Friday, September 12, 2008

UK DTR: Delayed Training rationalisation

The Daily mail newspaper ran an item yesterday "Credit Crunch hits £11bn Forces deal after development land value plummets", concerning the Defence Training Rationalisation (DTR) [originally: 'R' for 'Review'] program run by the UK Ministry of Defence.

The program was originally split into two packages under a PFI-PPP type regime to consolidate and manage high-quality training for non-combat tasks (for example engineering, driving etc.).

The Metrix consortium (led by QinetiQ) competed for both packages against a BAE Systems/VT Group consortium for package 1 and Holdfast (led by Babcock International Group) for package 2.

What ensued was a battle royale as the Welsh political lobby mobilised and pursued Prime Minister Tony Blair to rescue RAF St. Athan - where the DARA aircraft support organisation was due to be privatised and broken up - and the white elephant hangar "Red Dragon" had recently been built.

This political confluence worked well as the list of vested interests included the UK MOD, who possessed a financial stake in QinetiQ at the time. IAB objective assessment of the bidders must have been an interesting exercise.

The January 17, 2007 announcement by the MOD of preferred bidder favoured, funnily enough, Metrix for Package 1 and 2. However the financial strains were already evident in the decision to 'rescope' package 2 out of existence.

18 months on and, as industry observers hinted, financial difficulties would emerge. QinetiQ's role leading defence R&D is blurred by a training and a experiemental range facilities management contract - not exactly at the pinnacle of R&D.

Add to that the fact that too much time was taken in moving to identify land sales and making the disposals has handicapped the financial merits of the project.

One can only assume that the industrial 'losers' of DTR are relieved and that another headache for Defence managers refuses to go away. Perhaps the best solution is to either delay pending an uplift in land prices or to descope the project out of existence...

...and then re-open it to bidding

I should like to be the first to predict that DTR will achieve financial close in 2012 after the next Comprehensive Spending Round and second that the shape of the program and participants will not resemble what exists today.

New balls anyone ?

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