U.K. defense researchers pick U.S. partner: Washington-based Carlyle group to seek investors for London's new military technology firm.

The United Kingdom's Ministry of Defence has chosen a U.S. firm--the Carlyle Group--as a strategic investment partner for its QinetiQ Group plc, a spin-off of the former Defence Evaluation and Research Agency.

DERA--one of Europe's largest scientific research organizations--was the U.K.'s version of the U.S. Defense Advanced Research Projects Agency. It pioneered the development of such technologies as liquid-crystal displays, carbon fiber, flat-panel speakers, infra-red sensors and microwave radar.

In 2001, the MOD split DERA into two organizations, the Defence Science and Technology Laboratory and QinetiQ, a company spokesperson, Fiona J. Lewinton, told a symposium sponsored by the Precision Strike Association, in Laurel, Md.

DSTL remains an integral part of the MOD, but QinetiQ--pronounced "kinetic"--has been spun off as a company that currently is wholly owned by the government, Lewinton said.

With some 9,000 personnel and an annual income of approximately 800 million pounds, QinetiQ includes about three quarters of the old DERA. It has a small headquarters in London, with major facilities in Farnborough and Malvern.

Strapped for cash, however, the MOD wants to attract more private investment to QinetiQ. In September 2002, it selected the Carlyle Group from a field of 40 companies that had expressed an interest in acquiring a stake in the firm.

Based in Washington, D.C., Carlyle is a global investment company with a portfolio of nearly $14 billion and investors in 55 countries. Its board of directors is packed with retired, but still-influential U.S. and U.K. political figures.

Carlyle's chairman, for example, is former U.S. Defense Secretary Frank C. Carlucci. Ex-Secretary of State James A. Baker III is the firm's senior counselor. John Major, a previous U.K. prime minister, is chairman of Carlyle Europe, with offices in London.

"The Carlyle portfolio makes it a good match for QinetiQ's breadth and depth of science and technological expertise," said QinetiQ's chief executive, Sir John Chisholm, in a published statement. "Not only is Carlyle well known for its understanding of the defense world, but it has interests that extend into the broader fields of innovative science and technology."

At press time, the MOD and Carlyle were engaged in negotiations over terms of the partnership. The two were reluctant to discuss the negotiations in any detail, because they were "at a sensitive stage," according to Daniela Zuin, director of corporate communications for Carlyle Europe. Nevertheless, she told National Defense, an agreement was anticipated by early January.

Initially, the MOD plans to retain a majority interest in QineriQ, Chisholm said. This will ensure that British taxpayers share in any early growth in the firm's growth, and it will protect the U.K.'s wider defense interests over the long term, he said.

As a junior partner, Carlyle will act as agent for "a broader spectrum of investment funds and private investors, who are the direct investors in the business," Chisholm explained. He also sought to ease concerns that the United Kingdom might be surrendering control of its primary defense-related research and development program.

"Carlyle has undertaken to select investors who are predominately U.K. or European, so economic ownership remains overwhelmingly British," he said. In addition, he said, QinetiQ wilt continue to be run by its existing management team and board.

Seeking a Global Market

The investment partnership will enable QinetiQ to "have greater freedom and access to capital, allowing the company to greater exploit its technologies and capabilities, and diversify the wealth of knowledge it has built up over the years to the benefit of the wider U.K. economy," said Defence Minister Lewis Moonie. Eventually, he said, QinetiQ can become a globally recognized brand and the world's leading technology provider.

The MOD remains at the core of QinetiQ's business, Chisholm said in the firm's 2002 annual review.

In fact, he noted, the company has established a special division, Defence Solutions, to concentrate upon military projects. QinetiQ also is opening units for other target markets, including transportation, space, energy, health care, financial services, telecommunications, media and electronics.

The company has established a venture fund to provide early-stage capital to develop its technology for commercial exploitation. The fund-called QinetiQ Ventures Limited--invests in a small number of "high-value, early-stage" projects for an anticipated three-year period.

Recognizing that QinetiQ is a new name in the commercial market place, the company is looking for projects that will capture the public's attention.

One of these is an effort--sponsored jointly with the Met Office, the U.K.'s national weather service--to send a manned, helium-filled balloon, called QinetiQ 1, 25 miles into the atmosphere. If successful, the two balloonists would break the world manned-altitude record, now held by the United States.

The two also would become the first Britons to pilot a manned space mission. At a height of 25 miles, they could not survive without spacesuits, said QinetiQ spokesman Stephen Coke.

The plan is to launch the massive, 1,250-foot balloon--as tall as the Empire State Building-from QineriQ's trimaran ship, RV Triton. With its 6,500 scientists and engineers, QineriQ also is providing advice, support, training and test facilities for the pilots, Cooke said. The Met Office is supplying weather forecasts for the launch and landing.

During 2002, however, the weather did not cooperate, forcing the balloonists to postpone their flight until the spring of 2003 at the earliest.

QinetiQ also is cooperating with Sir Richard Branson, the flamboyant founder of the Virgin group of businesses, to place the latest military radar technology aboard a lighter-than-air ship and use it to locate landmines.

According to the International Committee of the Red Cross, landmines kill or maim 26,000 people each year. During wars of the 20th century, combatants planted an estimated 70 million landmines in battlefields in many parts of the world. Although the fighting eventually stopped, the landmines often were never removed.

