 

67. 

68. 

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

The following sections focus on the division of roles and on how the 
C o m m i s s i o n   f u l f i l l e d   i t s   r o l e   a s   t h e   k e y   p r o m o t e r   o f   t h e   G a l i l e o 
programme.

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.’

UNCLEAR DIVISION OF ROLES

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 GJU’s ability to manage the programme effectively was constrained 
by:

(a) 

Figure 2) 

Its governance structure (
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.

(b) 

Its temporary nature 
C l o s i n g   d o w n   t h e   G J U   b e f o r e   t h e   e n d   o f   t h e   d e v e l o p m e n t   a n d 
validation phase undermined its authority 60.

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69. 

70. 

71. 

The ESA/GJU agreement on implementing technological development 
activities in the development and validation phase (negotiated by the 
Commission  before  the  GJU  became  operational 61)  was  not  specific 
enough (a better model would be the ESA–Eumetsat agreements 62, 63). 
T h i s   r e s u l t e d   i n   a   l a c k   o f   c l a r i t y   r e g a r d i n g   t h e   r u l e s   g o v e r n i n g   t h e 
placing of contracts 64, transfer of ownership, reporting and implemen-
tation 65. 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 
t h e   p o l i t i c a l   d i m e n s i o n   a n d   t h e   G J U   a d d r e s s i n g   u s e r   r e q u i r e m e n t s 
and certification.

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.

The unclear division of roles resulted in unclear lines of accountability. 
M a n y   d e c i s i o n s   r e l a t i n g   t o   G a l i l e o   w e r e   a f f e c t e d   b y   t h e   f a c t   t h a t 
n o   o n e   a c t o r   ( C o m m i s s i o n ,   G J U ,   E S A ,   M e m b e r   S t a t e s )   a s s u m e d   f u l l 
responsibility:  the  decision  in  favour  of  separate  development  and 
deployment  phases,  the  choice  of  a  PPP,  acceptance  of  the  bidders’ 
m e r g e r   p r o p o s a l ,   t h e   E S A / G J U   a g r e e m e n t ,   i n c o m p l e t e   b u d g e t i n g , 
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 applies 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 that 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).

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F I G U R E   2

G O V E R N A N C E   S T R U C T U R E   O F  T H E   G J U

GJU Supervisory Board
(EU Member States)

ESA PB-Nav
(ESA Member States)

Galileo Security Board

GJU Administrative Board

GJU Executive Director

GJU Executive Committee

Galileo Joint Undertaking

ESA-GJU agreement

RTD grants

Study contracts

ESA

Industry

Consultants

Other contractors

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.

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73. 

74. 

36

THE PROGRAMME LACKED A STRONG STRATEGIC SPONSOR 
AND SUPERVISOR

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.

67  Such as the complementarity of 

the two programmes, models for 

the future exploitation of EGNOS 

and Galileo or the implementation 

of system priorities.

Throughout the programme, the Commission, as the programme’s key 
promoter, did not observe a number of management principles, such 
as:

(a) 

Setting clear, realistic and acceptable objectives: the programme 
has multiple objectives, which resulted in a diverse range of stake-
h o l d e r   e x p e c t a t i o n s .   I n   a d d i t i o n   t o   i t s   p o l i t i c a l ,   e c o n o m i c   a n d 
t e c h n o l o g i c a l   m o t i v e s   ( p a r a g r a p h   7 ) ,   M e m b e r   S t a t e s   h a v e   s e e n 
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.

(b) 

Defining appropriate strategies and instruments to pursue them: 
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:

(i) 

the absence of a roadmap for EGNOS and Galileo. Issues relat-
i n g   t o ,   f o r   i n s t a n c e ,   t h e   f u t u r e   e x p l o i t a t i o n   m o d e l   f o r   G a l i -
leo and EGNOS, the implementation of system priorities (e.g. 
which service to implement first) or the development of non-
c i v i l   a v i a t i o n   m a r k e t s   f o r   E G N O S   s t i l l   h a d   t o   b e   r e s o l v e d   a t 
the end of 2008;

(ii) 

the problems encountered in negotiating a framework agree-
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 
n a v i g a t i o n   p r o g r a m m e s .   H o w e v e r ,   t h i s   w a s   d o n e   w i t h o u t 
the  prior  agreement  of  the  other  EGNOS  stakeholders  (para-
graphs  5  and  64)  and  with  little  thought  for  the  complexity 
o f   t h e   i n s t i t u t i o n a l   f r a m e w o r k .   T h e   G J U   ( a n d   l a t e r   t h e   G S A ) 
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 
t o   t a k e   k e y   d e c i s i o n s   c o n c e r n i n g   E G N O S   a n d   t o   d i r e c t   t h e 
programme;

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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).

37

(iii) 

t h e   C o m m i s s i o n ’ s   p r e o c c u p a t i o n   w i t h   n a v i g a t i n g   t h e   p r o -
gramme from one Council meeting to the next (see for example 
paragraphs 21 and 22 on the Commission’s communication of 
6 October 2004).

(c) 

Setting up a future (permanent) organisation: between July 1999 
and  December  2006  the  Commission  charged  six  different  tem-
p o r a r y   s t r u c t u r e s   w i t h   p r o v i d i n g   t e c h n i c a l   s u p p o r t   f o r   G a l i l e o 
p r o g r a m m e   m a n a g e m e n t   o r   w i t h   t h e   a c t u a l   m a n a g e m e n t   t a s k . 
The GJU was the fifth such initiative. As a flexible and dedicated 
organisation with an entrepreneurial mindset, it could have been 
a n   e f f e c t i v e   p r o g r a m m e   m a n a g e r .   H o w e v e r ,   i t s   p o s i t i o n   w a s 
undermined  by  its  temporary  nature 68,  its  governance  structure 
(Figure 2) and its lack of expertise.

(d) 

Securing the appropriate skills to perform all programme compo-
nents managed and supervised by the public sector: when setting 
up  the  GJU,  the  Commission  did  not  pay  sufficient  attention  to 
t h e   f a c t   t h a t   i t   w a s   a   n e w   o r g a n i s a t i o n   a n d   t h a t   i t   h a d   i n s u f -
f i c i e n t   e x p e r i e n c e   a n d   e x p e r t i s e   t o   p e r f o r m   i t s   t a s k s   ( s e e   a l s o 
paragraph 41(c)).

(e) 

Providing  for  risk  management:  at  the  programme’s  outset,  the 
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.

(f) 

Taking timely decisions on all programme features: the Commis-
s i o n   d i d   n o t   s u f f i c i e n t l y   c r i t i c a l l y   r e v i e w   o r   m o n i t o r   t h e   G J U ’ s 
progress reports. Commission communications consistently ech-
oed the positive tone of official GJU statements. As a consequence, 
t h e   C o m m i s s i o n   d i d   n o t   r e q u e s t   o r   t a k e   s i g n i f i c a n t   c o r r e c t i v e 
a c t i o n   u n t i l   M a r c h   2 0 0 7 ,   e v e n   t h o u g h   t h e   c o n c e s s i o n   d e a d l i n e 
was postponed annually for a further twelve months.

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CONCLUSIONS AND 
RECOMMENDATIONS

38

75. 

The management of the development and validation phase was inad-
e q u a t e .   T h e   G a l i l e o   p r o g r a m m e   e x p e r i e n c e d   p r o b l e m s   a t   d i f f e r e n t 
levels:

(a) 

The GJU was not a strong programme manager nor was any other 
body assigned this role. It did not meet most of its objectives — 
o w i n g ,   h o w e v e r ,   t o   f a c t o r s   t h a t   w e r e   l a r g e l y   o u t s i d e   t h e   G J U ’ s 
control.

(b) 

The programme lacked a strong strategic sponsor and supervisor: 
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.

(c) 

Owing  to  their  different  expectations  for  the  programme,  Mem-
ber  States  intervened  in  the  interest  of  their  national  industries 
causing  decisions  to  be  held  up.  The  resulting  compromises  led 
t o   i m p l e m e n t a t i o n   p r o b l e m s ,   d e l a y s   a n d ,   i n   t h e   e n d ,   t o   c o s t 
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).

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78. 

79. 

80. 

TO WHAT EXTENT HAS SPENDING ON RESEARCH 
AND DEVELOPMENT ACTIVITIES BENEFITED 
THE GALILEO PROGRAMME?

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?

The  integration  of  EGNOS  into  Galileo  was  only  partially  successful 
b e c a u s e   t h e   G J U ’ s   m a n d a t e   w a s   n o t   c l e a r ,   t h e   d e c i s i o n   t o   i n c l u d e 
E G N O S   i n   t h e   c o n c e s s i o n   n e g o t i a t i o n s   h e l d   u p   t h e   a c h i e v e m e n t   o f 
the  EGNOS  programme,  the  EGNOS  institutional  framework  was  not 
c l e a r   a n d   t h e   G J U   d e v o t e d   l i t t l e   e f f o r t   t o   m a r k e t   d e v e l o p m e n t   f o r 
EGNOS (paragraphs 58 to 65).

