Select Committee on Public Accounts Minutes of Evidence




  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.


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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