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08 Feb 11. U.K. Ministers have cancelled advanced plans for the £6bn privatisation of the search-and-rescue helicopter service, citing concerns over misconduct in the bidding process. The last-minute decision to scrap the competition comes after military police were called in to investigate the alleged mishandling of commercially sensitive information by former Ministry of Defence staff. In a statement to the Commons Philip Hammond, transport secretary, said that while investigations were continuing the government had sufficient information about“irregularities” to scrap the competition and end talks with the Soteria consortium, which had been selected as preferred bidder.
“The irregularities included access by one of the consortium members, CHC
Helicopter, to commercially sensitive information regarding the joint MoD/DfT project team’s evaluations of industry bids and evidence that a former member of that project team had assisted the consortium in its bid preparation, contrary to explicit assurances given to the project team,” he said.
While the full repercussions of the decision remain unclear, dropping the private finance initiative programme will force officials to find a new long-term solution for the service. This could include redesigning the model for a privatisation, changing the required number of search-and-rescue bases, excluding the military in the delivery of the service or extending the programme to include other emergency services. Cancelling the privatisation will also require the government to put in place some potentially costly interim measures to provide a continuation of service.
Depending on the length of delay, this could include an upgrade to extend the air life of the existing Sea King helicopter fleet. The announcement will be a heavy blow to the Soteria consortium, comprising CHC, Thales UK and Sikorsky, which had been chosen as a preferred bidder in February and was within days of receiving a green light for the project in December. It will also amplify calls for a review of MoD rules on the employment of civil servants and military officers by defence companies during sensitive commercial competitions. The police investigation, which is expected to continue for some weeks, is focusing on access to information and the role of a military officer who helped to set the evaluation criteria and requirements for the privatisation before leaving to join CHC.
Mr Hammond said: “the Ministry of Defence Police are investigating how the commercially sensitive information came to be in the possession of the bidder. It would be inappropriate to comment further on the details of the investigation until it has finished.”
He added: “Even without the outcome of that investigation, the Government has sufficient information to enable it to conclude that the irregularities that have been identified were such that that it would not be appropriate to proceed with either the preferred bid or with the current procurement process.”
Ministers ordered an inquiry after the consortium flagged up a “possible issue”, hours before Mr Hammond was set to announce the deal was