Capita beats Serco to £400m Defence Infrastructure Organisation contract

Capita has been awarded a £400 million by the Ministry of Defence to support the transformation of its military estate over the next decade.

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Capita has been selected as preferred bidder for a £400 million contract to support the transformation of the UK government's military estate over the next decade.

The 10-year Ministry of Defence contract will see the IT outsourcing firm lead on planned changes at the Defence Infrastructure Organisation (DIO), with the aim of delivering cost savings of up to £300 million a year.

DIO is responsible for the management of around 4,000 separate sites worldwide over 230,000 hectares, including military barracks, land, air and naval bases, and military training grounds.

Capita was picked alongside engineering firm URS and management consultancy PA Consulting to help target potential savings and commercial opportunities at DIO, improve access to private funding for efficiency improvements and manage change across the organisation.

“Working with a strategic business partner will bring in private sector expertise to enhance the Defence Infrastructure Organisation and deliver value-for-money and potentially hundreds of millions of pounds of savings for the taxpayer,” said Defence Secretary Philip Hammond.

“This is another step along the way in implementing Lord Levene’s reforms and will allow us to tap into the innovation and expertise of the private sector so that we can deliver the best possible infrastructure and services for our armed forces.”

The awarding of the contract to Capita is likely to be a further blow for rival Serco, which also recently lost its electronic tagging contract to the outsourcing giant.

“The news will be a big disappointment for Serco, which was bidding with DTZ and Bechtel, and was down-selected alongside Capita and a third consortium Telereal Trillium, KPMG and Mace, back in August 2012,” said TechMarketView analyst, John O'Brien. "Only recently Serco highlighted the DIO as one of its hot targets for 2014. Capita is certainly proving a thorn in Serco’s side right now."

He added: “For Capita, it shows again what a formidable player it is, and now increasingly in the IT-enabled support services market – Serco’s traditional hunting ground. Capita will have been helped by its strong credentials in managing large, complex public sector outsourcing programmes, and property and infrastructure management capabilities."