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MoD oversees lucrative Saudi defence contract

Ministry of Defence is responsible for ensuring ‘governance’ in Sangcom project

At the heart of a massive Saudi defence deal and the flow of money through the Cayman Islands lies the UK’s Ministry of Defence.

The ministry runs the contract, known as the Sangcom project, to supply communications equipment to the Saudi Arabian national guard.

Sangcom – short for the Saudi Arabian national guard communication project – is covered by a government-to-government agreement between the UK and Saudi Arabia.

The Saudi government pays the MoD, which then pays the prime contractor, GPT Special Project Management

As Exaro reveals today, officials at the UK’s Ministry of Defence (MoD) were aware of secret offshore payments linked to the £2 billion defence contract with Saudi Arabia.

The MoD is the lynchpin ensuring delivery of the programme, overseeing all payments and imposing good governance. This includes ensuring that the Saudi Arabian national guard complies with MoD procurement procedures and ‘value for money’.

The department says that it has 45 staff based in Saudi Arabia in its Sangcom team, including civilians and military personnel, although documents obtained by Exaro show that the number was as high as 75 last year.

The graphic shows the flow of money in the Sangcom project.

At the top of the team structure is the ‘strategic review board’, which meets at six-monthly intervals. Below that is the ‘programme board’, which meets quarterly. The third tier is the ‘delivery board’.

The Saudi government pays the MoD, which runs a special Sangcom programme account. The MoD then pays the prime contractor, GPT Special Project Management, a British subsidiary of EADS, Europe’s biggest defence company.

Although the offshore payments revealed by Exaro were made between 2007 and 2010 to companies registered in the Cayman Islands, Sangcom dates back to 1978.

The MoD undertook to modernise communication technology for the desert kingdom’s national guard, an elite military force that protects the Saudi royal family from uprisings and coups.

Sangcom has been a rolling programme, with a series of agreements, each under a separate ‘letter of offer and assistance’. The current phase is a 10-year project, from 2010 to 2020, reportedly worth £2 billion.

GPT Special Project Management has been prime contractor for Sangcom since soon after the company’s formation in the UK in 1995.

The company’s accounts for the financial year 2010 show profit before tax of 75.8 million Saudi Arabian riyals (SAR) and turnover of SAR288.2 million, roughly £12.8 million and £48.6 million respectively.

It is one of a small number of military telecoms companies approved by the MoD to work on sensitive defence projects.

GPT is registered to the same address as its immediate parent company, Paradigm Services, the satellite-communications specialist, at Holborn Viaduct, central London. But GPT’s principal UK office is at Aztec West business park in Bristol, where support staff use video-conferencing to assist the main operation in Saudi Arabia.

According to its accounts, it had 347 employees at the end of 2010, but only five of them worked in the UK. It has staff across Saudi Arabia, but its headquarters is in the al-Faisaliah Tower in the capital, Riyadh.

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