A review of the non-combat fleet operated by the Ministry of Defence (MoD) is taking place in a bid to cut operating costs and drive efficiencies.

Since August 2011, the MoD’s leased fleet of 14,000-15,000 vehicles – the number varies according to demand – and an average 29,000 spot hires a month have been managed by Babcock International on a four-year contract with a one-year extension option.

The 12-month extension of the contract, called Project Phoenix, has been taken and a competitive exercise for a replacement contract – Phoenix II – is now underway.

The review will result in a new vehicle management contract being awarded in January 2016 with the contract due to go live the following September.

Vehicles are used for various tasks, ranging from operational activities such as bomb disposal, mountain rescue, emergency support to the civil authorities and the civilian communities as well as standard administration activities such as moving defence personnel and stores to support military operations or training exercises.

All cars, commercial and specialist vehicles are delivered through framework agreements compiled by the Crown Commercial Service (CCS), which is to take over management of the Phoenix contract from the MoD, as part of an expansion of its services.

An MoD spokesman said CCS was “looking to deliver savings across Government under a Cabinet Office initiative”. As a result, multinational management consulting firm McKinsey and Company has been employed to “look at near-term efficiencies”.

As part of the efficiency drive, Phoenix II will not only replace the existing fleet management contract, but two other contracts covering the UK and Northern Europe.

The tender document suggests that will involve the provision of fleet management, repair and maintenance services across a fleet in excess of 17,000 in addition to 200,000  rental bookings per year with more than 90% undertaken  in the UK.

The 2011 contract announcement suggested the deal was worth £338 million.

According to the tender document, the new fleet management contract will have an estimated value (excluding VAT) of between £40m and £150m over a contract length of between six and 10 years – a significant cut in the value of the contract compared with the current deal.

The spokesman said: “ contract will be for fleet management activities and will have a value of circa £10m per annum and will aggregate the three existing contracts into one. The overall intent of the contract is to drive greater efficiencies and improved utilisation of the fleet, thus reducing vehicle numbers. However, the number of vehicles is entirely driven by demand.”

The fleet management service will include the procurement, service, maintenance and repair of all vehicles, insurance and incident management, the handling of fines and related charges, work-related road safety management, and the provision of a telematics service.

The MoD told Fleet News that “£120 million is now the average spend on the provision and utilisation of vehicles per annum inclusive of maintenance”.

Earlier this year, defence secretary Michael Fallon questioned “how many cars and vehicles does the MoD and the armed forces really need?” adding “efficiency is nothing to fear”.

In July, following a national newspaper article which suggested the Treasury was furious about the military spending £120m on staff cars, an MoD spokesman said: “The Defence Secretary announced a fresh crackdown on efficiency earlier this year and was clear that this was one of the areas that needed looking at. That is happening and we are currently running a competition for a replacement contract which will deliver better value for the taxpayer.

“We need to bear in mind that the nature of defence is dynamic and the fleet of vehicles required will constantly change depending on the situation.

“A lot of these vehicles are used to support specialised activity such as responding to bomb disposal calls, transporting troops to training exercises and moving equipment. But we also need to do more to deliver efficiencies and that work is already underway.”

Babcock International declined to comment and directed all questions to the MoD.