Oral evidence: Brexit and the UK border: further progress review, HC 1942
Oral evidence, 13 February 2019.
Witnesses
Bernadette Kelly, Lucy Chadwick and Clare Moriarty.
Chair
Welcome to the Public Accounts Committee on Wednesday 13 February 2019. We have a busy session today, talking to both the Department for Transport and DEFRA about their preparations for Brexit, so there are areas we have picked up on before—and thank you particularly for your responses on the Treasury minutes and so on. We are looking at those issues in general, but we will kick off, as you might expect, Ms Kelly, with the issue of the Seaborne ferry contract and particularly the NAO’s very helpful memorandum, which pulls together the information that they were able to extract from the Department on this. Obviously, that is part of the bigger picture about overall preparedness for Brexit. Both your Departments are quite intertwined, in that the Department for Transport’s preparations have a major impact, potentially, on DEFRA’s preparations and vice versa, which is why you are both in front of us today. I will introduce our witnesses. We have, from my left to right, Clare Moriarty, permanent secretary at the Department for Environment, Food and Rural Affairs—she is a regular visitor here; welcome back, Ms Moriarty—Bernadette Kelly, permanent secretary at the Department for Transport—welcome back to you—and Lucy Chadwick, one of the directors general at the Department for Transport. Could I just check, Ms Chadwick, what your exact responsibilities are, because “director general” is a general term?
Lucy Chadwick
My job title is Director General of International, Security and Environment, and “International” covers aviation, maritime and, actually, much of our Brexit and international negotiations.
Chair
That explains to everybody why Ms Chadwick in particular is here. I am going to ask Ms Moran to kick off on the Seaborne issue.
Layla Moran
This question is to Ms Kelly. Why did you wait until September of last year to press the button on seriously considering no deal?
Bernadette Kelly
I don’t think we did wait until September to press the button on seriously thinking about no deal. I think quite a lot of the workstreams that we have had in play have been in play for a lot longer than that, and many of them are addressing some of the challenges of no deal as well as the challenges of a deal, so I don’t quite recognise the characterisation of us only thinking about this in September. I would say our preparations stretch back a lot further.
Chair
I think Ms Moran was talking about the ferries.
Layla Moran
Well, the ferries in particular.
Bernadette Kelly
Oh right; okay. On the issue of freight capacity in particular, I would say, first, that we had been thinking about it for a period of some months, actually, as a potential—
Layla Moran
How many months?
Bernadette Kelly
Certainly through the summer, we had been talking to the industry, keeping in touch. I think what crystallised our thinking into the need to develop a suite of possible Government interventions was probably three things. The first was the general decision across Government in the summer of 2018 to step up no-deal planning. That was a conscious and particular moment, I guess, for my Department as for others, when we absolutely were part of that broader effort in terms of refocusing our efforts on no deal alongside our deal planning. I think the second thing is that we were observing two things happening through our communications with the industry and more widely. One was that we could not see at that point evidence that, on the French side of the border, the authorities were starting to take seriously their own no-deal planning, if I can put it that way, in terms of thinking about the kind of systems and infrastructure you would need to put in place, in particular at Calais, to ensure the free flow of goods. That led us in turn to rethink some of our planning assumptions around the extent of disruption that we might expect to see in a reasonable worst-case scenario. At that point, as I say, as we saw what was happening on the ground or not happening, we thought hard about the evidence in front of us. We also thought very, very hard about what that meant for what assumptions we should now be working towards. At that point—I think the NAO Report identifies this—we took a decision following very intensive cross-Government discussion. Ms Chadwick can describe in more detail, if needed, how we went about that modelling, but it was a cross-Government effort in the end and decision that we should contemplate and be preparing for as much as six months of disruption, as opposed to the previous assumption, which was six weeks. So that was the second important trigger. The third thing I would point to, which I think also crystallised our thinking and the need for action, was that we had been watching to see how the market was assessing the situation and the extent to which there might be, as it were, a natural market response coming from both the freight industry and users.
Chair
That is detailed in the memorandum.
Bernadette Kelly
Those three things, essentially, brought us to the point in September where we thought, “Right.” We had been monitoring the situation and thinking about what might be needed. At that point, we concluded that we at least needed to present options for a more direct intervention.
Layla Moran
When it came to the contract itself, you decided to use the negotiated procedure, which meant that you were talking about “events unforeseen by the contracting authority”. Are you seriously saying that some kind of market reaction to no deal, you being intimately involved, as you have said a couple of times, in the Government decision to step up planning for no deal and waiting for the French to do something first were all things that you absolutely could not foresee?
Bernadette Kelly
There were two conditions under the procedure that we used. One was extreme urgency. We had absolutely concluded, by the time we had got to the point where we could enter into a procurement process and a contracting process—we knew, given the lead times for this capacity to be provided, that we did now need to act with extreme urgency.
