1.6 In recommending a PPP in autumn 1997, DERA estimated that total proceeds from privatising the entirety of DERA would be £780 million. The 1999-2002 Comprehensive Spending Review, published in July 1998, assumed that the PPP would be completed by April 2002 and would generate a receipt of £250 million for the Department. It had been agreed between the Department and the Treasury that any receipt in excess of this would be returned to the Exchequer. We consider that this agreement meant there was less incentive on the Department to obtain more than £250 million.
1.7 The inclusion of a £250 million receipt in the 19992002 Comprehensive Spending Review had the potential to create pressure for the PPP to be completed by the end of the financial year in March 2002. Although there was an expectation that the PPP would be completed in this timescale, both the Department and the Treasury recognised that this should not be at the expense of achieving overall value for money. The Treasury therefore agreed to credit the Department's 2002 budget with £250 million even if the project was delayed up to 31 March 2003 to preserve value for money.
2 | DERA proposed five options to address the threats to the business | |
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Option | Description | |
Base case | Continuing with DERA's current form | |
Federated Laboratories case | Franchising DERA's activities to laboratories managed by leading academic institutions and retaining a core of DERA staff to coordinate the activity | |
Diversification case | Vigorously pursuing entries into civil markets | |
Public Private Partnership case | Making the whole of DERA into a separate corporate entity with an increasing institutional shareholding | |
Defence Industries Council case | Withdrawing from all non-moD work and from that MoD work which could be fulfilled by the defence industry (suggested by the Defence Industries Council) | |
Source: DERA Corporate Plan 1998-2003, October 1997 | ||