1.14 The restructuring of DERA into two viable businesses involved significant risk and was a challenging project, made more so by the tight timetable in which it was achieved. It was originally intended to complete the project by March 2001 and although completion eventually slipped to July 2001 this was only 15 months after the PPP Core Competence model was chosen as the preferred option. The separation involved the allocation of over 12,000 staff between DSTL and QinetiQ and had to be carried out without disrupting the critical services DERA was delivering to its customers. As a limited company QinetiQ was subject to a new set of regulatory requirements and licenses had to be obtained for a wide range of activities and a new contracting framework established between QinetiQ and its customers. The Department had to agree the allocation of historic liabilities between itself, QinetiQ and DSTL, taking account of which was best placed to take these on. It was crucial to separate fully the operations of QinetiQ and DSTL in order to satisfy all stakeholders that the two organisations were independent of each other. To achieve this, the Department established separate IT systems and filing systems, security accredited to a high standard, and - wherever they shared a site - separate facilities.
1.15 The Department established separate working groups, each responsible for identifying, managing and reporting on the risks to delivery for different aspects of the project (see Appendix 3). The DERA Partnering Team coordinated the process, liaising closely with DERA's management. Consultants were heavily involved throughout. Following a competition, the Department appointed Simmons & Simmons to provide legal advice and retained PricewaterhouseCoopers and UBS Warburg (see paragraph 1.9) to provide advice in support of the Department's strategic, accounting and financial decisions. QinetiQ appointed Rothschild and KPMG to provide financial advice and Herbert Smith to advise on the legal aspects of the transaction.
1.16 The Department attempted to set high-level budgets for consultancy costs but this proved difficult given the evolving nature of the transaction. Instead the Department agreed hourly rates with the majority of the consultants through competitive appointment processes and set monthly caps on expenditure based on the expected short-term workload. UBS Warburg was remunerated through monthly payments and the agreement of a success fee based on a percentage of the eventual transaction receipts. Our review of the invoices and correspondence shows that the Department monitored expenditure closely. The costs incurred by the Department throughout the privatisation process are set out in paragraph 4.8 and Figure17.