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BAE Comments £2 Billion Ammunition Deal

LONDON, United Kingdom --- A new partnering arrangement between the UK Ministry of Defence (MOD) and BAE Systems initially worth £2 billion -- with anticipated growth to more than £3 billion during the next 15 years -- will guarantee secure supplies of ammunition to UK 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 UK Armed Forces for training and front line operations, including small arms and medium-calibre 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 £120 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 20 August between the MOD's Defence Equipment & Support organisation and BAE Systems Land Systems Munitions and will be implemented from October this year.

MASS guarantees the MOD ceiling prices for ten years and consists of three elements: a capability charge to cover all fixed costs; payment for products priced at direct material and labour 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 UK Defence Industrial Strategy in action, focussing 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.

"MASS takes our Munitions business from a period of rationalisation and consolidation to a phase of modernisation and growth. The forward order book it gives allows us to take a long-term strategic view. We will work with the MOD to ensure the UK has the necessary skills and resources, not only to support existing usage patterns, but also to be able to increase output and design new types of ammunition when required."

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. The improved plants will result in energy savings of 18,000 tonnes of CO2 emissions a year, equivalent to the carbon footprint of 1,500 UK citizens.

BAE Systems is the premier global defence and aerospace company delivering a full range of products and services for air, land and naval forces, as well as advanced electronics, information technology solutions and customer support services. With approximately 100,000 employees worldwide, BAE Systems' sales exceeded £15.7 billion (US $31.4 billion) in 2007.

UK Troops to benefit from £2 Billion Munitions Partnering Deal