Royal Ordnance: Orders (Hansard, 15 December 1992)

§ Lord Dean of Beswick
My Lords, in the absence of my noble friend Lord Howell and with his permission, I beg leave to ask the Question standing in his name on the Order Paper.
The Question was as follows: To ask Her Majesty's Government what proposals they have for further orders for the Royal Ordnance after March 1993.

The Parliamentary Under-Secretary of State, Ministry of Defence (Viscount Cranborne)
My Lords, the Ministry of Defence is reviewing its procurement strategy for ammunition following the expiry of the Explosives and Propellants and Related End Products agreement in March 1993. So far as possible, open competition will be used to ensure value for money and Royal Ordnance will be invited to bid for new orders. There can be no repeat of the EPREP arrangements.
We are looking at the possibility of longer term contracts of up to five years for some key items. This will give security of supply for the armed forces as well as providing industry with a better basis for forward planning and investment.

§ Lord Dean of Beswick
My Lords, I am grateful to the Minister for that detailed Answer. However, he must be aware that there have already been substantial redundancies in factories followed by more commercial awareness of living in the real world and not having guarantees. Along with increased performance, there is also in the pipeline, I understand, the development of new projects. Given time, those projects could be world-beaters in a commercial sense. Many people involved in them need to be encouraged that there will not be further redundancies and that the workforce will be kept intact. Is the Minister aware that if there are massive further redundancies, we shall literally go out of business on the international scene which, I am sure, is the last thing that the Government or anyone else want?

Viscount Cranborne
My Lords, I am grateful to the noble Lord for raising this Question. I wish to point out that the Ministry of Defence has a clear obligation to the taxpayer to make sure that it obtains maximum value for money in the procurement of ammunition, as with the procurement of everything else.
As a result of the new arrangements over the past five years, the price of heavy ammunition has decreased by about 50 per cent. and of small arms by 25 to 30 per cent. The redundancies are a matter for the parent company of Royal Ordnance, although, as I said in my earlier reply, we are aware that there are certain central matters which are of importance to procurement and which will themselves guarantee employment.

§ Lord Ironside
My Lords, is my noble friend aware that Royal Ordnance has this week in the MoD contracts bulletin been invited to tender for a large quantity of 5.56 millimetre blank cartridges? Those are rifle cartridges. Can he say why three other foreign firms have been invited to tender for the same product? How can he ensure fair competition here and the avoidance of any risk of dumping taking place?

Viscount Cranborne
My Lords, my noble friend will be well aware from his own experience that we are committed to what I am told is called a "level playing field" in this respect. In fact, the IEPG, the Independent European Programme Group, the last meeting of which I attended in Bonn last week, is committed to an agreement in this area. We are not yet satisfied that our European and NATO partners are operating as satisfactorily as they might, and we are committed to trying to improve their performance.

§ Lord Monkswell
My Lords, are the Government aware of the deficiencies of the infantry small arms system known as the SA80? What plans does the Ministry of Defence have for commissioning a replacement? What assurances can the Government give that such a replacement will be manufactured in the United Kingdom?

Viscount Cranborne
My Lords, I suspect that this matter is slightly outside the scope of the Question. If, however, your Lordships will allow me to do so, I should like to take advantage of the noble Lord's intervention to assure him that, in spite of initial difficulties with the procurement of the SA80, I know from personal experience that all ranks, from the Chief of the Defence Staff down to the lowliest private, are now happy with the SA80—with its accuracy, its revised design and the quality of its assembly.

§ Lord Williams of Elvel
My Lords, will the noble Viscount bear in mind that this is a serious situation for the Royal Ordnance factories and that, when the agreement runs out at the end of March 1993, there are liable to be up to 7,000 redundancies? That will put us out of business in terms of the provision of ammunition for the armed forces. Are the Government really satisfied that they can rely on foreign sources selling us ammunition, as the noble Viscount implied, possibly at marginal cost—not 497 at full cost and not on a level playing field? Are the Government really satisfied that that is in the interests of the defence of the United Kingdom?

