HC Deb 03 May 1994 vol 242 cc694-702

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Chapman.]

10.35 pm
Mr. Peter Thurnham (Bolton, North-East)

I am grateful for the opportunity to raise in an Adjournment debate a matter of some importance, not only to my constituents, but to those of a number of my hon. Friends whom I am pleased to see in the House. My hon. Friend the Member for Blackpool, South (Mr. Hawkins) has a constituency interest. I am delighted to see my hon. Friend the Member for Fylde (Mr. Jack), who not only has a constituency interest, but is to reply to the debate in his capacity as Minister of State, Ministry of Agriculture, Fisheries and Food.

As my hon. Friend knows, in June 1996 the Ministry expects to open a new £60 million central science laboratory in Yorkshire in the constituency of my hon. Friend the Member for Ryedale (Mr. Greenway), who has taken a great interest in the subject. I am pleased to see him present this evening. The contract for the supply of the building and the fittings in it has been awarded to a consortium of two well-known British contractors, John Laing Construction and Haden Young. John Laing Construction is now in a position to place an important contract approaching £2 million for the laboratory furniture for the new central science laboratory. It will be a prestigious contract and something of a showpiece when it is finished.

When the specifications were originally being drawn up by the Ministry of Agriculture, Fisheries and Food it did not think that it could obtain the equipment in this country and the specification was based on a foreign supplier. John Laing Construction quoted for the contract on that basis. But after an exhaustive analysis, John Laing is now satisfied that it is possible to purchase the equipment in Britain from the firm Cygnet Laboratory Furniture, which has factories in Bolton and Blackpool. That company is the leading British supplier, employs more than 100 people and has many customers, a number of whom have had contracts of more than £1 million with the company. They include many Government Departments, the national health service, various universities and well-known British manufacturing companies such as ICI, Zeneca, Unilever, Wellcome, British Nuclear Fuels and Boots. Laing is currently carrying out a contract for Ciba-Geigy, which includes Cygnet's laboratory furniture. I have a letter from Mr. Woolf, the project manager at Ciba-Geigy, in which he says how delighted he is with the progress of the £1.2 million contract.

In January this year there was a red letter day for the Cygnet business because the investors in the company decided to raise an additional £4 million of equity to help the company pursue its strategy. Some £1 million was raised by the Royal Bank of Scotland and £3 million was raised by S.G. Warburg Securities. I am delighted to see here tonight my hon. Friend the Member for Surrey, East (Mr. Ainsworth), who so ably represents that company's interests in the House. That money was raised only after exhaustive analysis by analysts from the City who visited the company, looked carefully at its proposals and judged the new management who had been brought into the business the previous year.

The money was raised through the holding company, Sycamore Holdings—a business with an annual turnover of £20 million, focused on high quality office and laboratory furniture. Cygnet has a turnover of some £8 million a year, and was founded in Bolton in 1946. Its corporate mission now is to become Europe's leading laboratory furniture manufacturer. In that mission, it is much encouraged by the numerous statements that have been made that manufacturing lies at the heart of our economic recovery. Indeed, during Prime Minister's questions on 8 March, the Prime Minister said:

I am delighted that we are making … and selling more at home and … abroad."—[Official Report, 8 March 1994; Vol. 239, c. 148.] On, 15 February, the Secretary of State for the Environment launched a Government-backed task force to reduce imports into the construction industry. I quote from the press release: The substantial trade deficit in building materials has persisted throughout the recession. It must now be attacked. In fulfilling the Government's wish to reduce imports, John Laing Construction is delighted that it has been able to establish to its full satisfaction—it must be remembered that Laing's bear the full contractual responsibility for delivering to the Ministry's specification—that Cygnet would be the best supplier. It would have the best quality and the best on-site performance. What is more, it can offer a lower price than the product which is currently nominated. It can reduce the price to the Government by £70,000 in the initial contract. That would be followed by considerable after-sales economies through being able to supply as the customer requested to suit any requirements without the difficulty of purchasing from abroad at a higher price.