Layla Moran
Did you not have those lead times before? Were you just unaware, or was it that you had not appreciated that—I am trying to understand. Did you not know that the lead times—
Bernadette Kelly
We absolutely knew what the lead times were. All I am doing is tracking back to a number of triggers in September that caused us to need to revise and accelerate our plans. We then went through an accelerated process, I would say, to define options, to develop a business case, to secure collective agreement for the sorts of actions that we might take and then to carry out a procurement process and contract.
Layla Moran
I will ask my question again. My question was: did you not see this coming? Because we did. As politicians, we were talking about this long before the summer and then during the summer. Did you not see it coming? This is the core of the issue. The legal advice in terms of whether or not you should have used the negotiated procedure surely hangs on those words: did you foresee it or not?
Bernadette Kelly
Obviously, we knew the prospect of no deal existed much earlier than that. The issue was the collective decision of Government to focus and step up its efforts in response to that. But also, what I don’t think we could have seen—and what I suspect others, also, would not have seen—was the practical responses on the ground, by which I mean what the French were doing and what was happening in the market. We were monitoring those things extremely closely. We could have foreseen that those responses would be different; they were not in practice, so I think what we could not foresee was exactly how the French would respond and how the market was responding. It was at the point at which we realised what those responses looked like that we concluded that we absolutely now needed to—
Chair
Were you talking to them? How were you engaging with the market before September?
Bernadette Kelly
We engage—we have a maritime directorate; Ms Chadwick is the director general responsible for it. We have a long-standing relationship with the sector.
Chair
So you were talking to them. So was it really a surprise when you went out to test the market and found that there was a lack of confidence in the UK and they would not be willing to bid? Was that actually a surprise in September?
Bernadette Kelly
Well, this is a market that typically operates without Government intervention and therefore one might reasonably assume that actors in this market—
Chair
No, I’m asking: did you get any indication—perhaps Ms Chadwick can answer—from the market that they were losing confidence in the UK market because, as the NAO memorandum lays out, of the approach towards getting a deal on exit, or the fact that the deal on exit had not been agreed?
Lucy Chadwick
I think we are talking about different points in time, aren’t we? The market was expecting a degree of confidence in terms of action from the French at the point in September that I think your colleague is referring to. At the moment at which we went out to the market, the market was moving, and we were picking that up. It moved very rapidly and very quickly and—
Chair
What was the timescale for that?
Lucy Chadwick
The moment at which we went out with the procurement—
Chair
In December.
Lucy Chadwick
In December and prior to that in October and November in terms of the indications from the market that interest in doing this was quite different. But the context in which actually that conversation—
Chair
So it was, as the NAO say, directly linked to the fact that the deal that the Prime Minister came back with did not give them enough certainty at that point.
Lucy Chadwick
Indeed.
Layla Moran
In hindsight—well, three bids came forward. Were you disappointed, Ms Kelly, with the number of bids that came forward?
Bernadette Kelly
We had approached nine operators. We might have hoped for more bids; we got three bids in the end. Those were the bids that we had. Clearly, we did approach more operators. We might have hoped to have seen more bids in response to that, but in the end we had to deal with the bids we had.
Layla Moran
So there were more operators that could have—
Bernadette Kelly
Yes, indeed. I think, again, the NAO Report describes this, but I think we sent our invitation to tender to nine operators—from memory—so we absolutely approached a wide range of operators.
Layla Moran
And that was the maximum number of operators that you could have—
Bernadette Kelly
What we were looking at was either operators who currently were operating shipping freight or those who reasonably could be expected to do so. So, in that sector, those were the key operators.
Layla Moran
So that was the maximum number of people. Would you accept, given what was happening with the market—this is a bit chicken-and-egg, but had you started earlier, you could have had more bids that were more competitive.
Bernadette Kelly
Look, with hindsight, I don’t know what might have happened; it’s not possible. I think we acted as rapidly as it was possible for us to do, given the things that caused us to decide to take this intervention, so I’m not sure that “with hindsight” is helpful.
Chair
Well, can I refer you to page 12 of the NAO Report, where footnote 6 tells us, “The Department initially ran the procurement over the first weekend of December, with a deadline of 3 December”? You informed the NAO that, “because the operators were unfamiliar with government procurement processes, no compliant bids were received.” Then you had to go out again. Even when you did it the first time, nobody who came forward was compliant.
Bernadette Kelly
We knew there was market interest. We had every reason to suppose that—
Chair
Just to be clear: nobody came forward. Obviously, this is an agreed Report—well, memorandum—so you do not dispute that fact.
Bernadette Kelly
No, I do not dispute the facts of the Report. We approved the Report as factually correct. What we were dealing with, I would say, was a sector and an industry that are not used to contracting with Government and therefore did not find it naturally easy to understand how to be compliant with this sort of process.
