The Driver and Vehicle Licensing Agency (DVLA) has awarded a contract for the administration of UK drivers' licences to Gemalto.
According to TechMarketView, the original tender notice valued the contract at between £60 million and £300 million.
Gemalto, which replaces incumbent IBM on the contract, will be responsible for providing between 40 and 80 million secure permit documents as part of the multi-year deal.
These include digital tachograph cards and biometric residence permits.
Simon Tse, CEO of DVLA, said: "The new contract we have signed delivers millions of pounds of saving for the UK taxpayer and allows DVLA to issue even more secure driving licences, and provide the next generation of high security smart cards for other parts of UK government."
IDC analyst Jan Duffy said that the contract award was an indication of how competitive the government market has become.
"It also confirms that indeed the UK government is true to its word that its buying behaviours and patterns would change," she said.
"Gemalto is a global player, so is not a newcomer to the secure identity card market, but this might be their first UK government contract. It's certainly a big win for them."
The DVLA will begin deploying Gemalto's Sealys line of products from 2013.
An IBM case study from 2008 shows that the company worked with DVLA to develop a secure photocard driving licence using technologies from Trb, a Swiss supplier of secure cards, and Mhlbauer, a German supplier secure-card manufacturing machinery.
Under the incumbent contract, IBM helped to develop a polycarbonate, non-chip card that met EU standards, but could also feature a chip to make it a smartcard in the future.
To transfer data from the DVLA database onto the card, the agency used InfoPrint software to send data to a laser engraving machine, which burned the information to a layer inside the card.
IBM also developed image evaluation technology to enable the DVLA to check photographs drivers submitted for their licences.
In its annual reports for 2010-11, DVLA revealed it was the largest purchaser across government for the provision of blank polycarbonate cards.
IBM still, with Fujitsu, holds an IT outsourcing contract with the DVLA. The contract for IT and transformation services was extended to 2015 in November 2009, with the contract renegotiation resulting in £17.3 million in savings in 2010-11.
Cabinet Office minister Francis Maude's discussions with key government suppliers helped the DVLA to achieve additional savings last year of £11.5 million and £5 million from IBM and Fujitsu, respectively.