Q51 Dr Pugh: It is page 24: "All excess properly excluded from the valuation". That seemed to be a distinctive feature of the Carlyle bid. I am simply asking, what does that mean?
Ms Leahy: Perhaps I can help. This was a valuation carried out by consultants we had employed and when comparing their evaluation with other valuations they wanted to do it on a like-for-like basis and part of Carlyle's bid included £60 million for proceeds from a surplus property, so Parthenon excluded that from the valuation when they were doing their work on the valuation.
Q52 Dr Pugh: In terms of QinetiQ's property portfolio, what is the value of that?
Mr Jeffrey: What is the value of the QinetiQ property portfolio?2
Q53 Dr Pugh: The property portfolio owned by QinetiQ, the company.
Mr Jeffrey: I could not put a value on that immediately. We may need to write you on this one.
Q54 Dr Pugh: Can you tell me how much property since the deal has subsequently been sold?
Mr Schofield: Perhaps I can help the Committee on that. There are two points I would make. One is that the value of the key piece of surplus property, which was the Chertsey and Aquila sites, was included as a financing item in the original Carlyle deal, so that was taken into account. The second thing is that for all the other aspects of property, any property released after the PPP, there were full claw back arrangements in place to the benefit of the Department.
Q55 Dr Pugh: Are further property sales anticipated?
Mr Schofield: That is probably a question for Sir John.
Q56 Dr Pugh: Sir John, maybe you can answer that.
Sir John Chisholm: We have no currently anticipated significant property sales.
Q57 Dr Pugh: In deciding on what Sir John and other people were going to gain from the proceeds, it actually says rather amusingly that it was thought inappropriate to refer to the remuneration committee, but it clearly was not thought inappropriate to involve the remunerated. Can you clarify that, please, why it was thought inappropriate to refer to the remuneration committee, which I would have thought would have been a sensible way of dealing with things?
Mr Jeffrey: I think the answer is that it was the remuneration committee of the company within the MoD rather than the future QinetiQ Holdings and, therefore, it was not formally part of their role. As regards the second part of your question, the discussions between Carlyle and QinetiQ management, as has been discussed earlier in this hearing, were not an unusual thing to happen between-
Q58 Dr Pugh: It would seem very odd to the general public that we think it is inappropriate to involve a remuneration committee, presumably set up to decide these sorts of things, but we do not consider it inappropriate to discuss the arrangements at appreciable length with the people who subsequently were remunerated. Can you appreciate the oddity of that?
Mr Jeffrey: I appreciate the oddity of that, but in the end the judgment about the executive gains element of this, subject to the Department's overriding interest in it, as has been said earlier, was a judgment that Carlyle made.
Q59 Dr Pugh: A judgment that Carlyle made?
Mr Jeffrey: Yes.
Q60 Dr Pugh: So they got it their way.
Mr Jeffrey: As the Report brings out. Carlyle, let us not forget, had no interest whatsoever in overgenerous incentivisation arrangements, they stood to lose value to the extent that they got that wrong.
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2 Note by witness: QinetiQ's annual 2007 report shows the net- book value of QinetiQ's land and buildings as being £260.7m. As indicated to the Committee, the Department has in place a 'property clawback agreement' with QinetiQ, which enables it to clawback a proportion of the gain on each individual property transaction which is in excess of a 30% gain on the July 2001 professional property valuations. The proportion of the excess gains due to the Department is based on a sliding scale which reduces over time from 50% to 9% and as at 31 March 2007, it stood at 41%.