Letter from the Minister for Defence Procurement,
to the Chairman of the Committee, 2 November 2000
Your letter of 27 July to the Ministry of Defence
Parliamentary Clerk requested information about the responses
received to the Department's consultation exercise. I am sorry
for the delay in replying.
The table below shows the breakdown of responses,
more than 200 in total, received from organisations and individuals:
||Number of Formal Responses|
|International Collaborative Partners||6
|Other Government Departments||3
|Trade Unions (DERA Consultative Council formal response)
I regret that it has taken longer than expected to collate
the information but a summary is now available. A copy is attached.
I note that the Defence Committee has also indicated that
it would like to have access to all of the submissions received
in full. I hope you will appreciate that this information could
not be provided without the express permission of the contributors,
and that to seek such permission would be a significant underdaking
on behalf of the Department. Although the Consultation Document
did ask people to indicate whether they wished their responses
to be kept confidential, this was done to allow us to use extracts
from their letters rather than on the basis that we might wish
to publish the whole response. In cases where people wished their
views to be known to MPs I believe they wrote directly to them,
and there were a significant number of such cases.
I hope that the summary paper will provide sufficient detailed
inforation for the Committee but I would be happy to discuss this
matter with you further should you wish.
HCDC: DERA PPP OUTCOME OF CONSULTATION
1. On 24 July 2000 the Secretary of State announced the
results of consultation on the MoD's proposal for the Public Private
Partnership (PPP) for the Defence Evaluation and Research Agency
(DERA). The announcement confirmed that the MoD would now proceed
with the implementation of a PPP model known as Core Competence.
This approach, which is fully described in the PPP consultation
document released on 17 April 2000 (also available on the Internet
at www.mod.uk), will create a new private sector company (New
DERA), consisting of around three quarters of the current organisation,
with the ultimate intention to float this on the stock market.
For strategic reasons, the remainder, now called the Defence Science
& Technology Laboratory (DSTL), would be retained within MoD
to carry out those functions which must be undertaken by Government.
The purpose of this document is to provide the House of Commons
Defence Committee and other key stakeholders with:
A summary of the DERA PPP consultation process.
An overview of the structure put in place to address
these issues and to take forward the other work needed to implement
A description of the major issues raised by stakeholders
in response to the consultation document and the MoD's initial
response to these issues.
A summary of the overall conclusions from consultation.
2. Initial consultation took place between May and October
1999 on a PPP proposal known as "Reliance". This would
have resulted in the majority of DERA's existing staff and facilities
transferring to the private sector. Reliance raised a number of
concerns from stakeholders, and in response to their views, the
Secretary of State for Defence announced a widening of the scope
of the work to study a number of other PPP structures for DERA.
This further work identified "Core Competence" as the
best available approach for meeting the PPP objectives whilst
also addressing the main issues raised by stakeholders.
3. The results of this work were announced to Parliament
on 17 April 2000, by the Secretary of State for Defence. At the
same time a detailed Consultation Document describing the revised
proposals was sent directly to key stakeholder groups including:
The HCDC and MPs with defence interests.
Trade Unions and DERA staff.
International Collaborative Partners.
Relevant Government departments.
4. The consultation document was also made electronically
available to the public on the Internet and published on the MoD's
and DERA's own internal Intranets. The Chief Executive of DERA
provided a briefing to staff, which was relayed to major DERA
sites by a live video link, and supported by subsequent cascade
briefings to staff. The proposal received significant coverage
from internal newsletters and there was also external press coverage.
5. As part of the process there has been substantial
and detailed discussion with the US and other major allies. Meetings
and briefings with the US have included ministers, senior officials
and staff within the main scientific organisations.
6. Formal consultation was completed on 9 June 2000 and
written responses have been received from all the main stakeholder
groups. This included responses from 125 individual DERA staff
(out of a total of 12,000 employees). The Trade Unions also submitted
a detailed response and discussed the issue with defence Ministers
at a formal meeting in June. The HCDC, conducted its own examination
of the proposals, and issued a formal report of its views. An
industry forum chaired by the MoD's Principal Finance Officer
was held on 16 June 2000 and this provided an opportunity for
a detailed discussion of the proposals.
