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Phalanx Availability Contract: Contingent Liability

Volume 619: debated on Tuesday 17 January 2017

The Secretary of State for Defence has retrospectively laid before Parliament a Ministry of Defence (MOD) departmental minute describing the contingent liability within the Phalanx close-in weapons system availability contract with Babcock Marine.

The departmental minute describes the contingent liability that the MOD will hold as a result of placing the new Phalanx availability contract, which will provide continuous support to the Navy’s operational fleet of ships. The maximum contingent liability against the MOD is therefore £268 million over the two-year life of the contract.

It is usual to allow a period of 14 sitting days prior to accepting a contingent liability, to provide Members of Parliament with an opportunity to raise any questions. I apologise but on this occasion it was not possible to do so.

However, a break in the contract with Babcock Marine would have resulted in potential severe operational impact to the support of Phalanx, particularly those on-board ships deployed on operations and requiring contractor support to repair them. As such, and by exception, I approved the awarding of the new support contract with Babcock Marine from 22 December 2016, to come into effect from 31 December 2016. This ensures that support provided to Phalanx was not interrupted.

In accordance with the procedures established for cases of special urgency, the Department wrote to the Chairs of the Public Accounts Committee and the Defence Committee on 23 December 2016, in advance of incurring this liability, inviting them to respond with any objections. No such objections have been received.

I apologise that the Ministry of Defence did not allow 14 sitting days for Members of Parliament to signify an objection. Contracts of this type do not normally fall within the parliamentary notification requirement, and it only became apparent that this contract was different late in the process. I have asked Ministry of Defence officials to ensure that these exceptions are identified earlier in future.

The Treasury has approved the proposal. If, during the period of 14 parliamentary sitting days beginning on the date on which the minute was laid before Parliament, a Member signifies an objection by giving notice of a parliamentary question or by otherwise raising the matter in Parliament, I undertake to examine the objection and respond to the Member concerned.