Consortiums to splash out £5bn in UK's big Coastguard sell-off

Britain's coastal search and rescue operations up for grabs in Government's controversial sale of public services

Four consortiums of British and overseas companies are bidding to secure a controversial £5bn contract that will see the partial privatisation of HM Coastguard.

The deal, involving the outsourcing of Britain's coastal helicopter search and rescue operations, is one of the largest private finance initiatives in the UK to date.

The Ministry of Defence and the Department for Transport will begin a process of "competitive dialogue" with each of the bidding groups next month after four months spent vetting their financial and technical capabilities.

The contract, estimated to be worth between £3bn and £5bn, includes everything from the provision of helicopters to the training of personnel and maintenance of equipment at 12 coastguard bases around the country. The contracts will have a term of between 20 and 30 years.

US defence giant Lockheed Martin has formed a consortium with shipbuilding and services group VT and British International, a helicopter company. It is up against a team of Thales of France and Canada's CHC Helicopter and another comprised of Bristow Helicopters, FB Heliservices, a joint venture between Cobham and Bristow, and service company Serco. A fourth group is made up AgustaWestland and Bond Helicopter.

The outsourcing deal is likely to be another controversial example of the Government's continuing commitment to transfer huge swathes of Britain's public services to private ownership as it seeks to cut costs and increase efficiency.

Last month, the Defence Secretary, Des Browne, awarded a 25-year military training contract worth up to £16bn to a consortium led by QinetiQ, the former Government defence research labs. That sparked accusations of a conflict of interest on the part of the Government, which is a 20 per cent shareholder in QinetiQ.

The MoD and the Maritime and Coastguard Agency, which is part of the DfT, will begin talks with the bidding groups on 12 March to clarify its requirements and allow the bidders to hone their offers.

Search and rescue involves a wide range of services and government groups, including the police, fire and ambulance services, as well as the Royal National Lifeboat Institution.

The bidders will eventually be whittled down to two, which will then face off in an auction. The contract is not expected to come into effect until 2012. CHC and Thales UK won an interim five-year contract to carry out coastguard's helicopter services at four UK bases.