7. In general terms, although respondents identified
many detailed issues which would need to be addressed in the implementation
phase, the overall reaction was positive:
the willingness of MoD to engage in genuine consultation
and to respond to stakeholder concerns was widely welcomed
there was general agreement from the majority
of stakeholders that the proposals represented a significant improvement
on the previous Reliance model.
the majority of stakeholders, in particular international
allies and UK industry, regarded the proposals as workable and
indicated a willingness to liaise with MoD to ensure that they
were implemented in a way that best meets defence interests
8. In the light of this analysis, the Government decided
to proceed with the proposals broadly as outlined in the consultation
document and this was announced to the House of Commons in a statement
on 24 July 2000.
9. DERA is a complex organisation with a wide range of
capabilities critical to UK defence and security. Its customers
require that access to these capabilities must be maintained during
and after PPP implementation. Achieving this in a way which ensures
value for money to the taxpayer, whilst delivering the broader
benefits of the PPP requires detailed work to resolve a wide range
of issues. In addition, DERA has many external relationships which
are of great importance to the UK and the process must ensure
that these are not disrupted. The change in status of New DERA
from a government organisation to a company subject to private-sector
rules and regulations must be carefully managed to ensure a smooth
10. The government places emphasis on ensuring that consultation
with stakeholders continues throughout implementation, and this,
in turn, places a responsibility on MoD to ensure that the process
is conducted in as open and transparent manner as possible.
11. In advance of the results of final consultation,
and the subsequent decision by the Government on the final form
that the PPP would take, it would have been premature and potentially
wasteful to try to address in detail the full range of potential
PPP issues. Consequently, the emphasis was on carrying out sufficient
work to provide confidence that the PPP proposals would be workable
in practice. In addition, a certain amount of preliminary work
was conducted to ensure that the MoD would be in a position to
move to implementation quickly once a final decision to proceed
was announced. This work included the establishment of a series
of Joint Working Groups (JWG) charged with taking forward the
necessary planning activities. The groups include representatives
from MoD, DERA, specialist advisers, and other government departments.
Following the decision to proceed with the Core Competence model
the JWG structure was expanded and the groups were tasked with
carrying out the bulk of the work needed to implement the PPP.
12. The JWGs report to a Project Management Group, chaired
by the Director of the MoD's DERA Partnering Team. In general,
the JWGs are responsible for carrying out detailed work on implementation
and for project planning and risk analysis within their own specific
areas. Responsibility for PPP policy and strategy, overall project
planning and value issues remains with MoD. The full JWG structure
showing the main groups and any associated subgroups is shown
below. The frequency with which each group meet varies and is
dependent on the nature of the issues being addressed.
Human Resources and Military
Employee Incentives (DERA attend by invitation
MoD Programmes and Contracts
Finance and Finance Systems
Land and Building contamination
Records Audit and Separation Project Board
Business Information Systems Project Board
Health and Safety, Security & Environment
Aircraft Test and Evaluation.
13. Many of the issues which the groups will address
require further consultation and this will be undertaken with
the appropriate stakeholders as required. This will include, for
example, establishment of a new pension for New DERA staff whereby
we will consult with DERA staff and Trade Unions on the proposed
14. For ease of reference, the issues raised have been
grouped under the following headings:
The DSTL/New DERA split
The relationship between New DERA and MoD
The relationship with international collaborative
The relationship with industry
Status of New DERA and the sale process.
GENERAL PPP ISSUES
15. Issue: Lack of detail in the Consultation Document,
making it difficult for respondents to feel confident about future
trading relationships with MoD, DSTL and New DERA.
16. Response: MoD was very conscious of the need
to balance the desire of stakeholders to see very detailed information
on PPP implementation with the need to avoid conducting excessive
and costly work on proposals which could be subject to revision.
The department believed that the Consultation Document represented
a sensible compromise and contained a sufficient level of detail
to explain the principles behind the approach and to provide confidence
that its proposals would be workable in practice. The MoD fully
accepts that there are many important issues that will have to
be worked through in full detail as part of the implementation
17. Specific issues such as contractual relationships,
Intellectual Property Rights (IPR), and safeguarding of sensitive
information are also dealt with in more detail later on in this
document. However at this point it is worth stressing that New
DERA, as with any other company with whom MoD contracts, will
have a normal commercial contractual relationship with the department.
