Bulk Supply Agreements (Hansard, 28 March 1968)

§ Mr. Edward Short

As I have previously told the House, the Telephone Apparatus Agreement which expires on 31st March, 1968 is not to be renewed and in future telephone apparatus will be bought by competitive tender. To give some assurance of continuity to manufacturers I intend to include a proportion of three-year as well as one-year contracts. We also intend to buy complete telephones, instead of buying some of the main parts separately, although in the early years of the new arrangements this may not be wholly practicable. These arrangements are consistent with recommendations of the Industrial Reorganisation Corporation.

The Government accept the principles laid down by the I.R.C. for exchange equipment, which are that procurement policy should:

(i) be based on competitive tendering as far as practicable;
(ii) while assuring the regular suppliers continuity of orders so long as their price, quality and delivery are satisfactory, give the more efficient amongst them the opportunity of gaining an increasing share of the business;
(iii) allow entry into the industry of any new bona fide supplier who is prepared to make a full contribution to the development of the industry.

Long-term purchasing arrangements based on these principles, and long term arrangements for research and development are at present being discussed with the industry. Full account is being taken of the objectives set out in the White Paper on Public Purchasing and Industrial Efficiency (Cmnd. 3291).

Meanwhile, the Telephone Exchange Equipment Agreement expires on 31st March and I have decided to extend it in a modified form for a further period of not more than three years to avoid a gap in supplies while long-term policy is being settled and implemented. The main modifications to the existing Agreement include an increase in the reservation percentage from 10 per cent. to 25 per cent.; a decisive rôle for the Post Office in the allocation of orders among the firms who are parties to the agreement and a break clause which enables the Post Office or the manufacturers to determine the Agreement by giving 12 months' notice at any time after 30th September, 1968. The intention is to introduce the long-term purchasing arrangements at the earliest practicable date and it is therefore unlikely that the extension of the existing Agreement will run its full course.

The industry must now demonstrate, as progress is made towards the new purchasing arrangements, that it can fully meet Post Office requirements in terms of price, delivery and quality, and is able at the same time to take advantage of export opportunities. There are very serious delays in delivery at the present time, but the supply of exchange equipment to the Post Office has doubled in the past two years and the capacity of the industry is now sufficient to meet any foreseeable need once the imbalance in production has been overcome.—[Vol. 760, c. 624–5.]