Chair
But that was a surprise to you over that first weekend.
Lucy Chadwick
We had had a lot of discussions with them. We had shared many of the documents. So in terms of what we received back—in terms of none of them—it was, yes. We had had—
Chair
Were you surprised, Ms Chadwick, when none of them were compliant bids that first weekend?
Lucy Chadwick
Yes, because we had had a lot of discussions with them.
Chair
Does that not perhaps say something about the processes in the Department, that you had given them all the information and they still did not manage to comply?
Lucy Chadwick
No, I think it says something about a market that is not used to contracting with Government.
Chair
So it is them, not you.
Lucy Chadwick
I am not saying it is either. It is a different—an unusual—market for the Government to step into, and as a result, they are not used to some of those processes. There are other markets where they are used to doing that. I think it was actually more a reflection of that. Understanding that, we attempted everything we could in terms of sharing and bringing them with us. We did not manage it on that first attempt. On the second attempt, in terms of going out, which we did very rapidly afterwards, we did. We actually got three very sensible bids.
Chair
We will talk about the three in a minute.
Layla Moran
When you went out to the nine companies that you thought could provide it, did you tell them that you were going out to others?
Bernadette Kelly
They will have known that it was a competitive process, absolutely. We will have been explicit.
Layla Moran
So what was the point of the NDAs?
Chair
The non-disclosure agreements.
Bernadette Kelly
The non-disclosure agreements were dealing with the particular terms and contractual arrangements relating to individual companies. They will have been absolutely crystal clear that this was part of a competitive process—
Chair
Ms Moran’s question was about non-disclosure agreements.
Layla Moran
I do not understand why non-disclosure agreements were used in this case, when you were going out to every possible person who could bid for it. What is the point of the NDA? It sounds like you are trying to hide it from everyone else to stop them panicking. What is the point of them?
Lucy Chadwick
No, what we were trying not to do at that stage was to send any signals into the market that were not being quite carefully managed. It was a sub-set of the market that we judged to be capable of responding to it; it was not the total market. If you look at the total international market for operators of ferries, there is a much broader market. These were the ones that operate in the UK or had plans to operate in this market.
Layla Moran
Is that a decision that you had taken yourself, or is that a decision that had been indicated from the cross-departmental co-ordination that you have been doing around no deal?
Lucy Chadwick
I am not going to get into a discussion about broader NDAs in the context of this particular question—
Layla Moran
No, but I am asking whether you had had a direction from elsewhere in Government to say, “Try to keep this under wraps.”
Lucy Chadwick
No; this was very specific in terms of this particular process. We wanted to manage it. You can imagine the messages it could send and we wanted to manage those in a very careful manner.
Layla Moran
But why this one and not any other one?
Lucy Chadwick
Because of the timing, particularly around the Prime Minister’s deal here and the vote around all of that.
Layla Moran
So all the procurement that you were doing around that time in your Department was being done under non-disclosure agreements.
Lucy Chadwick
No, only this particular one.
Layla Moran
But why?
Lucy Chadwick
Because of the timing of this and the particular—
Layla Moran
So there was no other procurement going on along these lines elsewhere in your Department.
Lucy Chadwick
I am sure there will have been other active procurements that were not managed in that way.
Layla Moran
So it was only this one, you are saying. I will ask Ms Kelly, because you have the overview of the entire Department. If other procurement was happening at the same time, why would this one—
Bernadette Kelly
We are engaged in procurements all the time relating to our general transport business, which are wholly unconnected with our planning for Brexit.
Layla Moran
So it is the Brexit ones in particular.
Bernadette Kelly
This obviously had a particular set of sensitivities, as Ms Chadwick has described, relating to our wider handling of Brexit preparations.
Layla Moran
So it would be correct to say that no other Brexit-related procurement was happening around that time.
Bernadette Kelly
I do not know that, because I have not checked that fact.
Chair
We know that across Government—Ms Moriarty will probably acknowledge this from her Department—there are non-disclosure agreements around Brexit work. You are saying this was a decision about this contract, but we have also heard—I think from you as well, Ms Kelly—that there are non-disclosure agreements as a result of the sensitivities of managing Brexit. Which is it? Is it your departmental decision, or is it a wider Government decision? We are still a little unclear.
Bernadette Kelly
I would say in this instance, the conduct of this process was one which the Department was managing and taking decisions around. Within that, we would have been taking judgments around the use of non-disclosure agreements, both in terms of commercial sensitivity and wider sensitivity of our Brexit planning.
Chair
Given that you were all going to nine people and they all knew that they were in a competitive race, what was the point of the non-disclosure agreement?
Bernadette Kelly
It is still the case that a lot of procurement activity that we do is commercially sensitive and is quite often covered by non-disclosure agreements in various forms and shapes.
Layla Moran
I can understand if you were only going to one specific partner, say. There are further questions about stakeholder management later. When you are going to everyone who could possibly do the service, why not just have an open and transparent procurement process?