So far, my hon. Friend and the Ministry have rejected the proposal that Cygnet Laboratory Furniture should supply because of three independent reports which were prepared last autumn before the company enjoyed the benefit of the new finance and the full benefit of the new management which came into the company last year. When I raised the matter with the Prime Minister, I received a letter on 28 March in which my right hon. Friend said:

Advice was taken from three sets of independent private sector consultants … MAFF's conclusion was that despite the apparent saving, the risk to quality standards was sufficiently great that it could not be guaranteed that the contract would deliver value for money. Both Cygnet Laboratory Furniture and Laing's dispute the findings of those three independent private sector consultants. I learnt today that one of them never visited the factory. Of the other two, one was a firm of architects and the other was a firm of construction project managers. Neither of them is an expert in manufacturing and therefore is hardly able to establish definitively whether the company was best able to produce.

The reports are now obsolete. They were prepared before the refinancing by the company and before the current programme of completing quality assurance, with BS5750 audit arrangements being put in soon. In a letter to me, Laing's confirmed that it is satisfied that the quality assurance procedures can be established in good time for production to take place.

What we need now is a proper independent consultant's report based on a firm that has expertise in manufacturing. I would like to see such a report put forward. Indeed, at a meeting this afternoon with departmental officials, I said that I was resolved to commission such a report myself if that would help the Government to come to the right decision.

There is a danger that the Ministry may be stuck in a time warp of last autumn's obsolete surveys without looking at the current position and the current improvements. The firm now has professional management with two directors who qualified at INSEAD—an institution which bears favourably on any worldwide analysis. I gained a management qualification from Harvard Business school and the Cranfield Institute of Technology in this country, and I know that INSEAD is an excellent establishment. This is a company with excellent management who are backed by the City after its analysts had looked closely at them. They and Laing's are satisfied that Cygnet will make a quality product that will more than meet the Department's specifications.

A mock-up for the benefit of officials was constructed at Ryedale at the suggestion of Laing's, but I understand that officials were instructed not to go to see it. It has been re-erected at the factory in Blackpool and I have a picture of it here. It is an excellent example of the work that the firm can do and I hope that the Minister will have an opportunity to look at it. It has convinced all those who are most closely involved and Laing's in particular that the firm makes a quality product and can offer savings.

I ask the Minister to back the judgment of British investors and the contractual judgment of Laing's, which bears the responsibility for the matter, and to forget the obsolete consultants' reports which were prepared last year. I again refer the Minister to the words of my right hon. Friend the Secretary of State for the Environment. At the press conference at which he launched the Government-backed task force to reduce construction imports he concluded: I believe there is a growing recognition that the future of this industry lies in developing co-operative forms of working and turning away from both conflict and narrow sectional interests. But if the vision of a new co-operative future is to be made real, it will call for leadership. Who will provide that leadership? … This is sensitive territory but it should not be sacred. I will play my part. I am prepared to commission a report from independent manufacturing consultants which will show that the firm is perfectly capable of delivering to the Department's specifications on time and that it will fully meet all the customer's requirements. I ask the Minister to have another look at the matter, and to accept that there is a British supplier who can do the work.

I should like to leave time for my hon. Friend the Member for Blackpool, South to contribute to the debate.

10.46 pm
Mr. Nick Hawkins (Blackpool, South)

I am grateful to my hon. Friend the Minister and to my hon. Friend the Member for Bolton, North-East (Mr. Thurnham) for allowing me to contribute to the debate.

I am concerned on behalf of my many constituents who work for Cygnet whose factory site in Blackpool can be clearly seen from the end of the road in which I live. When I am at my constituency home every weekend, it is a constant reminder of the importance of the issue.

One of the ironies of the debate is that it will be answered by the Minister of State, Ministry of Agriculture, Fisheries and Food, my hon. Friend the Member for Fylde (Mr. Jack), whose constituency is next door to mine. Many of his constituents also work for this company. It is helpful to note not only the involvement of my hon. Friend the Member for Bolton, North-East, but the fact that the Under-Secretary of State for Health, my hon. Friend the Member for Bolton, West (Mr. Sackville), is also in the Chamber. I know that he shares my concern, and the fact that my hon. Friends the Members for Ryedale (Mr. Greenway) and for Surrey, East (Mr. Ainsworth) are also concerned reinforces our anxiety about the matter.

