Global defence giants ready to battle for £2bn sea patrol deal

Monday, May 25, 2015

The aerospace giants Airbus, Boeing, Northrop Grumman and Lockheed Martin are mulling bids for one of the juiciest Ministry of Defence deals of the next two years, a £2bn maritime surveillance contract.

A defence industry source said that the contract “could be the only shiny new thing” to come out of the upcoming Strategic Defence and Security Review, which will set out the military’s requirements for the next few years.

Unlike the Department of Health, the MoD is not a protected department, so the review takes place with the spectre of budget cuts as the Government looks to balance its books.

But there is an urgent need to replace the Nimrod surveillance aircraft that were axed as a result of the 2010 defence review, with military commanders complaining that it leaves them reliant on patrol aircraft from other nations to protect UK waters and ships. The upgrade of Nimrod was running nine years late and some £800m over-budget.

There were rumours that the former defence secretary Philip Hammond was so impressed by Boeing’s P8 Poseidon Sea Patrol plane that he would hand them the contract without a bid process.

However, there are a number of other options, include unmanned aircraft variants, and the industry hopes that Michael Fallon, who succeeded Mr Hammond when he moved to the Foreign Office last year, will open up the deal to competition.

The source said that companies were “soft marketing” their plans to government before a tender process gets under way, maybe as early as next year.

He added that the deal would be worth “at least a billion, but possibly double that”, in simply building the aircraft themselves.

The contract would probably prove two to three times more lucrative as maintenance and upgrade costs are factored in further down the line.

Separately, it is understood that there are growing concerns from the industry that many executives have not yet met Tony Douglas, the incoming chief of Defence Equipment & Support, the £15bn budget agency that buys and looks after military kit.

Mr Douglas is a renowned project manager, having overseen the construction of Heathrow Terminal Five and, more recently, a deep-water port in Abu Dhabi. But he is a relative unknown in defence, having been the surprise choice to replace Bernard Gray later this year.

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