HL Deb 18 April 1990 vol 518 cc3-5

2.43 p.m.

Lord Ironside asked Her Majesty's Government:

What alternative arrangements will be made by the Ministry of Defence to make certified payments to small contractors during the installation and commissioning of the new computerised payment system in Liverpool.

The Parliamentary Under-Secretary of State, Ministry of Defence (The Earl of Arran)

My Lords, we have decided to impose a freeze on our normal bill paying arrangements for a four-week period during October, when the present computer system will be replaced. Special arrangements have been made to ensure that payments are made immediately before and after the freeze period to ensure that any delays are kept to an absolute minimum. Contractors have been given six months' notice of these arrangements to enable them to submit bills earlier than normal.

Lord Ironside

My Lords, I thank my noble friend for that very informative Answer. I hope that all the firms concerned will take note of what he has said. I speak as a member of the Council of the Defence Manufacturers Association. I am sure my noble friend recognises the deep concern felt by small firms over this planned four-week stoppage. Is he aware that on a pro rata basis to the MoD yearly spend something like £150 million per week is being put on hold? Can he therefore give the House an undertaking that small firms will not be penalised by this stoppage, which is not of their making?

The Earl of Arran

My Lords, I can tell my noble friend that the Chief of Defence Procurement wrote to the trade associations in both January and February advising them of our plans and giving details of them. They are aimed, so far as is possible, at minimising the effects of the freeze. Further details will be sent to all individual contractors later this month.

As regards the small contractors, because of the number with which we deal and the size and complexity of this conversion task, I cannot give an undertaking that we shall make special arrangements for individual firms who may have special difficulties. However, I can say that, if severe circumstances arise which are considered suitable for re-examination, then that will be the case and they will be treated with sympathy.

Lord Graham of Edmonton

My Lords, can the Minister say how many small contractors are likely to be involved in the problems that he just mentioned? Can he also tell us how long it will be before the installation is finally in place and in running order? Will he bear m mind that such difficulties also arise over a range of economic tendering issues at both central and local government level where other industries are involved? I am thinking especially of the building industry. Small businessmen are put at a disadvantage by having to wait for payment of their bills not just from large contractors but very often from local and central government sources.

The Earl of Arran

My Lords, I cannot give the noble Lord, Lord Graham of Edmonton, the exact number of small contractors who will be affected by these particular circumstances. However, I can say that most contractors will be able to submit bills for payment immediately before the freeze period which begins on 1st October. Contractors will submit their later bills in accordance with a specified timetable during the freeze period. These will be paid on 5th November. The four-weekly cycle will then be restored for all contractors immediately thereafter.

Lord Mellish

My Lords, the Minister will be aware that government are notorious for being very bad payers of bills —and that applies whichever party is in power. Small contractors undertake a job of work and it is inspected; but it is not until it is completely finished and passed that the bills are paid. Why cannot we devise a system which would ensure that if a contractor is doing a job and doing it pretty well he will be paid half-way through the contract for work already completed? Then, when the job is finally completed and inspected, he should be paid the balance straightaway. Such a system would stop this nonsense of holding matters up.

The Earl of Arran

My Lords, I cannot agree with the noble Lord on the point that he makes. Contractors working for the Ministry of Defence normally receive a very speedy and reliable payment service from the Liverpool office. Indeed, I understand that bills are normally paid within one week of receipt. We have done our best to limit the effects of the payment freeze and to maintain an acceptable level of service during this difficult month of conversion.

Baroness Sharpies

My Lords, does my noble friend agree that the problem is perhaps the contractor's fault if he does not pay the sub-contractor quickly?

The Earl of Arran

My Lords, obviously I cannot comment on specific circumstances.

Lord Cledwyn of Penrhos

My Lords, the question which my noble friend Lord Mellish put to the Minister has not been answered. Does not the Ministry of Defence have a system of interim payment for small firms whose cashflows may not be great—indeed, many such firms are on the verge of bankruptcy, although they are very good firms—which could be applied in cases where the work is being properly conducted and confirmed as such by the Ministry's inspectors? Will he deal with the principle of interim payment?

The Earl of Arran

My Lords, I hoped that I had already made clear that if there are circumstances in which it is thought that there is justification for giving sympathetic consideration, especially to small contractors, then such consideration will be given.