The Government, whom I strongly support, have a British supplier and many British jobs are at stake. The company can deliver at a saving of £70,000 of taxpayers' money a product that we all believe is as good as a German product. I should not like to think that the Government would risk awarding the contract to a German company and exporting the jobs of my constituents and those of my hon. Friends abroad.

I appreciate that there were problems in the company when the reports were prepared last autumn, but I share the view of my hon. Friend the Member for Bolton, North-East that a fresh look is appropriate. All the original reports predate the 15 January refinancing which Warberg successfully arranged. The standards of analysis that had to be set for City institutions to take up the rights issue and involve themselves in that refinancing were extremely strict. They would not have agreed to put their money and that of their investors into that company if they had not felt that it had a good future and that its products were of a high quality.

Subsequent to the refinancing and with the management which came into place last year, and which is now in full control of the company, there is every opportunity for independent consultants to look again at the matter. Perhaps the fact that one departmental official I know visited the company very shortly after that refinancing was little more than rubber stamping previous consultants' decisions.

My hon. Friend the Member for Bolton, North-East rightly pointed out that the consultants who produced those previous reports were not experts in laboratory furniture. There is a strong case for a fresh report. I firmly believe that that report is likely to result in confirmation of the view that we all hold that the company is capable of delivering a very high quality product to MAFF's fullest specifications. I have been round the factory and I have seen the high standards there.

We must also bear in mind what the Secretary of State for the Environment, my right hon. Friend the Member for Suffolk, Coastal (Mr. Gummer), said in a Government announcement about the balance of trade in the construction industry. That announcement postdated the company's refinancing. He pointed out that there was a negative balance of trade in the construction industry and that he wanted to see more construction work going to British companies.

In this case, a major British construction contractor, Laing, wants to use another British company, Cygnet, and believes that Cygnet can deliver the required quality.

Mr. John Greenway (Ryedale)

My hon. Friend began his remarks by saying that whenever he is in his constituency he has a constant reminder of the Cygnet factory. The point he made about the quality of the laboratory equipment goes to the heart of the issue. We want the laboratory in Ryedale. We warmly welcome it. It will be the best agricultural science laboratory in Europe. It must, as a consequence, have the best equipment of any laboratory of its kind in Europe. Many thousands, if not hundreds of thousands, of people will visit that laboratory over the years, and it will not be as successful for Britain if it does not have British equipment in it.

Mr. Hawkins

I agree with my hon. Friend.

In view of the time, I close my remarks by calling on my hon. Friend the Minister to reconsider the matter and to say that there are sufficient reasons for a fresh analysis to be made. In the interests of our constituents who work there, I strongly urge him to do so.

10.52 pm
The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. Michael Jack)

I realise that there has been considerable interest in the debate. I am interested to see my hon. Friend the Member for Bolton, West (Mr. Sackville) in attendance and my hon. Friends the Members for Ryedale (Mr. Greenway), for Torridge and Devon, West (Miss Nicholson), for Chelmsford (Mr. Burns) and for Surrey, East (Mr. Ainsworth). Such is the interest across the country that they have all attended the debate. I congratulate my hon. Friend the Member for Bolton, North-East (Mr. Thurnham) on securing tonight's Adjournment debate and my hon. Friend and near neighbour the Member for Blackpool, South (Mr. Hawkins) on his contribution.

We have heard this evening some criticisms from my hon. Friend the Member for Bolton, North-East about the way in which MAFF has acted on the contract. He will also know, however, that there has been no reluctance on our part to discuss the issue with him or with my hon. Friend the Member for Blackpool, South. Many of the points that I shall put to him today were aired at a meeting he had with my noble Friend Lord Howe on 24 February. Only today, he also had the benefit of discussing the contract with our permanent secretary, and with my right hon. Friend the Minister.

Much has been made of the intense interest created in the project. Although my constituency adjoins Blackpool, South and much as I would dearly love to see a British company win the project, I shall be putting on record some of the reasons why we are in the present position.

When a member of the company used a company employee as a way into my constituency advice bureau to lobby for the project, I realised then that there was a particular intensity in the way that the lobbying on a political level had been carried out for that particular project. Despite all that, even today we made the opportunity for our permanent secretary to speak with my hon. Friend the Member for Bolton, North-East. He had also had the benefit of a letter on the matter from the Prime Minister, laying down his position and making clear his support for the project.