This will bring greater clarity to the situation than we currently
have at the moment where DERA, as a part of the MoD, does not
have formal legal contracts with all its customers.
18. MoD remains committed to continuing consultation
with its stakeholders during the implementation process to ensure
that they are informed on the detail of the approach and that
their views are taken into account wherever possible.
19. Issue: Alternatives such as the Independent Publicly
Owned Corporation (IPOC) were not sufficiently considered.
20. Response: The MoD has been looking at possible
options for a DERA PPP since summer 1998 and has conducted detailed
studies of all the different mechanisms and organisational solutions
that might have been used to bring about the benefits of being
in the private sector for the larger part of DERA. None of the
alternative solutions that were looked at offered a suitable way
forward and the MoD is absolutely clear that the best option available
to it is that of "Core Competence", which forms the
basis of the proposals that have now been agreed. The difficulty
with the Independent Public Owned Corporation was that it left
the position of DERA employees somewhat confused in that they
would have ceased to be government servants, although government
would still have owned a majority stake in the corporation. This
was unacceptable to a number of stakeholders, in particular our
international allies, who wish to be clear as to the status of
people with whom they are collaborating.
21. Issue: The PPP is only being pursued as a way
of meeting shortfalls in the defence budget.
22. Response: This is absolutely not the case.
The main drivers for the PPP are not financial. The main objectives,
which are clearly outlined in the consultation document, are:
to enhance the opportunity for the exploitation
of technology locked up in DERA;
to improve access to technologies from the civil
sector for military application;
to introduce private capital into DERA to meet
its investment needs, and thereby accelerate its development through
exposure to private sector disciplines; and,
to provide increased freedoms for DERA, in for
example, employee terms; conditions; reward; and its ability to
grow commercial business.
23. As MoD ministers have made clear on a number of occasions,
the imperative to change the status of DERA comes from the Agency's
own need to have the freedom to exploit its technology in the
commercial sector and to have the capital and employment freedoms
necessary to succeed in that arena. Coupled with the decline in
defence research funds and changes in the environment within which
DERA operates which, if nothing was done, would lead to the gradual
degradation of the Agency's capabilities, this makes a compelling
case for the introduction of private capital. The government's
PPP initiative offers an ideal solution for achieving these ends.
24. Issue: The PPP as proposed does not offer good
value for money.
25. Response: As is made clear in the previous
paragraph, DERA needs to undergo change to avoid slipping into
a period of managed decline as the environment within which it
operates changes. If nothing was done there would be a steady
stream of site closures and redundancies which would incur considerable
costs. Such decline would also mean that the knowledge and experience
that DERA possesses and which can now be turned to the advantage
of a broader customer base would be lost. Neither of these situations
would represent good value for money.
26. Issue: There will be a high level of cost incurred
in completing the PPP.
27. Response: There will be some costs arising
from the initial separation and creation of New DERA and DSTL
and the establishment of their supporting infrastructures. However,
estimates are sufficient to give confidence that any costs will
be small in proportion to the benefits of the PPP. Estimates of
all costs are continually examined by the PPP Project Management
Group, which oversees all the working groups, to ensure that they
are properly scrutinised and authorised.
28. Issue: The review of central science and technology
organisation within the MoD should be allowed to report before
a final conclusion on the DERA PPP is taken.
29. Response: This study, which is being undertaken
under the auspices of the MoD's Chief Scientific Adviser, Sir
Keith O'Nions, is looking at how the science and technology staff
in the MoD can be organised most effectively. It will focus in
particular on the staffs who provide advice for the central MoD
and who commission the research programme. Obviously this will
have some impact on how DSTL is likely to be organised and the
results of the study will be fed into the work on the implementation
of the PPP through the joint working groups. The teams responsible
for the science and technology review and for implementing the
PPP are in close contact
30. Issue: Staff morale would be damaged by the PPP
process and in particular there might be damage to future career
paths for scientists and engineers in the UK.
31. Response MoD is very much aware that DERA's
capability is based on the quality and motivation of its staff.
