LONDON — Leidos has secured its first major support deal from the UK Defence Ministry, the MoD announced on Thursday. The US contractor was named as the preferred bidder on a multibillion pound program aimed at transforming how commodities are procured and stored for the military.
Industry sources said Leidos, formerly known as SAIC, beat out opposition from local defense support giant Babcock and a bid from an in-house team from the Defence Equipment & Support (DE&S) arm of the MoD.
"Today's announcement is a key step in bringing defense logistics up to the standard of industry best practice," Philip Dunne, minister for defense equipment, support and technology, said in a statement. "It will deliver state of the art warehousing systems to improve availability of supplies and better management of inventory for the armed forces."
An MoD spokesman for the MoD declined to confirm the award to the US contractor, but said that the department is was looking to "make an announcement in the near future." Leidos representatives in the UK did not respond to a request for comment.
The Logistic Commodities and Services Transformation (LCS(T)) program is reckoned to be worth around £7 to £8 billion (US $10.7 billion to $12.2 billion) to pounds over the 13-year life of the deal, but that figure could rise to as much as £13 billion if the MoD expands the range of products set to be handled under LCS(T).
The deal includes a three-year transition phase.
For the moment, the outsourcing deal includes procurement of commodities such as food, clothing, general stores, some fuels and other items.
Winning the deal is a major breakthrough for Leidos.
The company has secured some defense-related business here but nothing remotely on the scale of the LCS(T) program.
Leidos Senior Vice President executive Barbara Doornink told Defense News last year that fuel distribution and ammunition storage and distribution are two areas the company might eye in the future to expand its UK business.
Doornink said she saw "plenty of opportunities in Britain beyond LCS(T) for the sort of integration, IT and other solutions Leidos provides."
The program is part of wider MoD efforts to transform the efficiency of its equipment and support procurement effort.
Part of the deal will see more than 2,000 DE&S staff move into the private sector under Leidos management.
Under the current organization, each DE&S commodity area operates largely in isolation, resulting in duplication and increased costs.
Leidos and its subcontractor partners Kuehne & Nagel and TVS Supply Chain Solutions, are expected to invest in updating the storage infrastructure and rationalizing the numerous sites currently operated by DE&S.
The storage activity is currently conducted from about 70 warehouses across 11 sites holding around £8 billion of stock.
An announcement on the winning contractor had been expected in the final quarter of last year, but the complexity of the deal and other issues slowed down the negotiations.
With the election purdah set to kick in on March 30, LCS(T) is likely to be among the last major program awards ahead of the general election.
Under the long-standing purdah agreement between the main political parties, major announcements that could which may influence voters are banned until after the election.
With a government spending review due after the election threatening the defense budget, followed by a strategic defense and security review that which could well run into 2016, the next 12 months will likely be look like to be a thin time for big contract announcements.