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Aviation History
1964
1964 - 0515.PDF
308 FLIGHT International, 27 February Aviation Contracts Debated IN THE COMMONS By Frank Beswick THERE was a strong scent of General Election in the air of theCommons chamber last week, when the House debated theOpposition motion on Ministry of Aviation contracts. At times, indeed, the air was so thick with interruptions and points of order that it was difficult to discern the theme of the debate. The theme, nevertheless, was an important one and not less so because it has been with us for so long. It involves the extremely difficult problem of exercising proper control of public expenditure without incurring undue interference—in other words, of how to avoid extravagance on the one hand and frustration on the other. Mr Lee, opening for the Opposition, said that the Government had spent £3,400m "on the British aircraft industry" between 1950 and 1963. Of this, he claimed, £24Om was lost on cancelled contracts. If Government-backed contracts failed, said Mr Lee, "they do not in any way inhibit the manufacturers from making profits. The public money is lost, but the contractor makes his profit. When contracts are successful, the contractor makes a bigger profit and the State gets nothing." As illustration of the claimed lack of control Mr Lee instanced the case of the Ferranti Bloodhound contract, of which the Comp- troller and Auditor General had noted that "the sum total of the amounts included for direct labour and overheads in the agreed prices, relating to production up to March 31, 1961, exceeded by 70 per cent, or £2.7m, the total direct labour costs for that period..." Mr Lee maintained that when a factory had both government and commercial contracts there was nothing to stop "cross-booking on a mammoth scale," and he allowed himself to think that there was a danger that the £2.7m now under discussion was only a small item in a whole lot of items which had gone through in a similar way. Challenged by an indignant Mr Goodhew to say whether he was charging the aircraft industry of indulging in "a sort of fraudulent practice," Mr Lee said he was dealing with a case within the report of the Auditor General. But it was not enough, he continued, to have an inquiry into the Ferranti case only. The whole contractual system wanted reviewing. The standard contract, it was said, provided for access by the Ministry to the contractor's premises but not to financial records. A further aggravation was the breakdown of competitive tendering. Again according to the Auditor General, among examined contracts for electronic valves there had been no effective competition in two-thirds of the contracts over the past three years. In 26 cases only one contractor had been invited to tender, and in another 18 cases only one had responded to the invitation to tender—the explanation being, suggested Mr Lee, the complicated law of "Buggins' turn next." In another case the Auditor General had commented that a particular contractor, with whom orders to a total of £74,000 had been placed, consistently refused "to accept conditions of contract which would entitle the Minister to carry out cost investigations . .." Mr Neil Marten, Parliamentary Secretary to the MoA, patiently (too patiently for the temper of the House) went through the method applied by bis department to ensure control. First were the feas- ibility and project studies, during which time projects were fully defined and costs analysed before full contract commitments were made. There was a very close watch on technical and financial progress. In the main problem of relating the cost estimates to the hundreds of technical problems, "critical path techniques," some- time known as PERT, were applied. In addition, for each major project there was a management board consisting of senior officials from the Ministry of Aviation and the customer departments, with representatives of the contractors in attendance. The task of these boards was to supervise the administration of the project and to see that all problems got quick attention at top level. There was also a working group of senior officials to which representatives of the aircraft industry were invited, to study the whole question of estimating methods and cost control in the industry. As for the Ferranti case, said Mr Marten, it appeared that the Ministry paid excessively for some of the equipment of Bloodhound 1; the Minister had set up an inquiry under the chairmanship of Sir John Lang; the Public Accounts Committee would be examining the Ministry's accounting officer; and Mr Marten thought it would be wrong to be drawn into further detail. On this latter point the Opposition thought otherwise and much argument followed across the floor. No further details, however, were given. Mr Millan—a newcomer to aviation debates, but one who had sat on the Select Committee which had reported on public expen- diture on transport aircraft—offered his opinion, as an accountant, that if the Bloodhound business was perfectly straightforward it ought to take a matter of weeks, not months, to get to the bottom of it. Mr Wigg wanted evidence about it to be given on oath. Mr Diamond, also speaking as an accountant, said that here was a situation in which a company with a nominal equity capital of £2m had made a profit on one project of £2.7m, and he found it inconceivable that nothing was said about it until the matter was formally raised with the Ministry last August. Understandably, for lack of information other than that con- tained in the Auditor General's report, Government back-bench support on this issue was markedly restrained, though Lord Balneil declared that before being too savage with their criticisms the Opposition would do well to await full facts from the inquiry of Sir John Lang. The Minister himself, who chose to reserve his comments for the last 29 minutes of the debate, would say no more than that he would not try to anticipate the outcome of Sir John Lang's inquiry or the Public Accounts Committee inquiry, except- ing to say that the Bloodhound had been a most successful weapon and had been bought by such discriminating countries as Sweden and Switzerland. As for the alleged waste on cancellation, Mr Marten said that all projects were started in good faith and that there was no shame in cancelling a project if its useful role is shown, during development, to be much reduced. Sixty-one American projects had been can- celled at a cost to their government of £2,100m. Sir Arthur Harvey emphasized the items on the credit side of the industry's balance sheet, with seven or eight missiles performing excellently and £50m collected from their export. And among the aircraft were the BAC One-Eleven, with 70 now sold, including 41 in the USA. The Concord Agreement On the second part of their motion, which expressed concern over the terms of the Concord agreement with the French Govern- ment, the Opposition were on much less secure ground. Mr Lee queried the absence of Treasury control and of the time factor, which he said was of even greater significance. On the former issue he said the evidence to the Select Committee that there was as yet no Treasury authorization of the Concord expenditure was "an amazing disclosure." As to the time factor, the Ministerial state- ment of November 1962 said that the aircraft "should be ready for airline service by 1970," though Sir George Edwards told the Institute of Transport that deliveries to airlines would be "starting in 1971." This compared with the Boeing claim that their Mach 3 aircraft would "enter service in mid-1971." Mr Lee wanted to know if the Concord date given by Sir George Edwards took into account the proposed modifications designed to give better range and payload. Mr Lee also thought it was "crass negligence to produce an agreement in which there was no break clause." To this Mr Marten replied that as against the opinions of the Estimates Committee all the French and British advisers considered it unneces- sary to have a break clause—"it would seem like writing a divorce settlement into a marriage contract." He agreed that the increased engine power and wing modifications would add to the original cost, but remarked that the technical reassessment was as yet incomplete. , In winding up, Mr Amery said that if either nation endeavoured to do the job alone they would both miss the market. His opposite number in France, M Jaquet, assured him that the French Govern- ment had no intention of withdrawing co-operation; quite tn reverse. Finally, on this point, Mr Amery said, "The Concord, or so it seems, will have very much the same range as that projectea for the American aircraft, it will be in service earlier, and it will De substantially cheaper." He was sure it was right for Britain and tne Concluded on J»
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