Research and Development (Hansard, 25 March 1991)

§ Dr. Bray
To ask the Secretary of State for Defence whether his Department obliges defence contractors to declare to him the nature and value of any sub-contracts for research and development that they place with other companies.

§ Mr. Kenneth Carlisle
On major contracts the Ministry of Defence requires the presentation of "make or buy" plans detailing each work package valued at £50,000 or more. These indicate whether work is intended to be carried out in-house or to be sub-contracted. In addition, contractors are required to notify the Ministry in advance of any sub-contract which they intend to place which includes design or development work. In appropriate cases the Ministry will then enter into a design rights agreement direct with the sub-contractor concerned.

§ Dr. Bray
To ask the Secretary of State for Defence what progress his Department is making in its work with the Central Statistical Office in relation to the interpretation of Frascati definitions as they apply to defence research and development; and if he will make a statement.

§ Mr. Kenneth Carlisle
Statisticians in MOD and CSO have had a number of preliminary discussions about the interpretation of Frascati definitions as they apply to defence R and D and will shortly be commencing consultation with representatives of industry.

§ Dr. Bray
To ask the Secretary of State for Defence what is the average percentage profit element included in research and development contracts placed by his Department in private industry.

§ Mr. Kenneth Carlisle
In the case of a contract awarded by competition the element included in the price in respect of profit is a mater for the commercial judgment of the tenderer.
In respect of non-competitive contracts the Government profit formula does not draw any distinction between research and development contracts and other types of contract. For the average contractor the target rates of return on cost, on the basis of historic cost accounting, are:

Per cent.

Risk contracts (for example, those priced on the basis of forward estimates of cost) 11.08

Non-risk contracts (for example, cost plus percentage fee) 8.52

In the case of risk contracts the profit which the contractor actually earns will depend on the efficiency with which he performs the contract.

§ Dr. Bray
To ask the Secretary of State for Defence if he will estimate the amount of his Department's research and development expenditure in private industry which is further sub-contracted to other companies.
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§ Mr. Kenneth Carlisle
There is no departmental requirement to hold such information and disproportionate cost would be incurred in seeking to prepare an estimate.

	Per cent.
Risk contracts (for example, those priced on the basis of forward estimates of cost)	11.08
Non-risk contracts (for example, cost plus percentage fee)	8.52