WAS THE GALILEO PROGRAMME ADEQUATELY 
GOVERNED?

The  programme’s  governance  was  inadequate.  The  division  of  roles 
b e t w e e n   t h e   e n t i t i e s   i n v o l v e d   i n   t h e   d e v e l o p m e n t   a n d   v a l i d a t i o n 
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 
t o   t h e   c o n t i n u i n g   G a l i l e o   p r o g r a m m e   a n d   t o   f u r t h e r   p o s s i b l e   j o i n t 
undertakings and industrial programmes.

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82. 

The Commission has proposed itself as programme manager, a challenging 
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.

R E C O M M E N D AT I O N   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:

(a) 

the  quantity  and  expertise  of  its  human  resources  should  be 
commensurate with its task as programme manager;

(b) 

a n   a p p r o p r i a t e   E U – E S A   c o o p e r a t i o n   f r a m e w o r k   s h o u l d   b e 
established;

(c) 

the Commission should ensure it has the financial instruments 
t o   f u n d   i n f r a s t r u c t u r e   ( o t h e r   t h a n   v i a   g r a n t s )   a n d   t o   c o m m i t 
itself to bearing the yearly operating and replenishment costs 
of this infrastructure over a long time horizon;

(d) 

programme  governance  should  be  such  as  to  enable  the  pro-
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 
c a n n o t   b e   t a k e n   b y   t h e   C o m m i s s i o n   a l o n e   b u t   c l e a r   l e a d e r s h i p   i s 
paramount.

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R E C O M M E N D AT I O N   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:

(a) 

How should Galileo be positioned as a commercial system? Is it 
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?

(b) 

How  will  EGNOS  and  Galileo  relate  to  each  other  once  Galileo 
i s   f u l l y   o p e r a t i o n a l ?   W i l l   t h e y   e x i s t   s i d e   b y   s i d e   t h u s   e n s u r -
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 
i n t e r n a t i o n a l   s a t e l l i t e   p r o j e c t s ,   s u c h   a s   I n m a r s a t ,   I n t e l s a t ,   E u t e l s a t 
or Eumetsat.

R E C O M M E N D AT I O N   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.

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42

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 
c o s t s )   o r   a c c e p t   t o   f u n d   G a l i l e o ’ s   t o t a l   p o t e n t i a l   c o s t s   ( p o t e n t i a l l y 
1 0   b i l l i o n   e u r o   o v e r   t h e   c o m i n g   2 0   y e a r s ) .   I n   t h e   f o r m e r   c a s e ,   a n 
appropriate framework for users should be created.

R E C O M M E N D AT I O N   4

T h e   C o m m i s s i o n   s h o u l d   e n s u r e   t h a t   t h e   f o l l o w i n g   i s s u e s   a r e 
addressed:

(a) 

a n a l y s i s ,   c o n s o l i d a t i o n   a n d   v a l i d a t i o n   o f   r e l e v a n t   a n d   s t a b l e 
user requirements;

(b) 

development  of  enabling  actions  (such  as  the  necessary  legal 
and regulatory framework);

(c) 

p r o m o t i o n   o f   E G N O S   a s   a   s h o w c a s e   f o r   G a l i l e o ,   b y   c e r t i f y i n g 
EGNOS’ SoL service and making the EGNOS and Galileo exploi-
tation models compatible;

(d) 

development  of  a  clear  and  compatible  pricing  policy  or  rev-
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 
s u g g e s t s   t h a t   t h e   a p p r o a c h   t o   t h e s e   n e w   v e n t u r e s   s h o u l d   b e   w e l l 
planned and realistic.

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R E C O M M E N D AT I O N   5

For any future joint undertakings and industrial programmes in which 
the EU resolves to engage, the Commission should:

(a) 

ensure that there are clear and compelling reasons for creating 
a joint undertaking;

(b) 

ensure that all realistic options on private-sector cooperation 
have been properly considered;

(c) 

e n d e a v o u r   t o   e s t a b l i s h   a   g o v e r n a n c e   s t r u c t u r e   t h a t   d o e s 
n o t   i m p e d e   p r o p e r   p r o g r a m m e   m a n a g e m e n t   b y   t h e   j o i n t 
undertaking.

This report was adopted by the Court of Auditors in Luxembourg at its 
meeting of 14 May 2009.

ud to s
For the Court of Auditors

o t e Cou t o

Vítor Manuel da Silva Caldeira
President

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A N N E X   I

T H E   E U R O P E A N   S PAC E   AG E N C Y

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.

Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase

45

A N N E X   I I

E G N O S   FAC T S ,  F I G U R E S   A N D   I L LU S T R AT I V E   E X A M P L E S

CO M PA R I S O N   B E T W E E N   E G N O S   A N D   G A L I L E O

EGNOS

Galileo

Link with other GNSSs

Augments the GPS and Glonass signals

Fully independent from other GNSSs

Services

Coverage

Space segment

Ground segment

3: OS, SoL, SAR

5: OS, CS, PRS, SoL, SAR

Regional (Europe)

Global

3 transponders on geostationary (GEO) 
satellites orbiting at 36 000 km

30 medium earth orbit (MEO) satellites 
orbiting at 23 000 km

4 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 by

ESA, European Commission, Eurocontrol, 
EOIG, GJU stakeholders

ESA, European Commission, China, Israel

E G N O S   F U N D I N G   S O U R C E S

EGNOS funding sources ( Total 630 million euro, 2001 prices) 
Funds allocated between 1995 and 2007

GJU
staholders
7 %

Eurocontrol
2 %

EOIG
26 %

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 phase

46

E G N O S   L AC K E D   A   LO N G - T E R M  V I S I O N

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.

(a) 

EGNOS  grants  from  the  European  Commission  were  paid  in  annual 
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.

(b) 

Mid-term, changing requirements, evolving standards and new ideas on 
the certification of the system caused delays and extra costs.

(c) 

As of September 2008, there was still no roadmap for EGNOS.

(d) 

Although the EGNOS OS signal became available in July 2006, as of Sep-
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.

(e) 

Despite the ESA’s and the GJU’s efforts to demonstrate the capabilities 
of EGNOS overseas (e.g. in Africa, China and South America), there is no 
real strategy to support EGNOS outside Europe.

(f) 

In the GJU’s organisational structure EGNOS was assigned to the tech-
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 phase

47

A N N E X   I I I

I N T E R N AT I O N A L   CO O P E R AT I O N   O N   G A L I L E O

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.

Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase

48

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Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
56

A N N E X   V

G LO S S A RY   O F  T E R M S   U S E D   I N  T H I S   R E P O R T

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.

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57

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.

Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase

58

REPLY OF THE 
REPLY OF THE 
COMMISSION
COMMISSION

EXECUTIVE SUMMARY

I.-V.
G a l i l e o   a n d   E G N O S   a r e   t w o   p a t h - b r e a k i n g 
programmes  aiming  at  establishing  a  Euro-
p e a n   G l o b a l   N a v i g a t i o n   S a t e l l i t e   S y s t e m . 
T h e   E u r o p e a n   S p a c e   A g e n c y   a n d   t h e   C o m -
m i s s i o n   s t a r t e d   t h e s e   t w o   p r o g r a m m e s   a s 
a   j o i n t   i n i t i a t i v e ,   a n d   o b t a i n e d   f r o m   t h e i r 
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).

M e m b e r   S t a t e s   a n d   t h e   E u r o p e a n   S p a c e 
Agency played a key role since its inception. 
After having experienced difficulties in find-
ing private source financing, the integrated 
G a l i l e o / E g n o s   p r o g r a m m e   b e c a m e   i n   2 0 0 8 
an EU programme fully financed from the EU 
b u d g e t .   F r o m   t h a t   p o i n t   i n   t i m e ,   t h e   C o m -
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 
n a t u r e   a n d   t h e   t e c h n i c a l   s o p h i s t i c a t i o n   o f 
t h e   p r e - p r o j e c t   t h e   C o m m i s s i o n   c o n s i d e r s 
t h e   C o u r t ’ s   e v a l u a t i o n   o f   t h e   m a n a g e m e n t 
o f   t h e   d e v e l o p m e n t   a n d   v a l i d a t i o n   p h a s e 
o v e r l y   n e g a t i v e .   W i t h   t h e   b e n e f i t   o f   h i n d -
sight, it appears that more could have been 
d o n e   t o   a d d r e s s   s o m e   o f   t h e   e n c o u n t e r e d 
problems at an earlier stage.

