MoD deserts its post at Chelsea Barracks

Chelsea Barracks is in line to be sold off as part of a massive cost-cutting exercise by the Ministry of Defence (MoD), killing off plans to redevelop the site under a prime contract.

The news comes six months after the MoD pulled out of the £150m PFI Chelsea Barracks project (CJ 11 August 2004). At the time, the MoD cited concern at continuing the process with sole bidder Regalian Properties/Bovis Lend Lease. Officials said the scheme would probably be resurrected as a prime contract similar to Project MoDEL.

However, events have once more conspired to overtake the scheme. A major review of the Armed Forces is questioning the need to maintain any military barracks in the heart of London.

The review was triggered by the MoD White Paper Delivering Security in a Changing World, published last July. The paper set out plans to divert MoD funds to frontline capabilities by making efficiency savings of £2.8bn by 2007/08. These include plans to close larger military sites and to rationalise military headquarters in central London.

This has triggered yet another review of the Chelsea Barracks scheme by the MoD Investment Approvals Board. The Board has been looking at two options – to either let the scheme as a prime contract, or sell off the entire Chelsea Barracks estate. Sources say the Board has opted for the latter.

One source said: "The Chelsea Barracks project is dead in the water. The plan is to sell off the land, close down the barracks and move the personnel out of London. It just does not fit into the MoD’s long-term strategic plans."

A leading defence contractor concurred with this view. He said: "The review has raised fundamental questions about the long-term need for a barracks in central London. The word is it will be sold rather than redeveloped."

The sale of Chelsea Barracks would see 5ha of prime property in the heart of London released on to the market. The Treasury’s National Asset Register values the site at £58.5m.

An MoD spokesman said: "The Investment Approvals Board is reviewing a number of options for the Inner London Barracks project and will make its decision known in May."

The Chelsea Barracks scheme has been on a seven-year roller-coaster ride. The original project was delayed by an MoD review, downsized by £50m and then reduced to a sole bidder after the Amec/Berkeley Homes consortium pulled out of the competition (CJ 10 September 2003).

Then in August last year, the MoD Investment Approvals Board and a panel of Treasury officials aborted the PFI operation, leaving Regalian/Bovis Lend Lease facing an £800,000 bill for bid costs.

MoD officials were then tasked with setting up a prime contract, until the White Paper sent them scurrying back to the drawing board.