The United Kingdom awarded BAE Systems a munitions contract initially worth about US$3.76 billion, the company announced.
Over the next 15 years, the contract may grow to be worth approximately $5.63 billion.
That pact will guarantee secure supplies of ammunition to U.K. troops while providing value for money for the taxpayer.
The arrangement, known as Munitions Acquisition-the Supply Solution (MASS), is initially for a 15-year period and will supply approximately 80 per cent of the “general munitions” consumed by U.K. armed forces for training and front line operations, including small arms and medium-caliber ammunition, mortar bombs, tank ammunition and artillery shells.
Some 1,700 jobs will be directly sustained by the deal, including 230 specialist munitions engineer posts. BAE Systems has pledged to invest more than $225.3 million, over the next five years to accelerate transformation of its munitions sites into modern, safer, highly automated, energy efficient, and flexible facilities.
MASS was signed on Aug. 20 between the MoD Defence Equipment & Support organization and BAE Systems Land Systems Munitions and will be implemented from in October.
MASS guarantees the MoD ceiling prices for 10 years and consists of three elements: a capability charge to cover all fixed costs; payment for products priced at direct material and labor costs; and a further element to allow for flexibility, such as additional engineering tasks and “surge manufacture” to support operational deployments.
The agreement includes opportunities to share savings between BAE Systems and MoD achieved through improved performance, innovation, overseas sales and expansion of scope. There are also penalty clauses for under-performance.
BAE Systems Land Systems Managing Director David Allott said: “MASS is a far-sighted example of the U.K. Defence Industrial Strategy in action, focusing on through-life management to provide enduring military capability. It contracts for essential capability–retention of facilities and specialist skills–not just product. It also aligns objectives so that we, our customer and suppliers can work together to give the front line the vital supplies it needs while providing best value for money for the taxpayer, according to the company.
Three manufacturing sites will be transformed in the next five years under MASS: Birtley in County Durham, Glascoed in Monmouthshire, and Radway Green in Cheshire.