Copy of a letter from the Comptroller
and Auditor General to the Director of Air Foyle Ltd
Thank you for your correspondence on the Short
Term Strategic Airlift procurement. As you know, we have been
following up the issues you raised in your letters of 7 September
last and 23 January. Tim Banfield, the NAO Director responsible
for defence equipment issues, and his team have completed a rigorous
investigation into the conduct of this procurement and he has
already spoken to you about the results of this work.
The final decision on the Short Term Strategic
Airlift procurement was finely balanced and taken by Ministers.
Our enquiries focused on whether the Department followed best
practice in conducting the procurement and providing Ministers
with complete information on which to base their decision.
In this context, Tim Banfield and his team have
had detailed discussions with the Defence Procurement Agency Integrated
Project Team and the Department's Customer (Director of Equipment
Capability (Deploy, Sustain and Recover)), and they have reviewed
key documents supporting the procurement. These investigations
have focused around four criteria to assess the Department's conduct
of the procurement. The criteria used were based on the Department's
own recommended best practice and covered:
was Air Foyle's proposal considered
as a serious alternative;
were the Department's criteria for
evaluating proposals explicit;
were all the costs and risks fully
evaluated through a Combined Operational Effectiveness and Investment
Appraisal (COEIA); and
was the basis for the decision transparent.
My detailed findings under each of the above
criteria are set out in the attached Annex. My overall conclusion
is that the Department has not fully followed its own preferred
practice in evaluating the Short Term Strategic Airlift proposals,
but there is no evidence of illegality. The Department's exceptional
approach reflected what it saw as the unusual circumstances and
challenges of the procurement.
In summary, the Air Foyle proposal was considered
as a serious alternative as the Department accepted the An-124
100 assured charter as a viable option to meet the Short Term
Strategic Airlift requirement. There was significant dialogue
between the Department and Air Foyle during the procurement. However,
the Department was not explicit in setting criteria for how the
proposals submitted in the competitive environment were to be
evaluated and did not conduct a full Combined Operational Effectiveness
and Investment Appraisal because it could not quantify all of
the risks involved. Therefore, the information put to Ministers
by the Department, although comprehensive in identifying the costs
and risks associated with the options, lacked quantification of
some of the key risks and was inconclusive, leaving the decision
very open. This has led to lack of clarity concerning the basis
on which the decision was made, which has been added to by the
inconsistent picture given by the Department to industry and others
more widely on the determining factors.
Tim Banfield has raised our concerns with the
Department over the process weaknesses in this case. The Department
has recognised these and other lessons raised during your debrief
and has fed them back into its procurement practices through its
Learning From Experience Cell.
I hope that you find this reply helpful in explaining
the Department's conduct of the Short Term Strategic Airlift procurement.
I will continue to monitor the progress of the Short Term Strategic
Airlift project through the Major Projects Report, which it will
feature in from 2002.
Sir John Bourn
Comptroller and Auditor General
10 October 2001