LONDON — Babcock International has been given a £900 million (US $1.4 billion) contract by the Ministry of Defence to repair, maintain and upgrade vehicles for the British Army over the next 10 years.
The deal is part of the purchase agreement that saw Babcock purchase last month purchase of the land business of the state-owned Defence Support Group (DSG) for £ 140 million.
The MoD said in a statement that Babcock's transformation of DSG will cut the British Army's repair and maintenance bill by a third and generate savings of around £500 million over the lifetime of the contract.
An MoD spokeswoman said thereir was also an option to extend the 10-year deal. "There is an option to extend up to five years in one-year increments."
DSG provides repairs and overhauls for the bulk of Britain's armored vehicle fleets, including the Warrior infantry fighting vehicle and the Challenger II main battle tank. The organization also repairs small arms for the military.
The value of the deal could more than double to around £2 billion if plans to optimize a broader range of services are implemented, said the MoD.
"This contract puts DSG on a sustainable long-term footing to support maintenance and availability of land platforms for the Army, in a similar manner to existing contracts for support of platforms for the other services," said Defence Procurement Minister Philip Dunne.
"DSG will also gain the potential to provide vehicle maintenance to other existing heavy vehicle customers,which it is unable to do while owned by the MoD."
"DSG will also gain the potential to provide vehicle maintenance to other existing heavy vehicle customers," he said, "unable to do while owned by the MOD is it ichwh
Babcock, already Britain's largest defense support provider, also maintains and repairs much of the MoD's non-combat vehicle fleets and also has deals with mining, construction and other organizations in the civil sector.
The MoD said Babcock had already identified commercial work for DSG from within the company.
None of DSG's 12 vehicle sites around the UK will close as an immediate result of the sale, although an MoD source conceded a that "might well happen in the medium term" as part of a transformation plan.
Nobody was available from Babcock was available to comment.
The aviation electronics and component elements of DSG are not included in the sale and have been hived-off into a stand-alone government-owned business.
Media reports late last year said that Babcock's was also in line to win a second major support contract to run the MoD's purchase, storage and transportation of commodities.
Babcock and its partner, DHL, in a team known as Defence Integrated Supply Chain Solution, has been in a head-to-head competition against US company Leidos with Kuehne & Nagel and others acting as subcontractors to win the Logistic Commodities and Services (Transformation) (LCST) program. An in-house MoD team has also been bidding.
An Announcement of the on a winner for the LCST program had originally been planned for December but that has slipped until early this year. A report in the Independent newspaper here Nov. 28 said that Babcock had beaten Leidos to the deal. The MoD denied a decision had been made and said it was sticking to its timeline for an announcement in 2015.
The LCST is a major outsourcing deal with a price tag includesing operations and procurement of commodities like food, clothing, general stores, some fuel and other items potentially running to more than £13 billion over the 13-year life of the contract with the Defence Equipment & Support (DE&S) arm of the MoD.
Email: achuter@defensenews.com.
Andrew Chuter is the United Kingdom correspondent for Defense News.
