The contract work is being carried by Marshalls of Cambridge who do a lot of the deep maintenance level work for the MOD and also carry out some of the bigger modification programmes. The management of Marshalls will bill the MOD for the manhours required and the MOD will supply the parts, usually.
For a generic "big" modification or update, which requires help from an outside company, it usually works like this - The MOD will supply all the new equipment via a BOM (Bill of Materials) and give the company carrying out the work a "modification manual" of how and where to fit this equipment and then the contractors will do the work (fit new boxes, new wiring, new aerials, new controls/displays etc), including some very basic testing (self-test etc). While thats happening the RAF engineers will get training on the new system, how to fix it and how to fully test the system including any the 'secret' bits. I worked on two "big" modification teams when I was still in the RAF, on C-130J's (secure comms kit for Afghan) and on Merlin Mk3's (LAIRCM) alongside both Marshalls and Qinetiq respectively, and thats how they were run. For the far more numerous "small" modifications, the RAF does all the work themselves and it is far more common to happen that way, I've done dozens of these smaller mods.
My thoughts - I see it two ways. On one hand it still can be shared with the RAF as it's still a fully functional tanker, just with a different paint scheme which makes no difference to it's performance (that bit is good), but the VIP fit reduces it's "transport/cargo" ability due to the VIP conversion blocking off the front 1/3 of the cabin and it taking too long to fit/remove the VIP stuff to re-role the aircraft for different missions, which is a negative (the original MRTT idea being you can quickly fit/remove things to match whatever combination of seats vs cargo you need for each flight).
On the other hand, while I think having a "dedicated" VIP aircraft makes a lot of sense and the MRTT is a great base model for that, we're stuck in a loop of "it's a great idea but costly, it's costly so lets make it multi-role, its multi-role so it's not ideal for VIP, lets make it VIP only thats a great idea - Looped forever" and I think the country as a whole can't/won't get behind the idea of a dedicated "UK Air Force One" due to the cost (it'd require 2 custom built 2 planes) so we're currently having to make do which isn't the best solution for everyone but it is the most financially acceptable.
