Examination of Witnesses (Questions 40
- 59)
WEDNESDAY 28 JUNE 2000
SIR JOHN
VEREKER KCB, DR
MUKESH KAPILA,
MR DAVID
SANDS SMITH,
MR PETER
BERRY AND
MR ALAN
MATTHEWS
40. Why did you not extend it until after the
crisis was over? Why did you need to sign the contract in the
middle of the crisis?
(Sir John Vereker) Mr Steinberg, contracts which were
struck in 1995—
41. You had extended it already, had you not,
for a considerable period of time?
(Sir John Vereker) But we had made considerable progress.
I think our legal position would have been in doubt had we ignored
the fact that we had invited tenders but I would have to take
advice on that. The interesting thing is we had re-tendered against
refined specifications of what we wanted. We thought we were close
to getting, and indeed we did eventually get, a contract that
was better suited to our needs, it reflected a up-to-date view
of what our needs were.
42. Meanwhile the Crown Agents have a lucrative
contract without being in competition for it.
(Sir John Vereker) They certainly were in competition.
They won a competition between the time we went out to tender
in November 1998 and the time we judged the competition, 7 April
1999. We ran a competition; they won it.
43. Okay. The point I want to make, if that
is the case, is it appears then that the contract was then changed.
Here we are in the middle of a conflict and the Crown Agents come
along. You talked earlier about the core contract. Here we have
a situation where they come along, the core contract has presumably
been signed and yet they come along and ask you for 157 per cent
increase in costs from £893,000 to £2.3 million.
(Sir John Vereker) No, Mr Steinberg. We asked them
for additional services, that is what the contract allowed us
to do.
44. Why is that not in the original contract
then?
(Sir John Vereker) It is in the original contract.
45. They have a blank cheque.
(Sir John Vereker) No. The original contract, as extended
throughout the period of the crisis, contains—I repeat—two
elements, the core element and a call down element.
46. Exactly.
(Sir John Vereker) What we were doing was calling
down, exactly as we had originally planned, in response to a crisis,
to enable us to respond.
47. In 2.26 it says, quite clearly "...
Crown Agents, the preferred bidder, while leaving their level
of charges unchanged, increased their estimate of the cost of
the substantially expanded core element of the contract from ..."
the figure that I have told you. They increased their core element
157 per cent. Now presumably I would have thought the core element
would have remained as standard and if you wanted extra services
then you would pay for the extra services. Here it clearly says
it was the core element that was increased.
(Sir John Vereker) Mr Steinberg, you are absolutely
right. I puzzled over this when I read this phrase. I have to
read the phrase "expanded core element".
48. I have to say we are just poor laymen as
MPs, we are not experts.
(Sir John Vereker) Subject to correction from the
National Audit Office—
49. Some of us failed the 11 plus.
(Sir John Vereker)—the reference here to the
expanded core element is to the whole team. It is not just the
original core element. What we are looking at is a situation in
which the team was built up by 200 per cent—
(Mr Matthews) Correct.
(Sir John Vereker)—and Crown Agents' fee was
built up by 157 per cent. The Department secured huge value for
money. We had 25 per cent gain in cost of Crown Agents Management
Fee.
50. That does not read in the report, I have
to be quite honest. You signed up to this report which gives me
the impression that frankly the Crown Agents came along with a
blank cheque. Let us move on to the next paragraph, 2.27, and
let me quote it to you. It says: "... the original April
1995 contract nor the new contract signed on 28 October 1999 was
clear about what level of activity can be supported by the services
specified under the core contract". In other words, the contract
has been signed originally and then again and you do not know
what it is all about. You do not even know what you have signed
for. That is what you are saying or the report is saying.
(Sir John Vereker) I am not saying anything of the
sort.
51. Go on.
(Sir John Vereker) I am certainly not saying the Crown
Agents had a blank cheque.
52. It is a funny contract, is it not, if you
do not know what you are signing for?
(Sir John Vereker) No, I did know what I was signing
for. The original contract specified the core team. It specified
the people. It specified the services. What it did not specify,
with the advantage of hindsight, is what I would describe as the
capacity to respond. i.e. it was a little bit of an old fashioned
contract, it looked at inputs not at outcomes. What we are now
laying on the Crown Agents' team is an obligation to have a capacity
to respond. Instead of saying, well as well as saying "You
have to have 15 people in your core team" we are also saying
you have to have the capacity to respond, I think we say, to two
sudden on-set disasters, to two long running emergencies and to
two contracts for international United Nations support missions.
We have moved a bit away from just listing their inputs, but we
always had that, towards saying "You also have to have the
capacity to respond to six crises at once" which we thought
was a useful thing to do.
53. Fine. Can I presume that under the new contract
that was signed, now that the conflict is over, you have gone
back to the £893,000 for core services or has the contract
been signed on the basis the cost was £2.3 million for the
core services? What are you signed up to now? What is the actual
cost of the core services now within the contract?
(Sir John Vereker) The new contract, Mr Steinberg,
specifies a certain number of staff—
54. The point I am trying to make—
(Sir John Vereker)—capital and operating costs.
55. The point I am trying to make, Sir John,
which I was trying to make right at the very beginning was, you
signed a contract in the middle of the conflict when it was very,
very expensive because you were paying a lot of money. Now I want
to know if that contract, the core contract price, that you signed
for is what you originally had before the conflict or is your
core price now what you were paying during the conflict?
(Sir John Vereker) The contract now is for the core
that we need after the crisis. Obviously we had not signed a contract.
56. What is the core cost then?
(Sir John Vereker) These questions of costs are quite
tricky, Mr Steinberg.
Chairman
57. They are our meat and drink, Sir John, questions
of costs.
(Sir John Vereker) Okay. Perhaps we had better have
a little exchange about costs. It might be helpful, Chairman,
if you were to guide me as to how much information the Committee
seeks about costs in contracts.
Mr Steinberg
58. I am putting a simple question. All I want
to know is did the contract that you signed in the core part of
it, is it the cost you were paying during the crisis or the cost
you were paying pre the crisis?
(Sir John Vereker) Pre the crisis, broadly speaking.
59. Right. The core cost of the contract is
not £2.3 million, which it was during the crisis, it has
gone back to basically the £900,000.
(Sir John Vereker) The core contract is not the £2.3
million, it is a little higher than it was before because we recognise
the need for enhanced services.
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