The Department must actively manage the risks that privatising QinetiQ has created if the transaction is to realise value for money.
1 Although the Long Term Partnering Agreement (LTPA) has brought benefits to the management of test and evaluation services, the Defence Procurement Agency and its successor need to act as an 'intelligent customer' to ensure the savings envisaged in the contract are realised. We welcome the fact that in February 2007 the Department has decided to review some of the services conducted by QinetiQ and to build appropriate cost benchmarks. In the absence of other comparable service providers, cost benchmarks should be based on QinetiQ's past performance and should have regard to the cost of providing test and evaluation services by other bodies abroad. The Department should ensure these are developed in advance of the first price review period in March 2008.
2 The Compliance Regime appears to be working as intended but, as QinetiQ continues to expand its customer base and is able to bid for defence manufacturing work beyond April 2008, maintaining the effectiveness of the regime will become more difficult. We welcome the Department's September 2006 decision to audit the robustness of the Compliance Regime. The Department intends that the initiative to award an increasing proportion of research contracts through competition will reduce its dependency on QinetiQ, provide access to new sources of innovation and improve value for money. It should revisit its aspirations for this initiative and ensure that they are realistic in light of the market capacity for this work.