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59

REPLY OF THE 
COMMISSION

V.
(i)
T h e   G J U   w a s   s e t   u p   t o   a c t   a s   a n   i n t e r f a c e 
b e t w e e n   E S A ,   r e s p o n s i b l e   f o r   c a r r y i n g   o u t 
t h e   t e c h n o l o g i c a l   d e v e l o p m e n t   a c t i v i t i e s 
( I O V   o r   i n - o r b i t   v a l i d a t i o n   p h a s e ) ,   a n d   t h e 
European Commission in charge of the pol-
icy aspects.

IX.
The Commission proposal to integrate EGNOS 
i n t o   G a l i l e o   e f f e c t i v e l y   s a v e d   t h e   E G N O S 
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.

(ii)
The  Commission  constantly  supervised  the 
programme,  without  interfering  with  ESA’s 
r e s p o n s i b i l i t y ,   e s p e c i a l l y   a s   r e g a r d s   t e c h -
n i c a l   a n d   i n d u s t r i a l   m a t t e r s .   T h e   C o m m i s -
s i o n   s t e p p e d   i n   w h e n e v e r   n e e d e d   t o   a v e r t 
b l o c k a g e s   a n d   p r o p o s e   a d a p t a t i o n s   o f   t h e 
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-
o u s   a n d   r e a l i s t i c   p r o p o s a l s   i n   r e p l y   t o   t h e 
call for a PPP concession.

VIII.
T h r o u g h   t h e   G J U   a n d   t h e n   G S A ,   t h e   C o m -
m i s s i o n   h a s   u s e d   F P 6   f u n d s   t o   f u n d   t e c h -
n o l o g i c a l   d e v e l o p m e n t   a c t i v i t i e s ,   a n d 
application-related RTD. These RTD projects, 
and especially application-related RTD are to 
b e a r   f r u i t s   i n   t h e   m e d i u m / l o n g   r u n   ( 2 0 0 9 –
1 5 )   a n d   e x p l o i t a t i o n   o f   s u c h   w o r k   i s   t o   b e 
included in the forthcoming ‘GNSS Applica-
tion Action Plan’.

X.
T h e   s t a t e m e n t   o f   t h e   C o u r t   d o e s   n o t   f u l l y 
take into account the reality of the environ-
ment at that time. The programme involved 
a  large  number  of  public  sector  stakehold-
e r s   ( E U   a n d   E S A   m e m b e r   s t a t e s ,   E S A ,   t h i r d 
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-
t i o n   ( E C )   N o   6 8 3 / 2 0 0 8 ,   a r e   i l l u s t r a t i o n s   o f 
the leadership exercised by the Commission 
w i t h   d u e   r e g a r d   t o   t h e   r e s p e c t i v e   r o l e s   o f 
the stakeholders.

XI.
The  Commission  has  received  a  clear  man-
date  to  take  over  the  programme  manage-
m e n t   o f   t h e   d e p l o y m e n t   p h a s e ,   a n d   a s   a 
consequence  has  started  to  adapt  its  man-
a g e m e n t   c a p a c i t y ,   b o t h   i n - h o u s e   a n d   w i t h 
the support of qualified external advisors.

XII.
T h e   l e s s o n s   l e a r n e d   t h r o u g h   G a l i l e o   a r e 
shared with Member States and other stake-
holders to improve the management of large 
infrastructure programmes.

Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase

60

REPLY OF THE 
COMMISSION

17–18.
In accordance with Article 2 of the GJU stat-
utes the main tasks are to:

(1)   o v e r s e e   t h e   i n t e g r a t i o n   o f   E G N O S   i n t o 
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)   p r e p a r e ,   i n   c o o p e r a t i o n   w i t h   t h e   C o m -
m i s s i o n   a n d   E S A ,   t h e   d e p l o y m e n t   a n d 
o p e r a t i o n a l   p h a s e s   b y   m a n a g i n g   t h e 
t e n d e r i n g   p r o c e d u r e   r e s u l t i n g   i n   t h e 
conclusion of a concession agreement;
(4)   s u p e r v i s e   t h e   c a r r y i n g   o u t   o f   a l l   p r o -

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 
( I O V   o r   i n - o r b i t   v a l i d a t i o n   p h a s e )   a t   t h a t 
time was considered not incompatible with 
the start of the activities for the deployment 
phase of the programme in 2006.

INTRODUCTION

2.
T h e   E u r o p e a n   S p a c e   A g e n c y   a n d   t h e   C o m -
mission started EGNOS and Galileo as a joint 
i n i t i a t i v e ,   a n d   o b t a i n e d   f r o m   t h e i r   r e s p e c -
t i v e   M e m b e r   S t a t e s   s t r o n g   s u p p o r t   f o r   t h e 
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-
s t r a t i o n   p h a s e   o f   t h e   G a l i l e o   p r o g r a m m e , 
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 
b e t w e e n   E S A   a n d   t h e   C o m m i s s i o n   f o r   t h e 
development and validation phase.

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22.
Information  available  at  the  time  was  sup-
p o r t i n g   t h e   i d e a   t h a t   e x p e c t i n g   a   f a v o u r -
a b l e   o u t c o m e   o f   t h e   p r o c u r e m e n t   p r o c e s s 
was  not  unreasonable.  The  Communication 
indicated that the procedure so far was suc-
cessful  and  requested  the  Council’s  confir-
mation in order:

27.
At the end of 2005, the Commission prepared 
t h e   g r o u n d s   f o r   t h e   d e p l o y m e n t   p h a s e   b y 
initiating  the  steps  to  ensure  the  handover 
from  the  GJU,  created  for  the  development 
p h a s e ,   t o   t h e   G S A ,   c r e a t e d   f o r   m a n a g i n g 
p u b l i c   s e c t o r   i n t e r e s t s   i n   t h e   P P P   s c h e m e 
for the deployment and operations phase.

— 

— 

 to enable the joint undertaking to com-
plete the negotiation of the concession 
contract due to be signed in the course 
of 2005, and
 t o   e n a b l e   p r i v a t e - s e c t o r   s t a k e h o l d -
e r s   t o   c o n f i r m   t h e i r   b i d s   a n d   f i n a n c i a l 
commitments.

23.
T h e   C o m m i s s i o n ,   f u l f i l l i n g   t h e   p o l i t i c a l 
r e s p o n s i b i l i t y   a s s i g n e d   t o   i t ,   c r e a t e d   t h e 
conditions for agreement between Member 
States  by  asking  former  Commissioner  Van 
Miert to mediate. The Commission managed 
to unblock concession negotiation and that 
p a r t   o f   t h e   d e v e l o p m e n t   a n d   v a l i d a t i o n 
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 
t h e   C o m m i s s i o n   a n d   t h e   E u r o p e a n   I n v e s t -
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.

Two assumptions were driving these actions 
from Commission: (1) that concession nego-
t i a t i o n   c o u l d   b e   c o m p l e t e d   b y   e n d   2 0 0 6 , 
s o m e t h i n g   t h a t   t h e   s t a t u s   o f   n e g o t i a t i o n s 
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.
I n   a   p a r a l l e l   d e v e l o p m e n t ,   o v e r   2 0 0 6   a n d 
2 0 0 7 ,   E S A   c o n t i n u e d   t o   e x p e r i e n c e   s e r i -
o u s   d i f f i c u l t i e s   i n   i t s   m a n a g e m e n t   o f   b o t h 
EGNOS  and  Galileo.  On  EGNOS  the  difficul-
t i e s   w e r e   m o s t l y   t e c h n i c a l .   O n   G a l i l e o   t h e 
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-
r e c t   t h e   p r o g r a m m e ,   f u n d   t h e   d e p l o y m e n t 
p h a s e   f r o m   t h e   C o m m u n i t y   b u d g e t ,   a c t   a s 
p r o g r a m m e   m a n a g e r   a n d   u s e   E S A   a s   p r o -
curement  agent  for  the  deployment  phase. 
Regulation (EC) No 683/2008 on the further 
i m p l e m e n t a t i o n   o f   t h e   G N S S   p r o g r a m m e s 
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.

(a)
T h e   u n p r e c e d e n t e d   n a t u r e   o f   t h e   G a l i l e o 
Project made it extremely difficult to apply 
P P P   b e s t   p r a c t i c e s ,   s u c h   a s   d e v e l o p i n g   a 
r e l i a b l e   p u b l i c   s e c t o r   c o m p a r a t o r   f o r   l a c k 
of data.

T h e   m a t e r i a l   d i f f e r e n c e   i n   s c o p e   b e t w e e n 
t h e   I O V   a n d   F O C   ( f u l l   o p e r a t i o n a l   c a p a b i l -
i t y )   m a d e   i t   i m p o s s i b l e   t o   a p p l y   t h e   d a t a 
c o m i n g   f r o m   t h e   I O V   t o   d e v e l o p   s u c h   a 
comparator.

