A union flag flies over the entrance to the naval dockyards, where BAE Systems are also located, in Portsmouth, southern England, Nov. 6, 2013. Reuters/Stefan Wermuth

(Reuters) - BAE Systems has won a contract worth up to $1.2 billion to build a new type of armored vehicle for the U.S. Army, the company and Army officials said on Tuesday.

The British-based defense contractor said in a statement the program aims to engineer and produce a limited initial number of the vehicles, called the Armored Multi-Purpose Vehicle (AMPV), to replace the Vietnam War-era M113.

The initial 52-month term of the contract, worth about $383 million, calls for 29 vehicles to be produced among five variants, with an option to follow with 289 more, for a total contract value of $1.2 billion, BAE said in a statement.

"The AMPV capitalizes on proven Bradley and M109A7 designs, meeting the Army’s force protection and all-terrain mobility requirements while enabling the AMPV to maneuver with the rest of the Armored Brigade Combat Team (ABCT)," the statement said.

Work is expected to start immediately, mainly at the company’s facilities in York, Pennsylvania, and Sterling Heights, Michigan, it said.

The program was aimed at ultimately replacing 2,897 M113 vehicles, at the brigade and below level, the U.S. Army said in a statement announcing the contract award. It said replacements for another 1,922 M113s supporting Echelons Above Brigade may have different requirements, which had yet to be decided.