§ Mr. Sheerman
To ask the Secretary of State for Defence what steps he is taking to ensure that the effectiveness of the Defence Evaluation and Research Agency will be maintained if the proposals for its part-privatisation are implemented. 
§ Mr. Hoon
The Government concluded in the Strategic Defence Review that, in order to guarantee the ability of the Defence Evaluation and Research Agency (DERA) to continue to conduct world-class research, we would harness the opportunities offered by a Public Private 367W Partnership. Last year's consultation exercise on a potential PPP proposal produced a wide range of useful comments from stakeholders.
As a result of this process, I announced in October that we would be widening the scope of our discussion to take these comments into account. That work is now complete and has led to the development of two revised models for potential PPP structures, known as "Core Competence" and the "Public Sector Option". A detailed evaluation of these options indicates that Core Competence best meets the PPP objectives while also responding to the views of stakeholders. Both models are described in a consultation document which has been placed in the Library of the House and which is also available on the internet at www.mod.uk/commercial/ppp/dera/.
The essence of Core Competence is a clear separation of those functions which are best developed within a PPP, and those which are best performed wholly within Government. Around three quarters of DERA would be turned into a company, which we would hope to float on the stock market as soon as its potential is judged to be suitably developed. A core of staff would be retained wholly within the MOD to provide a high level overview of defence science and technology. This ensures that MOD would retain access to in-house impartial advice and allows management of the defence research programme and international research collaboration. Specific very sensitive areas and programmes would also be retained.
I believe that this approach would create two vibrant sustainable organisations. The new company would have the freedom to flourish, to grow its business and to diversify the wealth of knowledge it has built up over the years to the benefit of the wider UK economy while still providing the MOD with the essential services we will continue to need long into the future. The retained organisation will be a small but also world-class organisation offering rewarding careers within MOD and the wider civil service.
This approach is good for DERA, good for MOD and good for the wider UK economy. It will provide the UK technology sector with added impetus and ensure we are well placed to take on the challenges and opportunities offered by the 21st century.
All stakeholders are now being invited to submit their views on the revised proposals. As the exercise has proved, we are willing to listen and to respond to comments before taking a final decision.