4.15 The Department had a broad range of objectives in part-privatising DERA (set out in Appendix 2). Although the Department has told us it plans to carry out a postproject evaluation, no timetable has been set. Fully assessing the extent that objectives have been achieved will be challenging. The tangible outputs from research activity are difficult to measure because of the long lead time before results are realised. The Department's initiative to put in place metrics for measuring these outputs has not yet been fully developed though in time these should allow QinetiQ's performance to be appraised, albeit without benchmarking it to the performance of DERA. We have therefore been unable to reach conclusions on whether QinetiQ has been able to deliver the reduced contract prices, enhanced flexibility and improved service envisaged at the outset of the privatisation.
4.16 The Department appears to have created a successful independent organisation in QinetiQ, although its future success will depend on its continued ability to win contracts as a greater proportion of the research budget is awarded through competition. QinetiQ has broadened its customer base but still relies heavily on the Department for the majority of its revenue.
4.17 One of the Department's objectives was to provide QinetiQ with the flexibility to address skills shortages in critical technologies through greater flexibility in its remuneration and incentivisation policies. The privatisation has allowed QinetiQ to link its remuneration to market and individual performance. Flexible benefit arrangements have also been introduced to allow staff to have greater control over their remuneration packages. The extent to which this has resulted in an improved ability to address skills shortages is unclear due to a shortage of information. The annual rate of resignations in QinetiQ, however, has been consistently lower than benchmarks.43
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43 QinetiQ uses benchmarks drawn from the PricewaterhouseCoopers/Saratoga HR index.