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Royal Ordnance

Volume 124: debated on Tuesday 8 December 1987

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3.

To ask the Secretary of State for Defence if he will make a statement on the implications for competitive procurement for his Department arising out of the reorganisation of Royal Ordnance plc.

Decisions on the internal reorganisation of Royal Ordnance plc are a matter for the company. We do not expect the company's recent announcements to have any effect on the procurement decisions of the Ministry of Defence and we will continue to pursue our policy of maximising competition at both main and subcontract level.

Following the reorganisation of Royal Ordnance plc, is the Minister entitled to expect some improvement in the level of tender submitted by the company, given the National Audit Office figure of a £37 million discount to British Aerospace on the disposal of Royal Ordnance plc?

The price that the Government obtained for the disposal of Royal Ordnance plc was a good one. It was a competitive purchase. The value of assets is clearly what the purchaser will pay for.

I support competitive procurement, but will my hon. Friend note the importance of that major employer to the city of Nottingham? Will he also welcome the custom and practice of the present management in keeping not only staff fully informed of what is going on but, happily, also local Members of Parliament?

I am well aware of the importance of Royal Ordnance plc to Nottingham, and I welcome what my hon. Friend has said. I hope that the continuing improvements in efficiency by the company will provide it with wider opportunities to develop its market, including its export market.

In view of the conclusion in the report of the National Audit Office that the Royal Ordnance factories were substantially undersold because of the rush to privatisation, will the Minister comment on the fact that British Aerospace stands to make up to £100 million on the sale of the factory in Enfield alone?

I do not accept the premise of the hon. Gentleman's question that the Royal Ordnance factories were undersold. As I said earlier, it was a competitive purchase, and a good price was paid.

On 2 April this year my right hon. Friend the Secretary of State announced that negotiations were under way with Royal Ordnance for the exclusive supply on long-term contracts of propellants, explosives and some ammunition. As other British companies are capable of supplying some of those products, does that covert deal not drive a coach and horses through the policy of competitive tendering?

Last year, in the House, my right hon. Friend the Secretary of State referred to arrangements for long-term contracts for the supply of propellants, explosives and ammunition. We are aware of the interest of other British companies in the supply of such products, we are in touch with at least one other company, and we are awaiting proposals, which will certainly be carefully examined.