The idea of the private sector being involved in the defence of the realm is not new.

It was private contractors who provided most of the logistics for the Duke of Marlborough's campaigns in the eighteenth century.

There are no no-go areas for PFI as far as we are concerned

Ministry of Defence

Closer to our own times, the aircraft industry has always been closely involved in maintenance work with the Royal Air Force.

Of course the fundamental question is how close to the front-line can PFI activities come?

Here the Ministry of Defence (MoD) appears to have no dogmatic view.

"There are no no-go areas for PFI as far as we are concerned" says one defence official.

"The key point is to deliver what the armed services want in terms of both military capability and efficiency."

Peacetime demands

As governments struggle to get ever greater efficiency from the defence budget, the Private Finance Initiative (PFI) has facilitated the transfer of whole sets of functions away from the military to civil contractors.

Pilots are trained to fly early warning radar planes on PFI funded simulators

This, it is claimed, allows members of the armed services to get on with their main roles and it is argued that the private sector can provide certain types of facilities far more efficiently than can the MoD.

A whole variety of activities have now been undertaken under the PFI banner.

They range from the provision of training simulators, where a private company provides both the equipment and the instructors, to building projects where the private sector essentially manages the project and finds the skills and labour required.

Clearly in peace-time there may be no apparent contradiction between these goals.

War needs

But what about in war-time?

Are we likely to see a full-scale armoured battalion furnished by the private sector going into battle with their vehicles discretely emblazoned with a manufacturers logo or worse that of a finance company?

Of course not, but it I not such a silly question in the sense that the bounds of the public and private are changing.

Who would have thought twenty years ago that some British prisons complete with their warders would be provided by private enterprise?

Two major projects are testing the limits of the PFI experience.

Frontline civvies

A private consortium called FastTrax headed by Brown and Root, a subsidiary of US oil services giant Halliburton, has become the preferred bidder for a �300m contract to provide the British Army's new tank transporters.

Replacements are wanted for the aging heavy transporters

This is the first time that PFI has ventured into the combat support role.

And the consortium will not just provide the vehicles themselves but also a proportion of the crews to man them.

About one third of the personnel deploying with the transporters will be sponsored reservists - employees of the company who have had the necessary military training.

This allows some Regular Army personnel to be released for core military activities.

Flying corporate colours?

An even greater test of the PFI process will be a contract to be announced next year for the RAF's future air-to-air tanker.

Unlike tank transporters which have not frequently deployed on overseas missions, refuelling aircraft are much in demand.

They make up a significant element of Britain's contribution to the ongoing struggle in Afghanistan.

Two consortia are in the running for a contract that could be worth about �13bn over a number of years.

The aim is that the private company should buy, own and maintain the aircraft, provide training facilities and some personnel.

RAF crews would fly the aircraft, but in peacetime would not need all of them.

So the private contractor could earn extra revenue by using spare aircraft to transport commercial loads.

This deal really will take PFI into an area that is very close to combat indeed.

And it probably marks as far as PFI can go without the commercial sector actually going to war.