The Financial Times reports on the latest setback for the Defence Training Review:
On Wednesday, Qinetiq told the government that Land Securities had withdrawn from the process. Land Securities has spent about £20m so far and is reluctant to keep funding the project in the face of significantly increased costs over the next 18 months.
Qinetiq, the defence research group that is the lead contractor on the programme, is already in talks with alternative partners, although the move comes at a difficult time for the property market. There may also be reluctance to take on additional short-term costs just as property and construction companies struggle with a sharp fall in asset values over the past year.
The news is the latest blow to the controversial programme. There have already been concerns about the viability of the 25-year project after it emerged costs had risen by nearly 10 per cent since the beginning of last year.
The consortium had also been forced abandon its original plan to raise up to £1bn through a bond issue because of the difficulties in the financial markets.
This latest news from DTR is revealing that as predicted by PCS the programme is busy unravelling. Our meeting with Minister for the Armed Forces was cancelled at the last minute yesterday, but has been re-arranged for next Tuesday. We have even more questions to ask him following this announcement below.
Contractor quits defence academy deal
By Daniel Thomas and Sylvia Pfeifer
Published: December 10 2008 22:46 | Last updated: December 10 2008 22:46
The £12bn plan to centralise the
The Defence Training Review (DTR), the
The government awarded the contract to build and run the new defence academy to the Metrix consortium, a joint venture between Qinetiq and Land Securities' outsourcing arm, Trillium.
On Wednesday, Qinetiq told the government that Land Securities had withdrawn from the process. Land Securities has spent about £20m so far and is reluctant to keep funding the project in the face of significantly increased costs over the next 18 months.
Qinetiq, the defence research group that is the lead contractor on the programme, is already in talks with alternative partners, although the move comes at a difficult time for the property market. There may also be reluctance to take on additional short-term costs just as property and construction companies struggle with a sharp fall in asset values over the past year.
The news is the latest blow to the controversial programme. There have already been concerns about the viability of the 25-year project after it emerged costs had risen by nearly 10 per cent since the beginning of last year.
The consortium had also been forced abandon its original plan to raise up to £1bn through a bond issue because of the difficulties in the financial markets.
On Wednesday night, Charles Barrington, the chairman of Metrix, said the consortium and the Ministry of Defence had been able to cut costs. That had been achieved in part by reducing the number of courses that will be offered.
He added that changes in a consortium's structure were not unusual as "circumstances and priorities change".
"Land Securities Trillium has taken this decision for strategic reasons and not because the DTR proposition is flawed," he added.
A Land Securities spokesman said its Trillium arm was withdrawing "in the light of the significantly increased bid costs, carried at risk by the bidders, required20as the project moves into detailed design work".
The construction programme is valued at an estimated £1bn and will create 1500 jobs. Financial close on the deal is now expected in 2010.
Land Securities remains in talks to sell Trillium to a rival outsourcing company, Telereal, although the continuing discussions are not thought to have prompted its withdrawal from the training programme.
Trillium was providing land acquisition, management and development advice to the consortium.
Mark Pritchard (Wrekin, The, Conservative) Link to this | Hansard source | Video match this
On a point of order, Mr. Deputy Speaker. The defence training review is the largest private finance initiative in British history, worth £11 billion—indeed, the costs have increased in the last six months to £12 billion. I seek your advice, Mr. Deputy Speaker, because in today's Financial Times it was announced that Land Securities Trillium, one of the major backers of the defence training review package, has pulled out of the project altogether. This has major implications for the future training of our armed forces not only in the short term, but in the medium to long term. Is it not a disgrace that, yet again, the Government have chosen to leak this information to the Financial Times rather than bring it to the Floor of the House?
Michael Lord (Deputy Speaker) Link to this | Hansard source | Video match this
I can only repeat that Mr. Speaker considers it extremely important that all important matters on which this House should have a view should be brought before the House, but I am sure the hon. Gentleman will find ways to pursue these matters himself, and the points he has made are on the record.
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