Examination of Witnesses (Questions 20
- 39)
WEDNESDAY 28 JUNE 2000
SIR JOHN
VEREKER KCB, DR
MUKESH KAPILA,
MR DAVID
SANDS SMITH,
MR PETER
BERRY AND
MR ALAN
MATTHEWS
20. Sir John invited me to put the question
to you about your charges. The £2.7 million takes the NAO's
guideline amount to £13,000 a month in lost interest. Would
you have been charging Sir John £13,000 a month?
(Mr Berry) Thank you very much for giving me five
minutes to answer the question, Chairman. The point Sir John made
is that this is not money that would have been sitting on a deposit
account. It was necessarily a call-down account as if it had been
drawn down from the Exchequer. The interest figure is something
the NAO calculated, I presume. We have not calculated it and we
cannot, but on the basis of advice from my banker it is likely
to have been between £5,000 and £7,000 a month in bank
charges for what we did, which included taking responsibility
for cash. The accounts were held in London but a lot of cash was
moved to and in the field and a huge number of payments was being
made to suppliers, contractors and other parties as detailed at
the very back of this Report. The guesstimate from our banking
people is £5,000 to £7,000 a month.
21. Something like half what the interest rate
cost would be. It strikes me as rather unsophisticated—
(Mr Berry) That was the total per month.
22. Which is about half the rate of loss of
interest on £2.7 million which is the £13,000 rule of
thumb given in the Report. £5,000 per million.
(Mr Berry) I would repeat, Chairman, that I think
the basis of calculation, I suspect, is on Exchequer rates or
something and I think this money did have to be available at very,
very short notice. I would support what Sir John said.
Chairman: I am familiar with the problems of
moving money in the Balkans. Rucksacks are necessary instruments
sometimes, I understand However, I have got a feeling that the
table on this will make its way into our final Report. Let's widen
matters and out and start with Nigel Griffiths.
Mr Griffiths
23. Let me add to the Chairman's warm words
of support for your efforts. Can I say that I chair the Scottish
Charities Kosovo Appeal which distributes aid some of which comes
from DfID. If that is a registerable interest, then I so record
it. The Chairman has already touched on the question marks over
checking projects and in paragraph 3.11 the grant conditions do
require that interim reports come from projects lasting longer
than three months. How many lasted longer than that?
(Sir John Vereker) I do not have, Mr Griffiths, a
precise figure on how many lasted longer than three months but
I would guess that a pretty high proportion will have lasted longer
than three months. I am looking to Dr Kapila, who will probably
have a slightly better feel for this than me.
(Dr Kapila) Over the period of the crisis we had somewhere
in the region of 1,000 projects overall. I do not have the exact
figure at my finger tips. In the first phase of the crisis, during
the refugee outflow, a very substantial number of what we did
at that time was less than three months.
24. Right. How many interim reports did the
Department actually see?
(Dr Kapila) Again, I do not have the exact numbers
at my finger tips. We distributed a significant proportion of
reports for those projects which exceeded the immediate three
month period. As the crisis unfolded and agencies that we were
funding themselves had the time to prepare the reports, they were
able to submit them. As you know yourself from your own organisation,
in the very first phase of the crisis the agencies we were funding
were themselves extremely busy implementing the actions on the
ground and because we were able to have good dialogue with them,
because we only relied on agencies that had a track record of
working in such situations that we trusted in other words, we
were able to indicate to them that as long as the work was carrying
on on the ground and monitoring indicated that was the case, then
the paperwork would catch up as events calmed down as months went
by.
25. That is a helpful response. If I can look
at paragraph 3.12. I know the London based staff were reviewing
the performance of major organisations. You said the work was
by smaller organisations whose track records you knew were satisfactory
but from the NAO report there do not seem to have been visits
made to those smaller organisations?
(Sir John Vereker) Perhaps I should say, Mr Griffiths,
that, very much as Dr Kapila has just said, in the early stages
the first priority for field staff was operations on the ground
and getting operations out and making them effective. They prioritised
that rather than the formality of reporting. I would not want
to give the impression to the Committee that the Department is
lax about reports at the end or does not care about them. I think
the report is right to highlight this. As part of my preparation
for this hearing I inquired what proportion of the smaller grants
and grants to agencies and international organisations we made
we now have reports for and the answer is currently 93 per cent,
which is not perfect but it is reassuring. I think what we are
looking at here is an issue of priorities at the time.
26. Why was there not a standard format between
all the field offices so that there were minimum standards across
each of the regions: Albania, Macedonia and Kosovo?