My hon. Friend will know that at the heart of the matter is the Ryedale laboratory. As my hon. Friend the Member for Ryedale pointed out, it is at the heart of MAFF's work in the vital areas of the safety and nutritional value of the food supply. It will also look at diseases and pests affecting crops and agricultural produce. The laboratory's work is highly specialised, dealing with analyses which can involve the identification of minute quantities of impurities at levels down to one part in billions. To achieve that degree of accuracy will require laboratory equipment and furniture of a high specification and proven track record.

In early 1991, it was Ministers who agreed the project in principle. Work began on its detailed specification as part of the competitive tendering process. The skilful completion of this task by MAFF officials and their advisers had already reduced what started out as a £75 million contract to one priced at £60 million, fulfilling in every way our wish to acheive the best value for money.

Aspersions have been cast in this debate on the qualities of MAFF's advisers in the matter. I put on record that they have been involved, for example, in work on a Glaxo contract valued at some £500 million, of which £10 million was for laboratory furniture. In addition, our architects, RMJM, have designed and specified for 20 laboratories in the past five years. So they are no Johnny-come-latelys to this exacting area of activity.

As I said, the skilful completion of the task had reduced the contract to £60 million. In June 1992 we went out to tender and the contract was won by Laing-Haden in December 1992. Every aspect of the project was the subject of detailed specification. From the outset the principal contractors would have known that it was they, not Ministers, who would be awarding contracts to suppliers for all the items involved in building and equipping the laboratory. They would also have known that MAFF and its advisers would have to be kept fully informed of who the project suppliers were to be and of the requirements involved, should they wish to propose a change in a supplier. Such a move would also require MAFF's approval.

So what happened over the question of laboratory furniture? The specification written by the project's architects, RMJM, the project manager, Symonds, and the cost consultants, Turner and Townsend, all of whom, as I have said, are experts in this field, called for furniture with special surfaces which could be regularly deep cleaned. The units would also have to be interchangeable and easy to move, as well as being robust and durable. Finally, and most importantly, the architects advised that the laboratory furniture should come from a standard range so that the track record of the product could be clearly demonstrated. That bears tribute to the point made by my hon. Friend the Member for Ryedale in terms of the quality of the equipment in the laboratory. The specification would have to be higher than normal in laboratory terms.

By any standards the order is large, valued at around £2 million, or the equivalent of some 3,000 units of furniture. As the main contractor, Laing-Haden, was also aware, the contract required it to name a number of key suppliers or sub-contractors, including the one for laboratory furniture. That was so that we could be sure of the track record of the proposed firm and we could reduce the openings for the main contractor to Dutch-auction packages after the main contract had been awarded. Sub-contractors' organisations regularly complain to the Government about that practice. In addition, we could prevent the main contractor from trying to substitute an inferior product at a later date. That is also a constant problem in the building world.

Implicit in that arrangement was the Ministry's right to refuse any proposed sub-contractors or suppliers. Main contractors were also aware that under the contract they could ask for a named supplier to be changed, but that that would be allowed only if the contractor put forward a new firm which clearly offered substantial benefits over that named, or if the named supplier could no longer fulfil the terms of the sub-contract. Those two criteria govern all proposals to change suppliers.

So how did Laing-Haden react to those specification requirements? During the tender preparation stage in September 1992, Laing-Haden initially proposed a British laboratory furniture manufacturer for this section of the work, but our advisers recommended that that firm failed to meet the specified requirements by a wide margin. They told us that the company's standard range fell well short of the requirements and that its proposals to manufacture a custom-built range lacked credibility. Acting on the advice of its professional advisers, the Ministry rejected that firm. Laing-Haden accepted that, and its response was to research the market place again. As a result, Laing-Haden proposed Waldner MSA of Germany, one of the leading manufacturers of laboratory furniture in Europe. I repeat that Laing-Haden proposed Waldner MSA. At that stage, Laing-Haden could have proposed Cygnet Laboratory Furniture, but it did not choose to do so. Neither did it even mention Cygnet to our officials.

