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02 Nov 04. The FT reported that BAE Systems, the defence group, saw the first fruits of its £355m acquisition of Alvis, the tank maker, when the Dutch defenceministry announced that an Alvis-made fighting vehicle was its preferred choice to replace the army’s fleet of armoured infantry carriers.

In a letter to the Dutch parliament, Henk Kamp, defence minister, said the contract, which still has to be approved by the legislature, would be worth €891m (£618m) once signed. He said Alvis’s CV-90, which is used by the Swedish and Norwegian armies, beat two other competitors – one an Austrian subsidiary of General Dynamics, the US defence group, the other a German consortium.

The Netherlands is expected to buy nearly 200 vehicles – which are similar to light tanks but with smaller cannons – with delivery beginning in 2007. Such a schedule would be faster than anticipated, but Mr Kamp said the ministry’s evaluation warranted replacing the army’s 1970s-era vehicles more quickly.

“Differences between the candidates are so significant a final selection of the CV-90 can be made now,” Mr Kamp wrote. “By choosing now, the delivery can be accelerated and start as of 2007.”

In his letter, Mr Kamp said the armoured carrier made by Steyr-Daimler-Puch, the Austrian group and a General Dynamics subsidiary, would need a complete overhaul to meet Dutch requirements, making it a high developmental risk. The German consortium’s Puma vehicle is being developed for the Bundeswehr, and Mr Kamp said because it had yet to be field tested, it also presented a high risk.

“By selecting the CV-90, the time risk is the lowest as it concerns a fully developed and tested product that can be delivered on short notice,” Mr Kamp wrote. “The possibility that the qualification vehicle will not meet the stated requirements is very minimal.”

The CV-90s are made by Alvis Hägglunds, Alvis’s profitable Swedish arm. BAE declined to comment on the Dutch decision because no contract had been formally awarded. The contract offered to BAE will have penalty clauses in case the company does not meet all requirements, but the measures were not disclosed.

Even though the Dutch ministry is confident in the CV-90, its cost – like the other two finalists – is “significantly above the available budget”, forcing the ministry to negotiate with parliament on the cost. Mr Kamp suggested buying special add-on armour for only 100 of the vehicles, which would save €25m.

He also suggested using some existing tanks due to be retired as recovery vehicles for the new infantry fighting vehicles, rather than procuring new ones immediately, which would save another €73m.

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