13 June 2008
The taxpayer was the 'fall guy' in the privatisation of the Ministry of Defence research and procurement division that became Qinetiq, MPs have declared.
In a report, the Public Accounts Committee says that although the privatisation was a success, the public purse lost almost £100m because of inefficiencies in the sale process.
Qinetiq was privatised in two stages: the sale of a minority stake in the Defence Evaluation and Research Agency to the private equity firm Carlyle Group in 2003, then a flotation on the London Stock Exchange in 2006.
PAC chair Edward Leigh said: 'The privatisation of Qinetiq has been successful in protecting the viability of this business of strategic importance to UK defence interests. But the MoD conducted the deal like an innocent at a table of cardsharps, with the taxpayer the fall guy.'
The report, The privatisation of Qinetiq, published on June 10, says the MoD allowed Carlyle to negotiate a £55m reduction in the value of the business after it had been appointed as preferred bidder. At the time of the flotation, the top ten managers held shares worth £107m for an investment of just £540,000, MPs say.
'The senior public servants managing Qinetiq behaved dishonourably,' Leigh said. 'They sold the idea to the MoD of privatising the business without explaining they stood to benefit, a serious conflict of interest.'
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