QineriQ has developed a ground-penetrating radar system, the Ultra-Wide Band Synthetic Aperture Radar, that can detect buried landmine casings, even plastic ones. Now, in a project dubbed Mineseeker, it is cooperating with a Branson subsidiary, The Lightship Group, to mount this radar in one of TLG's A60+ Airships.

From the airship, it is possible to map mined areas at a rate of about 100 square meters a second, said project director Paul Bishop. That's two to five times as much as an experienced mine expert, using older technology, can map in an entire day, he said.

A Mineseeker airship was deployed recently in Kosovo for six weeks. During that period, it surveyed 30 mine sites and produced 60 hours of videotape and 500 still photographs.

Mine Clearance

"Mineseeker has contributed to our greater understanding of the scope of the mine and UXO (unexploded ordinance) problem in Kosovo," said John Flanagan, program manager for the Mine Action Coordination Center in Kosovo. "The data collected will be used extensively during the remainder of the clearance operations."

Over the next two years, the Mineseeker Foundation, set up by QinetiQ and TLG, aims to raise enough money to complete development of the system and deploy five airships to the world's mine hot spots.

QinetiQ has come up with simulation technology to test the control software for the new Eurofighter aircraft now being developed for use by several European countries, including the U.K.

The system makes testing safer, cheaper and faster, Chisholm said. Also, he added, it can be used to monitor the testing of engine-management electronics for automobiles.

The Triton, mentioned above, is QinetiQ's research vessel. With its triple hulls, it could mark the first major change in ship design in more than 100 years, Chisholm noted. Initial computer modeling indicated that trimarans could have considerable advantages over monohulls.

The narrower profile offers less resistance at higher speeds, reducing fuel consumption. The three hulls make the vessel more stable and create greater deck area, which makes helicopter landings safer and allows more flexibility in placing equipment.

The vessel has been undergoing sea trials over the past two years in all kinds of weather, from calm seas to severe storms. Thus far, Chisholm said, initial findings have been "very impressive," he said, adding that research on the ship will continue until 2004.

Another new QinetiQ technology, Chisholm said, has been deployed to help spot illegal immigrants trying to stow away on automobile-bearing trains running through the Eurorunnel, which connects the European continent with the United Kingdom. With trains passing through the tunnel every 20 minutes, he noted, checking each vehicle is "a major challenge."

The company's solution, designed initially for military use, was a thermal camera that can detect concealed weapons, as well as people. It speeds up security procedures by scanning vehicles as they pass through a checkpoint before boarding the train. The system has generated considerable interest among law enforcement and border control agencies, Chisholm said.

Under subcontract to Goodrich Corporation, of Charlotte, N.C., QinetiQ has played a significant role in development of the Reconnaissance Airborne Pod for the Royal Air Force's Tornado GR4 combat aircraft. Known as Raptor, this system provides real-time tactical reconnaissance and has just achieved initial operating capability with the RAE according to QinetiQ spokesman Douglas Millard.

Raptor supplies high-resolution, standoff imaging capabilities that can be used in support of tactical operations worldwide. It enables pilots to capture images, via electro-optical sensor technology under day or night conditions, Millard said. Pilot then can transmit the pictures back to image analysts back on the ground, all in real time.

The 15-foot long, 3-foot diameter, self-contained pod--developed and built at QinetiQ--is carried underneath a Tornado. A Data Link Ground Station, another QinetiQ technology, enables the rapid downloading, manipulation, exploitation and analysis of intelligence imagery.

To facilitate interoperability, the DLGS is fully compatible with a wide range of standards set by the United States, NATO and the International Organization for Standardization, and it maximizes use of commercial, off-the-shelf hardware and software to keep costs down.

In September, the company won a contract with the MOD to analyze the performance and assess the overall suitability of hybrid electric-drive systems for military vehicles. The contract calls for QinetiQ to act as systems integrator for the design and construction of a six-wheel, 18 8-ton technology demonstrator, with individual wheel control. QinetiQ will evaluate the vehicle's performance under realistic military conditions.

The demonstrator vehicle will include wheel-mounted electric drives, a battery energy storage system, diesel power generators and digital driver displays. It will be controlled by a QinetiQ vehicle-management system, direct the drive to individual wheels and manage the power supply for optimum performance and efficiency.

Many in the United Kingdom are waiting to see what impact the involvement of Carlyle--with its emphasis on the profit margin--will have on the QinetiQ research program over the long run.

QinetiQ's maneuvers also are being closely watched in the United Stares, where the Defense Department is considering consolidation of its more than 100 military research laboratories as part of the next round of base realignments and closings, which is scheduled to begin in 2005.

RELATED ARTICLE: The Defence Science and Technology Laboratory

The Defence Science and Technology Laboratory--one segment of the United Kingdom's now-defunct Defence Evaluation and Research Agency--is still a unit of the Ministry of Defence. It includes 3,000 scientists and engineers at 17 sites throughout the U.K. Its work focuses on:

* Chemical and biological defense.

* Defense analysis.

* Chemical and electronics systems.

* Integrated systems.

* Defense radiological protection.

In October, the DSTL announced that it would close down six facilities and consolidate operations at a new headquarters and laboratory complex at Portsmouth.