APPENDIX 1
SUPPLEMENTARY MEMORANDUM SUBMITTED BY
DEPARTMENT FOR INTERNATIONAL DEVELOPMENT (PAC 99-00/237)
THE EMERGENCY
LOGISTICS MANAGEMENT
CONTRACT WITH
CROWN AGENTS:
INFORMATION NOTE
Immediately prior to the Kosovo crisis the cost
of the core Emergency Logistics Management Team was running at
£355,000 per year. The Crown Agents bid of £893,000
to cover the three years from 1 April 1999 was accepted subject
to post-tender negotiations on the skills mix of the team offered.
It was based on a core team of six people.
In the light of the Kosovo experience and other
recent crises in which DFID had played an active operational role,
the Department, focusing on outputs, has recognised it is essential
that it has capacity to implement six simultaneous operations—two
rapid onset disaster responses, two chronic crisis responses and
two United Nations support operations. It was clear that this
would require a permanent increase in the ELMT core team from
the six specified in the original bid for the 1999 contract. Crown
Agents therefore, as the preferred bidder for the new contract,
were asked to present a new budget covering the cost of an enhanced
core team of 15 people for the whole three year period of the
new contract but using the same Terms of Reference as for the
old contract. The revised budget came out at £2,298,000 and
this was incorporated in the contract signed by the Department
on 28 October 1999.
PROVISION OF
AIR BROKER
SERVICES
Paragraph 74: practicalities of airlift operations
Airspace over large areas of the Balkans, and the
airports at Tirana and Skopje, were under NATO control during
the air campaign. In order to get civilian aircraft containing
relief goods into either airport during the period it was necessary
for DFID to obtain, by negotiation with the joint UNHCR/NATO Air
Operations Cell in Geneva, time-limited "slots" for
each delivery. Liaising between the broker and the Air Operations
Cell occupied a considerable amount of one DFID officer's time.
The duration of these slots depended on the type of plane and
nature of goods to be unloaded: a delivery of vehicles for example
was allowed one hour's turn round.
During the first week to 10 days of the humanitarian
crisis, when the need for moving goods was at its most acute,
the Russian and Ukrainian civil aviation authorities barred their
own air companies—a key source of large capacity cargo planes
such as the llyushin 76—from the Balkans for political reasons.
This bar was then lifted. In this early period DFID's air broker
made frequent use of a Latvian company which had a number of such
planes, including one positioned at Manston.
The choice of plane was also limited initially
by the lack of handling equipment at both airports. On one occasion,
Tirana airport was closed for most of one day because a side-loading
plane (not part of the DFID airlift) was unable to offload within
the time limit of its slot for lack of appropriate equipment.
When it became apparent that this was a major problem DFID provided
airfield handling teams including personnel, fork-lift trucks
and other equipment to the airports.
Part of DFID's support to the agencies included
moving their stockpiled goods into the region fast. For example
DFID funded several flights on behalf of the World Food Programme,
airlifting humanitarian relief supplies from as far afield as
Norway and Cairo.
Paragraph 80: how many companies tendered for
the 1996 brokerage contract?
The Department invited eight companies to bid
for the air brokerage contract, from an original list of 22 companies
who had expressed interest following a public announcement. In
the event five bids were received. Hanover Aviation and Chapman
Freeborn were selected to form an air brokerage panel following
oral presentations by each of the bidding companies.
Paragraph 81: what was the range of fees quoted
by the tendering companies?
Apart from one company, the bidding companies
quoted "5 per cent of charter price" as their fee rate
requirement. One company quoted "cost plus 15 per cent".
Paragraphs 89 and 91: what is the arrangement
for paying for aircraft charters, including the brokers commissions?
The Department's new invoicing arrangements
clearly state: the cost of chartering the aircraft to the broker,
plus the brokerage fee, or commission, which is set at 5 per cent
of the charter cost. These two figures combine to give a (gross)
fee payable by the Department. 5 per cent of the charter cost
is the standard rate used by the aircraft charter industry as
the fee, or commission, to brokers for arranging flights.
The air charter prices normally includes hire
of aircraft, plus cost of fuel, crew and airport handling charges
as appropriate. Additional charges incurred at point of arrival
are subject to further invoicing. War risk insurance is an additional
charge.
Paragraph 95: approach to another broker on one
occasion
The Department approached two brokers for a
specific airlift requirement. However, Chapman Freeborn were unable
to meet our requirements on that occasion. The job was given to
Hanover Aviation.
Paragraph 100: clarification of "this broker
is two people"
The new brokerage contract was awarded to Hanover
Aviation in equal partnership with Greenshields Cowie Ltd.
Paragraph 112: disposal of equipment under resource
accounting arrangements
Equipment purchased during the Kosovo crisis
would have been treated no differently under resource accounting.
DFID's policy in this area, which has been agreed with the NAO,
states that equipment should only be financed from DFID's capital
budget and incorporated within DFID's balance sheet as an asset
if it costs in excess of £1,000 and is to be used in the
general administration of the aid programme for a period in excess
of one year. Equipment purchased for a specific project or programme,
the benefits of which will accrue to the aid recipient, form part
of the project cost and is not treated as a DFID asset. Such equipment
is still subject to inventory control until such time that it
is gifted to the recipient or disposed of. This was the case in
Kosovo.
Department for International Development
17 July 2000
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