ESA’s puzzling privatization pullback

The 30th anniversary of the February 1986 launch of French Spot 1 Earth observation satellite that gave birth to the commercial geospatial imaging industry is a timely reminder of how far the space sector has come in privatizing formerly all-government undertakings.

Telecommunications and Earth observation, for both commercial and military applications, launch services and even astronaut activities have all moved, at different speeds, toward greater private sector involvement.

That’s why the European Space Agency’s decision to remove Airbus Defence and Space as prime contractor for Europe’s International Space Station operations and to appoint itself in Airbus’s place is so surprising.

While NASA has made more noise about it, ESA too has been ceding space station responsibilities to industry for more than a decade.

In recent years, the work has been conducted through a series of two-year contracts. Under pressure to reduce ISS costs, ESA forced Airbus to chip away at unnecessary spending with each successive contract renewal.

According to ESA and Airbus, that goal was reached, with a 30 percent savings realized by 2014 compared to 2011.

Apparently it was not enough. For the contract ending in December 2017, ESA has assumed the role of prime contractor. Airbus is a major supplier under a contract valued at 88 million euros ($96 million). Altec of Italy — a public-private company owned by the Italian Space Agency and Thales Alenia Space — now reports directly to ESA under a 25.5-million-euro contract.

The German Aerospace Center, DLR, a government agency, has the third ISS contract with ESA, valued at 19 million euros.

Taken together, the three contracts total 132 million euros — 32 percent less than the Airbus contract of December 2013.

ESA has told its member governments that it can do the Airbus work with no additional cost to the agency. How is this possible?

There are two obvious possibilities.

The first is that Airbus overplayed its negotiating hand, never imagining that ESA would reverse direction after finding huge inefficiencies in Airbus’s proposal.

The second is that ESA’s space station directorate was overstaffed and was facing layoffs in 2016. Under this hypothesis, ESA acted like any organization in protecting its people by giving them work previously done by Airbus while allowing the agency to say the new functions would be performed at essentially zero additional cost.

Just about everyone’s happy. ESA, which must find fresh ISS savings to persuade its governments in December to continue as an ISS partner to 2024, can present a large cost reduction that no one will question. Altec and DLR are happy with their continued work.

ESA Director Johann- Dietrich Woerner is a former chairman of DLR. He wants Europe to stick with the United States, Russia, Japan and Canada at ISS at least to 2024, and maybe longer. Asked about the ISS operations contract, he said no one should conclude that it signals a government move back into long-privatized sectors.

“Our governments want us to cut ISS costs and by doing this we achieve that goal,” Woerner said. “That’s all there is to it.”

ESA’s human spaceflight budget line for 2016 is 365.1 million euros, just 1.7 percent below the previous year. Clearly the full 30-percent cost savings are not there.

We’re likely to find out later this year where they’re hiding.