The  studies  commissioned  by  the  Commis-
sion and the GJU clearly indicated the risks 
at  stake  for  the  deployment,  operation  and 
c o m m e r c i a l   e x p l o i t a t i o n   o f   t h e   i n f r a s t r u c -
t u r e   p r o p o s e d   a n d   a s s e s s e d   t h e i r   e f f i c i e n t 
allocation as achievable under a PPP/conces-
sion scheme.

(b)
I n   v i e w   o f   t h e   t i m e   p r e s s u r e ,   a n d   t h e   d i f -
f i c u l t y   t o   f i n d   e n o u g h   p r e c e d e n t s   t o   b u i l d 
upon,  the  Commission  and  GJU  opted  for  a 
c o m p e t i t i v e   d i a l o g u e   p r o c e s s   f o r   t h e   p r o -
c u r e m e n t ,   i n   o r d e r   t o   e n a b l e   f o r   a   g r a d u a l 
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.

T h e   u n k n o w n   e l e m e n t s   c h a r a c t e r i s i n g   t h e 
G a l i l e o   P P P   w e r e   i n d e e d   s u p p o s e d   t o   b e 
tackled  through  this  procedure  by  interac-
tions with extremely serious and dedicated 
bidders.

T h e   p r o c e d u r e   w a s   e x t e n d e d   i n   t i m e   s o   a s 
t o   a l l o w   t h e   c a n d i d a t e s   p r e c i s e l y   t o   p u t 
forward refined and more credible business 
plan and financial models.

AUDIT SCOPE AND APPROACH

31.
I n   t h e   p e r i o d   a u d i t e d   b y   t h e   C o u r t   ( S e p -
t e m b e r   2 0 0 3   t o   D e c e m b e r   2 0 0 6 ) ,   t h e   G J U 
w a s   e s t a b l i s h e d   t o   e n s u r e   t h e   u n i t y   o f   t h e 
administration  and  the  financial  control  of 
t h e   p r o j e c t   f o r   t h e   r e s e a r c h ,   d e v e l o p m e n t 
and demonstration phase of the Galileo pro-
gramme, and to mobilise the funds assigned 
to that programme.

OBSERVATIONS

39.
T h e   P P P ’ s   c o n c e p t i o n   w a s   b a s e d   o n   s t u d -
i e s   a n d   r e p o r t s   e l a b o r a t e d   i n   t h e   c o u r s e 
o f   t h e   G a l i l e o   d e f i n i t i o n   p h a s e ,   w h i c h   h a d 
s h o w n   t h e   v i a b i l i t y   o f   d e l i v e r i n g   t h e   G a l i -
leo  deployment,  operation  and  commercial 
e x p l o i t a t i o n   u n d e r   a   P P P   s t r u c t u r e   e n t a i l -
ing private financing. The choice of the PPP 
has  been  encouraged  and  finally  endorsed 
by  the  Council.  The  preparation  of  the  PPP 
w a s   c o n s t r a i n e d   b y   t h e   l i m i t e d   t i m e   a v a i l -
able. The industry came up with serious and 
realistic  proposals  in  reply  to  the  call  for  a 
PPP concession.

41.
A s   s h o w n   b y   t h e   s t u d i e s   a v a i l a b l e   t o   t h e 
C o m m i s s i o n ,   b e s t   p r a c t i c e s   i n   t h e   P P P 
domain  were  definitely  taken  into  account. 
N e v e r t h e l e s s   t h e s e   b e s t   p r a c t i c e s   h a v e 
been developed with established industries 
a n d   s e r v i c e s   ( m o t o r w a y s ,   h o s p i t a l s ,   p o w e r 
plants…), where risks are already relatively 
w e l l   i d e n t i f i e d   a n d   c o s t   c o m p a r a t o r s   e a s y 
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.

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The  extension  of  the  dialogue  process  and 
t h e   i n t e r a c t i o n s   b e t w e e n   t h e   G J U   a n d   t h e 
c a n d i d a t e s ,   e v e n   a f t e r   t h e i r   m e r g e r ,   p r o -
duced  important  results,  which  were  incor-
porated in the heads of terms.

(c)
T h e   G J U   s t a f f   e n c o m p a s s e d   p r o f e s s i o n a l s 
h a v i n g   a c c r u e d   s p e c i f i c   e x p e r i e n c e   i n   t h e 
space  domain  and  projects,  having  specific 
management experiences in relation to pub-
lic sector infrastructure projects and project 
f i n a n c i n g .   T h e r e   w a s   n o   ‘ k n o w l e d g e   g a p ’ 
when compared to industry teams.

(e)
T h e   M e m b e r   S t a t e s   d i d   n o t   h a v e   t o   r e l y 
o n   G J U ’ s   o f f i c i a l   r e p o r t i n g   o n l y   s i n c e   t h e y 
were  represented  at  the  Supervisory  Board 
of the GJU which was debriefed extensively 
o n   t h e   p r o g r e s s   o f   t h e   n e g o t i a t i o n s   a n d 
r e g u l a r l y   u p d a t e d   o n   t h e   p r o g r e s s   o f   t h e 
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.

E x p e r i e n c e d   a d v i s o r s   w e r e   i n v o l v e d   i n   t h e 
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-
h o u s e C o o p e r s ,   L o v e l l ’ s , … )   a n d   E u r o p e a n 
Investment Bank senior staff were assisting 
the GJU in negotiations either before or after 
t h e   m e r g i n g   o f   t h e   c a n d i d a t e s   a n d   i n   t h e 
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 
o n   t h e   p r o c e s s   d e s c r i b e d   b y   t h e   C o u r t 
(essentially  loss  of  competition),  the  Com-
mission  imposed  conditions  on  the  merger 
approval.

T h o u g h   c o m p l e x ,   t h e   n e g o t i a t i o n s   w e r e 
structured  and  conducted  in  a  serious  and 
professional manner by the two parties, and 
o f f e r e d   n o t   s u f f i c i e n t   g r o u n d   f o r   t h e   G J U 
t o   q u e s t i o n   t h e   f e a s i b i l i t y   o f   t h e   c o n c e s -
sion.  GJU  reports  were  targeting  a  broader 
public than Member States, and as such had 
t o   k e e p   c e r t a i n   c o m m e r c i a l   i n f o r m a t i o n 
confidential.

42.
T h e   P P P   m o d e l   p r o p o s e d   b y   t h e   C o m m i s -
s i o n   d i f f e r e d   f r o m   o t h e r   P P P   m o d e l s   t h e n 
i n   e x i s t e n c e .   T h e   v e r y   s p e c i f i c   n a t u r e   o f 
the  activities  and  risks  at  stake  meant  that 
other existing projects could not be taken as 
a  reference  for  the  Galileo  Project  for  what 
r e g a r d s   t h e   s h a r i n g   o f   r i s k s   a n d   f i n a n c i n g 
between public and private sector.

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.

(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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Nevertheless  progress  was  achieved  in  the 
course thereof at least for what concern lia-
bility risk and market risk allocation.

M o r e o v e r   i t   i s   p r o b a b l e   t h a t   f a i l u r e   o f   t h e 
c o n c e s s i o n   n e g o t i a t i o n   c a n   a l s o   b e   a t t r i b -
uted to other factors, for instance industry’s 
realisation of more advantageous financing 
options.

T h e   d i f f i c u l t y   t o   t r a n s f e r   m a r k e t   r i s k   w a s 
identified and acknowledged, and as a con-
sequence heads of terms were clearly point-
ing  to  a  possible  agreement  where  the  risk 
t r a n s f e r   w o u l d   b e   m i n i m a l   a t   a   f i r s t   s t a g e , 
w i t h   m e c h a n i s m s   f o r   a   g r a d u a l   i n c r e a s e   i n 
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 
d e s i g n   r i s k s   w a s   p e r c e i v e d   b y   t h e   p r i v a t e 
s e c t o r   a s   a   m a j o r   c o n s t r a i n t   t o   t h e   u n d e r -
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 
c h a l l e n g e d   d u r i n g   n e g o t i a t i o n   g i v e n   t h a t 
t h e   p o t e n t i a l   c o n c e s s i o n   h o l d e r   w a s   c o m -
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-
b i l i t y   m i t i g a t i o n   s t r u c t u r e   w e r e   a g r e e d   a t 
head-of-terms level.

(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.

A v a i l a b i l i t y   p a y m e n t s   b y   t h e   p u b l i c   s e c t o r 
w e r e   c o n s i d e r e d   a   s u i t a b l e   i n s t r u m e n t   t o 
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 
t o   t h e   p r i v a t e   s e c t o r   a n d   w a s   h i g h l i g h t e d 
a s   a n   e l e m e n t   o f   c o m p l e x i t y   f o r   t h e   r e l e -
v a n t   r i s k   a l l o c a t i o n   w i t h i n   t h e   c o n c e s s i o n 
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 
d e v e l o p e d   t h e   d e s i g n   d u r i n g   t h e   d e v e l o p -
ment phase, was largely represented in the 
candidates for the concession contract.

