Qinetiq set to win £10bn deal to train armed forces

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Qinetiq, the defence research company that was controversially privatised earlier this year, is set to win a £10bn deal to train Britain's armed forces - one of the biggest contracts awarded under the Government's private finance initiative.

The contract, to provide all non-military training for the Army, Navy and Air Force, is due to be awarded by the Ministry of Defence before Parliament rises for the Christmas break, and a partnership between Qinetiq and the property company Land Securities is the front-runner to be selected.

The likelihood of Qinetiq being chosen increased yesterday after its rival for the contract, a partnership between the shipbuilder VT and Lockheed Martin of the US called Ascent, won a £6bn PFI deal to train military pilots for the next 25 years. The contract establishes VT as the country's leading provider of military flying training, and will further strengthen its rapidly growing support services business.

Qinetiq has won the backing of the Welsh Assembly for its bid for the MoD contract after pledging to locate the training facilities in South Wales, creating hundreds of jobs.

Graham Love, chief executive of Qinetiq, said he was hopeful of winning the deal, saying it had submitted a good bid, but he refused to be drawn further.

He was speaking as the company announced a 19 per cent rise in underlying pre-tax profits to £38.6m for the six months to the end of September. Qinetiq shares climbed 6 per cent to 186.75p but they are still 8 per cent below the 200p at which the company was floated in February. The sell-off attracted criticism because of the huge profits its management and private equity shareholders made in the float, and the lack of an offer to retail investors.

Mr Love said Qinetiq had a war chest of £300m to spend on further acquisitions in the US over the next two years. It has spent a similar amount buying North American companies in the past two years, and has set itself a target of increasing US sales to half the group total.

The company, which has been behind some of the most famous inventions of the past 50 years, including microwave radar, liquid crystal displays and Kevlar armour, is involved in trials of a new detector gun which enables security forces to spot and track potential suicide bombers remotely. US and British security forces are evaluating the equipment.

Qinetiq has also begun marketing of its Tarsier system, which detects debris on airport runways and could have averted the Concorde crash in July 2000. The equipment, which costs £2m a time, is now in use at Vancouver airport, and BAA will commence trials at Heathrow next year.