Small Firms Initiative (Hansard, 22 March 1988)

§ 1. Mr. David Evans
To ask the Secretary of State for Defence what progress has been made with his Department's small firms initiative; and if he will make a statement.

§ 8. Sir Geoffrey Pattie
To ask the Secretary of State for Defence what progress has been made with his Department's small firms initiative; and if he will make a statement.

§ The Parliamentary Under-Secretary of State for Defence Procurement (Mr. Tim Sainsbury)
The small firms initiative, which was launched by my noble Friend the Minister of State for Defence Procurement in November 1986, has contributed to a 30 per cent. increase in the number of firms seeking registration on the defence contractors list, and a greater proportion of those applying are accepted for registration.

§ Mr. Evans
Is my hon. Friend aware that it was the Ministry of Defence which, in 1980, pioneered the arrangements under which small and medium-sized firms were invited by the Ministry of Defence to tender for services and that in the process it saved £14 million—40 per cent. of previous costs? Does my hon. Friend agree that, with 1,300 companies now applying to the Ministry of Defence through the initiative, we may look forward to further value for money and competitiveness and a higher standard of goods, as was intended in 1980?

§ Mr. Sainsbury
I very much agree with my hon. Friend. I am glad to say that nearly 2,000 small firms have approached the Ministry of Defence as a result of the initiative, and those firms make a valuable contribution to our procurement effort overall.

§ Sir Geoffrey Pattie
Does my hon. Friend agree that one of the main problems facing small companies is the excessively long time that it takes them to get paid by the bigger companies involved in defence work? Will he consider using the considerable leverage that the Ministry of Defence has to insist that the smaller companies' terms of business are adhered to by the bigger companies, which, in turn, no doubt like their own terms of business to be honoured by the Ministry of Defence?

§ Mr. Sainsbury
I am very conscious of that point, and we have emphasised it in our defence contract guides. If 182 my right hon. Friend has any particular examples of slow payment to bring to my attention, I shall be happy to follow them up.

§ Mr. Wilson
As part of his general concern for small firms and their dealings with the Ministry of Defence, will the Minister give some consideration to small firms which undertake subcontracting work in good faith and find themselves with no protection from the Ministry of Defence, despite the fact that it is the end beneficiary of the enterprise? For example, he may be aware that several small firms in Scotland have experienced extreme financial difficulty as a result of not being paid for the work that they undertook on the Gairlochead bypass project.

§ Mr. Sainsbury
The hon. Gentleman will be aware that small firms have for a long time played a major part in the defence procurement effort as subcontractors of main contractors. In those circumstances, the contractural relationships are the responsibility, not of the Ministry of Defence, but of the main contractor and his subcontractors. As I said earlier, we emphasise to main contractors the importance that we attach to their passing on proper payments to their subcontractors. I repeat that I shall be happy to investigate specific examples which are brought to my attention.

§ Mr. Latham
Is the initiative, and the small firms involved in it, sufficiently robust to avoid the gross waste of up to £2 billion of public money on defence procurement every year, as revealed in the internal Ministry of Defence report "Learning from Experience"?

§ Mr. Sainsbury
I shall not be drawn by my hon. Friend on the specific figure that he mentions. However, I should like to emphasise again that we believe that if we have the widest possible number of contractors contributing to our competitive procurement methods that will help us to obtain value for money, and small firms have a valuable role to play in that process.