Simpkin Partnership (Hansard, 22 October 1993)

§ Mr. Jeremy Corbyn (Islington, North)
I am pleased that, at last, I have been able to secure the Adjournment debate on the Simpkin Partnership and Nuclear Electric. It has taken some time to get it and I am grateful to have it at last.
The problem is that Martin Simpkin, a constituent of mine, is the principal partner of the Simpkin Partnership, which is an engineering and quantity surveying consultancy that has offices at his home in Highbury, in my constituency. Its work is essentially troubleshooting on major contracts on things such as nuclear power stations—the burden of the argument I shall put forward today—and it also does quantity surveying, and the preparation of documents for contractors, in negotiation with the client, on how and when a final settlement and final payment should be made. Payment is usually made on the basis of fees for the partnership for its professional services and also a proportion—in this case 10 per cent.—of the final payments that are agreed as savings between the main contractor and the client.
The Simpkin Partnership was formed some years ago and was a fairly small partnership, but grew quickly because it was successful and well thought of in the work that it does. At its height, it employed some 20 people who did a variety of jobs, and was well known for its commitment and zeal for its work and the dedication of its staff. At its high point, it had a turnover of £1 million in fees, which had risen from £3,000 in 1985 when it was formed, so we have an idea of how quickly and well it did its work.
The problem that the Simpkin Partnership now faces, particularly Martin Simpkin, is that he initially undertook to do some work for Modern Security Systems in 1991. MSS had achieved a contract with Nuclear Electric to install security systems at Heysham power station in the north west of England. That contract was going extremely badly. I should say that MSS is a wholly owned subsidiary of the Ash Group. The contract was heading way behind contract date. The company was clearly in problems, as it had hoped also to achieve further contracts at other power stations Trawsfynydd, Dungeness, Oldbury and Hartlepool. Its future success depended much on the success or failure of its contract for the initial work that was being done at Heysham power station.
I have here details of the state of Modern Security Systems' trading account on its nuclear power station work when the Simpkin Partnership was brought in: by October 1991, MSS had lost £1.3 million on the work itself plus liquidated damages and quantity surveying fees—a total loss of £1.892 million on the contract. The date is important, being the date at which the Simpkin Partnership was brought in to assist in project management and to try to turn the thing round so that the project could be completed to the satisfaction of the main contractor and client, Nuclear Electric.
By June 1992, the contract was making a profit of £2.64 million less liquidated damages of £427,000 and fees of £150,000. In other words, a loss of nearly £2 million was turned into a £2 million profit in less than a year, largely due to the work of the Simpkin Partnership. Before the 553 partnership was brought in to assist it, Modern Security Systems had been losing a great deal of money on all the power station contracts. Clearly, some success can be attributed to the work of the Simpkin Partnership.
As I said earlier, the partnership's work involved troubleshooting, project management and documentation of the final negotiations that would take place with Nuclear Electric before it would be satisfied and make final payments to the company. I have seen volumes of correspondence suggesting that, initially, Nuclear Electric was extremely disappointed with the progress of the work being done by Modern Security Systems and extremely disatisfied with its quality and that on various occasions it made veiled or not so veiled threats to withdraw the contract altogether and end the relationship with the company. That would have had a catastrophic effect—and those words were used—on the future of Modern Security Systems. The Simpkin Partnership's work turned the thing round so that by 5 November 1991 Nuclear Electric was able to say that it was pleased to bear witness to the improvement of the performance of MSS … in relation to one particular contract. That is typical of this whole sorry saga.
The nub of my argument concerns the system of payment. The Simpkin Partnership is a small company which was brought in in desperation by a larger company because it was failing badly. Had the contract failed completely, it would have led to serious problems for MSS, if not to the company's liquidation. It was a desperate situation. The Simpkin Partnership was brought in, pulled the fat out of the fire, turned the contracts round and ensured that MSS gained further work and further contracts out of which it subsequently made a great deal of money.
