Swan Hunter bids investigation begins: Watchdog to examine contest for MoD order

AN URGENT inquiry by the independent watchdog on government spending was launched yesterday into the Ministry of Defence helicopter order that has left the Swan Hunter shipyard facing closure.

The National Audit Office began work on the investigation yesterday afternoon after Sir John Bourn, Comptroller and Auditor General agreed to a request by Sir Nicholas Bonsor, chairman of the Commons Select Committee on Defence.

It will examine how VSEL of Barrow-in-Furness, Cumbria, was able to undercut the Swan Hunter yard by more than pounds 50m to win the contract.

Swan Hunter, whose 2,200- strong workforce is currently engaged on building three frigates, is the last remaining shipbuilding yard on Tyneside. It went into receivership last week.

The original appeal for an investigation was made by Neville Trotter, Tory MP for Tynemouth, who said the gap between bids was 'staggering' and received the immediate backing of Tyneside Labour MPs.

Nick Brown, the Labour MP for Newcastle Upon Tyne East, claimed during a Commons debate yesterday that VSEL had been effectively subsidised by taxpayers who had paid for the Trident submarine programme on a 'cost-plus' contract.

The company had made large profits from the contract, enabling it to put about pounds 25m behind its bid, accounting for the gap between its tender price and Swan Hunter's, he said.

Mr Brown claimed afterwards he was satisfied from sources in both companies that the allegation was correct.

Archie Hamilton, the armed forces minister, told the Commons he would welcome any inquiry by the NAO.

David Clark, Labour's defence spokesman, called for a broad inquiry to cover the wider question of how MoD procurement policy would affect the future of the defence shipbuilding industry. Dr Clark said the reason behind the 'sacrifice' of Swan Hunter was the Government's intention to cut the Royal Navy to less than 40 ships.

But the NAO's examination will be confined to the helicopter carrier order so that a report can be presented to Parliament quickly, ideally before the summer recess.

A spokeswoman for Swan Hunter's receivers, Price Waterhouse, said yesterday that wages would be paid until 28 May, while talks were continuing over what would happen after that.