§ Mr. Leslie Huckfield
asked the Postmaster General what progress he has made with his consideration of the Industrial Reorganisation Corporation Report on the telecommunications industry; and if he will make a statement.
§ Mr. Stonehouse
The Post Office is mainly concerned with those part of the I.R.C. Report dealing with procurement policy, R. & D. and Post Office manufacturing policy. As a result of discussions with the telecommunications industry, I258W am now able to say how I propose to proceed.
now able to say how I propose to proceed.
So far as procurement is concerned, the primary Post Office objectives are to obtain what is needed at the right time and in such a way as to secure the best value for money spent; to do so in conformity with the principles of the White Paper on Public Purchasing and Industrial Efficiency (Cmnd. 3291) and in this way to help promote a British telecommunications industry which is strong and efficient at home and abroad. These objectives are entirely consistent with the I.R.C. view that the purchase of exchange equipment should:
- (i) be based on competitive tendering as far as practicable;
- (ii) but assure regular suppliers of continuity of orders so long as their price, quality and delivery are satisfactory and give the more efficient amongst them the opportunity of gaining an increasing share of the business;
- (iii) allow entry into the industry of any newbona fide supplier who is prepared to make a full contribution to the development of the industry.
I accept and will implement all these principles as the basis of telecommunications purchasing policy generally, but would like to give a little more detail about the application of the first two in particular sectors of our procurement.
Telephone apparatus and transmission equipment are already being bought competitively and this will continue with some changes suggested by the I.R.C. (such as the introduction where practicable of longer term contracts). Cables are also bought competitively but the question whether the procedures need to be modified in the light of the I.R.C. Report has yet to be discussed with the cable manufacturers.
Exchange equipment is at present being purchased on a Bulk Supply Agreement basis, the Agreement which expired on 31st March, 1968 having been extended temporarily as announced by my predecessor in his preliminary statement on changes in Post Office procurement policy on 28th March, 1968. As he then indicated, the intention is to terminate the Agreement at the earliest practicable date and the suppliers will then tender competitively for Post Office needs. The precise method of tendering has still to be worked out, but the present intention is as follows. In order to allow for some continuity of production, as recommended 259W by I.R.C., established suppliers (at present, S.T.C., G.E.C./A.E.I, and A.T.E. and Ericsson of the Plessey Group) would be guaranteed between them, subject to continued efficient performance, a proportion of the total requirement, reducing within two years to 50 per cent. Their share of the business above this level would be decided competitively on the basis of current tenders. Their share of the guaranteed proportion would depend on their competitive position as reflected in their total output for the Post Office in the previous year. In exchange for this guarantee, any profit above a level to be negotiated would be shared between the Post Office and the supplier, such profits on exchange equipment being certified by independent accountants for each firm.
Tenders for all telecommunications plant will be adjudicated on the basis of price, delivery, performance and quality, taking account of such wider considerations as are or may be relevant and consistent with the basic procurement objective.
As regards research and development there will be arrangements for consultation on a multilateral or bilateral basis as appropriate so that the Post Office may establish and maintain definitions of system requirements against which performance specifications can be published.
As regards manufacture by the Post Office, the I.R.C. Report suggested no reason to change current Post Office policy and no early change in the existing scale or scope of the Post Office factories is planned.—[Vol. 761, c. 316–17.]