Bidders on manoeuvres over MoD's plans for outsourcing

Bid teams have started forming to manage the Ministry of Defence's £23bn property estate ahead of a selection process that could start as early as next week.

For months, big-name outsourcing and property firms such as the FTSE 100's Serco and Land Securities have been circling the Defence Infrastructure Organisation's (DIO) plans to bring in a private sector partner. The formal invitation to bid will emphasise the need for "strategic change in the defence estate", according to an industry source.

It is understood that $10bn-turnover US giant Jacobs has teamed up with the property agent Jones Lang LaSalle while San Francisco-based URS Corporation is working with the UK construction and engineering consultant Capita Symonds.

Other parties have also started discussions with potential partners. In most cases, it is expected that a programme management-style group, which means companies that can oversee the development and rationalisation of a vast estate, would team up with firms that can micro-manage the needs of smaller bundles of property.

The MoD is on a huge cost-cutting programme and has identified its 93,000 acres of barracks, airfields and training areas as an area where it can make significant savings.

The DIO, which is the department's infrastructure division, believes it would be more efficient to outsource management of those properties and land.

The project is significant, as it will bring more private sector involvement in shaping the strategy of a department's property strategy. The selected partner is likely to have a significant role in deciding what land and facilities the MoD needs, and other departments may follow suit.

The risk is that this could lead to accusations of privatisation by stealth. However, that is not likely to stop a whole swath of other parties expressing their interest in the contract.