THE CONTEST to win Britain’s largest contract under the Private Finance Initiative enters a new phase this week, amid signs that the bidders have stepped up campaigns against their rivals.

Two consortiums of some of the world’s largest aerospace companies are bidding for the £13 billion contract to supply and service about 20 air- refuelling tankers for the Royal Air Force.

Final bids for the Future Strategic Tanker Aircraft are expected to be tabled with the Ministry of Defence (MoD) this week and the preferred candidate will be selected by the end of this year.

Both sides have emphasised high stakes in what is seen as the most ambitious PFI project to date, as it takes the concept into the front line of the military’s activities.

AirTanker, an Anglo-French consortium, told The Times that its rival’s bid would undermine the RAF’s long-term capability because it was offering reconditioned aircraft.But the Tanker & Transport Service Company (TTSC), the Anglo-American consortium, said buying new planes was a waste of money because they will fly infrequently.

Britain’s 26 ageing Tristar and VC10 refuelling aircraft need replacing, but, after delays in the tender process, new tankers are unlikely to enter service before 2008.

The consortiums are offering very different products and proposals for handling the service side of the 27-year contract.

AirTanker, made up of EADS, Thales, Rolls-Royce and Cobham, would supply new A330 aircraft from Airbus. The TTSC — Boeing, BAE Systems, Serco and Spectrum Capital — is offering converted former British Airways Boeing 767s.

Robin Southwell, who heads the AirTanker bid, said that using TTSC’s second-hand aircraft would, over the lifetime of the deal, “degrade rather than enhance the RAF’s long-term capability”.

He said that in buying new aircraft the RAF would get the most up-to-date equipment, important because the air force will probably end up using the tankers well beyond the contract date.

Mr Southwell said: “If you want me to say that over 20 years the competition (TTSC’s bid) will be cheaper, then I am happy to say that. But that cheapness comes at a cost in terms of degradation and potential of the aircraft beyond that date.”

Meanwhile, Keith Archer-Jones, director of TTSC, said that spending money on AirTanker’s new aircraft was a waste of taxpayers’ money because they would fly less frequently than normal commercial planes.

“We chose a used fleet because it means cheaper operating costs,” he said. “The MoD did not just pluck 27 years out of the air. It probably did not look beyond this horizon because by then there will be changes in technology and demands.”

The Governments of Italy and Japan have already chosen the Boeing 767 for their tanker fleet.

Both consortiums plan to earn revenues by leasing the aircraft to third parties, such as charter airlines, when they are not being used by the RAF.