Lucy Chadwick
I will repeat: I think this was an extremely sensitive moment, given where we were, actually, with the Prime Minister returning with a deal—
Chair
So it was sensitive at Government level. It wasn’t sensitive about the letting of this particular contract for some freight. It was more about the Government issues.
Lucy Chadwick
That is correct.
Caroline Flint
I want to pick up on the answer about the market not being used to contracting with Government. How much did you foresee that as a risk? You said that during the summer you started to rethink the strategy and rethink what might have been an outcome here. Surely that should have been pre-empted if you were doing a proper risk assessment and counting that in.
Bernadette Kelly
During the summer, we had not reached the point at which we would have taken the view as a Department or taken a collective view in Government that we needed to proceed to directly intervene to procure capacity in the market. The conditions had not reached the point that would lead us to that decision. Throughout the process of developing the business case and the optionality—as the NAO Report sets out, we looked at a very wide range of options—we were factoring into that what we understood to be the market’s readiness to engage in this procurement process. I would say that was very much a part of our thinking. As I say, the other thresholds that would have led us to conclude that we needed to actively intervene in this way had simply not been reached until we got into the autumn period.
Caroline Flint
I know we are going to touch on stakeholder engagement in more detail, but how much were the people responsible for liaising with the companies giving sound advice about the state of negotiations? It appears that there seemed to be a bit of an assumption that a deal was going to be forthcoming, so that maybe led to a certain complacency. I am interested in the guidance during the lead-up to December, or intimations that were given to companies about how big a problem no deal was going to be.
Bernadette Kelly
What we would have been saying to the parties was exactly what was being said publicly. There was no question in my judgment that we would have been asking or expecting departmental officials to be giving a different assessment to the companies. What we were saying to the companies, just as we were saying publicly, was that the Government were now taking their no-deal planning very seriously, that this was a serious set of contingency arrangements and that we were therefore putting into effect the steps needed to deal with that no-deal planning. That is exactly what we would have been saying to the companies. We would not have been giving them a different assessment, not least because I don’t think we were in a position to do so.
Layla Moran
The hope at the time the original business case was made was that the three contracts that had come in would cover 11%—correct?—of the capacity that would be needed, and the Department was planning to purchase 20% of the additional capacity on the routes. As we know, it ended up being 83% for Brittany and 100% for DFDS and then 50% for Seaborne. Ms Kelly, what is your assessment of why you ended up having to buy so much more than you had initially anticipated?
Bernadette Kelly
I think that is a misreading of the figures. I will try to clarify. At the point at which we developed our business case, before we went to the market, we tested a range of options, but we were looking at the possible costs and so on associated with purchasing capacity up to the equivalent of 25% of the capacity across the short straits. That was the sort of modelling figure that we used in our business case. Then we went out to the market, as the NAO Report describes, and we got back a set of bids. Those bids provided the possibility of up to 11% of capacity in total, of which 8% would be the capacity the Government itself was purchasing and reserving for, as it were, its own use. Actually, what we purchased, or contracted for, was less than the amount that we had set out in our business case, which, as I say, was more of a kind of modelling assumption in the interest of putting together a set of assessments.
Layla Moran
Is that because your modelling assumption had been that you would get more bids? That is my reading of that.
Bernadette Kelly
Our modelling assumption was that there might have been higher market appetite to enter into this sort of arrangement than in fact proved to be the case.
Layla Moran
Thank you for that clarification. Have you revised the business case now, after having purchased so much more capacity—
Bernadette Kelly
We have not purchased more; we have purchased less.
Layla Moran
Well no, but has there been any revision of the business case as a result?
Bernadette Kelly
What we were then doing, and what I certainly did in my accounting officer assessment elsewhere, was we were constantly, at various decision points, ensuring that any decision that was taken to proceed with the contracts could still be justified in terms of value for money as well as other aspects of managing public money. While we did not do a full business case revision, from memory, because many of the options in the business case had, by that point, been discounted, we certainly were looking at the potential costs now to Government of the bids on offer versus the benefits that we thought those contracts could secure. So yes, we were constantly revising that and keeping that under review throughout the process as the numbers changed.
Layla Moran
Moving to Seaborne itself, we see from the Report that there were various aspects of due diligence that were followed. Some were concerning. Why did you award the contract to Seaborne when it was non-compliant with the requirements set out in the invitation to tender?
Bernadette Kelly
In the case of two of the three bids, there were some non-compliances, but they were of an order that we thought enabled us to continue legitimately with a process. It is perhaps worth me saying a little bit in response to the general question of why we would contract with Seaborne.
Chair
We are going to have questions for you on it, so would you give us a quick answer?
