At a meeting in Luxembourg on Friday (8 June) European Commission delegates approved the money to supplement the £0.9bn already committed by European states. Ministers have asked the EU's executive commission to draft a detailed funding proposal that includes "all possible options of public funding" in time for a meeting in October.

Public funds were originally set aside to cover about one-third of the cost of Galileo, with the private sector expected to provide the rest and the total price tag estimated at £2.4bn. However, following a PPP delivery model would add an additional £1.3bn to construction costs, the meeting was told. "Ministers decided to abandon the public-private partnership and start again from scratch," said European Commission transport spokesman Michele Cercone.

Galileo would provide a rival to the US GPS system and could support a range of high-tech applications, included road pricing systems. However, in recent months the group of eight companies from the UK, France, Germany, Spain and Italy charged with developing the system have clashed, creating uncertainty about whether the project can be delivered at all.

The consortium - which includes European aerospace giant EADS; France's Thales and Alcatel-Lucent; Britain's Inmarsat; Italy's Finmeccanica; Spain's AENA and Hispasat; and a German group led by Deutsche Telekom - has so far proved unwilling to take on the economic risks of the project and missed the deadline to come forward with a single company structure to run Galileo. Under new proposals for the future development of Galileo, these companies will now be offered the opportunity to run the system - but only after the public sector has built it. It has yet to be decided whether the private sector will have any role in the construction phase of the project.

Germany's transport minister Wolfgang Tiefensee said after the meeting that Galileo was of "colossal importance" to Europe, adding: "We must prove our worth in this field of technology in competition with the US, Russia and Asia."

But Tiefensee said there was no agreement whether the money pledged should come from EU states or the Community's collective budget, and that ministers were still open to private funding, if any was offered. "We realised that the concession-based model was heading nowhere," Tiefensee said. "For that reason we want to try out all the possibilities of public sector financing including financing via the European Space Agency," he added, referring to the initiative's other major backer, which oversees Europe's space program.

Galileo would comprise a network of 30 satellites beaming radio signals to receiving devices on the ground, helping users pinpoint their locations. The first demonstrator spacecraft, Giove-A, is already in orbit. A second, Giove-B, which has experienced technical problems, should be in orbit by the end of this year. The contract for the first four commercial satellites in the final constellation was awarded at the end of 2004. Under the new arrangement, the public sector would order the remaining 26 and Galileo could be operational by 2012.

Last month, the European Commission urged member states to find extra funds after the consortium chosen to build and operate the satellite navigation system failed to agree terms. A spokesman said the project symbolises the political, economic and technological dimension of the EU and axing the project would waste 10 years' work and risk 150,000 jobs as well as making Europe more dependent on GPS and equivalent systems from Russia and China.

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UK holds out for private sector Galileo involvement

Transport Briefing: 15/06/07

Private companies should play a key role in delivering the Galileo satellite navigation programme, according to Britain's representative at the latest transport session of the European Commission's Transport, Telecommunications and Energy Council.

Reporting back on the meeting, held in Luxembourg from 7-8 June, minister of state for transport Dr Stephen Ladyman said the UK had submitted a joint statement with the Netherlands stressing the countries' commitment to the public private partnership principle for major infrastructure projects. The statement raised concerns about the potential increased costs of the public procurement of Galileo, the need for a reassessment of the business case, sound risk management, and ensuring that any extra funds are kept within the current EU financial agreement.

The move means Britain and Holland, with the support of Slovakia and Cyprus, are championing the PPP model for Galileo as other European countries increasingly look to the public sector to lead delivery.

During the session the Council adopted a Resolution on the Galileo satellite navigation programme, concluding that the current concession negotiations have failed and should be ended (Transport Briefing 11/06/07). The Resolution asks the Commission to prepare detailed alternative proposals for taking the project forward, to be presented to the October Transport Council. Council emphasised that these should be based on an additional thorough assessment of costs, risks, revenues and timetable. The Commission was also asked to submit financing options, a procurement strategy, concepts for the subsequent operation and exploitation phase, and proposals for a sound public sector governance structure. The Presidency made clear the possibility that, if suitable answers were not found, the project would be ended. It was also noted that the Council should not rule out the involvement of private finance.

In the ensuing debate, Ladyman accepted that Galileo had the potential to deliver significant benefits for Europe, but that it should not proceed unless the costs were justifiable. While it was clear that the current concession negotiations had failed, the risks in terms of costs and timetable would not be reduced, and might be increased by moving to a public procurement. The minister said public private partnership remained the UK’s preferred approach and open competition and open tendering was essential. He added that it was also essential that funding for Galileo, if the October Council agreed to proceed with it, had to be found within the limits of the current budget allocations, without reopening the EU financial perspective. Ladyman welcomed the Presidency's acceptance that the project could be ended if acceptable answers could not be found.