The Ministry of Defence has announced the shortlist for its 4bn Defence Information Infrastructure (DII) outsourcing contract. In an attempt to prevent the project from failing, in a similar manner to other large government IT contracts, the MoD is including strict performance-related penalty clauses that will allow it to change the service provider after just three years, or step in and change contractors if things go wrong.

The preferred bidder will eventually be given a 10-year contract to design and build a single information infrastructure for the MoD, covering some 177,000 desktops and disparate systems worldwide.

The DII shortlist features four consortia:

•   The EDS-led Atlas, with Fujitsu, Cogent, General Dynamics and LogicaCMG;

•   IBM with BAE Systems, Computacenter, Steria, NTL and Echelon;

•   Lockheed Martin with Deloitte Consulting, Hewlett Packard, QinetiQ, SAIC and Unisys;

•   The CSC-led RaDII group with BT, CGEY and Thales e-security.

The MoD will narrow this down to three bidders later this year and, following a review by the Office of Government Commerce, will award the contract in the first quarter of 2005. The MoD has not revealed figures for cost savings targets but said the single IT infrastructure is expected to provide 'greater efficiencies'.