Defence Evaluation and Research Agency (Hansard, 7 March 2002)

§ The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Bach)

We refer my noble friend to the announcement my right honourable friend the Secretary of State for Defence made in another place on 24 July 2000 (Official Report, cols. 778–79) about our decision to implement the Core Competence model for the DERA public private partnership. Under this approach, on 1 July 2001 around three-quarters of the former DERA organisation was vested with its assets as QinetiQ, a wholly government owned company. For strategic reasons, the remainder was retained within the Ministry of Defence as the Defence Science and Technology Laboratory to carry out functions that could not appropriately be transferred to the private sector.

Since the vesting of QinetiQ as a company on 1 July 2001, work has concentrated on preparing the company for sale, options for which were through a flotation or strategic partnership. We have now completed a comprehensive review of the available 34WA options for the transaction route and timing in conjunction with specialist advisers and QinetiQ's senior management. Although flotation has always been our preferred route, as we have consistently stated, the priority is to achieve a successful move into the private sector with a transaction that clearly achieves best value for the taxpayer. We believe that a flotation under current market conditions would not realise this, yet delay could lead to a damaging loss of momentum. We have, therefore, decided that the strategic partner route offers the best potential for a transaction within 2002, offers value to the taxpayer and meets our objective of a successful public private partnership.

A strategic partner would work closely with QinetiQ and contribute significantly to growing the overall value of its business, from which the taxpayer would benefit through MoD's initial retention of a significant financial interest in the company. MoD will also retain a special share as a means of protecting UK defence and security interests.

Confidential discussions with potential strategic partners will now begin and it is expected that a preferred partner will be selected, and agreements signed, later this year.