Babcock International has received a £900m contract from the UK Ministry of Defence (MoD) for the maintenance of the UK Army's land vehicle fleet.
Awarded as part of a December 2014 agreement that saw Babcock take over the land business of the MoD's Defence Support Group (DSG) for £140m, the ten-year agreement is expected to transform the way the army's vehicles are maintained, repaired and stored.
It could increase to around £2bn as a result of plans, subject to value for money, to help optimise a broader scope of services, while producing total savings of approximately £500m to the army. This represents a reduction of more than a third of current costs.
UK Defence Equipment, Support and Technology Minister Philip Dunne said: "This contract is excellent news and 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.
"Babcock will provide DSG with key engineering and fleet management expertise, which it has built up over 15 years of working with the army.
"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.
"The contract will also ensure the army's continued access to improved vehicle repair and maintenance support, all at significantly better value for money for the taxpayer."
Having committed to developing DSG, Babcock has already identified commercial work for the group from within the Babcock Group.
Effective from April, all DSG land business staff will transfer to Babcock with their terms and conditions protected, allowing the company to deliver and transform the services currently provided to the army by DSG's land business.
Babcock will lead a business improvement programme to optimise output performance.
Image: Babcock International will maintain the UK Army's land vehicle fleet over the next ten years. Photo: Crown copyright.