HC Deb 06 April 1982 vol 21 cc289-90W
Sir Victor Goodhew

asked the Chancellor of the Exchequer whether the arrangements for pricing Government non-competitive contracts are to be reconsidered.

Mr. Brittan

At the request of the Government and the Confederation of British Industry the review board for Government contracts has agreed to undertake a major review of the arrangements for pricing non-competitive Government contracts.

The terms of reference of the review are: Having regard to the need to remunerate non-competitive Government contracts on a basis which is fair to both Government and contractors, maximise the incentive to efficiency and encourage technical competence in the performance of Government non-competitive contracts, minimise consistent with propriety the administrative cost of the arrangements for remunerating non-competitive Government contracts, ensure appropriate long term security of United Kingdom supply of defence equipment, taking account of changing requirements and economic conditions; to review the present application of the arrangements established under the 1968 agreement, considering in particular (without excluding any other relevant matters).

  1. (a) the principle and practical application of comparability including the extent to which the target rate of return of these contracts should reflect changes in economic factors and the rate of profitability of other sectors of British industry.
  2. (b) the appropriate definition of the rate of profit, including the accounting conventions relating thereto and the balance between remunerating capital and cost.
  3. (c) the extent to which risk contracts should not only attract a higher rate of profit than non-risk contracts, but should differentiate if at all for varying degrees of risk.
  4. (d) the obstacles to earlier pricing of various kinds of contracts.
  5. (e) whether having regard to the purposes for which they were intended, the post-costing arrangements should be modified;
to make recommendations".