Bernadette Kelly
Let me just say a few things, because there has obviously been a lot of media noise about this. It is perhaps helpful to clarify how we viewed it in the Department. First, it is true that Seaborne was a start-up without a proven track record, but it was a known quantity in the industry—a fledgling company that had been seeking to set up a business for some time and had been working with Ramsgate to that end. Secondly, the business model that Seaborne presented was a plausible one for the industry. The fact that they were planning to lease ships, rather than owning those ships, was not in any way abnormal or remarkable for this industry. There was an industry piece in Lloyd’s List, for example, that described that very thoroughly about that time. Thirdly, the senior management did have very considerable experience in the sector. Fourthly, we knew that they had some credible backers. Specifically, we knew Arklow was a prospective backer with serious intent. Finally, we did do due diligence and that did not uncover any reason for us to think that this was not a fit and proper entity for us to contract with.
Layla Moran
How can that be true? For Deloitte—obviously the financial stability could not be assessed at all, because it had not been incorporated until April 2017, but that is a reason, not an excuse for ignoring it. That should have been raising some eyebrows.
Bernadette Kelly
Yes, that was. And by the way, can I just say—it is very important—we did put in place for this contract an exceptional set of milestones, precisely because we knew that it was a start-up, it did not have a proven track record, and the delivery risks were greater around Seaborne than our other two contracting parties. We put in place steps to ensure that we were managing those risks. It was the execution and use of those steps that led us to terminate the contract. We were well aware that it was a start-up that did not have a record, and we put in place conditions to deal with that.
Chair
You have used very careful words, Ms Kelly. You said that you knew Arklow was a prospective backer with serious intent. Did you have any paperwork to show that Arklow was actually going to be the backer of Seaborne?
Bernadette Kelly
Certainly, during the course of December, we had evidence that confirmed that they were a backer who were intending to work with this company.
Chair
What evidence?
Bernadette Kelly
They had presented evidence to Seaborne—words to the effect that, “Yes, we look forward to working with this company as a trading partner.” I cannot give you the precise details, but we—
Chair
Could you write to us with the details?
Bernadette Kelly
Needless to say, in our own due diligence as well as that carried out by the companies, we were asking the question, “This is a start-up company; can we believe that it has the sort of backers that would allow us to think it can deliver this plan?”
Chair
When did you first get a letter, or any comfort, from Arklow directly?
Bernadette Kelly
We got a formal letter to my Secretary of State from Arklow on 15 January, from recollection.
Chair
So, after you had let the contract?
Bernadette Kelly
Yes, after, but we had had intimations via Seaborne that they—
Chair
Via Seaborne? You took the word of Seaborne?
Bernadette Kelly
I would need to check what precise pieces of paper were in play at that point.
Lucy Chadwick
We certainly had a number of discussions with Seaborne in terms of who their backers were, and we did do what you would expect in terms of assurance and due diligence about the credibility of those in terms of their—
Chair
Now the contract has gone, will you be able to publish or provide us with that due diligence paperwork?
Lucy Chadwick
We can absolutely look at—
Bernadette Kelly
We will investigate that.
Chair
It has happened in other cases in Government. It wouldn’t be unprecedented.
Bernadette Kelly
We can investigate.
Chair
So that’s a yes?
Bernadette Kelly
I would like to write to the Committee once we have had a chance to review exactly what documentation exists.
Lucy Chadwick
The reason for pausing is that some of this documentation is shared with you at the time in terms of commercial confidence. The pauses are just because we need to make sure that we are not contravening that by sharing any information that would be commercially sensitive.
Layla Moran
Understood—you can come back to us. Coming back to due diligence, were you surprised that your due diligence did not pull up any of the issues with Seaborne’s directors that have been reported in the press since?
Bernadette Kelly
What our due diligence did was look at whether there were any winding-up orders or disqualification orders or things of that sort at Companies House. There were other things that the media brought up. I am not going to comment. Some of it seemed relatively unevidenced to me. I think the media were then looking for all sorts of things to publish about those people. What we did was the normal level of due diligence that we would expect to do—namely, asking, “Is there any evidence on the record that suggests that these people are not fit and proper people to be in this position in a company the Government is contracting with?”
Layla Moran
I understand that, and I would accept that if there was not everything else on which it was not possible to do due diligence, like their financial stability and the technical note that said it would be really difficult. Shouldn’t you have done more due diligence on the backgrounds of the directors of Seaborne than you would normally have done?
Bernadette Kelly
The step we chose to take to give ourselves confidence and to ensure that we were managing the delivery risks around this was to put in place a series of milestones. We were then strictly managing Seaborne to ensure that they were delivering against those milestones.
Layla Moran
But you did no formal due diligence on their management backgrounds. Is that correct?
Bernadette Kelly
We did the due diligence that Slaughter and May carried out for us, which was the normal due diligence we would do in circumstances of this sort. So yes, we did do formal due diligence—the normal due diligence that we would do in these circumstances.
