Racal forms new division to do battle for pounds 500m telecom project

MARY FAGAN

industrial correspondent

Racal has formed a new company to spearhead its bid for the hotly-contested Ministry of Defence telecommunications project, worth about pounds 500m over five years. Racal Managed Defence Services will be chaired by David Elsbury, chief executive of Racal Electronics.

The project involves the creation of a seamless digital telecommunications system con- necting MoD staff inWhitehall as well as Army, Navy and Air Force sites around Britain. The network would serve 200,000 users at 1,000 locations and replace 50 different networks used by various parts of the defence services.

Until now the MoD and armed forces have run their own networks for security reasons, often using capacity leased from BT. But the need to cut costs has forced a fresh look at whether the job could be done as well, and at much lower cost, by using outside contractors.

Bidders for the project will be expected to cut the Government's pounds 168m annual running costs by 40 per cent. The pounds 100m-a-year contract is intended to last for five years in the first instance but could well be extended, depending on the detail in the bid.

Racal's partners are Logica, the software and services firm, and WS Atkins. They are lined up against teams led by BT, Northern Telecom of Canada, and GPT - owned by GEC and by Siemens of Germany.

The rivals are expecting a shortlist to be issued next month with final bids due for submission in the new year and the contract awarded in the spring.

So-called managed network services have become increasingly important to Racal, whose chairman is Sir Ernest Harrison, in the commercial and government spheres. The group runs the Government Data Network, the Department of Social Services' nationwide voice network and the National Lottery data communications network.