§ Mr. Patrick Thompson
To ask the Secretary of State for Defence if he will make a statement on the report by the review board on its sixth general review of the profit formula for Government contracts.
§ Mr. Alan Clark
The main recommendation in the report is for an increase, based on comparability, in the overall target rate of return on non-competitive contracts.
After careful consideration I have concluded that we cannot adopt that recommendation and that the current target rate should remain in force. This decision implies no 122W criticism of the review board. It is based on my assessment in present circumstances that the maintenance of the existing target rate for such contracts will ensure adequate industrial resources to meet our current needs.
The report raises a number of other issues relating to the operation of the profit formula and the pricing of non-competitive contracts. My officials will be pursuing these with representatives of the CBI and with the review board, as appropriate.
A copy of the review board's report has been placed in the Library.