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Contract News Update

Date: 14 May 2012

Smaller and medium-sized contract wins are fundamental to Serco's growth and value creation; in addition to larger wins, this release updates on a broad selection of signed contracts and preferred bidder appointments so far in 2012.

Ferry services to the Northern Isles in Scotland
Serco has been selected as preferred bidder by Transport Scotland to deliver lifeline ferry services to the Northern Isles. Serco will operate the ferry services for freight and passengers between the Scottish mainland and the Orkney and Shetland Islands, providing essential access and supplies for the islanders. This will build on Serco's experience of managing and transforming critical local transport services such as Northern Rail, Scatsta Airport on the Shetland Islands and London's Woolwich Ferry. Serco also has extensive operations in the international marine market including services for the Royal Navy through which we operate more ships under the UK flag than any other company. The new six-year contract is expected to have a total value of approximately £350m.

UK asylum support services
Serco has signed a new contract with the UK Border Agency (UKBA) to deliver the COMPASS project (Commercial and Operational Managers Procuring of Asylum Support Services), providing accommodation, associated services and transport for asylum applicants. Serco is prime contractor for two of the six UKBA regions, the North West of England and Scotland & Northern Ireland. To deliver the programme, Serco is working with a network of well-established regional providers including a number of small and medium sized enterprises and voluntary sector suppliers. As prime contractor, Serco will use its supply chain management expertise to support its providers, helping organisations to develop and supply the best possible service. This includes providing a robust contract management and quality assurance regime, financial management, technology infrastructure and case management, implementation and logistics expertise and capacitybuilding support. The five-year contract has an estimated total value of approximately £175m.

Extension to Northern Rail franchise
Serco's contract for the operation of Northern Rail has been extended following the Department for Transport (DfT) granting a continuation of its Northern Franchise. This means Northern will continue to operate local and regional rail services across the north of England until 1 April 2014. Northern's franchise was originally due to end on 15 September 2013, after it had already secured a two-year extension in 2010 for improving the punctuality and reliability of its services. The Franchise Agreement contained a clause for the DfT to grant a franchise continuation of up to seven four-week reporting periods, which it has chosen to do. The extension has a value to Serco of approximately £150m.

Community health services for NHS Suffolk
Serco has been selected as preferred bidder to provide a wide range of community health services which include community nursing, specialist nursing, management and operation of community hospitals, speech and language therapy, specialist children's services and community equipment services. Serco will work with a range of NHS and third sector partners to create a unique model of integrated service delivery for Suffolk. This will address local health and geographical needs by simplifying services and processes, and utilising new technologies to improve accessibility and address the needs of rural patients. The model focuses resources to the frontline, increasing the time clinicians spend with patients and improving the overall patient experience. The new contract is expected to have a total value of approximately £140m over three years.

Secure escorting services for young people
Serco has been selected as preferred bidder by the Youth Justice Board to provide secure escorting services for young people to and from courts and establishments such as Secure Children's Homes and Secure Training Centres. Serco will tailor the service to meet the particular needs of young people. This will include escorting young people safely and securely between locations; providing information and advice; risk assessment and managing their welfare. In addition, Serco will provide in-court care and supervise young people who are admitted to hospital. The new contract, which covers England and Wales, is expected to have a total value of approximately £10m over four years.

Management and operation of the Atomic Weapons Establishment
The arrangements for the next pricing period for the Atomic Weapons Establishment (AWE) from 1 April 2013 to 31 March 2018 have been successfully concluded. Serco and its joint venture partners (Lockheed Martin and Jacobs Engineering Group Inc.) manage and operate AWE on behalf of the UK Ministry of Defence (MOD). AWE plays a crucial role in national nuclear security and the defence of the United Kingdom, and is operated under a 25-year contract. The contract is delivering value for money for the MOD whilst achieving excellent performance in the quality and timeliness of our programme delivery. Under the agreed arrangements, the joint venture will again be incentivised to save money against the future programme. Serco's share of revenue is expected to remain around £300m a year and approximately £1.5bn will be added to our order book.

