HC Deb 15 October 1969 vol 788 cc101-2W
Mr. Doig

asked the Chancellor of the Exchequer if he will make a statement on the establishment of the review board for Government contracts.

Mr. Diamond

The Board was set up on the 1st August. The Chairman is Sir William Lawson, and the other members are Viscount Caldecote, Sir Robert Hall, Mr. St. John Elstub and Mr. R. A. Barr. They were appointed by the Government after consultation with the Confederation of British Industry, and will be acting in an independent and personal capacity, within terms of reference agreed between the Government and the Confederation of British Industry.

As I indicated in my written reply to my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) on 17th July, 1968, the Board will have three functions. First, it is to make an interim report, within the next twelve months, on some of the complex accounting issues which have a bearing on the agreed target rate of return of 14 per cent. on capital employed for non-competitive Government contracts. Secondly, it will carry out a general review covering industry's average earnings in the period 1st January, 1969, to 31st December, 1971, and at three-yearly intervals thereafter, on Government contracts to which the revised profit formula applies, and make recommendations for future action. Thirdly, it may be asked to review certain individual Government profit formula risk contracts placed under the new standard conditions, to assess whether the price negotiated was fair and reasonable, and in the light of this assessment determine whether any financial adjustment should be made, and, if so, how much. Either party to such a contract will be able to refer it to the Board if post-costing suggests that a profit of 27½ per cent. or more on capital employed or a loss of 15 per cent. or more has been made. In exceptional cases, the Board might be asked to review individual contracts, referred to it by either side, within these percentages.

The general expenses of the Board will be met out of moneys provided by Parliament. A Supplementary Estimate will be presented in due course; any essential expenditure incurred before Supply is granted will be met by an advance from the Civil Contingencies Fund.—[Vol. 768, c. 247–8.]