The Ministry of Defence is contemplating allowing defence companies to invest in Qinetiq, its scientific arm, as its privatisation becomes more difficult.
Any such move would be controversial as Qinetiq relishes its independence. It employs scientists who make gizmos for defence and security agencies, the real-life equivalents of James Bond's Q.
Qinetiq is preparing the financial document that will be shown to potential investors. It is understood it is being prepared with the presumption that defence companies could be potential bidders.
"The Ministry of Defence has not ruled out talking to defence companies, while in the past they had been," said one source.
Officially the Government denies that defence contractors could be allowed to take over the company, and says it has not decided whether to float it on the stock market or sell it to an investor. But as Qinetiq is unlikely to float due to the current market conditions, selling it to a defence firm would be a last resort.
Carlyle Group, the US private equity firm, is thought to be planning to invest. This would also be controversial as it is a foreign company.
"My first hope is that it stays as it is," said Bruce George MP, chair of the Defence Select Committee, who is opposed to privatisation of Qinetiq. He expressed concern about the potential buyers: "You would not want a [defence company] taking it over because other companies would legitimately argue that this was creating a monopoly. And I don't want to see it foreign owned."Reuse content