In my view, this discussion and tucs comments in particular splits the debate into several threads:
1) The 10 fat-cats knew they were onto a winner but no one in MOD prevented this. There are fat cats in all walks of life. We all get annoyed with those who use/run public money/services/taxes, e.g. Adam Crozier's post office bonus or celebrities/heads in the BBC holidaying on my (no choice to opt out) TV License (tax) as two examples.
2) MOD always had to pay DERA for services, so I dont think cuts to front line capability can be directly attributable to the formation of QQ. Noted there appears to have been many cases of having to pay DSTL to "shadow". This then raises the question of what the purpose of DSTL exists for, something the Defence Comittee Examined in 2006/07 IIRC.
3) QQ doesnt make the big stuff (tanks, planes, ships) so any privileged position in conducting/knowing the research hasnt (and likely will not) land any contracts for them away from the likes of BAES, RR, Thales, GKN etc..
4) Research is now competed and QQ doesnt win it all.
5) There are as many influential people in DSTL who dont like QQ as there are those who share coffee and cakes!
6) The real reason front line capability gets compromised is because of the shoddy conduct (late and overbudget) of the big programmes (read the NAO reports). There are many reasons for this, ranging from "simple" incompetence through to "jobs for the boys" or votes, pipe-dreams for career progression, inter-service rivalries and many other factors that everyone in defence (govt, mil, servant, suppliers, contractors) have some shared blame.