The problem is—and it is a problem that seems rife in other sectors of industry, too—that, in an arrogant and high-handed way, MSS simply refused to pay the Simpkin Partnership what it was owed. The total amount paid was £50,000 in management fees and £15,000 in surveyors' fees—a total of £65,000. The amount owed to the Simpkin Partnership is considerably greater than that. At least £350,000 is still owed as a combination of fees arid a proportion of repayments made by Nuclear Electric to MSS plus the partnership's legal costs plus interest on the money owed. We are talking about a global sum of roughly £500,000. At the same time, payments have been made by Nuclear Electric for the security work. The contracts related entirely to personnel security work around power stations, fencing, closed circuit television and so on. In the case of Hartlepool power station, £1.7 million has been paid; in the case of Trawsfynydd, £1.3 million; in the case of Dungeness, £3.1 million. The Oldbury and Heasham contracts are unresolved.
This state of affairs has put the Simpkin Partnership in a desperate situation. It has had to give up its offices, and Mr. Simpkin now has to work from home. The company is a much smaller operation than it was. It is a devastating blow to the partnership that it is having to involve itself in acquiring extensive legal advice and in potential litigation to secure the money that it is clearly owed by MSS.
Mr. Simpkin asked me for assistance and advice. I wrote to the Secretary of State and tabled a number of parliamentary questions, but it is a complicated subject. Who is responsible for ensuring that Modern Security 554 Systems stands up to its obligations and pay the partnership the money that it is owed? I hope that the Minister can help.
Nuclear Electric, which administers the power stations, undertook the building of them and let the contract to the Automated Security (Holdings) Group and MSS for the security work, in which the partnership became involved, is a publicly owned company. In that sense, the Minister is responsible to Parliament for the operation of that company and one hopes that he will look seriously into its work.
Secondly, the quality of work that was initially done by MSS was not of the best order. There are piles of documentation to suggest that. If litigation finally proceeds, around 100,000 documents may be examined that consider the poor quality work, which was turned around by the Simpkin Partnership. One should look carefully at how the contracts are let and who is involved in letting them.
There is also the question of the payment of the subcontractor. There is provision by which Nuclear Electric can bypass MSS and pay the money, which they clearly owe, directly to the Simpkin Partnership.
We should consider the role that the Department of Trade may be able to take. The Department of Trade and Industry has a number of responsibilities. As the energy Department, it is responsible for the entire operation of nuclear electricity production and the safety of nuclear power stations. That responsibility includes the safety of the operation of the generation capacity and the physical safety of the buildings, the plant, equipment and access to it. Also, the Department has a responsibility, with its other arm, for the relationships between big and small businesses in industry. There is a legion of big contractors taking on smaller contractors to do their work. There is nothing wrong with that; it is normal in contractual relationships, but what is entirely wrong is that when the big companies find the going is getting tough—as they have during the recession—they boost their cash flows by delaying payments or not paying smaller contractors, which has devastating consequences.
The Simpkin Partnership has had to give up its offices, and there has been a great deal of strain on Martin Simpkin and his family. Also, relationships with his bank have been put under tremendous strain. The bank has been co-operative, but its patience will wear thin unless some final payment is made as a result of the pressures that we may exert on his behalf.
I look to the Minister to outline exactly what his responsibilities are in those areas, what pressure he is able or prepared to put on Nuclear Electric, to examine the quality of the work done by MSS and to ensure that this small engineering consultancy, which has a high reputation for good-quality work and which employs an enthusiastic group of people who are determined to do a good job in engineering and quantity surveying are paid the money that they are owed so that they can continue working normally. No company should be put through such a process as a result of the arrogance of large companies. I hope that the Minister says something about the approach that many large companies take towards smaller companies.
If the situation is not resolved, what are the alternatives open to a small company such as the Simpkin Partnership? Must it shut up shop and become bankrupt, resulting in a number of people becoming unemployed? A number of skills would not be put to good use for a long time and we 555 would all be generally worse off. If there were some legal and financial regime to ensure that such companies are not allowed to behave in such a way, especially when the major client company is a publicly owned company, the likes of the Simpkin Partnership and many similar companies would be a lot better off.
This is an important case. It is a crucial case for my constituent and I am pleased to be able to speak for him and to represent him. It is also an important case because of its implications which run widely within the industry. I hope that the Minister can help us in that respect, and that he will ensure that my constituent gets his money quickly so that he can get on with his business and his life, rather than having to surround himself with documents going back years as he pursues litigation that he should never have had to pursue in the first place.

