BAE Systems has signed a new contract with outsourcer Xchanging for procurement services.

Earlier this month, BAE replaced the outsourcer with Logica on another contract, for HR business processes.

The new three year contract for procurement will follow the end of the current UK deal with Xchanging at the end of 2012, but the outsourcer admits it will "have a lower margin than the existing contract".

TechMarketView analyst John O'Brien said of the deal: "It has something of a 'consolation prize' feel to it. Xchanging lost out on the bigger prize, the renewal of its HR BPO contract with BAE to rival Logica earlier this month."

That other deal was worth £18 million per year to Xchanging, although it only made a modest five percent margin, said O'Brien. Renewals "can come at a high price" to outsourcers, he said.