§ Mr. Wilson
To ask the Secretary of State for Defence what is the estimated total amount of cost overruns against original estimates on current procurement contracts.
§ Mr. Sainsbury
Original estimates are, by their very nature, provisional calculations. They will not relate precisely to the scope of work which is contracted for after detailed specifications are agreed. They are not, therefore, susceptible to direct comparison. The majority of defence contracts are now placed at firm, non-variable prices or, otherwise, with provisions to limit the Ministry's liability, or in the case of cost-plus percentage fee arrangements, with a maximum price. Once prices are agreed and contracted for, the liability for cost overruns would rest with the contractor.