The desire to ensure full and genuine consultation has meant that
the PPP process has taken some time. The need to make changes
to the initial proposals in response to the views of stakeholders
has also extended the process and resulted in an increased period
of uncertainty. This has obviously caused concerns amongst DERA's
staff, and has had an impact on morale. DERA and MoD have already
made considerable efforts to brief its staff on the rationale
behind the PPP And will be increasing this effort in the coming
months as implementation issues are progressed. This includes
providing information on a new pension scheme and the organisational
structures of both DSTL and New DERA. Whichever part of the organisation
employees are in, we are confident that there is a secure and
promising future and we will continue to convey this message to
32. Issue: The PPP will lead to major redundancies
at a number of DERA sites.
33. Response: The MoD has always made it absolutely
clear that the PPP is not about reducing the size of DERA. Finding
a PPP solution for DERA is not about cutting jobs. Planning for
the creation of two separate organisations has been carried out
in such a way as to leave us with two vibrant and viable entities.
The PPP is about creating a climate in which New DERA can go out
and use its considerable expertise to win new business and expand
its customer base. This should be good for employment prospects.
Obviously over the next few years there may have to be adjustments
in both DSTL and New DERA as they adapt to changing demands and
this may have employment implications. But this isn't newit
is happening at the moment in DERA as the balance shifts from
more traditional defence technologies to the new information economy.
34. Issue: The move to a PPP will lead to a diminution
in staff terms and conditions.
35. Response: DERA's success is based very much
on the skills, knowledge and experience of the people it employs.
Both New DERA and DSTL will wish to ensure that they continue
to employ the best people and consequently they will not do anything
to diminish terms and conditions in a way which would have precisely
the opposite effect on employees. TUPE regulations provide a legal
assurance on terms and conditions for staff, but in addition DERA
has made it clear that it is committed to ensuring that, as an
absolute minimum, terms and conditions are maintained at their
current level. Ideally DERA would like to see an enhancement as
business grows. Incidentally, it is also the case that the TUPE
regulations protect the position of employees in the event of
any future changes of ownership.
36. Issue: Staff in New DERA will suffer detriment
to their pension rights.
37. Response: Staff transferring to New DERA
will, when it becomes a new company, cease to be civil servants
and therefore no longer be eligible for membership of the Principal
Civil Service Pension Scheme (PCSPS). MoD and DERA have however
been working with consultants to design a new pension scheme which
will provide a comparable level of benefits. The new scheme will
need to be certified by the Government Actuary's Department as
providing benefits, which are broadly comparable to the existing
PCSPS. Staff who are in New DERA can be absolutely assured that
their pension rights will not be diminished.
38. Issue: Career prospects will be severely damaged
in both DSTL and New DERA.
39. Response: In working out the organisation
and business plans for both DSTL and New DERA the aim has been
to create two sustainable organisations that will both have a
secure future. DSTL will be focussed on Government work and will,
consequently, continue to act as part of a Department of State.
New DERA, on the other hand, will have the business imperative
to go out and seek new markets by promoting itself and its capabilities
more aggressively. Both parts of DERA will provide satisfying
careers and opportunities for staff with good prospects of personal
development and promotion.
40. Issue: The DSTL/New DERA split will lead to fragmentation
and duplication, and will impact upon the future viability of
world-class teams and capabilities.
41. Response: The separation is designed to draw
the distinction between two aspects of DERA's work. DSTL will
undertake those elements of current DERA business that must be
carried out in government, for example because of their sensitivity
or because close relationships with other governments are involved.
With this in mind DSTL will be structured so that it will contain:
a number of elements of the current DERA organisation
that are actually engaged in a sensitive research activities,
such as Chemical and Biological Division;
the majority of the staff in the Centre for Defence
Analysis since they are involved in the conduct of analytical
studies that underpin key decisions in MoD and would therefore
be inappropriate for the private sector;
and lastly, a cadre of knowledge integrators and
system scientists drawn from across the Agency to provide a high
level systems knowledge base in MoD that can give advice on the
full range of technology areas in which MoD is interested.
42. It is these people who will handle those areas where
security other sensitivities or the requirements of our international
collaborators make it necessary for the work to be carried out
within Government. All other work will be carried out by outside
organisations such as New DERA, whose principal business will
continue to be the provision of independent and impartial technology
services and research to MoD, as well as the provision of consultancy
and advice to an increasingly broad range of commercial customers.
