CONDICIONES PARTICULARES DE LOS CONTRATOS DE SUBASTA INVERSA ELECTRÓNICA

12.1 Homogeneity means that turnover per fte in the industry/product group used in the Analytical Tables should be similar. This suggests that figures for defence and non-defence activities should be comparable. Everything else being equal economists have argued that, as defence companies operate in less competitive markets they will have higher costs per person than non-defence companies. Whether “everything will be equal” may be challenged since defence companies may sub-contract less as a means of labour hoarding. The overall impact on sales per person is then difficult to predict. Current information to permit comparison of turnover per person figures for defence companies with non-defence is not available publicly. Companies do not publish separate figures that align defence and non- defence (civil) activities with industrial classifications. Even comparing figures for commercial work in, say the aerospace industry (which may be associated with SIC 35.3 (aircraft and spacecraft)) is fraught. British Aerospace publish sales and employee numbers for “Commercial Aerospace” - for Airbus and Aircraft Services Group (BAE Systems, 2002). These indicate sales per employee of some £3Bn/ 11900 = £252,100 per employee. It is not clear if the employees are heads or full- time equivalent. The number quoted includes a figure for the “share of joint venture employees”, and so will include overseas as well as UK workers. The sales will include a corresponding figure. These sales will, presumably, also include the cost of engines that are contracted out: Airbus supply engines made by General Electric, Pratt and Whitney or Rolls-Royce. Rolls-Royce Civil Aerospace sales per head (including their share of a consortium) are some £3.443Bn/ 24300 = £141,687 (Rolls-Royce, 2002) which is significantly less than the BAE Systems figure for its commercial aircraft operations. (The Rolls-Royce sales per head figure for its defence business is some £194,444: but this includes a US (aeroengine) subsidiary and (in 2001) Vickers Defence Systems who manufacture, among others, tanks which fall to the Weapons and Ammunition SIC.)

12.2 It might be argued that as long as the mix of industries in the MOD vector matches the mix of industries in the ABI then using an average rate would make no difference to the numbers calculated. However, since the MOD will presumably buy disproportionately from defence firms, this equation probably does not hold unless the products mostly for defence constitute the majority of the product group. It might be considered that in some sectors (eg Weapons and Ammunition) sales are likely to be mostly for defence. But, unfortunately this sector provides an example of probable

12.3 Pite (1980) in describing the early MOD work on the employment estimates was able to obtain sales per head for defence contractors in specific

industries from the “Business Statistics Office under the Statistics of Trade Act, 1947” (Table 5). He used these in his estimates of direct labour, and advises that if average figures had been used throughout “the estimated level of direct employment generated by the Defence equipment

programme in 1978 would have been about 8,000 job opportunities less”, some 4% of the direct total then of 218,000. The Defence companies (average) sales per head were in several sectors less than the non defence companies. Pite is less clear on how he handled the indirect numbers – these were early days in the use and availability of Input-Output tables. He refers to these and to a broad average of 1.8:1 indirect to direct as being the ratio. By using this he implicitly assumes that defence contractors and non-defence contractors have the same ratio. He is not clear on how the 1.8 is calculated, if it was determined using an average rate then there is a mismatch in the rate, since, strictly, the Leontief Inverse provides total output at basic prices: he does not mention this.

Industry MLH* Defence Contractors £ in 1978 All establishments £ in 1978 Scientific and industrial instruments 354 10,290 11,250 Electrical engineering of which - Order IX 12,950 13,640 Telegraph & telephone equipment 363 11,520 9,690 Radio and electronic components 364 11,410 10,130

Radio, radar, & electronic capital goods 367 12,720 12,710 ‘Other electrical goods’ 369 10,940 11,790 Shipbuilding & marine engineering 370 8,156 9,730 Aerospace equipment 383 12,780 12,730

* MLH = “Minimum List Heading” – the titles used in SIC 68 Table 5: Sales Per Head For Various Industries in 1978

12.4 There will be delays between a company undertaking a task and its receiving payment for it. The actual payment dates will vary by contract. The MOD has moved more towards paying against achieved programme stages rather than simply following contractor’s outgoings. By taking the payments in a financial year and using turnover per fte for financial years, implicitly it is assumed that there is approximately a 3 month delay between task and payment. Whilst sensitivity analysis might be used to see the effect of varying this (by using a weighted average rate) it is suggested that doubts about the true rate, the actual period this covers, and the variation observed between years would mean that the results would not be very illuminating.

12.5 Conclusion

In this section an attempt has been made at exploring the homogeneity assumption of products in a product group by using information from published accounts in the aircraft and spacecraft sector. It is not possible from published accounts to ensure that the figures relate mostly to one industrial (SIC) sector and are UK based. The figures discussed for BAE and Rolls Royce suggest that there are wide differences within some product groups and that homogeneity does not strictly hold. It is not possible from published accounts to isolate defence and non-defence products, though such data may be available within some sections of MOD. 12.6 This concludes the description of deriving the overall employment figures

using the Analytical Tables. In the following sections, we consider direct regional employment, other approaches to estimating employment and international practice.