Viscount Cranborne
My Lords, I must advise the noble Lord, Lord Williams, that, as he rightly observed during the course of my perhaps over-lengthy initial Answer, we have been careful to look at the possibility of longer-term contracts for up to five years covering some absolutely key items for the same reason that he gave. Meanwhile, as he is well aware, there is a massive over-supply of various kinds of ammunition in certain areas which it is convenient for us to consider in terms of value for money. I sincerely hope that the Royal Ordnance factories will be able to compete, particularly as a result of the improvements in their management during the past few years.

§ Lord Mayhew
My Lords, the noble Viscount referred to the SA80. Has it been issued to our forces in Bosnia and, if so, are they satisfied with it?

Viscount Cranborne
My Lords, the noble Lord, Lord Mayhew, knows as well as I do that the SA80 is now the standard infantry weapon and, as such, has been issued to the Cheshire Regiment. As far as I am aware, that regiment is as satisfied as anyone else with the performance of the SA80 as now issued rather than as originally issued.

§ Lord Marlesford
My Lords, does my noble friend agree that with the growing world disorder there are, unhappily, likely to be an increasing number of occasions when the United Nations will seek well-trained and well-equipped forces to undertake peace-making or peace-enforcing roles throughout the world? Will the Government ensure that Britain's forces, which are so well suited to this task, are properly equipped and maintained? That, of course, has considerable implications for the British armaments industry in general and for the Royal Ordnance factories in particular?

Viscount Cranborne
My Lords, I am most grateful to my noble friend for his remarks. I hope that he will accept—and not only from me —that our troops in Bosnia are doing a remarkably professional job, as I was told at a reception last night for the defence correspondents, a number of whom had visited them. They were unanimous in saying that never before—even by the high standards of British forces—had they seen such a professional job being done. And they are, after all, supposed to be dispassionate observers. Equally, I can advise my noble friend that we have been extremely careful to ensure that, in view of the extreme conditions under which they are operating there, our troops have the best possible equipment, notably cold weather equipment. We have taken considerable care to ensure that they are properly equipped in that respect.

§ Lord Mackie of Benshie
My Lords, is the Minister able to assure us that in asking for competitive tenders the Ministry of Defence has protected itself by saying that it is not bound to accept the lowest offer?

Viscount Cranborne
My Lords, the noble Lord knows as well as I do that the lowest offer is not always the best offer, and we certainly take that into account.

§ Lord Williams of Elvel
My Lords, given the question asked by the noble Lord, Lord Marlesford, which is very relevant in the circumstances, can the noble Viscount now give an undertaking that British troops who go into any sort of engagement under whatever standard—United Nations or British—will be properly supplied with ammunition made in Britain by British people?

Viscount Cranborne
My Lords, perhaps your Lordships will allow me to answer the noble Lord, Lord Williams, in this way. The spin which, as a distinguished cricketer, he puts on an apparently simple-minded question is always one of which any Minister has to be careful when replying. I have already made it clear that we should like to make sure that certain key areas are supplied from here. At the same time, we are perfectly satisfied that there are other areas which are properly open to competition, particularly from companies operating from within the national membership of the IEPG. Obviously, we shall keep the situation under review. But a level playing field and competition of the kind I have described are beneficial not only to the performance of the kind of ammunition that we procure, but also in terms of value for money for the taxpayer, which is something that I know the noble Lord keeps well in mind when asking questions.

§ Baroness Seear
My Lords, does the noble Viscount agree that it would make a very pleasant change to have a flat floor instead of a level playing field?

Viscount Cranborne
My Lords, the noble Baroness is absolutely right. I am well aware that I have been using an over-used cliché; it will be my firm endeavour to change.

§ Lord Peyton of Yeovil
My Lords, since the level playing field has come up again, I wonder whether my noble friend agrees that that is something worse than a cliche; it is a fairy story.

Viscount Cranborne
My Lords, I have already said to my noble friend Lord Ironside—and I repeat this to my noble friend Lord Peyton —that we are not yet satisfied that our partners in the IEPG are playing as clearly on whatever expression I dare to use now. We are doing our best to make sure that we improve it. Whether it is a level playing field or anything else, it is clear that our new procurement policy has greatly improved the value for money that the British taxpayer is getting. I have given as an instance the 50 per cent. saving in costs for heavy ammunition.