There need not be any conflict or duplication in these two roles,
which can be clearly defined. DSTL will be able to draw on the
scientific and technical experience and resources within New DERA,
the rest of industry and academia in order to provide the MoD
with access to the capability it requires. In other areas (eg
DPA, DLO and front line customers) New DERA will continue to work
directly to the MoD customer. It is true that there has had to
be some breaking up of existing teams in order to ensure that
the right balance of knowledge integrators go into DSTL but it
is the MoD's firm belief that this is being accomplished with
minimal disruption and minimal impact on capability.
43. Issue: There will be insufficient resources in
both DSTL and New DERA to sustain each organisation.
44. Response: Achieving the right split between
DSTL and New DERA is fundamental to the successful implementation
of Core Competence. Consequently, this area has received significant
attention over the past few months and work is continuing within
the relevant working groups to examine and resolve the issues
relating to separation. We are confident that we will be able
to create two organisations that are capable of carrying out their
respective roles and which will be sustainable in the long-term.
The basis of Core Competence is that MoD via DSTL will remain
expert in the systems area and certain other specialist topics.
These experts will draw world class technology from New DERA or
wherever the best technology exists.
45. Issue: There are not enough resources in DSTL
to carry out what appears to be a very extensive range of responsibilities.
46. Response: It is important to make the point
that DSTL is not intended to be a scaled down version of DERA
and will not attempt to do everything that DERA currently does.
As explained above, there are three specific functions which DSTL
is being established to carry out:
Individual programmes of sensitive research.
Provision of advice and conduct of studies to
underpin high level defence procurement decisions.
A top level function of knowledge integration
and systems level research in order to be able to put together
top level advice on technology areas in which the MoD is interested
and also manage international collaboration.
47. The way DSTL is currently being constructed will ensure
that it has precisely the resources needed to carry out those
48. Issue: The interface between DSTL and New DERA
will be problematical.
49. Response: It is fully recognised throughout
MoD that New DERA will be a critical supplier to the Department.
It will contain many capabilities and facilities of great importance
to its MoD customers, and DSTL will need to work closely with
New DERA, as the company is likely to continue to be the MoD's
largest source of scientific and technical advice into the foreseeable
future. However, this does not imply that the relationship between
MoD and New DERA will, in principle, need to be different from
that which exists with other private-sector organisations. Indeed,
as identified in the consultation document, it is important that
there should be a clear separation between the two organisations.
Stakeholders, particularly industry and our collaborative partners,
have indicated strongly that they want to be clear whether the
people with whom they deal are in the private-sector or the public-sector.
It is also clear that there would be a fundamental contradiction
between allowing New DERA the commercial freedoms necessary to
operate successfully in the private sector whilst at the same
time allowing it to have a privileged relationship with MoD. The
relationship between DSTL/MoD and New DERA will be a formal contractual
relationship and will be no different from the arrangements that
exist between MoD and other private sector suppliers.
DERA AND MOD
50. Issue: Will the relationship between New DERA
and MoD be one of partnership, close co-operation or simply that
of customer and contractor?
51. Response: For the foreseeable future New
DERA will continue to be the MoD's principal supplier of scientific
and technology services. However, it should not be inferred that
there is an intention for a "special" relationship between
New DERA and MoD. The MoD is committed to ensuring that there
is a level playing field for competed work and that New DERA does
not enjoy an unfair competitive advantage. To ensure maximum benefit
is obtained from the broader technology base, MoD will of course
continue to form partnerships with a range of private sector companies,
including New DERA, who can meet MoD requirements. The same principles
that govern these partnerships will apply equally to New DERA
with proper commercial contracts established. The work undertaken
by a number of the working groups, in particular that relating
to Programmes and Contracts, will focus on ensuring clear contractual
boundaries are established.
52. Issue: There is concern that MoD customers may
no longer be willing to do business with New DERA
53. Response: New DERA will continue to contain
capabilities and facilities of critical importance to MoD, and
MoD customers will continue to need access to these and will be
placing work with NewDERA.
