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Small and Medium-sized Enterprises

Volume 570: debated on Monday 4 November 2013

2. What assessment he has made of the level of contracting by his Department with small and medium-sized enterprises; and if he will make a statement. (900854)

As I have said in the House before, the Government understand the significance of SMEs to the United Kingdom’s economy. The Ministry of Defence is playing its part in increasing the number of opportunities for SMEs to contribute to defence, both as direct suppliers and as subcontractors on major programmes. We recently published details of the MOD spend for 2012-13. Some £1.1 billion was spent directly with 12,000 SMEs. During that year, 10% of all new contracts by value and 36% by number were placed with more than 1,000 SMEs.

Jobs in the supply chain are vital to constituencies such as Ogmore, but I understand that last year the MOD was fined £21,000 for making late payments to suppliers. The new contracts and direct payments that were promised by Ministers have not materialised. Can the Minister explain to SMEs in the supply chain in Ogmore and throughout the United Kingdom why the Government’s actions do not match their rhetoric?

I am very glad that the hon. Gentleman has chosen to light on the single late payment penalty that the MOD suffered in just one of the 4 million transactions that took place in 2012-13. It involved a company that was not based in Ogmore, not based in Wales, and not based anywhere else in the United Kingdom. It was for late payment for aviation fuel sent by a supplier to our base in Akrotiri in Cyprus, with an invoice from a Greek company in Corinth, over the Christmas holidays. The Ministry of Defence pays 92% of its bills within five days, and has a better record in that regard than any other Department.

I greatly welcome the letting of the main contract for the expansion of MOD Stafford to enable it to receive two more Signals regiments. Will the main contractor be encouraged to work with local SMEs which offer value for taxpayers’ money?

I think that my hon. Friend is referring to facilities management contracts which are being placed on a regional basis. The contractors will of course undertake to use SMEs in their supply chain, but it will be up to them to decide where they place their contracts, so I cannot give my hon. Friend any specific reassurance relating to how many of the subcontracts will go to Staffordshire companies.

Although reassuring in many respects and full of detail, the Minister’s response will not give much comfort to SMEs that hold subcontracts with Serco and are awaiting the outcome of the Cabinet Office review, which I assume has been further delayed following this afternoon’s announcement by the Serious Fraud Office. This matter is of serious concern to, for instance, those involved in the consortiums that are bidding for the GoCo. When does the Minister expect a firm decision from his colleagues on whether the MOD can let further contracts to Serco?

As the hon. Lady said, there has been an announcement following the Serious Fraud Office inquiry into two contractors, which was first highlighted by the Ministry of Justice in its announcement of 26 September. I cannot give her any information about when the SFO will complete its inquiries, and she would not expect me to do so. Until that has happened, we shall not be in a position to make any comment on Serco itself.

A constituent of mine is considering installing on his farm an anaerobic digestion plant that could supply heat to HMS Raleigh. Will my hon. Friend agree to meet my constituent and me to discuss that?

I am grateful to the hon. Lady for mentioning her interest in encouraging the supply of renewable energy to Ministry of Defence bases throughout the country as well as in her constituency. The matter that she has raised is the responsibility of the Under-Secretary of State for Defence, my hon. Friend the Member for South West Wiltshire (Dr Murrison), but I am sure that one of us will be happy to meet her as soon as possible.