HC Deb 10 February 1965 vol 706 cc98-9W
77. Mr. Burden

asked the Minister of Aviation if he will make a statement on the findings of the Departmental Committee of Inquiry into the Ferranti contract for Bloodhound missiles.

Mr. Roy Jenkins

I have studied carefully the report of the Inquiry which has been carried out in my Department into the circumstances in which excessive prices were paid to Messrs. Ferranti Limited on their contracts for the production of components for the Bloodhound Mark I missile.

This Inquiry has confirmed that the excessive payments arose primarily from an over-estimate by the technical costs staff of the direct labour required for the performance of these contracts. Bloodhound Mark I was the first large guided weapon for which technical costs estimates had been prepared. The prior assessment of production costs in this novel and advanced field of technology is inevitably difficult, and some margin of difference between the estimates and the actual costs is almost inevitable. In this case, however, the margin of error was very large, and I consider that the estimates represented a standard of work much lower than that which the technical costs staff can reasonably be expected to achieve. The officers concerned have been so informed.

The opportunity which subsequently presented itself of identifying the initial technical costs error by means of crosschecking the information available to the Department's accountants with the technical costs estimates was so exceptional as to be outside the experience of the officers concerned. I consider, nevertheless, that the accountants should have recognised the special significance of the figures which they had produced and should have drawn to the attention of the contracts staff the possibilities of crosschecking which they presented. Their omission to do so amounted to a failure to show the initiative which should normally be forthcoming from the Government's professional staff. The officers concerned have been so informed.

The agreement of fixed prices on contracts placed without competition for the supply of equipment of the type for which the Ministry of Aviation is responsible is a difficult task demanding from the staff a combination of application to a mass of detail with a readiness to accept responsibility for large settlements. I do not draw from the exceptional circumstances of these particular contracts the conclusion that this work is not normally performed in an efficient manner.

Nor do I think that punitive action against those concerned would help to achieve the over-riding objective of minimising the risk of any recurrence of the Ferranti mistakes.