Support services to the UK's Royal Air Force and Naval Air Command
Serco has successfully rebid to provide a range of operational support, engineering and training services, known as Multi-Activity Contracts (MACs). For the UK's Royal Air Force (RAF), at Northolt we will continue to provide aviation and engineering facilities and logistics support - including maintenance and associated support of 32 (The Royal) Squadron - at this major RAF airport and various satellite stations in and around London. A second MAC will similarly continue to provide aviation and engineering facilities and aircraft support at Royal Navy Air Stations (RNAS) Yeovilton and Culdrose, together with various satellite stations. These two MACs, including option years, have a total value to Serco of approximately £70m and £40m over seven and five years respectively.

Pre-deployment training and support for British Army
For the UK Ministry of Defence (MOD), Serco has been awarded a new contract to provide training and support to the British Army prior to deployment on operations around the world. Known as the Contemporary Operating Environment Force (COEFOR), and awarded by the British Army's Headquarters, under the contract Serco will provide critical pre-deployment training including essential language, culture and operational environment skills, and will create realistic training conditions to prepare UK military forces for deployed operations primarily in Afghanistan, but also worldwide. The contract, which would run from April 2012 to December 2014 including an option year, has a total value of approximately £55m.

Leadership for corporate services to the UK Ministry of Defence
Serco has been awarded a new contract to take over the leadership of Defence Business Services (DBS), which provides corporate services for the MOD such as civilian human resources, finance, information and security vetting. Serco is providing an executive leadership team who will work with DBS staff to transform the organisation into a lean and effective shared services centre, building on private sector best practice. DBS will continue to be part of the MOD and DBS personnel will continue to be employed by the MOD, with the same terms and conditions. Serco will be paid by results, designed to ensure that the MOD receives both service continuity and improvements in DBS effectiveness and efficiency. The contract is valued at around £36m over its initial four-year duration.

Non-custodial services for German prison
Serco is preferred bidder in the rebid for its contract to support Hünfeld prison in Hessen, Germany. Originally opened in 2005, Serco won the country's first major prison contract as the government sought to improve its prison services with the support of private suppliers. Serco will continue to provide all noncustodial services including psychological, medical and educational care, rehabilitation, catering and facilities management. The rebid contract is expected to have a total value of approximately ?38m over six years.

UK air defence radar technology
Serco has been awarded a new prime contract by the MOD to further deploy radar technology to prevent wind farms interfering with the UK's air defence radars. New radars will be provided at Remote Radar Head (RRH) Brizlee Wood, Northumberland and RRH Staxton Wold, North Yorkshire. In its capacity as prime contractor, Serco is working with Lockheed Martin to develop and provide the technology, and is also responsible for the overall system performance, undertaking the safety case analysis, introducing new ground to air communications and providing ongoing consultancy. The innovative technological solution clears a path for the MOD and the Department of Energy and Climate Change (DECC) to enable the further development of wind farms and so help the Government realise its target of reducing carbon emissions. The new contract has a total value of approximately £27m over two years.

Air Traffic Services to the UK's Army Air Corps and Joint Helicopter Command
Serco has successfully rebid its contract for the provision of air traffic services at Middle Wallop and Netheravon Airfields. Since 1997, Serco has continuously provided air traffic control, air traffic engineering and flight planning services in support of the overarching Defence Helicopter Flying School contract at Middle Wallop, and tri-service pre-deployment mission rehearsal exercises at Netheravon. The contract has a total value of approximately £8m over four years.

Technology support to military satellite communications
Under a contract awarded in 2003 to Paradigm by the UK MOD that runs through to 2022, Serco continues to provide support for secure military communications throughout the world via the Paradigm-owned Skynet 5 satellite constellation. To meet the customers' evolving needs over and above the core contract, additional staffing resources are being provided by Serco to support the delivery of: cryptographic management; security services; network planning, operations and maintenance; space operations; logistics support; and training provision. The additional value to Serco is approximately £6m over one initial year.