Waldner's laboratory furniture was from its standard range, and it was assessed by the Ministry and its advisers as capable of meeting the specification for the project. The equipment offered differed in some minor aspects from the precise terms of the specification, but not so significantly as to affect its ability to meet the main requirements. In addition, Waldner had a proven track record and also had in place ISO 9000 quality assurance systems.

Mr. Thurnham

Will my hon. Friend allow me to intervene?

Mr. Jack

Perhaps my hon. Friend will allow me to make a little progress, because there is much that I want to say in response to the great deal of information that he gave the House.

As a result, Laing-Haden wrote Waldner into the contract as the supplier of laboratory furniture. At that stage, the whole contract was signed and sealed by the Ministry and Laing-Haden on 22 December 1992. Design work started in January 1993 and construction began in earnest that summer. As far as the Ministry and its advisers were concerned, the supplier of the laboratory furniture was settled.

While all that was going on, we learnt that, despite the fact that Laing-Haden had specified Waldner in the contract, during 1993 Laing-Haden circulated the requirement for the laboratory equipment to a number of alternative suppliers. We first became aware of that in October 1993, when Laing-Haden brought on to the site some examples of the standard range of furniture produced by Cygnet Laboratory Furniture Ltd.—nearly one year after Laing-Haden had written Waldner into the contract.

Cygnet has a factory in Bolton and another in the constituency of my hon. Friend the Member for Blackpool, South.

Mr. Thurnham

Will my hon. Friend give way now?

Mr. Jack

I should like to make a little more progress.

Cygnet's samples did not meet the specification, and that was accepted without demur by Laing-Haden. In December last year, however, Laing-Haden brought on to the site prototypes of the laboratory furniture range that Cygnet claimed would meet the specification requirement. Three reasons were advanced for that suggested change in supplier: Cygnet was nearer to the site than Waldner and thus should be able to offer a faster response; Laing-Haden offered the Ministry a £70,000 inducement under the contract to agree to the change to Cygnet; and Cygnet had already supplied laboratory furniture to a number of leading UK companies.

Representatives of the Ministry—including the central science laboratory—project manager, architect and Laing-Haden visited Cygnet's factory at Blackpool at the beginning of January this year. They reported back serious doubts in the minds of the Ministry's advisers and officials about Cygnet's ability to complete that large order successfully. The prototypes were one-offs and not from a standard range, and as such had no track record to commend them. Our advisers also expressed the view that the factory's production layout and the work in progress there did not engender confidence. No quality control system was in place, the range of laboratory furniture proposed for the contract had no track record, and the firm had not completed a laboratory furniture contract anywhere near the size of that required for Ryedale. In addition, independent financial checks made on Cygnet and on Sycamore Holdings—the parent company—showed that the latter had a negative net worth, and guarantees were strongly advised in any dealings with it.

In conclusion, the Ministry's three professional advisers were unanimous in their recommendation that the Ministry should not allow Laing-Haden to change the supplier of laboratory furniture from Waldner MSA—the firm named by Laing-Haden in the contract—to Cygnet.

Mr. Thurnham

The advisers that my hon. Friend mentioned, who were involved in the project from the beginning, based the specification for the laboratory furniture on the German company's own range. That is why it was difficult for Laing-Haden initially to put forward anything other than the Waldner product. It was only after a period of time that Laing-Haden was able to establish that the product could be satisfactorily made in this country. The three so-called independent consultants who visited Cygnet were the same consultants who originally specified the German equipment.

Mr. Jack

I do not think that my hon. Friend was listening when I pointed out at the beginning that a British company was there. The specification was drawn up a long time before Waldner became involved. It was not specified around the Waldner range. It is interesting and ironic that, when Laing-Haden cast further doubt on Waldner in its own mind by trailing that project around, the alternative that it suggested was not Cygnet, but a Dutch company called Luntri—such is its interest in the matter. We have bent over backwards to try to accommodate—

Mr. Thurnham

Will my hon. Friend give way?

Mr. Jack

I have given way to my hon. Friend, and I want to conclude my remarks.

We have bent over backwards to try to take into account the representations made to us by the company, particularly with reference to its refinancing. As my hon. Friend knows, one of our officials recently visited the company to look again at the units. What he found, in effect, was that nothing—

The motion having been made after Ten o'clock and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at five minutes past Eleven o'clock.