The Marketplace Report: Privatizing Bond's Gadget Lab

The United Kingdom's Defence Evaluation Research Agency is where British government scientists develop weapons technology and gadgets. It's also the inspiration for "Q" in the James Bond film franchise, the wonkish scientist who makes unique spy gear for the film's hero. Madeleine Brand talks with Stephen Beard of Marketplace about the agency's decision to privatize one of its divisions, and how employees at that division want a piece of the windfall.

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MADELEINE BRAND, host:

Back now with DAY TO DAY. I'm Madeleine Brand.

And for sale today in Britain, a part of the British government once created to dream up ideas for weapons and other military equipment the Defense Evaluation and Research Agency was Ian Fleming's inspiration for the place where the gadget guru Q works in the James Bond series. The real place is spinning off a subsidiary called QinetiQ with a stock listing valued at more than a billion dollars. Well, the sale is causing a lot of controversy in the UK and joining us from London is "Marketplace's" Stephen Beard.

And, Stephen, here in the US the government has an agency for this kind of research called DARPA. Is the agency you're talking about the British equivalent?

STEPHEN BEARD reporting:

Yes. DARPA--there's a difference. DARPA farms out its research, but this British group does most of it in-house. It has a staff of more than 9,000 scientists and engineers whose job, among things, is to invent and test weapons and military equipment, and it's got a pretty illustrious past. Amongst other things, it invented radar, the microwave oven, carbon fiber, the liquid crystal display. So it's quite an illustrious body.

BRAND: So why is the British government selling it off?

BEARD: The cost of running an organization like this is a huge burden on the taxpayer. In fact, the government started the process of privatizing this group three years ago. It sold off just under 50 percent then and that's when it gave this name, QinetiQ. The thinking has been that in the private sector it'll become more commercial. It'll dream up more innovations that it can sell to private industry. But the government's decision announced today to sell off its controlling stake in the company and have the shares listed on the stock market has now stirred up a lot of criticism.

BRAND: And tell us about that. What's the problem?

BEARD: Well, this will, of course, mean that Britain's main defense research arm will be fully in the private sector. James Arbuthnot, a member of Parliament, is wondering whether this privatization could jeopardize Britain's close cooperation with the US on defense issues.

Mr. JAMES ARBUTHNOT (Member of British Parliament): Would the United States share secrets essential to the defense of Britain and--with a commercial company that would be competing with American business?

BEARD: The British government says this will have no effect on defense cooperation, but there is another worry. Three years ago the government sold around 30 percent of QinetiQ to an American investment for around $70 million. Now when QinetiQ gets its stock market quote, it's likely that that investment will have increased eightfold to almost $600 million. Not bad for three years. So the government's critics say that they sold a big chunk of this valuable, vital national asset at a rock-bottom price.

BRAND: Stephen Beard of public radio's daily business show "Marketplace" and "Marketplace" is produced by American Public Media.

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