Select Committee on Defence Appendices to the Minutes of Evidence


Letter from the Secretary of State for Defence, to the Chairman of the Committee, 24 July 2000

  I wrote to you on 17 April when we launched the consultation document on a revised proposal for the public private partnership, (PPP), for the Defence Evaluation and Research Agency, DERA. In the House this afternoon I will be announcing that we now intend to proceed with the implementation of the Core Competence structure.

  I recognise that you and the Defence Committee remain to be convinced that this is the approach necessary in view of the changing environment which DERA faces and the need for the Government to take positive action to ensure its continued survival and development as a major national asset. I expect you will monitor further progress carefully. I hope that you will come to agree that this is the right course as we take it forward.

  In producing its revised proposals the Government listened to the views expressed in response to the initial consultation exercise carried out last year. This indicated that some stakeholders were uncomfortable with our original proposal. Consequently we have made a number of substantial changes to the original proposal, and these were set out in the consultation document released on 17 April. This was widely publicised with copies sent to all stakeholders and made available to the public on the Internet. In addition, we have conducted extensive briefings involving industry, trade unions and international partners. Formal consultation ended on 9 June and we have been examining the responses in detail since then.

  We are extremely grateful to all those who responded with their views on the proposal, in particular the Defence Committee. In analysing the feedback it was encouraging that many stakeholders acknowledged the improvements we have made and welcomed our willingness to listen to their views and make changes where appropriate. The overall response has been positive, with the majority of stakeholders recognising the need for change and endorsing our proposals as a sensible way forward. Overall, the responses have given us a high degree of confidence that the proposals are workable and will meet our PPP objectives.

  Within the next few weeks we will be issuing a document summarising the responses received during consultation. I will write to you again enclosing a copy.[1]

  The essence of this model is a clear separation of those functions that are best performed within a private sector company and those that are better suited for retention within Government. The Core Competence structure will result in around three quarters of the current DERA organisation being turned into a company, New DERA, with the ultimate intention that this is floated on the stock market. Just under 3,000 staff will be retained within the Ministry of Defence to provide a high level overview of defence science and technology. This approach will ensure that the MoD retains access to impartial in-house advice, has a strong research capability in key areas of technology, and will allow management of the defence research programme and international collaboration.

  Our timetable envisages that we will achieve separation between New DERA and RDERA around the end of the year. This will be followed by a period of shadow operation to demonstrate that both organisations and their supporting infrastructure are robust. We expect this to last around three months, but we retain the flexibility to extend this period if we believe that it is prudent to do so. Once shadow operation has been completed successfully we will vest New DERA, establish it as a separate government owned PLC, and complete the preparations necessary for its sale. Our preference is to seek a flotation of New DERA on the stock market as soon as its potential is suitably developed and at a time when we can ensure best value for the taxpayer. However, we will keep open the option to seek a strategic partner for the business as an intermediate step. To help ensure the smooth creation of the new company, we have begun the search for a suitable Chairman.

  In completing each of these specific points in the timetable there are of course many detailed issues to be addressed. To take this forward we have established a set of working groups involving the MoD, DERA, specialist city and financial advisers and other Government Departments, which will continue to consult with stakeholders. The output of these groups will be monitored against specific project milestones in the implementation timetable.

  During implementation we envisage that RDERA will continue under the current Trading Fund arrangements, although this will be reviewed to determine whether it is appropriate in the long term. In parallel with the PPP process, we are reviewing aspects of the career management for members of the Defence Engineering and Scientific Group. This includes the potential to strengthen the Graduate Science Trainee scheme. We are also confident that RDERA will offer rewarding career opportunities capable of continuing to attract and retain high-calibre scientific staff in the face of growing competition from the civil sector.

  Another important consideration in this PPP process is the future organisational structure of the Defence Diversification Agency, DDA, which is currently part of DERA and was set up to take forward our commitment to strengthening the links between civil and military technology. The formation of New DERA will in itself make a major contribution to this process, and we remain fully committed to ensuring that the objectives set for the DDA are fully met. We are currently reviewing how best to take this forward in the light of the PPP process.

  I am copying this letter to Michael Clarke and Martin O'Neill.

Geoffrey Hoon

1   Appendix 3. Back

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2001
Prepared 13 March 2001