The contract will transform the way the army’s vehicles are maintained, repaired and stored.
It also has the potential to grow to around £2 billion as a result of plans, subject to value for money, to optimise a broader scope of services.
From April 2015, Babcock will deliver and transform the services currently provided to the army by the Defence Support Group (DSG) land business.
The £900 million contract will generate total savings to the army of around £500 million over the life of the contract, a saving of over a third. The contract was awarded as part of the sale of DSG to Babcock for £140 million, which was announced in December last year.
Minister for Defence Equipment, Support and Technology 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.
Babcock has committed to develop DSG and has already identified commercial work for DSG from within the Babcock Group.
No MOD sites will close on sale. All DSG land business staff will transfer to Babcock with their terms and conditions protected. Babcock will lead a business improvement programme over several years which is aimed at optimising the output performance of the business.