Box 2

Market risk, design risk and to a lesser extent 
third party liability risks were the more con-
tentious areas during negotiations.

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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’.

T h e s e   a c t i v i t i e s   w e r e   c a r r i e d   o u t   b y   E S A 
i n   t h e   f r a m e w o r k   o f   t h e   G a l i l e o S a t   p r o -
g r a m m e ,   j o i n t l y   f u n d e d   b y   E S A   m e m b e r 
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 
p a r a g r a p h   4 ,   w a s   l i m i t e d   t o   e n s u r i n g   t h a t 
all phases of the programme dovetailed cor-
rectly,  and  was  not  conceived  as  a  replace-
ment of ESA technical expertise.

47.
T h e   G a l i l e o   b u d g e t   f o r   d e v e l o p m e n t   a n d 
v a l i d a t i o n   w a s   e s t a b l i s h e d   b a s e d   o n   s t u d -
i e s   c o m m i s s i o n e d   b y   t h e   C o m m i s s i o n   a n d 
w a s   a c c e p t e d   b y   E S A   i n   t h e   G a l i l e o S a t 
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.
L a t e   s t a r t   o f   t h e   G a l i l e o S a t   p r o g r a m m e 
b y   E S A   M e m b e r   S t a t e s   r e s u l t e d   i n   u p s t a r t 
d e l a y s   a n d   i n c r e a s e d   c o s t s ,   w h i c h   w e r e 
never recovered.

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49.
The procurement of the IOV phase was per-
f o r m e d   b y   E S A   f o l l o w i n g   i t s   o w n   p r o c u r e -
ment system.

ESA chose in favour of an industrial organi-
sation led by a single prime contractor, but 
s t i l l   e n s u r i n g ,   a t   l e a s t   o n   t h e   p a r t   o f   t h e 
programme  funded  by  ESA  Member  States, 
a geographical return to subcontractors.

G a l i l e o   w a s   t h e   f i r s t   a n d   o n l y   G N S S   p r o -
gramme actually opened for European space 
industry participation. As a result, the prime 
c o n t r a c t o r   c h o s e n   w a s   l i k e l y   t o   e n j o y   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 
o f   s e v e r a l   i n t e r e s t e d   m e m b e r   s t a t e s ,   t h e 
p r i m e   c o n t r a c t o r   e v e n t u a l l y   e l e c t e d   w a s   a 
j o i n t   v e n t u r e   o f   a n t a g o n i s t i c   c o m p a n i e s , 
w h i c h   n e v e r   m a n a g e d   t o   w o r k   e f f i c i e n t l y 
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 
d i r e c t   p r i m e   r e s p o n s i b i l i t i e s   a n d   c o n t r a c t 
out directly to subcontractors the different 
work packages.

53.
R e s e a r c h   a c t i v i t i e s   f u n d e d   b y   t h e   F P 6 
w e r e   f o c u s e d   o n   a l l   t h e   m a i n   u s e r   s e c t o r s , 
a d d r e s s i n g   r e s e a r c h   o n   a p p l i c a t i o n s   a n d 
o t h e r   a s p e c t s   ( s t a n d a r d i s a t i o n ,   l e g a l   a n d 
s e r v i c e   p r o v i s i o n   a s p e c t s ,   m a r k e t … )   t h a t 
w i l l   e n a b l e   t h e   f u t u r e   u s e   o f   G a l i l e o .   T h e 
research projects in the various user sectors 
have generally included development, tests 
and demonstration activities.

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A number of FP6 projects have experienced 
d e l a y s ,   b u t   a   p r o j e c t - b y - p r o j e c t   a n a l y s i s 
p o i n t s   t o   v a r i o u s   c a u s e s   n o t   n e c e s s a r i l y 
linked to the transfer.

56.
T h e   a c t i v i t i e s   f u n d e d   w i t h   F P 6   i n c l u d e   t h e 
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 
a n d   t e c h n o l o g i c a l   i n n o v a t i o n   s h o w s   t h a t 
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.
E G N O S   h a s   s u f f e r e d   f r o m   d e l a y s   t h a t   a r e 
m a i n l y   d u e   t o   t e c h n o l o g i c a l   i s s u e s   n o t   i n 
the control of the Commission, which imply 
development delays.

(a)
T h e   c o n c l u s i o n   o f   t h e   E G N O S   a g r e e m e n t 
p r o v e d   t o   b e   v e r y   d i f f i c u l t   d u e   t o   i n t r i n -
s i c   d i f f i c u l t i e s   p r o p e r   t o   t h e   r e l a t i o n s h i p 
b e t w e e n   t h e   d i f f e r e n t   p a r t i e s   i n v o l v e d   i n 
EGNOS. Finally the agreement was finalised 
by the end of 2008 and signed on 31 March 
2 0 0 9 .   M o r e o v e r ,   t h e   E S A ’ s   p r o g r a m m e   f o r 
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.

Exploitation  of  such  work  is  to  be  included 
in the forthcoming ‘GNSs application action 
plan’.

T h e   d e f i n i t i o n   o f   t h e   s e r v i c e s ,   w h i c h   w e r e 
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 
i n   w h i c h   d o m a i n   s u c h   d e v e l o p m e n t s   s h a l l 
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 
a s   l e a d e r s   o n   t h e   m a r k e t ,   s u c h   a s   I f e n   a n d 
S e p t e n t r i o   f o r   d u a l   G a l i l e o / G P S   r e c e p t o r s , 
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 
o f   t h e   C o m m i s s i o n .   T h e   u s e   o f   t h e   r e s u l t s 
o n   t h e   c o m m e r c i a l   m a r k e t   h a s   t o   r e m a i n   a 
decision to be taken by the project consortia 
themselves.

55.
T h e   f o l l o w   u p   o f   t h e   p r o j e c t s   b y   G S A   w a s 
ensured  mostly  by  personnel  having  previ-
ously worked for GJU on these projects. The 
G S A   f o s t e r e d   t h e   d i s s e m i n a t i o n   o f   p r o j e c t 
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.

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(b)
In March 2009 the system will effectively be 
c e r t i f i a b l e ,   a n d   i t   i s   p l a n n e d   t o   c e r t i f y   t h e 
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-
c e s s i o n   c o n t r a c t   w e r e   r e q u i r e d   t o   a d d r e s s 
t h e   E G N O S   i n t e g r a t i o n   i n t o   G a l i l e o   a s   a n 
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-
p l e x   d u e   t o   h i s t o r i c a l   r e a s o n s   o n   h o w   t h e 
programme was set up.

I n   t h i s   r e s p e c t   i t   i s   t o   b e   u n d e r l i n e d   t h a t 
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.
T h e   E G N O S   p r o g r a m m e   w a s   r u n   a s   a n   E S A 
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 
n o r   G J U ,   w h i c h   a l s o   r e s u l t e d   i n   p r o g r a m -
matic delays.

(d)
The GJU has commissioned the preparation 
o f   s e v e r a l   b u s i n e s s   p l a n s   f o r   E G N O S   a n d 
s t u d i e s   o n   t h e   p o s s i b l e   c o m m e r c i a l i s a t i o n 
of its services which outlined a fairly limited 
potential in terms of EGNOS revenue genera-
tion capabilities.

(b)
I t   i s   v e r y   d i f f i c u l t   t o   a p p o i n t   a n   o p e r a t o r 
for an infrastructure which is not completed 
f r o m   a   t e c h n i c a l   s t a n d p o i n t .   M o r e o v e r   i t 
would have been impossible for the Commis-
sion  to  entrust  an  operator  without  having 
rights on the assets to be operated.

D i s c u s s i o n s   h e l d   w i t h   t h e   a v i a t i o n   s e c t o r 
h a v e   s h o w n   t h e   d i f f i c u l t y   o f   e s t a b l i s h i n g 
a   r e v e n u e   g e n e r a t i o n   m e c h a n i s m   f o r   t h e 
EGNOS signal itself which is open and acces-
sible to any user for free.

T h e   a p p o i n t m e n t   o f   a n   E G N O S   e c o -
n o m i c   o p e r a t o r   i s   n o w   u n d e r   f i n a l i s a t i o n 
u n d e r   t h e   r e s p o n s i b i l i t y   o f   t h e   E u r o p e a n 
Commission.

T h e   n e e d   t o   c o n c l u d e   a   f r a m e w o r k   a g r e e -
ment had a limited impact on the concession 
negotiations.

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64.
T h e   G J U   r e c e i v e d   a   c l e a r   m a n d a t e   t o   i n t e -
g r a t e   E G N O S   i n t o   G a l i l e o   w h i c h   m a d e   i t 
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 
b y   G J U   w e r e   u l t i m a t e l y   n o t   s u c c e s s f u l   d u e 
to the complex institutional framework rec-
ognised by the Court itself, but have served 
a s   a   s o u n d   b a s i s   f o r   t h e   c u r r e n t   f i n a l i s e d 
agreement with the Commission.

