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Cablegate: Unsurprisingly, Galileo Already Late and Over

VZCZCXRO6168
RR RUEHAG RUEHAST RUEHDF RUEHDH RUEHHM RUEHIK RUEHLN RUEHLZ RUEHMA
RUEHPB RUEHPOD RUEHROV RUEHSL RUEHSR RUEHTM RUEHTRO
DE RUEHBS #1153 2311246
ZNR UUUUU ZZH
R 191246Z AUG 09 ZDK
FM USEU BRUSSELS
TO RUEHC/SECSTATE WASHDC
INFO RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING
RUEHMO/AMEMBASSY MOSCOW

UNCLAS BRUSSELS 001153

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: CH EAIR ECON ETRD EUN PGOV PREL RS TSPA EINV
SUBJECT: UNSURPRISINGLY, GALILEO ALREADY LATE AND OVER
BUDGET

REF: BERLIN 429

1. (SBU) SUMMARY: A late June communication released with
little fanfare by the European Commission to the European
Parliament and Council, explained current cost overruns and
delays in deployment of the Galileo satellite navigation
system. At the moment, complete deployment of all 30
satellites likely will be delayed by almost a year. The
Commission had anticipated finalizing all procurement
contracts by July 2009, but the target has moved to the end
of 2009, and likely will be extended into 2010. The
Commission has already provided additional funds of 376
million euros for the in-orbit validation (IOV) phase, and
additional delays in deployment will set the entire program
much further behind. END SUMMARY.

2. (SBU) In its first annual report to the European Council
and Parliament on the implementation of the European
satellite navigation programs, Galileo and EGNOS (the EU's
regional satellite navigation augmentation system), the
Commission explained that it has taken all steps necessary
for the full transfer of management of Galileo and EGNOS from
the European Space Agency (ESA) to the Commission. The
process required the Commission to hand over additional
funds, in the amount of 376 million euros, from the full
operational capability (FOC) phase management reserve to
cover ESA's cost overruns in the IOV phase. This tightened
funding constraints on the implementation of the deployment
phase, and there is now little margin in the budget.

3. (SBU) The procurement for full Galileo deployment was
launched in July 2008, with a target completion date of July
2009. However, delays in the procurement process have led
the Commission to state that the "process of competitive
dialogue" will be finished sometime during 2009, with most
contracts concluded by the end of the year. Publicly, the
Commission claims that this will not delay full deployment of
all 30 satellites. However, in a private conversation with a
Commission official from the Galileo office, USEU EconOff
learned that the procurement process, including finalizing
all contracts, is unlikely to be completed before summer
2010. This will likely delay full deployment by at least a
year, which will inevitably include additional cost overruns.

4. (SBU) International activities are prominent in the first
Galileo and EGNOS report, with cooperative meetings with the
United States, China, and Russia highlighted. The Commission
noted the plenary meeting hosted by the Department of State
in October 2008, focusing on an agreement to "coordinate EU
and U.S. positions towards third systems." There was little
progress with Russia except for a new EU-Russia working group
on cooperation in search and rescue (SAR) capabilities. Work
with China received the most attention, with the Commission
calling compatibility and interoperability between Galileo
and Compass key. In the report, the Commission argues that
cooperation with China will undergo a "major test" in 2009 to
assess progress made on Galileo-Compass compatibility. If
China does not provide positive reactions to proposals made
by European experts (no further information given), and the
problem is not solved promptly, the cooperation with China
would need a "major reshaping."

5. (SBU) COMMENT: Given the history of the Galileo program,
it is not surprising that it is experiencing delays and cost
overruns. The problem is exacerbated because Galileo is the
single largest procurement effort-3.4 billion euros-ever
undertaken by the European Commission, and the EU bureaucrats
are learning on the fly. In the private conversation with
the Commission official, USEU EconOff was told that the
Commission had not been surprised by the early delays, but
hoped to improve with time. Cost overruns could be a larger
problem. It took a substantial effort in 2007 to obtain the
3.4 billion euros in public funds, even bending some of the
budget rules to do so, with assurances give to the European
Parliament and the Member States that no further funds would
be needed for deployment. If likely costs begin to stretch
closer to five billion euros or more, as predicted by
industry and several independent organizations, there is a
real risk that neither the Parliament nor the Council will
approve additional funding. This could leave the Commission
to work within its existing financial limits, and ultimately,
deploy fewer than 30 satellites but still maintain a
functional system. END COMMENT.

MURRAY
.

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