APPENDIX 5
Memorandum submitted by QinetiQ trade
unions (22 January 2003)
1. The trade unions in QinetiQ represent
9,500 staff in the organisation operating on 18 sites on a multiplicity
of roles including land, sea and air defence systems.
2. The trade unions gave a cautious welcome
to the announcement that the Carlyle Group has been selected as
the preferred bidder to help run the QinetiQ organisation. When
if was further announced on 5 December that the Ministry of Defence
had sold a stake in the company to the Carlyle Group the unions
continued to express a cautious viewpoint. This was based on the
following.
3. The trade unions have long expressed
their concern over the sell off of the former DERA organisation
because of fears that a buyer would leave QinetiQ vulnerable to
asset stripping and breaking up of sensitive and prestigious defence
projects. The desire of the staff is to keep the company intact
and to have a long-term successful future. The trade unions are
very concerned that should flotation occur the requirements of
the City, which operates essentially for a short term return on
investments, will cause pressure to concentrate on whatever core
business will make most money quickly and dispose of the remainder.
4. As a model the Committee is invited to
examine the case of AEA Technology that was floated following
separation from the United Kingdom Atomic Energy Authority in
1996. this company had a similar ex public sector high tech profile
to QinetiQ. Following a good start two profits warnings followed
within two years. The consequences were that in order to survive
AEA Technology had to sell off its core (and profitable) nuclear
interests and as a result half the staff that were originally
transferred on privatisation were sold off.
5. The Carlyle group in its Fact Sheet (updated
2 September 2003) states "Our mission is to generate extraordinary
returns" for its investors. A similar promise to the city
in 1996 that AEA Technology would generate 20% year on year profits
was its downfall. Our view remains that such a strategy in QinetiQ
will lead to loss of long term project planning, wholesale job
cuts, an attack on the terms and conditions of staff and an eventual
break up of the business.
6. The majority of QinetiQ staff have transferred
terms and conditions protected under TUPE including redundancy
compensation and a good final salary pension scheme. These staff
benefits are likely to be seen as a liability by investors. The
trade unions will do everything in their power to protect their
members' conditions in this regard. Such contractual terms cannot
be disposed of lightly.
7. The Company announced on 18 October a
share scheme for staff. This has been made possibly by an investment
by the Carlyle Group. However, we are most disappointed that the
MoD contribution is very limited. In addition, there are restrictions
on the investments allowed by staff compounded by the fact that
some managers are being given preferential treatment. In fairness
we consider strongly that al staff should be given an equal opportunity
to share in the company.
8. Our concerns about these matters including
the selection of the Carlyle group as investor were raised with
the Minister Dr Lewis Moonie in letters from John Billard on 18
September and 27 November 2002. other than giving general assurances
on the reasons for the selection of the Carlyle Group, the minister
refused to meet the unions face to face to hear their apprehensions.
This evasion has not helped the unions to convince their members
that the government is acting in their interest in planning the
future of QinetiQ. This is bound to have been a sensitive matter
for the staff and our historic opposition to the privatisation
for these reasons was well known. We think that this should have
led to us being heard at first hand. We remain available for such
a meeting.
9. MoD has a close relationship with the
company particularly as QinetiQ operates facilities deemed strategic
by the Department. However, such designations can change and then
being deemed non-strategic can place the company under extreme
short-tern economic pressure to close a facility. We argue that
an approach should be adopted to allow QinetiQ to make business
decisions in the longer term. In addition, the company may be
faced with restructuring costs, including redundancies, as a result
of these decisions. We consider strongly that these costs should
be borne by MoD as it has done in previous restructurings where
there has been a private operator eg in the dockyards and at AWE.
10. The trade unions wish to emphasis to
the Committee that they wish to retain the cordial relations that
presently exist with QinetiQ managers at all levels. It is in
everybody's interest that QinetiQ is a commercial success. It
is considered that the recently signed partnership agreement,
endorsed by the minister, will provide an essential foundation
for agreement on the way forward provided out concerns set out
above are addressed.
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