Examination of Witnesses (Questions 220-239)
MINISTRY OF DEFENCE, SHAREHOLDER EXECUTIVE & QUINTEQ
3 DECEMBER 2007
Q220 Chairman: Maybe the principal advice, but he was still continuing to give advice throughout this process?
Mr Jeffrey: He was still—
Q221 Chairman: The chief executive.
Mr Jeffrey: The chief executive and—
Q222 Chairman: And he was seeing ministers, was he, advising them?
Mr Jeffrey: I was not there at the time but I imagine Sir John was. I was making a point about the way in which the department managed the fact that—
Q223 Chairman: In all fairness, Sir John, I have to give you a chance to reply to this.
Sir John Chisholm: From the time the corporate plan 1997, called the CP98, was published, the Ministry of Defence appointed a separate official to take the lead on policy, so from that time onwards, quite appropriately, the lead was taken by someone else other than me.
Q224 Chairman: The lead, but did you give any advice to ministers after 1998 on this?
Sir John Chisholm: I met with ministers remarkably seldom.
Q225 Chairman: I did not ask you that. Did you give any advice to ministers after 1998 on this project?
Sir John Chisholm: I do not remember, I have to say, discussing this with Lord Gilbert. We had a council.
Q226 Chairman: I did not ask you that. Did you give any advice to ministers after 1998 on this project?
Sir John Chisholm: I presented our Corporate Plan. That I do remember doing.
Q227 Chairman: You presented your—
Sir John Chisholm: Corporate Plan.
Q228 Chairman: Did you give any advice on the implications of the sale or the relationship with Carlyle or anything else? Were there any conversations after 1998?
Sir John Chisholm: Carlyle was absolutely not in it at that stage.
Q229 Chairman: All right. You are deliberately trying to avoid answering the question. Did you have any discussions with ministers appertaining to this privatisation that we are discussing this afternoon after 1998 of any nature?
Sir John Chisholm: I supported from time to time the Ministry of Defence team.
Q230 Chairman: So you did advise ministers?
Sir John Chisholm: I supported the Ministry of Defence team.
Q231 Chairman: What does that mean, "I supported the Ministry of Defence team"?
Sir John Chisholm: Exactly that.
Q232 Chairman: What does it mean?
Sir John Chisholm: That the Ministry of Defence had a team.
Q233 Chairman: Yes.
Sir John Chisholm: And so far as the team—
Q234 Chairman: You advised them?
Sir John Chisholm: So far as that team needed technical advice I advised them.
Q235 Chairman: And you were in a position, of course, as the leading authority on this, to give advice, which presumably was heeded? You were not just some clerk, were you? You were not some junior researcher, or junior official, think, in the parlance, were you?
Sir John Chisholm: The thrust of the advice that I was engaged in was first of all in helping with the formulation of a model and the first model was that early PPP model that I have just described, which involved the whole of DERA.
Q236 Chairman: But you were active right through. What about this advice that the percentage going to management should rise from 10% to 20%? You were not involved in that either, were you?
Sir John Chisholm: I said earlier on, I think, that one of the contributions I made --- let us just remember that up to the moment of down- selecting two the interaction with management was rigorously controlled; indeed, it was rigorously controlled throughout but we had no one-to-one interaction. The interaction we had at that time was primarily orientated around Carlyle, and indeed Permira, getting advice as to what the strength of the team was. They also, both of them, wanted to have input on how the management team would respond to a share scheme. I gave them my advice. Carlyle took that away and later, post-September, came back with their scheme. It was their scheme that they came back with.
Chairman: All right. We must press on. I apologise to Mr Griffiths.
Q237 Nigel Griffiths: I have been a Member of this Committee, Mr Leigh, for a number of years over the past decade and I have seen some damning reports on MoD projects and separately damning reports on privatisation. This is not one of them. I think Sir John might agree.
Sir John Bourn: Certainly the Report testifies to the success of the business. It does, of course, make points that we believe a better price could have been got for it.
Q238 Nigel Griffiths: What it also does not seem to do is criticise Sir John at any stage for his participation. I do not know if you picked that up, Mr Jeffrey, or not.
Mr Jeffrey: You are right to say that. There was no criticism of that sort in the Report.
Q239 Nigel Griffiths: Indeed, paragraph 2.20 on page 21 would imply that if this was such a surefire profitable scheme then senior managers who did not invest in it must have been mugs at the time not to invest, which implies that it was not a surefire thing and that indeed if the Financial Times and Financial Times journalists thought that so many schemes were surefire or not they would probably be multi-millionaires instead of becoming Members of Parliament. I notice that in paragraph 1.2, and that is perhaps an explanation; perhaps you can help me, Mr Jeffrey, it implies that in the six years leading up to 1998 the budget had plummeted by 40%, I cannot remember, and therefore people involved in this organisation perhaps did have some doubts about the future viability of it.
Mr Jeffrey: They did, and one of the reasons for the course the department took was that there had been this fall in the amount of business that we could expect to bring to DERA and it was becoming questionably viable, but I certainly take your point, Mr Griffiths, and it was one I was trying to make earlier, that it is easier now than it might have been then to say that this was a surefire winner.
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