Draft Single Source Contract (Amendment) Regulations 2024

Debbie Abrahams Excerpts

Wednesday 6th March 2024 General Committees

[James Cartlidge]

That is a fair point, which I will reflect on. I shall ensure that the right hon. Lady and all colleagues on the Committee receive copies of the draft guidance as soon as possible, but to be clear, we think that this approach to statutory guidance is a fair one. On a subject of such complexity, if we did not do this, the legislation itself would have to be far more complicated in terms of definitions to ensure clarity for industry, which after all has to implement these relatively complex contracts.

There were some good questions about the SSRO. I have had lots of engagement with the office, which is a highly competent and focused, very professional, relatively small organisation compared with some of those we have in the MOD. It does excellent work and we are always engaging with it on what more we can do together, because this is such an important area. As the right hon. Lady rightly said, arguably it covers 50% of equipment spend and contracts. There is a good reason for that, given the monetary value of some of the big submarine or ship builds. As for resources, the SSRO has made some efficiency savings and has an efficiency target, which I have discussed with it. Those have enabled the office to absorb some extra pressure, which is the best way to deal with it without having to have recourse to further injections of funding. Obviously, we always keep that under review.

The right hon. Lady asked about value for money. Frankly, we could spend all day talking about that, but as we have the Budget later and that will be the theme today, I will not detain colleagues long. I just make the point that the single source procurement regime exists to protect sovereign capability, but that is not its only role. For example, we may be purchasing something at very short notice and there is only one supplier. If we were to competitively let contracts in very sensitive areas, such as nuclear or some of our key naval contracts, there is of course a risk that they would be won by a company that we did not want to win them, so there is no point starting the process in the first place. I think there is a broad consensus on that point. That is why the regime exists and why it has become much more relevant.

The right hon. Lady made some interesting comments about speed, implying that I am a man in a hurry, but I seem to recall that when responding to my statement on acquisition reform she said that we were not going fast enough. We appear to be seeing one of those Leader of the Opposition-style flip-flopping processes under way, which is rather confusing to behold. She did ask a fair question, though: how does this reform fit in with wider reform of procurement? As I announced the other day, our new integrated procurement model is all about the threat we face as a country. We need to procure more quickly, because our competitors in military terms are moving at a frightening pace on some quite extraordinary capabilities that will pose a threat to the United Kingdom.

The purpose of our reforms is to ensure that we have the most effective procurement model, but this will never be completely straightforward, simple or swift; it is a highly complex area of procurement. Were we to undermine the single source regime and make it unfit for purpose, fewer companies would come forward and we would reduce the potentially available supply even further, not only from the big primes but right through the supply chain.

I engage constantly with industry. I had a small and medium-sized enterprise forum in Rosyth last week with Scottish SMEs. The week before I had one of our first engagements with industry at “Secret” in MOD Main Building. For me, that is a critical example of the new system. What it means is that industry is in the room, hearing military secrets of the most sensitive kind—obviously subject to the usual security, which we follow as closely as possible on this side of Europe—ensuring that firms understand what is coming down the track, what our plans are and what the likely security requirements are. That is moving much more quickly than before.

We talk about a three-week implementation time. At the moment, we have got companies in Ukraine that are spiralling capability within days. In that sort of context and with the need for speed because of the military scenario, we should not be afraid of acting swiftly. It is in the national interest.

I take on board the points that the right hon. Lady made. We want to make the regulations effective because they cover arguably the most critical procurements this country makes, in relation particularly to the deterrent, so I am grateful for her support.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

This is not an area that I am that familiar with, but I would like to understand how equivalent this approach is to that of our allies in Europe and the US.

[James Cartlidge]

That is an excellent question, and it is something I have looked into in considerable detail. We want to be confident that our regime is comparable or stands up to scrutiny at least, compared to peers. We are talking about the awarding of enormous amounts of public money without competition, so it is important to get it right. I would say it is arguably more common in Europe than in the UK to have the dominance of one or two nationalised or semi-nationalised defence companies in each country. The area of comparison I looked at was the profit rates. What we would not want is a sense that the profit rate we allowed on a contract was significantly higher. It is very difficult to compare, and the initial information I have seen is difficult to track. As the Committee can imagine, getting data on this sort of sensitive information is difficult, but we are looking at it. It shows, I think, that we are in the same ballpark, broadly, as our European peers.

We are talking about value for money and speed, and those important issues come together. Single source procurement can be an important instrument that is available at the moment in other contexts, and will become increasingly necessary, for example, for very fast procurement into Ukraine or situations in which we feel a supply chain needs to become more resilient because the military threat has heightened. From the MOD’s point of view, this is a really important tool to have available. It covers an enormous amount of very sensitive procurement. I am confident that the regulations will improve the system, but we will constantly engage with industry and colleagues. I will ensure that the right hon. Member for Garston and Halewood receives a copy of the draft statutory guidance and that we issue the full biftas as soon as possible. I am grateful for colleagues’ support.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Single Source Contract (Amendment) Regulations 2024.