54. Issue: How can New DERA be impartial?
55. Response: There seems to be a mistaken belief
amongst some respondents that once New DERA is partly owned by
private investors it will no longer be able to offer independent
advice to its MoD customers. This is a complete fallacy; indeed
there are many companies in the private sector whose principal
product is the provision of independent advice. A further safeguard
in New DERA's case is the commitment of the government to achieve
either flotation or intermediate sale to a strategic investor
and not sale to the defence industry. The provision of high quality,
impartial and high integrity advice and services will be at the
heart of New DERA's business for all customers, including MoD.
New DERA would therefore have every incentive to protect its independence
and integrity through internal processes and through the maintenance
of appropriate values and culture. Customers, both Government
and industry, will rapidly determine whether the advice provided
is of high quality, and it would be commercially extremely damaging
if New DERA allowed its reputation for impartiality to be lost.
We believe that this, together with the professionalism of the
staff within New DERA, should be a powerful force to ensure that
the organisation is rigorous in maintaining the quality of its
56. Issue: New DERA may well decline under commercial
pressures or will cease to do innovative scientific work.
57. Response: Commercial pressures are likely
to ensure that DERA continues to employ a taut management style
which is tough on overheads and ensures that resources are put
into the revenue earning areas of the business. This is already
being addressed through the development of a corporate model and
application of future scenarios. Since DERA's principal product
is the advice that it can provide based on its knowledge, it is
certainly not going to neglect this core area. There will be many
ways of ensuring that New DERA maintains its scientific edge,
continuing to conduct research to meet specific customer needs
is one way; securing alignments and joint ventures with other
organisations is another possibility. What is absolutely certain
is that DERA will continue to provide excellent opportunities
for scientists who wish to apply and develop their knowledge in
finding solutions to challenging problems.
58. Issue: It will be difficult for DERA to maintain
its relationship with its international partners.
59. Response: A major objective for the DERA
PPP is to ensure the continuation of the very valuable programme
of international research collaboration that DERA currently undertakes
with its allies. The division into DSTL and New DERA has been
designed specifically to safeguard that relationship. DSTL, whose
staff will be MoD civil servants, will be responsible for all
areas of international research collaboration that require Government
to Government interaction. Where appropriate, and subject to allies'
agreement the basic research work that underpins collaboration
will continue to be carried out in New DERA and New DERA employees
may well find themselves in the position of supporting DSTL personnel
in international meetings.
60. The working group responsible for this area is examining
the details of each of the existing international research collaboration
programmes to ensure that appropriate arrangements are put in
place. Liaison visits are also planned where UK collaborative
points of contact, who will form part of DSTL, will visit international
counterparts to ensure collaborative issues area addressed in
61. Issue: What about the many Memoranda of Understanding
62. Response: There are MOUs which will need
to be examined closely, a proportion of which will be amended
to take account of the changed circumstances arising from DERA
PPP. Recent meetings and discussions with our partners have been
very constructive and have confirmed that our allies are keen
to see collaboration continue.
63. Issue: Information exchanged under collaborative
arrangements may find its way into unauthorised hands.
64. Response: Information that is provided to
the MoD on the basis that it remains within Government will continue
to be fully protected just as it is at present. There may be other
situations, however, where information provided under collaborative
agreements can legitimately be given to New DERA, or other outside
organisations, and used specifically for the purposes of that
collaboration, but this will only happen where all parties to
the collaboration are content. Moreover, it will be essential
for New DERA to demonstrate that when it is handling sensitive
information, it can be trusted to do so entirely properly. New
DERA will be subject to the same security requirements that other
private companies must meet when dealing with Government contracts.
New DERA's success will depend on it being trusted by MoD and
its other customers and it would therefore have a strong commercial
incentive to avoid conflicts of interests.
65. Issue: It is feared that New DERA will be in
a position vis a vis MoD that gives it an unfair advantage over
66. Response: At the moment DERA receives from
MoD uncompeted contracts for the research programme. A pilot competition
is in the process of being conducted, covering some 3% of the
research programme, and the results of that competition are expected
in a few weeks time. Gradually over the next 5-7 years, it is
envisaged that the remainder of the research programme will be
opened to competition. What this means in practice for industry
is that gradually over the next few years it will have access
to a whole range of projects which were previously closed to it.
