HC Deb 27 July 1988 vol 138 cc351-2W
Mr. Gerald Howarth

To ask the Secretary of State for Defence when, pursuant to his answer of 28 June,Official Report, column 232, he expects to announce his decision regarding the agreement between his Department and British Aerospace for the supply by Royal Ordnance of explosives and propellants; and if he will make a statement.

Mrs. Ann Winterton

To ask the Secretary of State for Defence (1) why he has not hitherto been prepared to implement the heads of agreement signed between his Department and British Aerospace in April 1987 concerning the establishment of an agreement with Royal Ordnance plc for the supply of explosives, propellants and related products;

(2) whether it remains his policy to invest £12 million in assisting Royal Ordnance plc with its productivity improvement programme, as envisaged in the heads of agreement for the supply of explosives, propellants and related products signed in April 1987.

Mr. Heathcoat-Amory

To ask the Secretary of State for Defence if he will make a statement on progress on negotiations between his Department and Royal Ordnance plc over an EP (REP) agreement to supply explosives and propellants.

Mr. Coombs

To ask the Secretary of State for Defence when he anticipates completing the explosives and propellants and related end product agreement with Royal Ordnance; and if he will make a statement on the progress of negotiations.

Mr. Allen

To ask the Secretary of State for Defence what is the position regarding the award to Royal Ordnance of an EP(REP) agreement.

Mr. Sainsbury

[pursuant to his replies, 28 June 1988, c. 105 and 7 July 1988, c. 703.]: I can now advise the House that subject to final contract negotiations an agreement has been reached with Royal Ordnance plc under which the company will supply some 80 per cent, of the Ministry's requirements for specified explosives, propellants and ammunition at annually reducing prices for the period to 31 March 1993. The cumulative value of the contracts under the agreement is of the order of £400 million and represents something under 50 per cent, of the Ministry's anticipated requirements for ammunition, mines and explosives over the period concerned.

The undertaking to enter into discussion of a long-term contract of this nature was disclosed to the House by my right hon. Friend the Secretary of State on 2 April 1987 in relation to his announcement of the sale of Royal Ordnance plc to British Aerospace. We are satisfied that the prices negotiated under the arrangement, which also subsume the £12 million investment referred to by my hon. Friend the Member for Congleton (Mrs. Winterton) represent good value for money for the taxpayer as well as ensuring continuation of supply of these important stores to the armed services.

The new agreement, which will take effect from 1 April this year, will terminate the current agreement between the Ministry of Defence and Royal Ordanance plc for the exclusive supply of most explosives and propellants also referred to by my right hon. Friend on 2 April 1987. This measure, together with the substantial proportion of Ministry of Defence requirements not covered by the new agreement, should be of assistance to other companies seeking to develop their capabilities in this sector of the market.