(Sir John Vereker) If I may say so I think that is
a very reasonable point. There was not because of, as Mr Matthews
has said, a presumption that it is difficult to draw up standard
requirements for these kind of emergency and untypical events.
However, I think experience of this kind of long running complex
emergency with large numbers, 700 to 1,000 different interventions,
does show the benefit of having standard requirements and that
is included in our standard operating procedures.
27. You have guidelines for use in the future?
(Sir John Vereker) Yes. It is included in the standard
operating procedures to which Mr Matthews referred which is, as
it were, a living document. It is being operated, although continuously
under discussion.
28. The Macedonia field office did recover unspent
expenditure of some £16,000 but there is a suspicion that
because the other field offices were not carrying out the detailed
monitoring we will not quite know whether their money was spent
wisely or not?
(Sir John Vereker) Is this a reference to—
29. 3.12.
(Sir John Vereker) If I can find the reference.
30. It is the fourth line from the bottom.
(Sir John Vereker) Oh, yes, I have got it at the top
of page 41. Unspent grants, yes, that is right. We did recover
unspent grants but, subject to correction from Dr Kapila, the
nature of these grants is such that under the requirements placed
on the organisations unspent grants would have been recoverable
anyway and as we get towards 100 per cent of reporting they will
come in. Is that right?
(Dr Kapila) Absolutely. All grants are subject to
a project completion report. Admittedly there are delays in the
first days of the crisis, as I was saying earlier on, but sooner
or later project reports are done and they are logged off before
one closes a project file. If there is an unspent grant or an
issue to do with the finances one would not sign off the project
completion report and one would go back to the agency concerned.
As things stand at the moment we have got roughly 30 or 40 projects
outstanding at the present time because projects are still being
completed. There is nothing to suggest that any of the unspent
monies have not been recovered from any of the other organisations.
31. If I may turn your attention to another
subject that the Chairman raised, the emergency air lifts. It
appears that the Department did fail for three years to ensure
that there was a proper air charter facility. I am not sure that
the reasons for that are convincing.
(Sir John Vereker) Mr Griffiths, I am not trying to
offer convincing reasons to the Committee. I have said that I
think it would have been better if we had an up to date contract
for our air broking. What happened was that, as I said in response
to the Chairman's initial question, we did conclude when this
expired in 1997 that it was unlikely that we would get involved
in that kind of direct chartering operation that we have had,
for instance, in Bosnia over a long period. With hindsight perhaps
that was not the right judgment and we did need this arrangement.
I invite the Committee, if I may, though to bear in mind that
this is a contract with an air broker, it is not a contract with
the charter companies themselves. It is a contract with intermediaries.
The fact that we did not have a contract extant and that we simply
made an oral contract to continue the previous one did not lead
to any loss of value for money or competitive pressure in the
market place because each individual air charter was still subject
to a requirement for competitive tender. I think three costed
quotes in each case. The competitive element was still there.
The brokerage fee was the standard five per cent and the arrangements,
to my mind, were therefore satisfactory. I am not excusing the
fact we did not have an extant contract, it would have been tidier
if we had.
32. On the arrangement with Hanover, your Department
had not obtained any particular quotes from them or others, is
that right?
(Sir John Vereker) When the original contract with
Hanover was struck, it was struck following a competitive process
in 1996. They were selected. That contract, as we know, expired.
We renewed it orally. We have since had a competitive process
and through that contracted air brokers.
33. Why was there not a contract between March
and October between the Department and the Crown Agents?
(Sir John Vereker) There was a contract with the ELMT
team, they were always under contract. The contractual arrangements
were that the first contract ran from July 1995 until March 1998,
that was amended six times. I can give the dates if the Committee
would like. The final amendment on 23 July 1999 extended it by
four months to 31 October, at which point the new contract took
over. We were never—subject to correction—without
a proper written contract with Crown Agents and, indeed, I have
all the contractual documents in my briefing folder.
34. You said 1996 in answer to my previous question
and I think it is April 1995.
(Sir John Vereker) I am sorry, I thought your previous
question was about Hanover. I may have got confused. The contract
for the air broker aviation contract was, I believe, struck in
1996. That is paragraph 2.28. My last answer related to the contract
with the ELMT because you asked about the Crown Agents.
35. That is dated 28 October, and you said the
31st. Is that because it was signed on the 28th with effect from
the 31st?
(Sir John Vereker) The new contract is dated 28 October,
1999. You want to know when it comes into effect? I think it came
into effect on the 28th. It came into effect the day it was signed.
36. Have you given any thought to devising contracts
with a pre-set rate to take into account emergencies?
