Private Firms (Contracts)

Oral Answers to Questions — Ministry of Aviation – in the House of Commons at 12:00 am on 15th April 1964.

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Mr. Lee:

asked the Minister of Aviation if he will change the conditions of contracting between his Department and private firms to ensure that the outturn of each contract, and access to the relevant books of the firm, are available to his Department.

Photo of Mr Julian Amery Mr Julian Amery , Preston North

Such a condition is already included in contracts when the price is determined on actual cost.

It would be inappropriate in contracts let after competitive tendering.

The hon.. Gentleman's Question therefore arises only in respect of contracts Let either after single tender or on the basis of what is called "price to be agreed".

The price-fixing arrangements in my Department are currently being re-viewed, and I would not wish at this stage to anticipate the outcome.

Mr. Lee:

Would the right hon.. Gentleman agree that it is not a lot of use to condemn any firm which makes what we are pleased to call excessive profits unless we do all we can to prevent such things from happening? While he is issuing contracts, instead of merely confining himself to insisting upon the right to have a look at the factory while the thing is going through, why does he not also insist on the right to seethe outturn of any individual contract, so that at that stage he can ensure that this kind of excessive profit cannot be made?

Photo of Mr Julian Amery Mr Julian Amery , Preston North

I do not think that the hon.. Gentleman quite understood my Answer. Where contracts are priced on the basis of actual costs, this is what we do. There are two other methods, one the single-tender contract and the other competitive tender. When there is competitive tendering, what we try to do is to give the firm an opportunity to get a good profit by proving to be more efficient than other competitors who have tendered. In this case it would be inappropriate to try to check after the event. This proposition is quite different from a price fixed non-competitively. The hon.. Member's question arises where a single contractor is concerned, that is to say, when only one firm is allowed to tender because we are convinced that it is the only one appropriate; or where the prices are fixed after development has actually begun, or production has actually begun, which happens in certain cases I am now inquiring very closely into these price-fixing arrangements.

Mr. Lee:

The right hon.. Gentleman will agree that in his Report the Comptroller and Auditor General speaks of 18 contracts put out to competitive tender when in each case only one firm tendered. In other words, the whole object which the right hon.. Gentleman has in mind is altogether vitiated by what is undoubtedly an agreement that only one firm should tender for the contract. This means that there is no competitive: tendering, so that the right hon.. Gentleman's whole object cannot be achieved while that kind of thing goes on.

Photo of Mr Julian Amery Mr Julian Amery , Preston North

I was trying to say that where there is only one tender, if there is a single tender, then there is a problem. The hon.. Gentleman's question applies to single-tender contracts, as in the Ferranti case placed on the basis of what is called "price to be agreed". I am looking into these arrangements and I should not like to anticipate the outcome of my inquiries or those of Sir John Lang.