65.
D u e   t o   t h e   d e l a y s   e x p e r i e n c e d   b y   t h e   p r o -
g r a m m e ,   t h e   G J U   d i d   n o t   i m p l e m e n t   t h e 
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 
p u r p o s e s   o f   t h e   d e p l o y m e n t   p h a s e   b y   t h e 
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)
T h e   w i n d i n g   u p   o f   t h e   G J U   d o e s   n o t   h a v e 
any impact on the role of GJU in that phase 
of the programme.

O n   t h e   o t h e r   h a n d   c l o s i n g   d o w n   t h e   G J U 
was necessary to avoid duplication of roles 
between GJU and GSA.

69.
T h e   E S A / G J U   a g r e e m e n t   w a s   i n t e n d e d   t o 
s e t   f o r t h   a   p a r t n e r s h i p   b e t w e e n   t h e   p a r -
t i e s   c o - f i n a n c i n g   t h e   p r o j e c t   w h e r e b y   E S A 
would have applied its own rules for placing 
contracts.

Implementation and reporting arrangements 
w e r e   n o t   d e t a i l e d   a s   i n   s t a n d a r d   c o n t r a c -
t u a l   r e l a t i o n s h i p s   d u e   t o   t h e   c o o p e r a t i v e 
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 
a n d   E G N O S   t h r o u g h   t w o   E S A   p r o g r a m m e s 
GalileoSat and ARTES 9.

71.
The  Commission  is  of  the  opinion  that  ESA 
is  clearly  accountable  for  the  results  of  the 
t e c h n o l o g i c a l   d e v e l o p m e n t   a c t i v i t i e s   i t   i s 
c o n d u c t i n g .   T h e   C o m m i s s i o n   h a s   c l e a r l y 
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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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 
t h i s   h a s   n o t   c h a n g e d   t h e   o b j e c t i v e s   s e t   a t 
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-
t a t i o n )   c o r r e s p o n d s   i n d e e d   t o   a   l o n g   t e r m 
strategic vision and planning.

The lack of success of this process does not 
a f f e c t   t h e   l o n g   t e r m   a p p r o a c h   a d o p t e d   b y 
the Council.

(i)
Under a PPP concession scheme the exploi-
t a t i o n   m o d e l   a n d   r o a d m a p   i s   s u p p o s e d   t o 
be delivered by the private sector.

One of the reasons for choosing this model 
lays exactly in the fact that the private sec-
t o r   h a s   b e e n   j u d g e d   t o   b e   i n   t h e   p o s i t i o n 
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-
m e n t   o f   t h e   r o a d m a p   w i l l   b e   a   m a t t e r   f o r 
negotiations in the context of the selection 
of the future EGNOS operator.

73.
T h e   C o m m i s s i o n   e x e r c i s e d   a   k e y   p r o m o t e r 
role for the GNSS programmes.

In 2005–07 the concession negotiations were 
in  process  and  delivered  in  December  2006 
the expected heads of terms.

C o r r e c t i v e   a c t i o n s   w e r e   t a k e n   a t   t h e   t i m e 
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-
m i s s i o n   h a v e   t h e   e l e m e n t s   t o   a s s e s s   t h a t 
the concession process prolongation would 
not have delivered good value for the pub-
l i c   s e c t o r   a n d   t h e r e f o r e   t o   t e r m i n a t e   t h e 
negotiations.

T h e   C o m m i s s i o n   a l s o   r e f e r s   t o   i t s   r e p l y   t o 
point 23.

74.
The difficulties experienced in the develop-
ment phase were due to reasons which were 
l a r g e l y   o u t s i d e   t h e   C o m m i s s i o n ’ s   c o n t r o l 
and  mostly  not  influenced  by  the  manage-
ment principles guiding its actions.

(a)
The Commission managed to get clear object-
i v e s   f o r   t h e   E u r o p e a n   G N S S   p r o g r a m m e s , 
endorsed by Council and Parliament.

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(ii)
The problems encountered in negotiating a 
framework agreement for EGNOS depended 
largely on the dynamics between the EGNOS 
stakeholders.

(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.

The negotiation of the agreement has been 
t a k e n   o v e r   b y   t h e   G S A   a n d   c o n c l u d e d   b y 
t h e   C o m m i s s i o n   w i t h o u t   a n y   d i s c o n t i n u i t y 
or gap of negotiating power.

T h e   E C – E O I G   a g r e e m e n t   w a s   f i n a l -
i z e d   b y   D e c e m b e r   2 0 0 8   a n d   s i g n e d   o n 
31 March 2009.

(iii)
T a k i n g   i n t o   a c c o u n t   t h e   p o l i t i c a l   a n d   s t r a -
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: 
t h e   G J U   ( u n d e r   A r t i c l e   1 7 1 )   t o   s e r v e   a s   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 
p e r f o r m e d   u n d e r   f o u r   d i f f e r e n t   c o n t r a c t s , 
b u t   t h e s e   d i d   n o t   i n v o l v e   t h e   c r e a t i o n   o f 
legal structures.

(d)
S e e   t h e   C o m m i s s i o n   c o m m e n t s   u n d e r 
point 41(c).

An extensive set of documents on the iden-
t i f i c a t i o n   a n d   p o s s i b l e   a l l o c a t i o n   o f   s u c h 
risks have been produced during the course 
o f   t h e   n e g o t i a t i o n s   w i t h   t h e   c o n c e s s i o n 
candidates.

T h e   n a t u r e   o f   t h e   p r o j e c t ,   a s   d e s c r i b e d 
above,  did  not  allow  a  thorough  identifica-
t i o n   a n d   a p p r e c i a t i o n   o f   t h e   m a g n i t u d e   o f 
these risks up front.

(f)
The Commmission exercised a key promoter 
r o l e   f o r   t h e   G N S S   p r o g r a m m e s .   C o r r e c t i v e 
a c t i o n s   w e r e   t a k e n   a t   t h e   t i m e   w h e n   e v i -
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-
m i s s i o n   h a v e   t h e   e l e m e n t s   t o   a s s e s s   t h a t 
the concession process prolongation would 
not have delivered good value for the pub-
l i c   s e c t o r   a n d   t h e r e f o r e   t o   t e r m i n a t e   t h e 
negotiations.

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The realignment of the programme proposed 
by the Commission in 2008 clearly assigned 
the role of programme manager to the Com-
m i s s i o n ,   t o   a d d r e s s   t h e   i s s u e   t o   w h i c h   t h e 
Court has given prominence.

76.
The PPP was prepared with the level of infor-
mation available at the time, based on pre-
p a r a t o r y   w o r k   h a v i n g   r e c o u r s e   t o   s t a t e   o f 
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-
m e n t ,   o p e r a t i o n   a n d   c o m m e r c i a l   e x p l o i t a -
tion under a PPP structure entailing private 
f i n a n c i n g .   T h e   c h o i c e   o f   t h e   P P P   h a s   b e e n 
e n c o u r a g e d   a n d   f i n a l l y   e n d o r s e d   b y   t h e 
Council. The preparation of the PPP was con-
strained  by  the  limited  time  available.  The 
specific challenges of the Galileo PPP, linked 
p r i n c i p a l l y   w i t h   t e c h n i c a l   a n d   m a r k e t   s p e -
cificities explain in a large part the inability 
to conclude the concession process.

77.
E S A   e n c o u n t e r e d   t e c h n i c a l   a n d   p r o g r a m -
matic  difficulties,  which  explain  the  delays 
and cost overruns.

78.
R T D   a c t i v i t i e s   h a v e   b e e n   i n s t r u m e n t a l   i n 
helping define the Galileo mission and per-
f o r m a n c e s ,   f o c u s   o n   a l l   t h e   m a i n   u s e r   s e c -
t o r s ,   a d d r e s s i n g   r e s e a r c h   o n   a p p l i c a t i o n s 
and other aspects that will enable the future 
use of Galileo.

CONCLUSIONS AND 
RECOMMENDATIONS

75.
Given the innovative nature and the techni-
c a l   s o p h i s t i c a t i o n   o f   t h e   p r o j e c t   t h e   C o m -
mission considers the Court’s evaluation of 
t h e   m a n a g e m e n t   o f   t h e   d e v e l o p m e n t   a n d 
validation phase overly negative.

(a)
The GJU was not conceived as a strong oper-
a t i o n a l   p r o g r a m m e   m a n a g e r .   R e g u l a t i o n 
(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 
p r o g r a m m e . ’   I t   a l s o   r e q u i r e s   f r o m   t h e   G J U 
t o   ‘ c h a r g e   t o   [ E S A ]   t h e   c a r r y i n g - o u t   o f   t h e 
activities required during the development 
p h a s e   w i t h   r e g a r d   t o   t h e   s p a c e   s e g m e n t 
and  the  earth  segment  associated  with  the 
system,’ effectively recognising ESA respon-
s i b i l i t y   f o r   c a r r y i n g   o u t   t h e   t e c h n o l o g i c a l 
development activities.