Sir Geoffrey Clifton-Brown
Did your due diligence team include a legal element?
Bernadette Kelly
Yes, it did.
Sir Geoffrey Clifton-Brown
And they produced a report on this prospective contract?
Bernadette Kelly
I am not sure I recognise “a report on this prospective contract”. What we were doing throughout this process was seeking advice from a number of sources. We were getting advice from Deloitte on financial stability and also on pricing. We were getting advice from Mott MacDonald on the technical aspects of delivery. We were getting advice from Slaughter and May on some of the legal issues. We were getting advice throughout this process on all those aspects.
Sir Geoffrey Clifton-Brown
What I am specifically interested in is this. Surely, if you had a legal team on board and a critical part of this contract was the leasing of the 50 ships from Arklow, at the very least—
Bernadette Kelly
Fifty ships? No.
Sir Geoffrey Clifton-Brown
How many ships was it?
Bernadette Kelly
Two.
Sir Geoffrey Clifton-Brown
At the very least, I would have expected, before the Government accepted this contract, to have seen some heads of terms of agreement between Arklow and the company as to the terms that they were going to lease these ships on. Were there any heads of terms? Was there a draft lease? Was there an actual lease?
Bernadette Kelly
The milestones contained several specific steps that we expected to have been achieved at various points along the way, which would have given us confidence that the contractual arrangements were in place for the ships that Arklow was going to acquire on behalf of Seaborne. They were not in place at the point at which we signed the contract, but we put in place milestones to drive that process and to ensure that those things happened within the necessary timeframes.
Sir Geoffrey Clifton-Brown
My daughter is a high-powered IP and M&A lawyer. Commercial companies can do these sort of deals in 24 hours. Why did you not have the proper legal paperwork in place, given that this deal was predicated on the company’s having no ships and having to get them from elsewhere? It chose to get them from Arklow, but there was no paperwork to give any form of comfort to the Government that they could realistically attain those ships.
Bernadette Kelly
I think our assessment was that there was sufficient evidence to think that they could realistically achieve that. We knew that not all those contractual arrangements had been entered into; that was explicitly understood. However, we put in place a set of milestones to drive that process.
Sir Geoffrey Clifton-Brown
You are going to consider carefully what evidence you can publish or give to the Committee on this matter. Will you please specifically cover this? It seems to me incredible that the Government could contemplate letting a contract like this without sufficient comfort that these ships were actually going to be available. Can I move on to my second question?
Bernadette Kelly
Can I just say that it was important that we took an informed judgment on whether it was credible that those ships would be available, and our informed judgment was that it was? The sequence of events of this particular commercial matter occurred because, in order for Seaborne to be able to secure contractual arrangements with its backers, those backers wanted the assurance of the Government contract, as it were, to drive that process. I think it was the commercial sequence of events. However, we certainly took a view about whether the plan they presented was plausible, and our judgment was that it was.
Sir Geoffrey Clifton-Brown
Was your having no real paperwork on these ships the reason that the contract was abruptly cancelled last Friday? Was it that the Government got cold feet about the contract, or was it that Arklow pulled out?
Bernadette Kelly
We had a set of milestones against which we were holding Seaborne to account. We were carefully assessing whether sufficient progress was being made against those. Up until Friday, or the period very shortly before Friday, there was evidence to suggest that good progress was being made in the critical areas of leasing ships, securing financial backing, port operations and all those key areas. Arklow then had a change of mind, which caused us to judge that we should terminate the agreement.
Sir Geoffrey Clifton-Brown
So it was the latter—Arklow pulling out, rather than the Government having cold feet?
Bernadette Kelly
We remained committed to ensuring that, if Seaborne was making progress towards the milestones we had set, we would, in good faith, see that contract to a successful conclusion. That was our desired outcome. Arklow pulled out.
Caroline Flint
Two quick questions. You wrote to the Committee Chair at 5 pm on Friday 8 February. By 7 am the next day, the media were reporting that the Department for Transport had ended its contract with Seaborne Freight after Seaborne lost the support of its financial backer, Arklow Shipping. On Monday 11 February, the Secretary of State told Parliament that “Arklow Shipping suddenly and unexpectedly withdrew its backing from Seaborne.” When you wrote that letter to the Committee, which was to update us ahead of this hearing, were you aware that Arklow was pulling out?
Bernadette Kelly
I signed that letter earlier in the day. I was aware that there was a question and a risk. The decision had not been taken or agreed, and it had not been communicated to the company. You can quite understand that, until this had been communicated by my Secretary of State, I was unable to communicate it to the Committee.
Caroline Flint
Would it be fair to suggest that the Department would likely have declined a contract involving such a significant amount of risk had the response to its invitation to tender not proven so disappointing?
Bernadette Kelly
I don’t know. You are asking me to speculate on a set of circumstances that didn’t exist.
