Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 20 - 39)



  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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