HC Deb 26 July 1988 vol 138 cc239-40
3. Mr. Riddick

To ask the Secretary of State for Defence what evidence he has on the effect on prices charged of his Department's policy of requiring suppliers to stick a two-tier price label on packages of spare parts; and if he will make a statement.

The Parliamentary Under-Secretary of State for Defence Procurement (Mr. Tim Sainsbury)

Last year the Department introduced the requirement for spares to be price-labelled. This initiative is part of the Ministry's drive to ensure value for money in defence procurement. Price labelling will provide a further check against possible overcharging for spares by contractors and improve cost awareness among our personnel. It is much too early to quantify the benefits that will be obtained.

Mr. Riddick

Is my hon. Friend aware that in practice in some cases the labelling requirement is resulting in higher prices being quoted to the Ministry of Defence? Is he aware that a company of my acquaintance made two quotes, one without the labelling requirement and one with the labelling requirement at a 5 per cent. premium, and the MOD contracts office accepted the higher price? Is there not a case for introducing greater flexibility into the system?

Mr. Sainsbury

I am sure my hon. Friend will understand that adding a small additional piece of information to a label that is already required is likely to result in a negligible increase in cost in the vast majority of cases. If particular difficulties are associated with one product, we are prepared to discuss that with the supplier, but, overall, we see major benefits which would greatly exceed the small extra cost of putting that information on the label.

Mr. Nicholas Brown

That is not the only anomaly in the Ministry of Defence's procurement policy. Is the Minister aware that his Department told the Public Accounts Committee that it sought to avoid getting into a situation where one"——

Mr. Speaker

Order. The hon. Gentleman must not quote. Paraphrase, please.

Mr. Brown

Is the Minister aware that his Department told the Public Accounts Committee that it sought to avoid a situation where one contractor was supplying all the frigate procurement package in order to make long-term savings and then went on to place the entirety of the frigate procurement package with one yard in direct contradiction to what was said to the Public Accounts Committee? How does the Minister account for that?

Mr. Sainsbury

We have capable frigates on order, and I scarcely think that they fall into the category of spares.

Mr. Page

Price labelling will help to give value for money on the £2 billion-plus spares order for military equipment and prevent scandals such as occurred in the United States with the $1,200 ashtray and the $1,500 toilet seat, but does my hon. Friend agree that more could be saved by avoiding small uneconomic batch ordering and looking more closely at the quantities that are being ordered?

Mr. Sainsbury

My hon. Friend has a good point. We are looking at the size and frequency of each order, but, as he is clearly aware, there is a large spend on spares—over £2 billion—and we must ensure that we avoid the sorts of instances that have been reported from the United States, where, to give another example, a list of stores contained what was called a multi-directional impact device priced at $400, which, on closer examination, turned out to be a hammer.