A consortium led by EDS has been selected as preferred bidder for the first stage of a 10-year, £4 billion IT contract to renew IT systems for the Ministry of Defence (MOD).

The preferred bidder status for the Defence Information Infrastructure (Future) project indicates that the government has agreed to enter into exclusive negotations with the Atlas consortium over the details of the contract.

The Atlas consortium comprises EDS, Fujitsu, General Dynamics, LogicaCMG, Cogent Defence and Security Networks and junior partners HP and IBM.

EDS, which weathered bad publicity last year for problems with a variety of systems it created for the Department of Work and Pensions (DWP) and the Inland Revenue, said it was proud to have won the contract.

The companies are charged with pulling together the MOD's multiple made-to-order IT systems into a single, fully networked and managed infrastructure that will be accessed by around 70,000 desktops around the world, an MOD spokesman said. The infrastructure is expected to incorporate 100 computer systems and hundreds of software applications, and will serve 320,000 users at 2,000 locations, according to the MOD.

The contract will be awarded in increments, with the first part valued at £2.3 billion. The production contracts for the first increment will be awarded to the Atlas members in the coming months, the MOD spokesman said.

After a three-year process, Atlas beat out the last remaining consortium, called Radii, which was led by Computer Sciences (CSC) and included BT and Thales.

The Atlas group will provide networks, servers, terminals, printers and associated operating software; services such as security authentication; productivity tools including office automation; e-mail messaging systems; directory services and hosting for applications.

"The MOD conducted a rigorous competition and believe Atlas will provide an effective, efficient and value-for-money service. It was the best overall bid for the modernisation of the defence department," the MOD spokesman said.

As part of the last stage of the bidding process, both groups were required to demonstrate their products to 25 users across the MOD and give a presentation on "strategic fit."

Some analysts had tipped Atlas to win, in part because the size of its core team made it better suited to the MOD's criteria that there be "no single point of failure," meaning alternate suppliers would be available for any part of the project. Additionally, EDS has worked with the MOD in the past. CSC, though a major player in the US defence sector, has had little experience in the UK defence market.

EDS acknowledged its failures earlier this week, not just with its work with the UK government, but also with its US$8.8 billion US contract to manage the US Navy/Marine Corps Intranet. But the company asserted that it is now stronger thanks to the lessons it has learned.