Integrated facilities management for NHS foundation trust
Serco has been selected as preferred bidder for a new contract to provide integrated facilities management (FM) services to the East Kent Hospitals University NHS Foundation Trust in the UK. Serco will be delivering services to three acute hospitals, two community hospitals and several small clinics in the area. Providing a range of non-clinical FM services, Serco will work in partnership with the Trust to modernise services across the estate and contribute towards improving clinical service provision and the patient experience. Amongst numerous new developments, Serco will introduce Ward Housekeepers as the link between clinical and cleaning staff, make greater use of technology and implement a new centralised helpdesk to manage resources to best effect. The contract, comprising an initial seven-year period and a maximum three-year extension, is expected to have a total value of approximately £140m over ten years.

Facilities management for Northern Ireland Civil Service
Serco has been awarded a new contract by the Northern Ireland Civil Service (NICS) to deliver a range of facilities management and support services to twelve Government departments and a number of nondepartmental public bodies. Responsibility covers sites located across Northern Ireland and the transfer of around 380 staff. The contract has a total value of approximately £16m over four years.

Leisure services management for local authorities
Serco has been awarded new contracts with two local authorities - Mansfield District Council and Shropshire Council - to provide a comprehensive and high quality range of health, leisure, fitness, wellbeing and community-focused services. Serco already manages a total of 68 facilities on behalf of community leisure trusts, local authorities, universities and Sport England, with a track record of improvement through investment in areas such as building infrastructure, new technologies, new marketing tools and environmental efficiencies. The two new contracts have a combined total value to Serco of approximately
£6m over ten years.

New BPO contract with leading UK retailer
Serco has signed a new Business Process Outsourcing contract to provide and enhance the efficiency of customer contact services for Shop Direct Group (Shop Direct), the UK's leading online and home shopping retailer. Serco will assume responsibility for managing customer contact across Shop Direct's brands. The partnership will work together to significantly enhance service levels and efficiency through the investment in the latest technology, such as web chat and mobile digital services, which are designed to seamlessly integrate online and mobile into customer contact management. The contract represents a significant further step forward for Serco's recently formed Global Services business, which combines the capabilities from Intelenet and The Listening Company as well as the additional scale advantage from Serco's other BPO operations. Our proposal includes a blend of on-shore and off-shore service provision. Around 1,800 contact centre and administration employees will transfer to Serco. The ten-year contract has a total estimated value of approximately £430m.

Shared services proposition for UK health sector
Serco has signed the agreement to operate the Anglia Support Partnership (ASP), Serco's first shared services proposition in the emerging market for middle and back office support to the UK health sector. The support services provided currently include: operational and specialist IT; finance operations; employment services; contracts management; procurement; primary care support services; occupational health; risk management; catering; and estates and property. A new framework agreement permits the call-off of additional services including: commissioning advice and related support services; cost reduction, efficiency advice and consultancy services; and patient administration. The framework enables, amongst others, all NHS organisations in the new Midlands and East Strategic Health Authority to access services equivalent to around 25% of total NHS spend. The annual revenue to Serco of the current contracts is approximately £30m, equivalent to an initial total contract value of £120m over an average of four years.

Contact centre services for UK retail customers
Serco has been awarded a new partnership agreement with Freemans Grattan Holdings (FGH), the UK arm of the world's largest distance selling organisation - the Otto Group. Serco will provide customer contact services for all FGH's UK brands, managing seven million customer contacts every year. The contact centre in Sheffield will be operated by Serco and will deliver all aspects of customer contact including customer enquiries, inbound and outbound sales, credit applications, payments, order processing, white mail and email handling. The ten-year contract with FGH has a total value of approximately £55m. An equivalent contract has also been awarded by Ideal Shopping, a leading digital retailer in the UK, valued in total over five years at £17m.

