LONDON -Teams led by UK and German prime contractors have been shortlisted to fight it out over a program to update the British Army's Challenger 2 main battle tank fleet.

"The Ministry of Defence has chosen BAE Systems and Rheinmetall Landsysteme as preferred bidders for the assessment phase of the Challenger 2 life extension project," a spokesman for the Defence Equipment & Support organisation confirmed Nov 2.

The assessment phase is aimed at modernizing up to 227 of the aging Challenger 2 tanks currently in service with the British Army.

The spokesman said the selection is an "important step forward as we continue to work with industry to deliver a key equipment program for the UK's armed forces."

The two contracts are on track to be signed by the end of this year triggering a 24-month assessment program ahead of selection of a winning proposal in 2019. The British are investing £53 million, or $65.4 million US, in the assessment phase. Each of the contractors will receive £23 million and there is an additional £7 million being set aside to cover additional, unspecified work.

It’s expected the modernization program could be worth around £650 million ($802 million), to the eventual  winner.

BAE’s team includes General Dynamics UK, Qinetiq, Leonardo, Moog and Safran. A company spokeswoman confirm that BAE  has been recommended preferred bidder. " We now await the formal decision of the UK MoD for contract award," she said.

The rival Rheinmetall consortium includes BMT, Pearson Engineering, Supacat, and Thales UK. The German company could not be contacted by telephone or email.

The Challenger 2 design authority is held by BAE but that would pass to Rheinmetall if the Leopard 2 main battle tank company were to be selected for the modernization.

Losing bidders included a Lockheed Martin UK-Elbit Systems team, CMI Defence of Belgium and RUAG of Switzerland.

"We have been informed that we have not been taken forward as a preferred bidder for the Challenger 2 life extension project. We are disappointed in this decision as we believe our proposal showed our capability and experience, creating and safeguarding British jobs and offering a de-risked yet innovative solution," a spokeswoman for Lockheed Martin UK said.

The rival teams are expected to build a prototype based on their proposal as part of the two year assessment, said the Daily Telegraph Oct 31.

Challenger 2 entered service in 1998. It’s out-of-service date was extended 10 years to 2035, as a result of the 2015 strategic defense and security review.

The upgrade will largely address obsolescence issues in turret systems, but it’s possible other capability upgrades will be adopted subject to sufficient funding.

The assessment-phase work is expected to look at affordable upgrades that go beyond just keeping the tanks effective. For example, one of the studies involves a look at improved lethality.

Lockheed Martin executives, talking in July at the time their teaming with Elta Systems was unveiled, said lethality could extend beyond traditional weaponry, potentially also covering radio-frequency jamming pods and target-designation equipment to enable joint fires.

Announcing their intention to bid for the life extension program in August, Ben Hudson, the head of Rheinmetall’s Vehicle Systems Division, gave a hint of the potential extent of their proposal, including a possible move to a 120mm smooth bore gun eventually.

"Our team has put together an innovative proposal to solve not only the obsolescence issues of the Challenger 2 but to also cost effectively enhance the capabilities. One example of this is that our solution can integrate either the existing 120mm L30 rifled gun or our proven 120mm L55 smooth bore system that is in service with the German Army," Hudson said in a press statement.

"When combined with the new optronics, situational awareness and fire control systems our solution will allow the Challenger 2 to fight, survive and win on the battlefields of today and tomorrow," said Hudson.

Another potential capability hike was highlighted in a letter earlier this year from the chief of the general staff, Gen. Nick Carter, appointing Maj. Gen. Mark Gaunt as the senior responsible owner of the Challenger update — officially known as the Armour (MBT) 2025 program.

Carter said one of the milestones in the program would be an April 2018 decision on whether to field a soft-kill, defensive-aids system on Challenger.

Bid for Turkey’s First Indigenous Battle Tank

Ismail Demir, Turkey's undersecretary for defense industries, discusses the final bid for serial production of Turkey’s first indigenous battle tank.

In early July, the Defence Science and Technology Laboratory placed a £7.6 million deal with Qinetiq to evaluate active-protection equipment for armored vehicles, including integrating an Airbus Defence system known as MUSS on the Challenger 2.

The letter to Gaunt said the aim of the program is "through a series of projects, to examine value-for-money options to deliver main battle tank capability from 2025 to 2035."

Also included in the letter was a requirement for Gaunt to start looking at a replacement for the Challenger 2.

Germany and France are in the early stages of looking at a new main battle tank for the 2030s but to date there is no sign of British interest.