01 Mar 2007 | Ref. 064/2007
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BAE Systems works with the RAF customer at RAF Waddington (Crown Copyright)
Warton, United Kingdom. - An important step towards a Long Term Partnering Agreement (LTPA) between BAE Systems and the UK Ministry of Defence (MoD), covering the support and upgrade of the current and future fixed wing aircraft fleet, was taken today, Thursday 1 March 2007, when the LTPA Foundation Contract was signed by the two organisations.
This announcement is significant in that it provides a framework for detailed negotiations aimed at signing a long term full and legally binding LTPA before the end of this year. Such an Agreement is a key target set out in the fixed wing chapter of the MoD’s Defence Industrial Strategy (DIS) of December 2005.
The Foundation Contract also includes incentives for BAE Systems to further transform its air sector business aimed at the cost-effective and efficient delivery of industrial capabilities to the long-term benefit of both BAE Systems and the MOD. BAE Systems’ long-term goal from an LTPA, which has been acknowledged by the MOD, is to establish a sustainable air sector business that supports the Front Line whilst also delivering the opportunity for the Company to earn profit.
In announcing Foundation Contract signature, Lord Drayson, Minister for Defence Procurement, said: “This contract is a significant step forward towards agreeing a Long Term Partnering Agreement with BAE Systems in the fixed wing sector so that it can more efficiently meet the needs of the Armed Forces in the future. We will now be working hard with the Company to negotiate a robust agreement that makes commercial sense to both sides by the end of the year.”
Mike Turner, Chief Executive of BAE Systems commented: “The signature of the Foundation Contract should be seen in the context of our continuing commitment to the Defence Industrial Strategy. With goodwill and continuing commitment from both sides, this Contract should lead to the significant goal of a binding agreement between us that will provide effective through-life support to the RAF’s fixed wing fleet for front line service. For our part, we fully understand the need to further transform our air sector business so that we can deliver on this”.
The DIS Fixed Wing chapter highlighted that BAE Systems and the MoD were negotiating a Long Term Partnering Agreement (LTPA) in order to help sustain the key industrial skills and capabilities needed to support and upgrade the current and future aircraft fleet.
Last year, both sides agreed to work towards an LTPA by the end of 2007 which delivered:
For BAE Systems:
• Strategic dialogue on potential future orders enabling better planning
• A sustainable business with the opportunity to earn profit
• A coherent customer with a strategic business approach delivering the right incentives for optimum behaviour
For MoD:
• Capacity reduction leading to cost savings
• Sustainment of industrial capabilities and capacity to support the front line
• Cost effective delivery of Industrial Capabilities/Capacities
The Foundation Contract is an important milestone in meeting the above objectives as it means we remain on course to deliver a full and legally binding LTPA by the end of 2007.
Specifically, the Foundation contract will help construct the sound ‘foundation’ elements of an LTPA. It is comparable to a typical CADMID* Assessment Phase, helping provide confidence to both parties and pave the way for the detailed negotiation of an LTPA by the end of 2007.
The Foundation Contract will include incentives for BAE Systems to further transform its air sector business and the cost-effective and efficient delivery of the industrial capabilities to the long term benefit of MoD and the BAE Systems. This includes for example delivering value from the recent merger of BAE Systems military aircraft production and support businesses, into one Military Air Solutions business entity focussed on the delivery of through-life capability from cradle to grave.This mirrors transformation steps and organisation changes being implemented within the MoD.
(* Concept, Assessment, Demonstration, Manufacture, In Service and Disposal)
About BAE Systems:
BAE Systems is a 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 88,000 employees worldwide, BAE Systems' sales exceeded £13.7 billion pounds sterling (US25.4 billion dollars) in 2006.
For further information contact:
Malcolm Adams, BAE Systems
Tel: +44 (0) 1772 854 177 Mob: +44 (0) 7971 114 483
Malcolm.adams@baesystems.com
Lisa Hillary-Tee, BAE Systems
Tel: +44 (0) 1252 384934 Mob: +44 (0)7801 718994
lisa.hillary-tee@baesystems.com
Issued by:
BAE Systems, Farnborough, Hampshire GU14 6YU, UK
Tel: +44 (0) 1252 384710 Fax: +44 (0) 1252 383947
www.baesystems.com
