Monday, 25 August 2008

BAE's 15 year ammo deal

The MoD has just signed a 15-year deal with arms company BAE Systems to supply ammunition to British troops and modernize the UK's outdated munitions factories; the agreement covers about 80 percent of the ammunition required by the U.K.'s Armed Forces. The deal, which could be worth up to £3 billion, comes a few weeks after the House of Lords upheld a 2006 decision by Britain's Serious Fraud Office to halt an inquiry into whether BAE offered bribes in exchange for lucrative contracts in Saudi Arabia. BAE said it will invest £120 million its Royal Ordnance munitions factories, some of which use machinery that dates back to WW2.
It said the deal would help meet the increased demand for bullets, mortar rounds and artillery shells caused by operations in Iraq and Afghanistan. According to the MoD in six months in Afghanistan the guys fired off: .50cal (198,000 rounds), 5.56mm (2,370,400 rounds), 7.62mm (2,233,800 rounds), 9mm (170,000 rounds), 81mm mortar (38,868 rounds) and 105mm (4,430 shells). As the BAE contract is to supply 230 million rounds of small arms and medium-calibre ammunition a year, you begin to wonder where the other 220 million rounds are going: target practice presumably.
The deal also means that Royal Ordnance, a hitherto ailing part of the BAE empire, takes on a much more economically viable appearance and it is quite possible that BAE may, at last, be able to offload the subsidiary; this of course could raise the thorny old problem of security of supply.