MEMORANDUM SUBMITTED BY THE DEFENCE ENGINEERING
GROUP, UNIVERSITY COLLEGE LONDON (18 MAY 2000)
DERA PPP (April 2000 proposal)
1. Since the Strategic Defence Review (SDR)
announced in 1998 that DERA was to be the subject of a Public-Private-Partnership
(PPP, the MoD has been trying to reconcile its primary aim of
maintaining an adequate supply of expert unbiased advice to guide
its future planning and procurement with the Treasury's wish to
raise funds from the privatisation or partial privatisation of
a public sector organisation. The delay in formulating a widely
acceptable plan for DERA PPP suggests that the initial SDR decision
was unsupported by much (if any) analysis of how a PPP might be
effectively implemented and the same comment could well apply
to the current proposal.
2. The initial MoD PPP proposal was widely
criticised by many external organisations, notably industry and
academia, and was subsequently withdrawn. One of its most serious
flaws was that it had apparently not considered that the US government
research laboratories (and those of other nations) would be unable
to collaborate and exchange technical information with a private
foreign company.
3. The April 2000 consultation document
proposes the division of DERA into two parts. Some 3,000 staff
would be retained in MoD to provide impartial advice, to undertake
some high-level systems research and to manage the MoD research
programme and international research collaboration. The remaining
9,000 staff would form "new DERA" which would become
a private company to be floated on the Stock Market. We welcome
the recognition that MoD does need to retain a capability for
generating impartial technical advice and for high level systems
work, but it is not clear how the number of staff required by
MoD for these tasks was determined. Ideally, a list of specific
tasks would have been drawn up with viable numbers set against
each of them. Whether or not this was done, the proposed PPP arrangement
would significantly reduce the scale of advice available, since
3,000 staff with management responsibilities could in no way deploy
the same expertise as the 12,000 currently in DERA. As the retained
staff would be engaged in less research, their expertise would
soon become obsolete and they would have to seek an increasing
amount of technical advice from "new DERA". Such advice
would hardly be impartial as it would inevitably be influenced
by the interests of the shareholders of "new DERA",
as indeed is the advice from industry at present.
4. The new proposal suggests that international
research collaboration with the US and other allied government
laboratories would be managed by "retained DERA" and
this would involve the control and protection of imported sensitive
information. This arrangement would reduce the amount of such
information available to "new DERA" researchers, who
would no longer be able to have direct interchange with research
colleagues overseas and would therefore see little value in assisting
the collaborative activities. In other words, the collaborative
mechanism which has traditionally generated many of the most fruitful
research opportunities would no longer exist.
5. It is ironic that, after a decade of
proclaiming the benefits of integrating all defence evaluation
and research work and of rationalising the organisation and structure
of the DERA establishments, it is now proposed that the whole
structure should be divided again, especially since the penalties
of doing so have not been elucidated. Until the two parts of DERA
can be relocated to separate sites, and while they continue to
share the same laboratories and facilities, it may be difficult
to persuade the defence industry and the American authorities
that the Chinese walls erected are sufficiently impervious and
that proper military and commercial confidentiality can be preserved.
6. It is unclear how the division of staff
between the two new organisations would be managed, as both will
be seeking to retain high calibre staff on whose energy and morale
their futures will depend. In any event, the continued secondment
of military staff to a privatised DERA, which has always been
perceived as valuable in formulating and conducting the research
programme, would undoubtedly be seen as unfair to its commercial
rivals.
7. The MoD appears confident that the proposed
"new DERA" can evolve into a successful commercial company,
but it is unclear whether the change in its status would benefit
UK industry as a whole. The detailed terms and conditions under
which "new DERA" would compete with the defence industry
have not been clearly promulgated so it is difficult to see how
the transition from the current situation will be managed or what
the end point will be. "Retention of a special share"
by MoD would seem to be in danger of distorting competitive activities
and it is by no means clear what freedom DERA will have to use
IPR generated and partially funded by industry on the co-operative
Pathfinder programmes of recent years. Moreover, if "new
DERA" loses work to industry in open competition, how can
MoD be assured that the needed capabilities and facilities will
continue to be available?
8. In summary, too little evidence has been
presented on the above issues to give confidence that the full
implications have been properly considered.
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