(b)
T h e   C o m m i s s i o n ,   w i t h i n   t h e   l i m i t s   o f   i t s 
r e s p o n s i b i l i t y ,   c o n s t a n t l y   s u p e r v i s e d   a n d 
g u i d e d   t h e   p r o g r a m m e .   T h e   C o m m i s s i o n 
s t e p p e d   i n   w h e n e v e r   w a s   n e e d e d   t o   a v e r t 
b l o c k a g e s ,   p r o v i d e   a d d i t i o n a l   f u n d s   a n d 
adapt the structures of the programme.

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Recommendation 1
The Commission has already made very con-
c r e t e   s t e p s   t o   a d a p t   i t s   r e s o u r c e s   a n d   i t s 
l e g a l   a n d   f i n a n c i a l   i n s t r u m e n t s   t o   a c t   a s   a 
p r o g r a m m e   m a n a g e r .   I n   o r d e r   t o   f a c i l i t a t e 
this process a Galileo Interinstitutional Panel 
(GIP) has been set up.

(a)
The Commission has secured the transfer of 
3 0   e x p e r i e n c e d   s t a f f   f r o m   G S A   ( s o m e   w i t h 
e x p e r i e n c e   d a t i n g   b a c k   t o   G J U )   a n d   c o m -
p l e t e d   i n t e r n a l   r e c r u i t m e n t s   t o   s e t   u p   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)
R e g u l a t i o n   ( E C )   N o   6 8 3 / 2 0 0 8   p r o v i d e d   t h e 
Commission with a dedicated Galileo budget 
line to fund the infrastructure. The Commis-
sion is using public procurement to purchase 
the infrastructure.

A s   r e g a r d s   t h e   o p e r a t i o n s   a n d   r e p l e n i s h -
m e n t   c o s t s ,   t h e   C o m m i s s i o n   i s   p r e p a r i n g 
the next financial framework to ensure ade-
q u a t e   b u d g e t   c o v e r a g e .   I t   w i l l   a l s o   r e v i e w 
t h e   f i n a n c i a l   i n s t r u m e n t s   m a d e   a v a i l a b l e 
under  its  financial  regulation  to  make  sure 
t h e y   a r e   a d e q u a t e   f o r   t h e   f u n d i n g   o f   t h e 
programme.

(d)
The governance framework created by Reg-
u l a t i o n   ( E C )   N o   6 8 3 / 2 0 0 8 ,   c l e a r l y   a l l o c a t e s 
roles and responsibilities.

T h o s e   a c t i v i t i e s   h a v e   r a i s e d   s i g n i f i c a n t 
interest in the users’ communities and have 
developed technologies and knowledge that 
w i l l   b e   e x p l o i t e d   i n   a   l a t e r   c o m m e r c i a l i s a -
tion phase.

79.
T h e   i n t e g r a t i o n   o f   E G N O S   i n t o   G a l i l e o   h a s 
b e e n   e s s e n t i a l   t o   e n s u r e   t h e   c o n t i n u i t y 
o f   t h e   E G N O S   p r o g r a m m e ,   a n d   s e c u r e   t h e 
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-
a t i o n ,   a n d   r e g u l a r l y   t o o k   t h e   i n i t i a t i v e   t o 
unblock and foster the programme.

81.
T h e   C o m m i s s i o n   h a s   o v e r h a u l e d   t h e   m a n -
agement of the programme, taking on board 
m a n y   r e c o m m e n d a t i o n s   o f   t h e   C o u r t   o f 
Auditors.

82.
The Commission decided to propose to take 
o v e r   t h e   p r o g r a m m e   m a n a g e m e n t   o f   G a l i -
l e o   a t   a   d e c i s i v e   t i m e   f o r   t h e   p r o g r a m m e . 
C o u n c i l   a n d   E P   e n d o r s e d   t h i s   p r o p o s a l   b y 
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.

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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)
I n   t h e   f r a m e w o r k   o f   t h e   c o m m u n i c a t i o n , 
t h e   C o m m i s s i o n   i s   c o m p i l i n g   u s e r   r e q u i r e -
ments and mapping out the enabling actions 
t h a t   a r e   n e e d e d   t o   f o s t e r   t h e   u s e   o f   G N S S 
t e c h n o l o g y .   T h i s   w i l l   e n a b l e   t h e   C o m m i s -
s i o n   t o   p r o p o s e   a n   a p p r o p r i a t e   r e g u l a t o r y 
framework.

(c)
The  Commission  has  taken  steps  to  ensure 
that an operational EGNOS meets the needs 
of its users, particularly in the aviation sec-
t o r ,   a n d   f o r   t h a t   p u r p o s e   h a s   s e l e c t e d   a n 
e x p e r i e n c e d   o p e r a t o r   w i t h   s t r o n g   a v i a t i o n 
background.

86.
The  Commission  has  set  up  and  may  set  up 
other  joint  undertakings.  Each  of  those  are 
t h o r o u g h l y   p l a n n e d   a n d   a s s e s s e d   a g a i n s t 
the  criteria  relevant  for  their  activity,  on  a 
case-by-case basis.

Recommendation 5
T h e   C o m m i s s i o n   c a r e f u l l y   e x a m i n e s ,   o n 
a   c a s e - b y - c a s e   b a s i s ,   t h e   r a t i o n a l e   a n d 
t h e   o p t i m a l   g o v e r n a n c e   o f   a n y   n e w   j o i n t 
undertaking.

83.
R e g u l a t i o n   ( E C )   N o   6 8 3 / 2 0 0 8   h a s   c l e a r l y 
t a s k e d   t h e   C o m m i s s i o n   t o   e x e r c i s e   l e a d -
e r s h i p   a n d   t o   p r o p o s e   t o   C o u n c i l   a n d   P a r -
l i a m e n t   s c e n a r i o s   f o r   G a l i l e o   b e y o n d   t h e 
d e p l o y m e n t   p h a s e .   I n   a d d i t i o n   a   G a l i l e o 
Interinstitutional Panel is set up.

Recommendation 2
R e g u l a t i o n   ( E C )   N o   6 8 3 / 2 0 0 8   h a s   r e i t e r -
a t e d   t h e   p r o g r a m m e ’ s   p o l i t i c a l   o b j e c t i v e s 
that  have  remained  constant  over  the  past 
y e a r s .   I t   h a s   a l s o   p r o v i d e d   t h e   p r o g r a m m e 
w i t h   a   s o l i d   r o a d m a p   f o r   t h e   d e p l o y m e n t 
p h a s e ,   a n d   h a s   r e q u e s t e d   t h e   C o m m i s s i o n 
t o   c o m e   u p   i n   2 0 1 0   w i t h   a   c o m m u n i c a t i o n 
on the future of Galileo beyond the deploy-
ment phase.

(a)
T h e   C o m m i s s i o n ’ s   c o m m u n i c a t i o n   w i l l 
c o v e r ,   i n t e r   a l i a ,   t h e   s t r a t e g i c   a n d   o p e r a -
t i o n a l   o b j e c t i v e s   o f   G a l i l e o .   I t   w i l l   a d d r e s s 
the question of the model for the operations 
o f   t h e   s y s t e m   t a k i n g   i n t o   a c c o u n t   m a r k e t 
r e a l i t i e s ,   d e s i r a b l e   p o s i t i o n i n g   o f   t h e   s y s -
t e m   o n   t h e   v a l u e   c h a i n ,   a n d   w i l l   c l e a r l y 
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 
w i t h   t h e   v a r i o u s   s t a k e h o l d e r s   t o   d r a f t   t h i s 
Communication and has sought the support 
of  external  advisers  to  help  it  take  stock  of 
t h e   w e a l t h   o f   i n f o r m a t i o n   g a t h e r e d   o v e r 
the years, notably thanks to the concession 
negotiation experience.

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(e)
ESA’s  and  GJU’s  efforts  to  demonstrate  the 
c a p a b i l i t i e s   o f   E G N O S   o v e r s e a s   h a v e   b e e n 
c o o r d i n a t e d   a n d   f u n d e d   b y   t h e   C o m m i s -
s i o n .   B a s e d   o n   t h e s e   p r e p a r a t o r y   s t u d i e s , 
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-
g e t e d   a t   E G N O S ,   a s   w e l l   a s   f u n d s   f r o m   D G 
A I D C O   i n   2 0 0 5 .   I n   a d d i t i o n ,   s e v e r a l   F P 6 
projects  were  dealing  with  EGNOS.  Finally, 
the GJU benefited from a discretionary stud-
i e s   b u d g e t   a p p r o v e d   o n   a   y e a r l y   b a s i s   b y 
its Board, that could have been used, if GJU 
m a n a g e m e n t   h a d   s o   d e c i d e d ,   t o   f u n d   s p e -
cific EGNOS-related studies.

