The Ministry of Defence said it will save £600m over 10 years with a joint personnel administration system to serve all UK armed forces to be built by global IT services giant EDS.
The systems, to be built for the Armed Forces Personnel Administration Agency, will serve the Royal Navy, the RAF and the Army replacing standalone systems for these forces from 2006 to 2007.
The system will be developed under the terms of a £300m contract signed between EDS and the MoD in 1997 that runs until 2009.
JPA is part of the MoD's Defence Change Programme, which the government believes can become a benchmark for future relationships between the public sector and the IT supplier community.
The prospect of failure in the 12-year Public Finance Initiative contract caused the MoD to renegotiate terms with EDS in 2001. At the time, Malcolm Pledger, deputy chief of defence staff (personnel) said there had been a "failure" of the original contract between EDS and the AFPAA.
As a result contract required "substantial reconstruction" as the two sides seek to improve the timeliness, accuracy and cost of handling the pay and pensions of hundreds of thousands of UK service personnel.