(Sir John Vereker) The fee rates in the contract with
the Crown Agents are, broadly speaking, in two parts. There is
the fee for what I describe as the core services, that is to say
the core staff which are permanently there in ELMT, which are
specified in contractual documents, they are listed there, and
then the second part of it are fee rates which relate to additional
field staff who are deployed in response to a particular crisis.
So this is in effect a call-down contract, a contract under which
we call down additional services on standard terms.
37. Looking to the lessons, and I am pleased
to hear that clearly lessons are being learned all the time from
this, have you created a committee to co-ordinate the future efforts
of NGOs and the Department when future emergencies arise?
(Sir John Vereker) The first thing to say, Mr Griffiths,
is that you are absolutely right, we try to be a lesson-learning
department. We have been deluged with praise for our operation
over Kosovo. That does not go to our head. We rather welcome objective
looks at how we did and the opportunity to learn lessons. I believe
that throughout this process our relationship and dialogue with
the NGOS with whom we work, and on whom to a substantial extent
we relied for rapid delivery of essential services, was a good
one. Dr Kapila led on this so could I ask him to give a response.
38. Can you touch, Dr Kapila, on any role you
believe the private sector management expertise can bring to this?
(Dr Kapila) On the first issue of NGOs and humanitarian
organisations in general, partly based on the Kosovo experience
and partly on other such experiences we have now standard arrangements
(which prevailed at that time). We have periodic face-to-face
meetings with the agencies that we know are interested in a particular
part of the world, allowing us to give them information on important
issues like security for their own aid workers, like discussing
policy, like sharing common problems in relation to difficulties
with the authorities on the ground, and what HMG can do in terms
of facilitating the efforts of NGOs. Those meetings are fairly
routine and were fairly routine during the Kosovo crisis. In addition,
we produced very regular situation reports, at one stage on a
daily basis and after that two or three times a week, which were
circulated by e-mail to all concerned. Our field office on the
ground always had a welcome so to speak, so people would come,
use the photocopier, have a cup of coffee and exchange information
and that is very important in the context (as you know from your
own visit) that facilities on the ground were not good for the
agencies operating. I should add for the sake of completeness,
that we have a standard arrangement with the Disasters Emergency
Committee, which is a co-ordinating body for the major humanitarian
organisations in emergencies, in terms of getting together quickly
when there is a major crisis so we can co-ordinate our efforts,
as we did subsequently in the case of Mozambique. On the role
of the private sector we certainly welcome that and have always
welcomed that. When, for example, in the case of the Kosovo crisis
it came to finding out what resources might be available locally
in terms of logistics, camp construction and so on with the Emergency
Response Team quite a lot of effort went into seeing what partners
could be found in assisting us with that task.
Mr Griffiths: Thank you.
Chairman: Gerry Steinberg?
Mr Steinberg
39. I also would like to say what an excellent
job you all did during this crisis, but I am afraid you do not
come this Committee to get medals for excellent jobs; you come
to this Committee to answer for the mistakes that you made, and
frankly the whole issue of awarding the contract to the Crown
Agents appears to me to be very unsatisfactory. During a conflict
it surely is more costly because it is obviously a heavier workload.
I find it very difficult to understand why in the middle of the
conflict you would decide to sign a new contract, bearing in mind
you could have extended it anyway and you could have waited until
the conflict was over and you could have gone out to tender for
a new contract. Why did you not do that?
(Sir John Vereker) Thank you, Mr Steinberg. We approach
this in exactly the same spirit as you do. Can I draw the Committee's
attention to paragraph 2.22 of the Report. Just to repeat, the
position was that the original contract signed in 1995 ran for
three years and we ran it on for a further year to 3 March 1999
in order to ensure continuity of response to emergencies that
were on-going at the time, and these included Monserrat predominantly.
It would not have been, in our judgment at the time, sensible
to re-tender then, but while that one-year extension was going
on, we re-tendered in November 1998, which was the proper thing
to do. Six months before the extended contract expired we went
out to tender again. As part of the normal tender process we invited
competitive tenders. We examined them and on 7 April 1999 we told
the Crown Agents that they were the preferred bidder. So we were
in a position about a week after the crisis broke where we had
not concluded the new contract but had selected the Crown Agents
as the preferred bidder. It is normal for us to have post-tender
negotiations with the parties concerned and at that point we were
in the middle of a grave humanitarian crisis. I believe we then
did the right thing. We amended the contract, as it says here,
a couple of times to take us through until the end of the crisis
and when we had finished our post-tender negotiations, which was
on 28 October, we signed the new contract.
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