Caroline Flint
The circumstances were that, as you have said, Seaborne was a new company that did not own or charter ships at the time. My colleagues have gone through and pressed on the arrangements to ascertain how concrete the relationship between Arklow and Seaborne was likely to be. Due diligence has been talked about. But along with that, the port of Ramsgate required a programme of infrastructure works before it could be made ready for sustained roll-on/roll-off use, and the mayor of Ostend said that they were not necessarily going to be ready to receive, either. That is a pretty long list of concerns and therefore I ask the question again: is it fair to suggest that you would likely have declined this if there had been a better response to the contract that was tendered?
Bernadette Kelly
We might well have continued to look at whether we thought this was—I think we would have continued, in any circumstances, to consider whether this was a sensible proposition on its own terms. There is actually a particular strategic value in a Ramsgate-Ostend route, and that was interesting to us. It is a hypothetical set of circumstances you are describing. I think that, had we had a much stronger market response to the invitation to tender, we might well have contracted for a higher volume, which might well have included Seaborne in those circumstances. But I can’t speculate, really, on exactly how we would have responded to a different set of propositions and responses from the market.
Layla Moran
Have you managed, Ms Kelly, another contract that had this many concerns about it and this many milestones at any point in this Department?
Bernadette Kelly
My Department manages many, many very challenging and difficult procurement exercises, so I am sure there have been many others that will, for example, have included milestones.
Layla Moran
Can you give us an example?
Bernadette Kelly
I would need to come back to you, but as I say, we do a lot of very complex procurement exercises. I think—
Layla Moran
No, that wasn’t my question. My question was about a contract that had very specific concerns about it and that—
Chair
Was a novel and exceptional—
Layla Moran
Yes, a novel and exceptional proposition, requiring careful judgment—that was said about it. How many times has this been done in your Department?
Bernadette Kelly
We talk a lot about the contractual processes here, and I understand, of course, why the Committee would be interested in those, but can I put it in a bit of context, because actually you are using my language now and I would like to explain why I use that language? My Department was actually taking steps, on behalf of the whole of Government, to secure capacity for essential goods—things like medical supplies—in the event of significant disruption, which we recognise is a reasonable worst-case scenario event in the event of a no-deal Brexit. That is a very novel and exceptional set of circumstances, and what my Department was trying to do, in that context, was act at pace to secure the necessary capacity, as part of a wider contingency planning effort. That did require, without doubt, some quite difficult judgments to be made about the balance of risk on one side versus the benefits we were seeking to secure, on behalf of Government, on the other side. In that sense, this is a very unusual procurement.
Chair
Which paragraph 2.20 lays out very clearly.
Bernadette Kelly
And actually, by the way, I think we acted reasonably and responsibly throughout when you consider the circumstances in which we were acting and the benefits we were trying to secure, against some of the challenges we were trying to deal with around delivery.
Layla Moran
Why did you not seek a ministerial direction for this particular contract?
Bernadette Kelly
Because my assessment, as an accounting officer, was that it met the requirements of managing public money and therefore a direction was not required.
Layla Moran
If you had had a contract like this outside Brexit, would you have sought a ministerial direction on it?
Bernadette Kelly
I cannot speculate on what I would do in a different, imaginary situation that does not exist.
Chair
Can I ask, while Ms Moran gathers her thoughts for the next question, about Ben Sharp, one of the directors? Did you do any assessment on any of the individuals to see whether they were fit and proper people to be running a company?
Bernadette Kelly
The general assessment that was done by Slaughter and May, of the usual sort, on the directors of the company to ensure that there was no reason to assume they were not fit and proper—that is my understanding of exactly the due diligence that was done.
Chair
Have you seen that due diligence yourself, or has Ms Chadwick seen it?
Lucy Chadwick
Yes.
Chair
And you are content that they did enough deep diving in that, given that, as Ms Moran highlighted, it was a brand-new company?
Lucy Chadwick
Was it appropriate for the circumstances of a brand-new start-up? Yes.
Chair
Were there any investors in Seaborne other than Arklow that you had to check out?
Lucy Chadwick
Yes, there were.
Chair
Can you tell us who they were?
Lucy Chadwick
That is commercially sensitive information still at this point.
Chair
Okay, but were they companies or individuals that gave you comfort that this was a—
Lucy Chadwick
Yes, they did.
Chair
So they were solid, well-established individuals or companies. Were they individuals or companies?
Lucy Chadwick
They were companies.
Chair
In the shipping industry, or other investment financiers?
Lucy Chadwick
These were backers of other shipping companies. They back other businesses, but they do back the shipping sector.