Education support to Glasgow's primary schools
Serco's property and IT joint venture with Glasgow City Council, known as Access, has been further extended to include Information, Communications and Technology (ICT) support for the authority's Pre-12 schools, Additional Support for Learning (ASL) schools, nurseries and other establishments. This follows last year's expansion to provide equivalent services to 29 secondary schools, and means Access is now responsible for supporting the learning of 80,000 Glasgow school children. The education property team will also transfer to Serco. These additional services have a total value of approximately £20m over six years.

Loyalty programme support for leading global online travel company
Serco has entered into a new partnership in the US with a leading global online travel company to book travel and hospitality services for an award-winning loyalty program. A team of specialist customer travel professionals will be dedicated to supporting the client's members who want to redeem their reward points to book trips. Support includes providing travel advice and options, assisting with navigation of the travel website, placing bookings and making subsequent adjustments. The majority of the contract will be served on-shore through Serco's Fargo, North Dakota and Campbellsville, Kentucky delivery centres. An additional 300 travel and hospitality roles will be created, with many of these supported by a unique 'work from home' model to provide flexibility to the employees. Additional near-shore support will be provided from Guatemala. Over three years, the combined contracts have a total value of approximately US$34m.

Back office support for major UK private medical insurer
Serco has signed a new agreement with Pru Health, a leading UK-based healthcare insurance provider backed by international financial services companies Prudential and Discovery Holdings. Under the agreement, Serco will set up off-shore delivery centres to provide back office services such as indexing, invoice processing, claims adjudication and policy maintenance. The five-year contract has a total value of approximately £10m.

Undersea surveillance for the US Navy
Serco has successfully rebid its contract to support Naval Sea Systems Command Integrated Undersea Surveillance System (IUSS) Logistics Support Facility (LSF). Serco is responsible for the operation of the sole logistics support depot for the US Navy's IUSS, including both ship and shore activities. We support programme management, policy development, procurement, technical research, configuration management outfitting and warehousing. The logistics IT system utilised by IUSS was developed in-house by Serco during the previous contract. The contract has a nine-month base period with four additional option years, with a total value of US$19m.

Forecast technical support services for the US Army
Serco has been awarded a new contract to perform a full range of technical support services for sustainment and operations of the Active Army Strength Forecaster (A2SF) System. The A2SF System provides the US Army with forecasts to reflect political and military climate changes to support the budget process, policy decisions, congressional inquiries and personnel management decisions. Serco will use sophisticated algorithms and forecasting models, as well as delivering operations and maintenance support, data conversion, information assurance and security and training solutions. The contract has a one year base period with four additional option years, with a total value of US$9m.

Medical support services to the US Air Force
Serco has been awarded a place on the new Consultant, Advisory, and Technical Services (CATS) contract vehicle that will provide support services to the US Air Force Medical Service (AFMS) at 69 Air Force Medical Treatment Facilities in the United States and its territories. Serco is among 13 awardees on the Indefinite Delivery, Indefinite Quantity (IDIQ) contract, which is valued at US$985m over a five-year ordering period. Serco will compete for task orders for Advisory & Assistance Services (A&AS) that will help reduce critical workload demands being placed on the Air Force Medical Service. Services will include support in the areas of health care administration, executive assistance, financial analysis, business process consulting, policy analysis, engineering and technical services, and others.

Modelling and counselling task orders to support the US Navy
In December 2011 Serco won an IDIQ contract to provide Manpower, Personnel, Training and Education (MPTE) planning support, policy and program analysis, financial program management and training solutions for the US Navy. Serco's portion of the contract vehicle has a ceiling value of US$47m, and in early 2012 we have won two task orders. The first is to provide forecasting models to support Navy personnel readiness and insure the budget is prepared to support any forecasted changes, and is valued at a US$11m. The second is to provide counsellors in support of wounded Sailors and Coast Guardsmen, and is valued at US$4m.