New DERA will of course also have greater freedom to broaden its
markets and will be seeking to take its technology and knowledge
into new areas. This may bring it into competition with some elements
of industry, but this will be on an entirely level playing field
and New DERA will have to prove itself capable of winning work
competitively. The one area where DERA will be constrained is
in the matter of defence production. DERA has never had any pretensions
to be a defence manufacturer and there is no intention that that
will change for New DERA.
67. Issue: DERA may use intellectual property (IP)
that belongs to industry for its own advantage.
68. Response: DERA is, and has always been, an
experienced practitioner in the knowledge business and is fully
aware of the constraints and issues surrounding ownership IP.
Mechanisms drawn up during implementation will ensure that IP
for which it does not have the full rights of ownership will not
be used in an inappropriate way. Indeed it will be very much in
DERA's interests to demonstrate to industry that it can be trusted
to use IP passed to it for specific defence purposes precisely
for those purposes and for no other. MoD is currently putting
in place processes to ensure that IP that is currently held within
DERA is properly protected. Detailed discussions are being held
with industry representatives to ensure that the issue is satisfactorily
69. Issue: There is concern that the mutually beneficial
relationships that currently exist between academia, industry
and DERA might suffer as a result of a change in DERA's status.
70. Response: Both New DERA and DSTL will have
MoD customers to serve and as part of this they will wish to ensure
that those customers receive the best scientific and technical
advice that can be put together. Both parties are therefore likely
to want to continue to involve academia in the position of sub
contractor since it is from this sort of relationship that many
successful joint programmes have developed. There is no reason
to believe that DSTL or New DERA will want to involve universities
any less than they do now and indeed New DERA's freedom to pursue
commercial ventures may prove advantageous in those cases where
it has a partnership with a university.
71. With regard to intellectual property, then clearly
where that has been funded by the MoD and access is required in
order to further a MoD programme, then that IP will be made available
for such purposes. In the case of academia, some information is
accessed via reports and other material published by DERA scientists
in academic journals. It is expected that these scientists will
wish to continue to publish their work. However, as is the case
now with DERA as a Trading Fund, any information with potential
for commercial exploitation will first need to be adequately protected
(ie by way of patent application) before the information can be
72. Issue: There might be confusion over the status
of New DERA and its employees insofar as international allies
73. Response: The advantage of the Core Competence
model is that there is absolutely no room for confusion about
the status of either DSTL or New DERA's employees. DSTL will be
MoD civil servants. The employees of NewDERA will be private sector
employees and will not be civil. This does not necessarily preclude
them from inclusion in international collaborative meetings; indeed
there is already significant contractor investment in many collaborative
for a, but their presence will be subject to agreement with allies.
74. Issue: There is concern over who will be allowed
to invest in New DERA.
75. Response: As was made clear in the Consultation
Document, it is the MoD's intention to retain a special share
to allow shareholding restrictions to be placed on New DERA through
the Articles of Association. This may include restrictions on
undesirable ownership and a maximum limit on individual shareholdings.
We are currently developing the specific terms of the special
share in conjunction with legal and Other Government Department
76. In summary the overall responses to the consultation
process have indicated that stakeholders welcomed the willingness
of the MoD to listen to responses from the earlier consultation
process and to make changes to the proposals. Most of the main
stakeholders feel that the proposals are workable and are a significant
improvement over the Reliance approach.
77. The main conclusions from the consultation are:
although the process has identified many issues
and some potential risks, these are all areas that can be satisfactorily
addressed in implementation, and indeed we are currently taking
all of these forward in the joint working groups;
stakeholder responses to the revised proposals
have been generally positive.
there is broad agreement that Core Competence
is a improvement on the previous approach.
MoD's willingness to respond to earlier concerns
has been widely welcomed.
the majority of stakeholders believe the proposals
78. The positive response MoD has received has been encouraging.
We are of course under no illusion that there are many detailed
issues to be addressed. However, with the implementation working
groups established and progressing well against the project timetable
we are confident that the PPP will be achieved efficiently and
result in two viable and sustainable organisations capable of
delivering MoD and other customer needs.
HC 462, The Future of DERA. Ninth Report of the Session 1999-2000,
7 June 2000. Back