APPENDIX 7
Memorandum submitted by Seacas (UK) Limited
I. The undersigned has been closely involved
in most DFID sponsored/financed projects in Indonesia between
1988-98. This involvement resulted from consultancy contracts
between my company—Seacas (UK) Limited—and companies
seeking to conclude service and supply contracts with the Indonesian
Government on the basis of ODA/DFID sponsored projects. My principals
included companies such as British Aerospace, ABB/AdTrans, WS
Atkins, BREL Ltd, IAL, Trafalgar House/Kvaerner, etc.
II. Based on my experience with two Trafalgar
House/Kvaerner projects I believe the DFID should consider to
revise its contracting practices. The two projects are:
1. The Cikampek to Padelarang Toll
Road Project in West Java for which one of the Kvaerner subsidiaries—PT
Citra Ganesha Marga Nusantara—was the BOOT developer on
the basis of a very profitable 27 year concession granted by the
Government of Indonesia. See enclosed document.
The ODA (DFID) financed a survey for
this project and also agreed to provide Development funds for
this project, for which there was no competition.
2. The Cikampek to Cirebon Railway
Project for which the Indonesian and British Governments had
formally agreed to grant a contract to another Kvaerner subsidiary—Davy
British Rail International (DBRI)—and for which the ODA/DFID
had agreed to provide a soft loan to the amount of £41.5
million. This was confirmed after the ODA/DFID had sent an Appraisal
Mission to Indonesia to evaluate the feasibility of the project.
Competition for this project was also excluded by the ODA/DFID.
III. The Indonesian Authorities formally
withdrew from both projects, knowing that by doing so they would
lose much needed development funds from Britain. They gave two
reasons for the cancellation of the Railway Project: (a) DBRI's
attempts to replace its long standing agent in Indonesia by two
young men with connections in both the Indonesian and the British
Cabinet and (b) DBRI's attempts to charge exorbitant prices for
the project. The withdrawal came after a DFID value for money
audit had revealed that the DBRI prices were at least 20 per cent
above reasonable levels, as was confirmed when DBRI agreed to
reduce its price form the original £41.5 million to £33.2
million.
IV. My suggestion that the DFID should consider
to revise its contracting practices is based on the following:
The two specified projects have cost the DFID
several million pounds, which—but under the prevailing circumstances—are
totally wasted funds. To prevent such or similar developments
in the future the DFID should introduce regulations which would
make it mandatory for a company wishing to benefit from DFID funding
to compensate in full all expenses incurred by the DFID in the
event a contract is lost because of malpractice by the company.
This is particularly relevant where all forms of competition for
the project were excluded. It should also be considered whether
such companies should be excluded from any future DFID funded
projects.
Mr Philipp Ohlenschlager, Managing Director, Seacas
(UK) Limited
June 2000
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