BAe Systems (Hansard, 19 May 2004)

§ The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Bach)
My Lords, as was made clear in the Government's defence industrial policy published in October 2002, competition remains the bedrock of our procurement system as it is often the best means of securing best value. However, competition is a means to an end and not a dogma. Individual procurement strategies are always considered on a case-by-case basis. BAe Systems is well placed to continue to win work from the Ministry of Defence.

§ Lord Astor of Hever
My Lords, I am grateful to the Minister for that reply. The quarrel conducted in the media between the MoD and BAe, our biggest defence contractor, is bad for the MoD, for BAe and, most importantly, for our Armed Forces. What are Ministers doing to restore that important working relationship? Will the Minister confirm that in accordance with the recommendations of the National Audit Office, the MoD will not be managing the contract for the new carriers?

§ Lord Bach
My Lords, the defence industrial policy is aimed at supporting the whole of the UK defence industry and not individual companies, however distinguished they are. Obviously, we very much value the work of BAe Systems and the equipment and economic benefits that it provides. Our relations with the workforce of that company continue to be excellent. I pay tribute to their dedication and commitment.
768 We agree with the company on many issues, but we have different responsibilities. We are government; it is a private company. We cannot always expect to agree on everything. Indeed, if there was no tension in a relationship between a government and any defence company from time to time, that would be a fault rather than a virtue. Of course, companies will always pursue their individual objectives as their shareholders see fit. Our priority remains to deliver capability to the Armed Forces when they need it and at value-for-money for the taxpayer.

§ Lord Redesdale
My Lords, in the Government's view, what effect would the speculated bid by BT Systems for the shipbuilding and submarine-building arm of BAe shipyards have on the carrier contract?
I know that this is slightly wide of the Question, but will the Government enter into the fray of whether the joint strike fighters are too heavy to land on the carriers which are being built for them?

§ Lord Bach
My Lords, the noble Lord is certainly right in one thing: that is certainly wide of the Question that I was asked. I think he knows that I cannot answer those questions today, even if they were absolutely on the ball, which, for once, they are not.
As far as CVF is concerned, the noble Lord knows that my right honourable friend the Secretary of State announced on 30 January that we believe that the best means of delivery in the carrier programme is by an alliance approach involving BAe Systems, Thales UK and the Ministry of Defence. As regards shipyards, at this stage that is a matter for the private companies involved.

§ Lord Campbell of Alloway
My Lords, is the noble Lord aware that the reasoning that he has given for the action that has been taken does not appear—certainly to me—to be wholly satisfactory? The preferred contractor sis a safeguard for our Armed Forces and the security of the type of equipment that is put forward.

§ Lord Bach
My Lords, the whole CVF concept—that is, the new aircraft carriers—is an extremely complex and demanding programme in respect of time and cost. The alliance approach, in which we hope that BAe Systems will play a major part along with other companies, will allow us to draw on the strengths, resources and expertise of all parties involved and provide the most effective way of managing both risk and reward. I am sorry that the noble Lord is not yet persuaded, but I shall work on him.

§ Lord Craig of Radley
My Lords, does the concern of the Government, in not accepting BAe Systems as a preferred contractor, have anything to do with the possibility that that company might amalgamate with an American one?

§ Lord Bach
My Lords, I have to tell the noble and gallant Lord that negotiations on all of those issues, including the preferred contractor issue, are continuing 769 with the companies involved in order to determine the most effective contracting strategy for the aircraft carriers. It is not our intention to force out any company or supplier. It has nothing to do with what on the whole are fairly unfounded stories in the press this weekend about the short take-off vertical launch (Stovl) version of JSF.

§ The Countess of Mar
My Lords, does the noble Lord agree that Her Majesty's governments—in plural—over a number of years have had a sorry record in safeguarding taxpayers' money as regards MoD contracts with various suppliers? What are the Government doing to ensure that contractors meet times and costs as originally contracted?

§ Lord Bach
My Lords, when going back over years in general terms, I do not think that there is a bad record as far as the taxpayer is concerned and certainly not as far as concerns the Armed Forces. They enjoy—they are the first to say so—some of the best equipment in the world, which is the envy of many other countries. So I do not agree with the proposition.
Of course, we can improve our procurement policy. I do not know how long the House has got: not very long, I suspect. We have brought in the principles of Smart Acquisition, which means in short that we work closer with industry. We ensure that we spend enough money and enough time at the assessment phase of each project, so that when we meet the manufacturing phase we do not find those delays and, thus, those cost increases that lead taxpayers and newspapers sometimes to complain.

§ Lord Haskel
My Lords, my noble friend will be aware that in the recent innovation White Paper there was an item that said that the Government would try to be a purchaser who encourages innovation. Can my noble friend confirm that the MoD is encouraging innovation by its purchasing policy?

§ Lord Bach
My Lords, that is certainly what we intend to do. As I said, this is an extremely complex field. A great deal of taxpayers' money is involved here. It is very important that what we do is responsible, but there are new flexible ways of procuring equipment. We have got to find the right way in each case.

§ Lord Tebbit
My Lords, as the Minister seems to be prepared to go slightly wide of the original Question, will he tell the House whether Her Majesty's Government have paid damages to ETC, the American company that failed utterly to fulfil its contract for building the Royal Air Force centrifuge, which has now fallen into complete abeyance?

§ Lord Bach
My Lords, I knew I had made a mistake in answering the noble Lord, Lord Redesdale. I might have known that it would be the noble Lord who would take me up on it. I am about to reply to the noble Lord's Written Question. It is not the first Written Question on this legitimate subject. I am afraid that I do not have the answer in my head.