The Government Communications Headquarters' (GCHQ) proposed new Cheltenham building, the largest so far provided under the Private Finance Initiative, has been given the go-ahead by Ministers and work on its construction will begin shortly. In early 2003, building work should be finished, with full occupation following in mid-2004. Contracts with construction and services consortium Integrated Accommodation Services (IAS) - comprising Carillion, Group 4 and BT - are to be signed within the next week.

The outdated buildings on two existing sites in Cheltenham - many of Second World War vintage - are now inefficient and expensive to run. The £330m new building that will replace them has been designed to the most modern standards and will ensure GCHQ's readiness for the national security and intelligence-gathering challenges of the 21st century.

The 30-year contract also requires IAS to provide maintenance and ancillary services at the new building including security, catering and cleaning. These costs, the construction costs and additional costs agreed by Ministers for the transfer of essential operating equipment from current sites, total some £800 million (at net present value) spread over the next 30 years. The IAS consortium is proposing to finance both capital expenditure and interest through a £400m bond.

GCHQ Director Francis Richards said today: "This is an excellent deal for GCHQ. It provides a clear way forward to sustain GCHQ's capabilities for the next thirty years and well beyond. It is an exciting project, combining maximum efficiency, better working conditions for our staff and excellent value for money."

Anna Lagerkvist