Singapore Markets closed

U.S. Marines award amphibious vehicle deal to BAE - U.S. official

By Idrees Ali and Mike Stone
FILE PHOTO: A union flag flies over the entrance to the naval dockyards, where BAE Systems are also located, in Portsmouth, Britain November 6, 2013. REUTERS/Stefan Wermuth/File Photo

By Idrees Ali and Mike Stone

WASHINGTON (Reuters) - The U.S. Marine Corps has awarded BAE Systems PLC <BAES.L> a contract for wheeled amphibious combat vehicles (ACV) that transport Marines from ship to shore under hostile conditions, according to a U.S. official and a person familiar with the decision.

The award is a blow to defence services company Science Applications International Corp (SAIC) <SAIC.N>, which was competing to be lead contractor on the vehicle.

The Department of Defense estimated that procurement and maintenance of all 208 vehicles in the programme will be about $6.2 billion (£4.7 billion) over their lifetime.

The new vehicles will replace the ageing fleet of expensive to maintain flat bottomed amphibious assault vehicles in service since 1972.

BAE could not immediately be reached for a comment. SAIC said it was "disappointed" their vehicle was not selected.

The award for an initial batch of 30 vehicles shifts the programme from its prototype and testing phase into low-rate production, which is scheduled to begin this year. The contract for the 30 vehicles amounts to about $190 million, the official said.

A recent report by the U.S. Government Accountability Office cautioned the Marine Corps from entering a second year of low-rate production until the contractor demonstrates the vehicles produced have consistently high quality manufacturing standards.

The acquisition cost for the 208 vehicles is expected to total about $1.2 billion, sources said.

Costs per vehicle would ease in the early 2020's if the Marines elect to continue production past 208.

BAE Systems partnered with Italian company Iveco Defense Vehicles to build its ACV offering.

In 2011, the Marines started a competition for the next generation of ACVs.

In 2015, it awarded SAIC and BAE development and testing contracts for the wheeled amphibious combat project.

The programme will be a replacement for the tracked Expeditionary Fighting Vehicle (EVF) that was being developed for the Marines by General Dynamics Corp <GD.N> before its cancellation in 2011 following large cost increases and technical issues.

The Marine Corps had spent $3.7 billion on development before cancelling the EVF programme.

(Reporting by Idrees Ali and Mike Stone in Washington; Editing by Sandra Maler and Bill Berkrot)