The Department chose to place the critical test and evaluation services with QinetiQ

1.12  The Department divided DERA by reviewing each division and keeping the most sensitive areas of the business within a new trading fund, named the Defence Science and Technology Laboratory (DSTL). All other functions were transferred to a new corporate entity, 100 per cent owned by the Department, which became QinetiQ. The divisional structure of QinetiQ on formation is shown in Figure 4.

1.13  One of DERA's key strategic roles was the provision of testing and evaluation services for the Department and other customers. This included managing firing ranges, testing facilities and instrumentation and measurement equipment that are critically important to the UK's ability to procure defence equipment. By 1998 the Department had identified that significant funding was required for rationalisation and to upgrade equipment 

4

QinetiQ's 2001 revenue was derived from three principal business divisions

1  Solutions - carrying out research in a wide range of areas and applying the results through three business segments:

■  Military Procurement Advice

■  Knowledge Information Systems

■  Sensors & Electronics

2 Complex Managed Services - management of test and evaluation services to the Department under the Facilities Management Contract, including maintaining the test and evaluation ranges and carrying out the tests

3  Estates - management of the property portfolio for the provision of accommodation and support services 

Source: National Audit Office analysis of QinetiQ 2001-02 annual report and accounts

and infrastructure. The decision to place these activities with QinetiQ without competition followed an options review carried out by a Departmental customer group independent of the DERA Partnering Team. QinetiQ was awarded a Facilities Management Contract on an interim basis whilst a long-term solution was negotiated.13 Several sub contracts for test and evaluation work that had previously been awarded to SERCO were terminated and included in the Facilities Management Contract.




_______________________________________________________________________________________

13  The Facilities Management Contract was replaced by the Long Term Partnering Agreement, signed on 28 February 2003.