[A-List] UK arms industry: fiscal crisis at BAE

["Michael Keaney" <michael.keaney@xxxxxx>]

MoD throws BAE a bone

David Gow
Wednesday December 18, 2002
The Guardian

BAE Systems, the troubled military contractor, will today announce its first
contract with the ministry of defence since the two fell out last week over
delays and cost overruns on key projects.

Struggling to repair the damage to relations with its biggest customer, BAE
has won a contract from the MoD's defence logistic organisation to replace
bulky technical manuals for the armed forces with an online system.

The contract is worth a mere £10m compared with the £5.3bn value of the
contentious deals to upgrade 18 Nimrod reconnaissance aircraft and build
three Astute submarines that lie at the heart of BAE's bitter row with the
MoD.

But the company, which does 28% of its business with the ministry, sees
today's deal as evidence that the two continue to depend on each other
despite last week's MoD decision to load the entire £1bn cost of the
Nimrod/Astute delays onto BAE.

The DLO deal will, company officials say, see millions of pieces of paper
removed from MoD files on military equipment such as tanks, missiles and
aircraft and save at least £150m over the next 10 years.

Using a web browser akin to Microsoft's internet explorer, maintainers and
operators of such equipment will be able to access more up-to-date
technological data quicker and more efficiently.

Major-General Tim Cross, director general of the DLO's defence supply chain,
said: "With the large number of very advanced weapon and computer systems in
use across the armed forces it was taking too long to update existing paper
documentation."

The deal comes as BAE and its French rival, Thales, step up efforts to win
key MoD contracts worth billions of pounds to design and build two new
aircraft carriers and unmanned reconnaissance aircraft known as Watchkeeper
as well as to provide the infantry with hi-tech battlefield equipment.