Sunday Express: Regions go to war over GBP 10 bn defence training shake-up

THOUSANDS of people flocked to an old RAF training base near Wolverhampton last month to watch the Red Arrows at the Cosford Air Show.

But amid the roar of the Hawk jets as daredevil pilots looped the loop, few spectators were aware that this Second World War airfield is at the centre of a blistering row over one of the UK's biggest-ever defence contracts.

Billions of pounds of investment and thousands of jobs at training bases across the UK are at stake.

Politicians are up in arms and companies around the globe are watching closely.

In a few weeks' time, the Ministry of Defence is set to unveil the winner of a contest to run its GBP 10 billion Defence Training Rationalisation (DTR) - a 25-year programme in which the technical and logistics training of tens of thousands of military cadets is being outsourced to the private sector.

DTR is one of the biggest, and potentially most lucrative, private finance initiatives (PFI) in UK history. Currently, the MoD spends GBP 4.2billion a year - 20 per cent of the annual defence budget - on training at sites such as Cosford but half the money goes on site maintenance.

The Navy, Army and Air Force offer separate training programmes and the principle behind DTR is to simplify and cut costs.

It's a huge opportunity and, not surprisingly, competition has been intense. Industry insiders say the Metrix consortium is in pole position to scoop the first half of the programme, worth at least GBP 5billion.

Metrix includes recently floated defence technology group Qinetiq, property giant Land Securities and US missile giant Raytheon. It would build facilities and supply educational courses for military staff in everything from engineering and maintenance of tanks and planes to communications and IT.

The MoD insists no final decision has been made but Metrix is believed to have outmanoeuvred the rival MC3 consortium, including VT Group, BAE Systems and Carillion, with its proposal to move all UK technical military training from several sites across the UK to a single 'academy' on another old RAF base at St Athan, in the Vale of Glamorgan.

It is an ambitious plan that Metrix has pushed as an opportunity to regenerate an economically disadvantaged region. It has secured support from the Welsh Assembly and pledges of cash from the Welsh Development Agency to modernise local transport links.

"[Locating in Saint Athan] would have a major impact, " says Madeleine Moon, Labour MP for Bridgend. "It would represent a huge investment in the area and create 5,500 jobs." Others emphasise the plan would provide a big boost for the region's aerospace industry, a key sector in Wales which employs 20,000 people in more than 150 companies.

Metrix also hopes to win the second part of the DTR contract, to provide "logistics" training in a host of subjects, including photography, languages and catering, and locate all this at St Athan, too.

Another consortium - Holdfast, which includes Babcock, Mowlem and TQ Education - is also competing for this programme, valued at GBP 5billion.

But the Metrix plan is highlycharged politically. While popular in the Labour stronghold of South Wales, rejecting MC3's bid would trigger the closure of rival sites in Conservative constituencies across the Midlands and southern England.

They include RAF Cosford, an existing training ground employing 3,000 people, where Spitfires were assembled during the Battle of Britain.

However, Cosford is intrinsic to the plans of MC3. It is one of two key sites proposed for use by the consortium and lies just a few miles from MG Rover's former plant at Longbridge in the troubled heartland of the UK manufacturing industry.

Losing Cosford would be a bitter blow, says local Tory MP Mark Pritchard, who thinks shifting military training to Wales would be a mistake. He argues that many highly skilled military training personnel would simply refuse to move, meaning disruption and extra costs.

"If the decision is to be made in the interests of training the armed forces, Cosford is the clear option, " claims Pritchard, adding unemployment in his constituency had risen 32 per cent in the past year.

Other sites such as Bordon barracks, near Farnham, Hampshire are also at risk if Metrix loses.

Military top brass are concerned because St Athan is a long way from the military's training heartland in the south and south-west of England. Others worry that lumping all training together risks eroding the individual ethoses of the three services.

But the debate doesn't end there.

Some defence industry insiders claim Qinetiq has an unfair advantage because the MoD retains a 56 per cent stake in the company. It floated controversially in February at 200p a share, giving it a market capitalisation of GBP 1.3billion. Last week the price had fallen to 164p a share, valuing it at just over GBP 1billion.

A spokeswoman for the MoD said bids were still being evaluated and no final recommendations had yet been made to new Defence Minister Des Browne.

The verdict is likely in September, possibly provoking a roar of protest in the West Midlands not even the Red Arrows could drown out.