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Britain enters talks with two consortiums to outsource arms buying
August 21, 2013 / 1:19 PM / in 4 years

Britain enters talks with two consortiums to outsource arms buying

LONDON (Reuters) - Britain’s defense ministry is in talks with two consortiums - led by U.S. engineers CH2M Hill and Bechtel - that are competing to run its 159 billion pound ($249 billion) equipment buying program to cut delays and cost overruns.

A Ministry of Defense (MoD) spokesman said on Wednesday it was taking forward commercial negotiations with the CH2M Hill-led group that also consists of British firms WS Atkins and Serco Group as well as with Bechtel, supported by PricewaterhouseCoopers and PA Consulting.

Reuters reported last month the government was set to choose firms for formal discussions and would cut down the number from a list of about 20 interested parties that included QinetiQ and Balfour Beatty.

Britain will be the first country to outsource negotiations with arms makers such as BAE Systems and Finmeccanica should it proceed with plans to put the Defense Equipment and Support unit in the hands of a private contractor.

At a time of austerity, the government wants to reform the way the unit buys equipment, a process that has been beset for decades by cost overruns. It is still considering another option known as ‘DE&S plus’, for which it has not provided details but has described as an “improvement of the status quo.”

The DE&S accounted for almost half of the Ministry of Defense’s (MoD) 34.4 billion pound budget last year and Britain expects to spend 159 billion pounds on military equipment between 2012 and 2022.

CH2M Hill’s chief executive Lee McIntire resigned as a non-executive director of BAE Systems on Tuesday to avoid any potential conflict of interest due to the bid.

An August 15 notice published on the government’ Defense Contracts Online website showed that the government hopes to issue the contract on September 17 next year. The value of the contract has not been disclosed. ($1 = 0.6378 British pounds)

Reporting by Brenda Goh; Editing by Anthony Barker

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