PARIS AIR SHOW: Galileo faces 40% cost hike says EADS

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The Galileo constellation of satellites could cost up to 40% more under dual procurement, claims EADS Astrium satellites chief executive Evert Dudok, one of the companies bidding for the contract.

His increased price estimate is based on greater costs resulting from a reduced volume for each manufacturer if both EADS Astrium and its German rival OHB System are awarded part of the overall satellite contract.

The total expected price for the European Union's navigation satellites is €840 million ($1.16 billion), but at a breakfast briefing on Tuesday 16 June, Dudok described a split procurement plan, where the two manufacturers are asked for eight spacecraft each.

Based on that performance, one would win a contract for the remaining 12. Dudok is expecting a procurement decision in December, after the September tender deadline.

The prospect of a split procurement has been made more real by a decision by the European Space Agency to place spacecraft under long-lead item contracts with both companies to ensure production can start as soon as possible.

Dudok was surprised by the result of the split long-lead item award: "I have asked ESA why we have been awarded a €6 million contract for long-lead items, and OHB System has been awarded €10 million." At his conference, Jean-Jacques Dordain, director-general of ESA, which is managing Galileo's procurement for the EU, explained the agency would own the long-lead items and it was insurance against either company winning.

Dudok also described a possible outcome if the overall cost of Galileo exceeds the approved sum of €3.4 billion. If the EC does require more money and cannot award a contract for the full constellation, Dudok outlined a situation where an initial contract for 12 could be placed that would be followed by the remainder at a later date. In this scenario, Galileo units would for a time use signals from US Navstar global positioning system spacecraft to deliver a service.