Defence Contracts: Competition (Hansard, 12 April 1988)

§ The Minister of State, Foreign and Commonwealth Office (Lord Glenarthur)
My Lords, progress has been significant. We have extended the list of potential suppliers to include more new firms, advertised contracts more widely and continued support for companies from the Small Firms Advice Division. As a result, in the year to February 1968 contracts placed by competition amounted to 80 per 976 cent. and 70 per cent. by volume of land and air systems work respectively and 40 per cent. of sea systems, even taking account of non-competitive Trident contracts.

§ Baroness Sharples
My Lords, I thank my noble friend for that extremely encouraging reply. Can he confirm that Her Majesty's Government insist on strict quality control over electronic components for military weapons, especially for the weapons to come, which are the high-tech weapons of the future?

§ Lord Glenarthur
Yes, my Lords, I can give my noble friend that assurance. Competition is certainly no way of getting round the high quality assurance standards, which of course remain paramount.

§ Lord Graham of Edmonton
My Lords, does the Minister recall the House being told in 1986 that awarding the AWACS contract to Boeing would result in the creation of 4,500 new British jobs, although in fact it resulted in the cancellation of Nimrod with the loss of 2,000 jobs? Will the Minister comment upon that matter? Now that it has been revealed that £4 billion of the annual £8 billion equipment budget was unforeseen expenditure, does he not agree that that is a scandal and a disgrace for a government that pride themselves on being efficient and cost-effective and even boast about it?

§ Lord Glenarthur
My Lords, with respect to the noble Lord, I think that the latter part of his supplementary question is rather wide of the particular and specific Question on the Order Paper. Nevertheless, so far as concerns AWACS and the history of that business, perhaps the noble Lord is aware that that took place before the particular competition initiative began.

§ Lord Mayhew
My Lords, does the Minister agree that it is quite relevant to the Question that, in spite of the welcome increase in the amount of competitive tendering, the most outrageous overcharging still goes on in many parts of defence procurement? Can he say whether there has been an increase in the proportion of contracts awarded to the smaller firms?

§ Lord Glenarthur
My Lords, I think it is true that there could well still be overcharging. However, perhaps I can give the House two examples which were quoted in the 1987 Defence Estimates. As a result of the competition policy there have been 30 per cent. savings on a contract for sonarbuoys on the prices previously paid under single source procurement arrangements and savings of almost 50 per cent. over the last non-competitive price in a competition for training missiles. I think that that goes some way towards indicating that the policy is effective. So far as concerns small firms, about 2,000 small firms have contacted the Ministry of Defence as a result of the small firms initiative and a number of them have indicated that they are keen to be involved in defence work.

Lord Morris
My Lords, does my noble friend agree that there is no better evidence that Her Majesty's Government are encouraging greater competition in this field than their determination to go for international tendering in certain instances?

§ Lord Glenarthur
Yes, my Lords, it is important that we continue to do that, provided of course that the quality assurance is kept up to scratch, as my noble friend Lady Sharpies suggested.

§ Lord Kennet
My Lords, can the noble Lord say whether there is anything in the new competition system, which he described and which is surely welcome, that will help to get rid of the perpetual cost over-runs which are so much of a problem in defence procurement—that is to say that one obtains a nice, low price after a competition and then the supplier does not stick to it?

§ Lord Glenarthur
My Lords, I hope so. There is also of course considerable scope for competition at the sub-contract level, which may go some way toward preventing the sort of problem to which the noble Lord refers.

§ Lord Ironside
My Lords, in encouraging greater competition in defence contracting, can my noble friend say what is the extent of government policy now in inviting foreign bidders to take part in the competitions? Within the figures mentioned for what went out to competitive tendering in the past year, can he say, by value, what proportion was awarded to foreign firms?

§ Lord Glenarthur
My Lords, I am afraid that I cannot give my noble friend the detail for which he asks but I shall find out and let him know.

§ Lord Glenamara
My Lords, can the noble Lord say anything about the order for four frigates which must be placed this year if the Navy is to have 50 ships of that kind, which I take it is still the target, and if the shipyards are to retain their labour forces? Is he aware that Swan Hunter on the Tyne, which now has a labour force of 3,300, will have to start reducing it early next year unless some of those naval orders are forthcoming?

§ Lord Glenarthur
My Lords, I am afraid that I cannot go into detail on specific contracts, but if there is anything that I can find out and let the noble Lord know, I shall of course do so.