September 8, 2002
12:05 PM   Subscribe

MOD Selects The Carlyle Group as Preferred Bidder for QinetiQ. In a move that seems to be going ahead with very little coverage, Britain's military research agency is being sold off to a foreign company. Given the important role Qinetiq plays in Britain's Defense, and the type of business The Carlyle Group is, this is perhaps surprising...
posted by chill (12 comments total)
The Carlyle Group's principal aim is profit, and there's nothing intrinsically wrong with that. To simplify, they achieve this by buying up failing companies, making them profitable, and then selling them on. This is something that they seem rather good at (note for example United Defense, discussed in the Red Herring article). This does however seem rather in conflict with the purpose of Qinetiq. Their principal aim is research, evaluation and development for the MOD.
Surely there is a major conflict of interest here? Not only is there the usual private profits versus public needs question, there is the fact that Carlyle still own half of United Defense Industries. Weapons manufacturers were actually banned from bidding for Qinetiq due to any possible conflicts of interest that may arise, and yet now it is being sold not only to a company with a major interest in Defense, but a foreign company at that. Can someone tell me where the benefits to the British taxpayer are here? Would Americans accept DARPA being sold off to improve profits of a foreign company?
posted by chill at 12:06 PM on September 8, 2002

I think that the intention is that the rump of DERA (DSTL) will retain the original DERA remit, whilst the new Qinetiq, will become a broader, technology business, selling technology solutions to all and sundry. Therefore, Qinetiq will become (is?) focused on profit rather than scientific, or technological advance per-se.
posted by daveg at 12:29 PM on September 8, 2002

As I understand it from this page, only the chemical, biological and nuclear areas of interest of DERA will be retained by DSTL, the rest is with QinetiQ. 80% of Qinetiq's business still resides with the MOD. That includes weapons technology, sattelite technology, air defenses etc.
posted by chill at 12:41 PM on September 8, 2002

chill: You may be interested in DSTL's capabilities, which is a public admittal of capability - they also have less publicised departments!

Aside: I think that Qinetiq's public statements are now heavily driven by commercial consideration.
posted by daveg at 1:20 PM on September 8, 2002

QinetiQ..... was anyone else's first thought of Q from James Bond movies?
posted by mogwai at 2:07 PM on September 8, 2002

We seem to have /.'d the place. I'll try back later. :)
posted by dejah420 at 6:44 PM on September 8, 2002

Qinetiq is government-owned, but it doesn't appear to be a nonprofit. I don't know that much about the UK's activities, but the U.S. government frequently invests in for-profit ventures that serve strategic interests (Witness In-Q-Tel) and I don't *think* it's any different there.

Also - United Defense is a U.S.-based company, but it's also public, which means that it probably has a not-insignificant level of foreign ownership (funds and whatnot) as well as global operations. It's a multinational. The Carlyle Group is U.S. based as well but likewise has a not-insignificant level of non-U.S. limited partners.

Also - Carlyle's sweet spot is the leveraged buyout (LBO), but that doesn't always lead to carve-outs and sell offs, and it's not the only thing, or even the primary thing they do. They're a private equity shop and that includes LBOs, but it's not the whole story.
posted by lizs at 4:28 AM on September 9, 2002

QinetiQ is, as has been noted above all of the non Security related parts of DERA. They do all sorts of government contracting from building the spectular, falls over at the drop of a hat 1901 census site to papers on Open Source usage in government and the like.
posted by nedrichards at 6:13 AM on September 9, 2002

it probably has a not-insignificant level of foreign ownership

saudi investors? i thought this part was interesting as well: "the firm has been making close to $50 million a year training the Saudi Arabian National Guard, troops that are sworn to protect the monarchy," esp given their origins in the ikhwan -- militant islamic fundamentalist evil-doers!

they're also publishing yellow pages now (or trying to save qwest :)
posted by kliuless at 6:53 AM on September 9, 2002

Thanks for the points of view all.
lizs, thanks for the information about In-Q-Tel, on the face of it that seems to be a very similar situation, so I'll read into it further. Everything else you say is correct of course, but doesn't really allay my fears and frustrations. Even though The Carlyle Group is not exclusively focussed on LBOs, they are absolutely focussed on profit. That to me is a conflict of interest, if I am right about the extent of QinetiQ's current dealings with the MOD. The sites I linked to above indicate (to me at least) that whilst they are using the technology they have developed to diversify into other areas of interest, they still play a considerable roll within the MOD, regardless of the work carried out by DSTL. I guess I'll have to try and find some non-marketing tainted information to try and answer that question once and for all.
I don't know, maybe I'm just jaded by the string of recent privatisation problems in the UK, and frustrated that we seem to lack the management skills in the UK to take the company forward without having to look abroad. This frustration will be compounded if we ever get into the situation where the company needs to be supported by the British taxpayer, such as was the case with Railtrack, and may be the with British Energy in the near future. Admittedly the credentials of The Carlyle Group look good, so hopefully that situation will never arise.
posted by chill at 7:10 AM on September 9, 2002

The US has a history of privatizing and subcontracting out government RD. Los Alamos national lab is operated by the University of Califronia, this national lab is operated by the Bechtel Corporation, National Renewable Energy Labs (NREL) is operated by Bechtel and Batalle, both for profit enterprise, in fact, just go to this site to find a list of national labs and click through to see who operates them.
posted by pjgulliver at 7:11 AM on September 9, 2002

I don't know, maybe I'm just jaded by the string of recent privatisation problems in the UK

Would it make you feel better if you knew that John Major, head of government for many of the later privatisations, including Railtrack, is Head European Honcho (or whatever his title is) for The Carlyle Group?
posted by vbfg at 8:26 AM on September 9, 2002

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