State underwrites St Athan defence’s PFI project

Please see the attached which is a copy of document placed before the House of Commons with regards DTR. Mark Pritchard MP tabled an objection today and therefore there will have to be a further investigation prior to this going ahead. It would seem that the Department are getting ever more desperate to somehow give Metrix even more funding to enable them progress. Its looks like they were hoping to sneak this through..... This should be some serious debate asking if this programme should continue if we keep having to bail out Metrix and give them ever more time to try and balance the books to make it look palatable.

Ministry of Defence spends another £40m on ailing contract Daily Mail
The Defence Training Review (DTR) is the government's largest private finance deal. It aims to consolidate the MoD's training bases from 30 to about ten,...

Details that the taxpayer has underwritten almost £50million in investment in the project to outsource soldier training even before a brick has been laid has angered the Tories.

Mark Pritchard, MP for The Wrekin and secretary of the Conservative defence committee, has written to the Financial Secretary to the Treasury, Stephen Timms MP, asking him to explain the rising costs.

He said: 'There are serious underlying funding problems in the DTR project and it is incumbent on ministers, given the increased level of taxpayer money involved, to make an early statement on the reasons and justification for these new funds.'

...State underwrites UK defence’s PFI project
Financial Times - London,England,UK
Under the deal, taxpayers will underwrite a further £32m of risk in order to push through the Defence Training Review, the UK’s biggest private finance ...

State underwrites UK defence’s PFI project

By Alex Barker, Political Correspondent Published: February 25 2009 02:19 |

Ministers have quietly offered contractors bigger state guarantees as a means of rescuing the £12bn ($17bn) private finance project to centralise the military’s training, the Financial Times has learnt.

Under the deal, taxpayers will underwrite a further £32m of risk in order to push through the Defence Training Review, the UK’s biggest private finance initiative.

The offer was made as the government prepares to intervene to save a clutch of big private finance deals facing funding difficulties, in areas from school building to road construction.

Qinetiq, the defence group, is the lead contractor for DTR, a giant project designed to centralise all non-military technical training for army, navy and air force personnel in one academy in Wales.

The 25-year deal, which has seen significant cost increases, suffered a big setback late last year after an outsourcing arm of Land Securitieswithdrew from the process.

The doubts over its future were partly allayed when Sodexo, the French contract caterer, stepped in to replace Trillium in the Metrix consortium, which was awarded the contract to build and run the academy.

Fresh offers to underwrite parts of the deal, specifically on the design and planning of the new centre, appear to have removed the remaining sticking points.

In an “unnumbered command paper” slipped out to the Commons, the Ministry of Defence said fresh guarantees could be exercised only if it delayed the project. It said the Treasury had approved the plan in principle. The MoD said: “Underwriting the costs of this project is a sensible and prudent business practice.”


It is normal practice, when a Government Department proposes to undertake a contingent liability in excess of £250,000 for which there is no specific statutory authority, for the Department concerned to present to Parliament a Minute giving particulars of the liability created and explaining the circumstances; and to refrain from incurring the liability until fourteen Parliamentary sitting days after the issue of the Minute, except in cases of special urgency.

The Defence Training Review Package 1 Project is a large and complex Private Finance Initiative project, with the Metrix Consortium as Preferred Bidder. It seeks to transform the way the Ministry of Defence (MoD) delivers specialist engineering and communications and information systems training on a Defence wide basis to support better the future needs of the Armed Forces.

In January 2008, a Minute was laid before Parliament outlining an initial contingent liability for the underwriting of an element of Pre-Contract activity with Metrix. This existing Pre-Contract Agreement Letter (PCAL1), which the Department committed to in March 2008, underwrites risk reduction activity up to a maximum value of £9.5M. At the time this was considered sufficient to carry the project to the main investment decision point, however, whilst PCAL1 achieved its strategic objectives in generating the momentum necessary to establish an affordable and acceptable programme, further risk reduction activity is necessary to mature the deal and maintain the mobilisation of Metrix resources to ensure the most effective programme to the point at which the Contract is let.

In order to maintain this momentum a second package of risk reduction activity valued at £40.40M is proposed. This work, of which £32.67M will be underwritten by the MoD, is predominantly focused around the design and planning of the estate solution at St Athan, and further development of the training solution. By undertaking these activities ahead of the main investment point, it will be possible for Metrix to make a planning submission in May 2009 (which is essential if construction at St Athan is to start on time in August 2010). Further development of the training solution will build customer confidence in the training solution, allowing quicker and more efficient drawdown of military manpower after Financial Close.

The costs of these risk reduction activities are to be recovered through the tendered contract and are already captured within the Metrix price. Provided that the Programme reaches Financial Close, the costs will be paid from within the planned budget at no additional charge to MoD. The MoD will only become liable to reimburse the underwritten value of these costs if there is a failure to achieve Financial Close for a reason not attributable to Metrix. This commitment will be subject to a clear Limit of Liability, in total and by specific activity area, with any reimbursement of costs subject to full cost analysis supported by open book provisions. Should this liability be called, provision for any payment will be sought through the normal Supply procedure.

The Treasury has approved the proposal in principle. If, during the period of fourteen Parliamentary sitting days beginning on the date on which this Minute was laid before Parliament, a Member signifies an objection by giving notice of a Parliamentary Question or by otherwise raising the matter in Parliament, final approval to proceed with incurring the liability will be withheld pending an examination of the objection.


DTR costs could rise by a further £1bn
Tuesday, February 24, 2009

The cost of the Defence Training Review (DTR) may rise by a further £1bn Defence Management has learned. In a report that first appeared in the South Wales Echo, the cost of the project was listed as £13bn, an increase of £1bn since the last officials figures on the DTR were released late last year.

Sodexo Takes Equity Share in £12bn DTR
PPP Focus.com, UK - 11 Feb 2009
The 30-year £12 billion project is the UK ’s largest PFI and the academy will be the largest vocational training facility Europe when it opens in 2014. ...
New partner found for largest-ever PFI New Civil Engineer
New Partner for UK Outsourcing Training Consortium DefenseNews.com (subscription)
Metrix: a first look into the future WalesOnline

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