§ The Minister for Energy (Mr. Tim Eggar)
I am grateful to the hon. Member for Islington, North (Mr. Corbyn) for raising the issue and I am sure that his constituent is also grateful. It is fair to say that this is a slightly unusual case, in that there are no allegations that Nuclear Electric itself has behaved improperly or has delayed payments. The involvement of Nuclear Electric is almost incidental; the dispute is between Modern Security Systems, in most cases the main subcontractor to Nuclear Electric, and MSS's adviser, retained consulting engineer and quantity surveyor, the Simpkin Partnership.
Having made that point, having been for some time the Minister responsible for small businesses and being aware of the considerable and widespread concern about the late payment of debts, and about the nature of the relationship between large companies and small companies, I agree with the hon. Gentleman that it is important that companies of all sizes pay the contractual debts that are due. We all, of course, accept that from time to time there are contractual disputes. That is in the nature of business, and the Simpkin Partnership knows that more than most because it makes a living out of advising people on disputes, as I understand it from the hon. Gentleman's description of the business.

§ Mr. Corbyn
Part of its living.

§ Mr. Eggar
As part of its work. As a general matter of principle, the Government attach much importance to the prompt payment of debts. One of my questions when I knew that the issue would be raised by the hon. Gentleman on the Floor of the House concerned Nuclear Electric's own record. It appears that apart from slight initial problems when it first became an independent company, Nuclear Electric has had a good record of paying invoices when they are due. Certainly, no cases of late payment per se have been brought to my attention while I have been Minister. There are, of course, as in any big business, a number of disputes about the amount that must be paid. That is something rather different.
The hon. Gentleman raised the question of the relationship between the Government as 100 per cent. shareholder in Nuclear Electric and the management of the company. The company is wholly owned by the Government, but I take the strong view as Minister that the correct relationship between a nationalised industry, and 556 the Department and the sponsoring Minister is that Ministers should expect the management to manage the company and should not expect to intervene in day-to-day management matters.
There have been a number of recent developments with regard to Nuclear Electric which support my approach to establishing the relationship with senior management. I do not believe that Ministers should be in the business of second-guessing nationalised industries at every turn. Over past years, the tendency for political intervention has contributed significantly to the lack of efficiency and to the unresponsiveness that were, going back to the war, such features of nationalised industries. I pay tribute to Nuclear Electric for the way in which it has improved its efficiency over recent years and months. It is widely accepted that the present management has done an extremely good job in terms of increasing output and of decreasing costs.
I shall respond in brief to the hon. Gentleman regarding the Government's role in contractual matters. In the absence of clear evidence of fraud, maladministration of funds or of similar matters, the contractual matters must be left to the management of Nuclear Electric. The hon. Gentleman raised implicitly a question about whether the dispute between the Simpkin Partnership and MMS regarding the quality of work carried out by MSS had in some way adversely affected the security arrangements at nuclear power stations. That is obviously of concern to the House, and to me.
I have made inquiries and I have received an absolute assurance from Nuclear Electric that, whatever its views on the quality of work that was provided by MSS, it does not believe that security at the power stations was in any way affected. The difficulty that we have, and I have made it clear in my response to a letter that I received from the hon. Gentleman, is that the dispute is between the Simpkin Partnership and MSS. It would be obviously inappropriate to intervene in any way in a contractual dispute, which, as the hon. Gentleman said, appears to be in the hands of solicitors of the two parties concerned.
The hon. Gentleman stated to me in a previous conversation that there may be a possible contractual right for Nuclear Electric to pay moneys directly to the Simpkin Partnership. If he would try to explain that statement on behalf of the partnership, I will ask Nuclear Electric to study it. In the relatively short time that I have had to investigate the matter, it appears to me that, if the sub-clause that I have identified is the sub-clause to which he has referred, I do not think that that power applies in this case. However, I will look at it and I accept the point that there is the possibility of a locus between Nuclear Electric and the Simpkin Partnership. I would not want to exclude that without asking Nuclear Electric to investigate the matter further.
I understand the hon. Gentleman's concern that he has expressed on behalf of the Simpkin Partnership. Because of my time as the Minister with responsibility for small businesses and because of my experience as a constituency Member of Parliament, I appreciate the difficulties which small companies can get into in contractual relationships with large companies. From time to time, there is exploitation by large companies of the relatively weak position of smaller companies.

§ Mr. Corbyn
The Minister is aware that Nuclear Electric has paid £6.1 million to MSS for security works. Clearly the money was not paid on to the Simpkin 557 Partnership or the dispute would not exist. Is the Minister prepared to try to write into future contracts with companies such as MSS that they must fulfil their obligations to their own subcontractors which, in effect, are being paid at arm's length by Nuclear Electric?

§ Mr. Eggar
My immediate reaction to the hon. Gentleman is that this must be a matter for contractual negotiation between the main contractor and subsequently between any subcontractors to the main contractor. Normal commercial negotiation is the best way to approach the matter. I will certainly raise the issue with the managing director of Nuclear Electric and ask him to consider it, because I understand the point that the hon. Gentleman has raised.
558 I wish that I could be more helpful to the hon. Gentleman. I always seek to play as constructive a role as possible in Adjournment debates. It is an important function of Members of Parliament to raise such issues on the Floor of the House. Often, an Adjournment debate makes it possible for Ministers and Members to move things forward. However, in this case, the nature of the dispute, which by common consent does not involve Nuclear Electric directly, makes it difficult for me to be as positive as I should otherwise like to be.