ANNEX III

T h e   a g r e e m e n t s   w i t h   N R S C C   a n d   M a t i m o p 
a n d   t h e   G J U   w e r e   t r a n s f e r r e d   t o   t h e   G S A . 
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.

ANNEX II

The EGNOS programme was conducted under 
an optional ESA programme (ARTES 9) under 
E S A   p r o g r a m m e   m a n a g e m e n t .   A s   t h e   f i r s t 
E S A   p r o g r a m m e   i n   n a v i g a t i o n ,   i t   s u f f e r e d 
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-
t i a t i o n   t h e   r o a d m a p   f o r   E G N O S   h a d   t o   b e 
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.

T e c h n i c a l   a c c e p t a n c e   b y   E S A   o n l y   s t a r t e d 
a t   t h e   b e g i n n i n g   o f   M a r c h   2 0 0 9 .   T h i s   i s   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 
t h a t   E S A   h a s   s e t   f o r   i t s e l f   i n   t h e   A R T E S   9 
programme.

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ANNEX IV

T h e   C o m m i s s i o n   r e f e r s   i n   g e n e r a l   t o   t h e 
r e p l i e s   p r o v i d e d   a b o v e   t o   t h e   t e x t   o f   t h e 
Court’s  report,  in  particular  paragraphs  39, 
41 and 42.

A.2.
D u e   t o   t h e   u n p r e c e d e n t e d   n a t u r e   o f   t h e 
p r o j e c t   i t   w a s   n o t   p o s s i b l e   t o   r e a c h   t h e 
level  of  maturity  on  requirements  and  con-
straints  that  can  be  found  in  projects  with 
established industries and services (motor-
w a y s ,   h o s p i t a l s ,   p o w e r   p l a n t s … ) ,   w h e r e 
r i s k s   a r e   a l r e a d y   r e l a t i v e l y   w e l l   i d e n t i f i e d 
a n d   c o s t   c o m p a r a t o r s   e a s y   t o   b u i l d   b a s e d 
upon existing cost data. In view of the time 
pressure,  and  the  difficulty  to  find  enough 
precedents  to  build  upon,  the  Commission 
a n d   t h e   G J U   o p t e d   f o r   a   c o m p e t i t i v e   d i a -
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.

A.3.
See the reply to A.2.

A.4.
See the reply to A.2.

A.5.
I n   a l l   i t s   r e c e n t   r e l e v a n t   r e g u l a t o r y   a c t i v i -
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-
s i o n a i r e   a t   t h e   t i m e   o f   n e g o t i a t i o n s .   T h e 
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.

T h e   u n k n o w n   e l e m e n t s   c h a r a c t e r i s i n g   t h e 
G a l i l e o   P P P   w e r e   s u p p o s e d   t o   b e   t a c k l e d 
through this procedure by interactions with 
extremely serious and dedicated bidders.

Developing  a  reliable  public  sector  compa-
r a t o r   w a s   n o t   a   r e a l i s t i c   o p t i o n   f o r   l a c k   o f 
r e l e v a n t   d a t a ,   c o n t r a r y   t o   w h a t   e x i s t s   f o r 
more mainstream industries.

The  extension  of  the  dialogue  process  and 
t h e   i n t e r a c t i o n s   b e t w e e n   t h e   G J U   a n d   t h e 
c a n d i d a t e s ,   e v e n   a f t e r   t h e i r   m e r g e r ,   p r o -
duced  important  results,  which  were  incor-
porated in the heads of terms.

Even data coming from the IOV (in-orbit vali-
dation)  could  not  be  used  to  develop  such 
a   c o m p a r a t o r ,   b e c a u s e   o f   t h e   m a t e r i a l   d i f -
ference  in  scope  between  the  IOV  and  FOC 
(full operational capability).

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B.2.
Throughout the competitive dialogue phase, 
full  attention  was  given  to  the  assessment 
a n d   f o s t e r i n g   o f   t h e   u n d e r s t a n d i n g   o f   a l l 
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.
D u r i n g   t h e   c o m p e t i t i v e   d i a l o g u e   p h a s e , 
t h e   d r a f t   c o n t r a c t   w a s   f u r t h e r   r e f i n e d   a n d 
expanded, and extensive discussions on the 
choice of applicable law were held.

B.4.
T h e   p l a n n i n g   w a s   a m b i t i o u s ,   a n d   t h e   G J U 
amended it to take account of the fact that 
n e g o t i a t i o n s   w e r e   m o r e   c o m p l e x   t h a n   i n i -
tially expected.

B.5.
The continued feasibility of the project was 
r e g u l a r l y   r e v i e w e d   a n d   c o m m e n t e d   u p o n , 
notably in successive communications from 
the Commission.

B.6.
See the reply to A.6.

B.7.
A s   n o t e d   b y   t h e   C o u r t ,   t h e   t e n d e r   p r o c e s s 
managed to attract a diverse range of Euro-
pean  companies,  strongly  dedicated  to  the 
project. It is only natural that for an innova-
t i v e   a n d   c h a l l e n g i n g   s p a c e   p r o j e c t ,   s p a c e 
industry  took  a  prominent  role  in  the  con-
sortia. Operators were nevertheless present 
in all competing consortia.

A.7.
T h r o u g h   t h e   c o m p e t i t i v e   d i a l o g u e ,   i n n o -
v a t i v e   s o l u t i o n s   h a v e   b e e n   g e n e r a t e d 
a n d   p r o p o s e d   b y   b i d d e r s ,   a n d   t h o r o u g h l y 
discussed.

P a r t i c u l a r   c a r e   w a s   g i v e n   t o   a s s e s s   t h o s e 
innovative commercialisation solutions that 
t h e   b i d d e r s   h a d   i d e n t i f i e d .   T h r o u g h   t h i s 
p r o c e s s   t h e   C o m m i s s i o n   w a s   a b l e   t o   g a i n 
insight into new applications and markets.

A.9.
T h e s e   t o p i c s   w e r e   c o v e r e d   u n d e r   t h e   p r e -
l i m i n a r y   s t u d i e s   c o n d u c t e d   b y   P r i c e w a t e r -
houseCoopers, and the conclusion of those 
studies were supporting the value for money 
of the PPP option.

B.1.
T h e   G J U   s t a f f   e n c o m p a s s e d   p r o f e s s i o n a l s 
h a v i n g   a c c r u e d   s p e c i f i c   e x p e r i e n c e   i n   t h e 
space  domain  and  projects,  having  specific 
management experiences in relation to pub-
lic sector infrastructure projects and project 
f i n a n c i n g .   T h e r e   w a s   n o   ‘ k n o w l e d g e   g a p ’ 
when compared with industry teams.

E x p e r i e n c e d   a d v i s o r s   w e r e   i n v o l v e d   i n   t h e 
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-
h o u s e C o o p e r s ,   L o v e l l ’ s , … )   a n d   E u r o p e a n 
Investment Bank senior staff were assisting 
the GJU in negotiations either before or after 
t h e   m e r g i n g   o f   t h e   c a n d i d a t e s   a n d   i n   t h e 
context of the merger process itself.

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B.8.
See the reply to A.2.

B.11.
P r i v a t e   s e c t o r   b i d   c o s t s   w e r e   n o t   a s s e s s e d 
as there was no intention to fund them from 
public money.

B.12.
See the reply to B.1.

B.13.
T h e   c o s t s   o f   e x t e r n a l   a d v i s o r s   w e r e   c o n -
stantly monitored.

C.1.
See the reply to B.2.

C.2.
T h e   b i d s   w e r e   t h o r o u g h l y   a s s e s s e d   a n d 
compared.

C.4.
In spite of the merger, the GJU managed to 
d r i v e   t h e   n e g o t i a t i o n   p r o c e s s   a n d   a c h i e v e 
c o n v e r g e n c e   o n   m a n y   t o p i c s ,   w h i c h   w a s 
reflected in the heads of terms signed at the 
end of 2006 with the merged consortium.

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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 Communities

2009 — 77 pp. — 21 (cid:2) 29.7 cm

ISBN 978-92-9207-317-6

doi: 10.2865/44017

Special Report No 7/2009 — The management of the Galileo programme’s development and validation phase

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their contact details on the Internet (http://ec.europa.eu) or by sending a fax
to +352 2929-42758.

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  INFRASTRUC TURE 

PROGRAMMES,  THE  COMMISSION  MUST  USE  THE  APPROPRIATE 

MANAGEMENT TOOLS.

EUROPEAN COURT OF AUDITORS

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ISBN 978-92-9207-317-6