IT services in support of US Air Force NexGen
Serco is part of the CACI team that was awarded a US$78m US Air Force NexGen IT Service Provider contract to provide integration, sustainment and deployment services. The NexGen enterprise transformation program was established to provide the Air Force with accurate, real-time data necessary to make strategic decisions and better manage their resources. The team will support the Air Force Office of the Civil Engineers by replacing legacy IT systems with current technologies. As the IBM TRIRIGA expert on the team, Serco will be responsible for deploying the designated integrated workplace management system to 170 Air Force bases around the world. Initial work awarded to Serco has an estimated value of approximately US$7m.

Program support to the US Air Force Materiel Command
Serco has secured follow-on work to provide analytical, technical, and program office support to the Air Force Materiel Command (AFMC) Depot Operations Division. Serco will oversee the logistical analysis in order to help the Air Force to manage the depot maintenance functions including maintenance, repair, and overhaul of aircraft and related equipment. The additional task order is valued at US$11m.

Engineering and IT services to the Department of Defence
Serco provides a range of mission-critical engineering and IT services under the C4I2TSR contract vehicle. These services include engineering, systems integration, hardware procurement, software development, technical support, installation testing operations and maintenance. Additional task orders in the year to date are valued in total at US$11m.

Logistics expertise to the US Army
Under the Army's Logistics Civil Augmentation Program (LOGCAP), Serco oversees the performance of other contractors and provides programme management, cost analysis, logistics planning and administrative services around the world in support of the United States and allied forces during operations. Additional task orders in the year to date are valued in total at US$11m.

New prison contract in Auckland, New Zealand
Serco's consortium has been selected by the New Zealand Government as preferred bidder to provide and operate the new Wiri prison in Auckland. Under the design, construct, manage and finance contract, Serco will manage the new 960-place male prison once it becomes operational in 2015. The prison will be built by Serco's construction partner Fletcher Construction with the design drawing on Serco's international experience of operating prisons to ensure it complements the innovative approach to reducing reoffending in a safe and secure environment. The exact price of the 25-year contract will not be finalised until negotiations are complete, but the maximum potential price has been capped at NZ$900m. This covers design, construction, maintenance and operation over 25 years.

Young Adults Facility in Australia
For the Western Australian Department of Corrective Services, Serco has signed a contract to operate and maintain a new Young Adults Facility. The facility is the first of its kind in Western Australia and marks Serco's entry into the youth justice sector in this region. Accommodating up to 80 male offenders aged 18-24 years, Serco will provide: rehabilitation and reintegration services; care and wellbeing services; custody and containment services; and facilities management. Our bid emphasised the importance of seamless case management, coupled with a through-care approach, specifically focused on individual rehabilitation and reintegration into the community. The contract has a total value of around A$50m over five years.

Passenger information and support services in Australia
Serco will continue its 17-year partnership with the Public Transport Authority in helping customers access Perth's public transport systems. Serco provides InfoLine services, customer feedback administration services, ticket administration services and SmartRider forms processing. External research by Transperth into the services showed a high level of satisfaction and there is a continual focus on customer service through improved technologies, processing and staff development. The extended contract has a total value of A$30m over five years.

Hospital facilities support in Hong Kong
For the Hong Kong Hospital Authority, Serco has been awarded a new support services contract for the Prince of Wales Hospital. Serco will provide specialised non-clinical facilities management, including cleaning and transportation services. The hospital is one of the busiest in Hong Kong, with over 1,000 beds and complex facilities. The contract has a total value of approximately HK$90m over two years.


For further information please contact Serco:
Stuart Ford, Head of Investor Relations T +44 (0) 208 334 4122
Marcus De Ville, Head of Media Relations T +44 (0) 208 334 4388

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Last Updated: 14 May 2012