Chair
We look forward to getting paperwork on this. If we do not, I am sure the NAO will have a chance to look at this as well. Can I just ask about Thanet Council, which Ms Flint touched on? It was interesting timing that Thanet District Council refused to pass its budget on 7 February—last Thursday—then the contract was pulled on the Saturday. What comfort had been given? We know from the Report that the Treasury had asked your Department, Ms Kelly, to find the money to support Thanet District Council in getting the works done at Ramsgate—a rather big bill of £3 million for a small district council. How far had you got with that at the point you did the contract?
Bernadette Kelly
We continue to be in discussions with Thanet about the nature of—
Chair
“Discussions” is a nice word, but what contract—
Bernadette Kelly
There was no formal financial commitment to Thanet Council—I think that is correct—at this point.
Chair
According the press coverage, there was a conversation between the leader of Thanet Council and somebody from your Department. Was that a ministerial phone call?
Bernadette Kelly
I don’t know which press coverage you are referring to, I’m afraid.
Caroline Flint
It is actually an Isle of Thanet News report from 11 February. It says “the budget report was withdrawn following discussions between Thanet council leader Bob Bayford and Mr Grayling.” So I presume you must be aware of that conversation? Ms Chadwick is nodding her head.
Bernadette Kelly
Conversations have taken place at various points in this process.
Chair
They did not just withdraw the budget; they said, “We withdraw the budget, but we’ll bring it back in March.” Do you know if any pledges were given in that conversation that any money would be given to Ramsgate? It was a pretty big thing for a small district council.
Bernadette Kelly
There was not a pledge given of £3 million of infrastructure investment funding.
Chair
In your analysis of this whole contract—given that all this work needed to be done to Ramsgate, that it was a small district council with a small budget that had to cough up this money, and that there had been, as you have now confirmed to us, no guarantee that the Department would fund that—how did you expect Thanet District Council—
Bernadette Kelly
What I said was that we had not committed the funding. Obviously we had been in discussions with Thanet Council throughout this process. We fully recognise that it is a significant sum of money. Clearly, Thanet Council would not be able to fund that sort of infrastructure works itself. We had been in discussions to indicate that if this proposition were to go ahead, we would find a way to support the infrastructure investment needed, in order to make it feasible. Clearly, if the route is not going to go ahead—if there is not going to be an operating service—that investment would not go ahead.
Chair
But this was all still in play up to last Thursday—7 February. How long did you expect these works at Ramsgate to take?
Bernadette Kelly
They are relatively straightforward dredging and moderate infrastructure works; they are not very, very major works of the sort that would take a large number of weeks to complete.
Chair
So how long did you expect them to take?
Bernadette Kelly
They were on a timeline to be completed for the beginning of this service, had the Seaborne contract been concluded.
Chair
Was that March or April? We have had different dates.
Bernadette Kelly
The 26th of April was the point at which we were working with Seaborne to achieve the service.
Chair
So there had been no financial settlement with Thanet Council and therefore limited works done at Ramsgate port, yet as of 7 February there was still potential that the physical works would have all been done and the service could have been up and running by 26 April?
Bernadette Kelly
Yes.
Chair
Presumably going through a proper procurement process, or was there going to be another emergency procurement process?
Bernadette Kelly
There wasn’t a need for a procurement process for funding to be made available for Thanet to get some of this work done, as I understand it.
Lucy Chadwick
And any of that would have been handled by Thanet.
Chair
Somebody—not necessarily you—had to do the procurement. Thanet Council would have had to have done the procurement.
Lucy Chadwick
Thanet had been considering the exact routes through which it was going to be undertaking that infrastructure. They had set out that plan very clearly. We understood, as did Seaborne, the dependencies through this timeline.
Chair
Sorry, I’m just in a bit of a puzzle here. Thanet had no money but was planning to do the work on Ramsgate port. The money was going to have to come from the Department effectively, because the council could not afford it. It did not have the money, so it could not have commissioned the work. It had not commissioned the work as of 7 February and was going to delay its budget until 11 March—this is at the point when you did not know that it would all wrong and that Seaborne would be right out of the picture. From 11 March to 26 April—is it really going to be possible to do that work at Ramsgate?
Lucy Chadwick
This is not a set of novel plans that we are talking about here that Thanet have had around Ramsgate. For a number of years they have had ambitions to undertake this infrastructure work, so that it could do much more extensive ferry operations. This is not something that has emerged out of nowhere. They have been considering this over a number of years, as much as they have been considering options to moth-ball the port. Both of those were serious propositions that they were looking at in their budget discussions. I think your question is one to ask of Thanet. We have had numerous discussions—
Chair
Sorry, but this was a major part of your Brexit planning. You needed to be sure what was going to happen, and you relied on Thanet District Council.
Lucy Chadwick
And we have done a lot of assurance throughout this process to understand that that could credibly happen in time.
Layla Moran
Thanet District Council is going to go into purdah because it has local elections at the beginning of May. At the point when all this was going to be finally—
Bernadette Kelly
It would have been completed before that.
Layla Moran
Before purdah? So the date by which all this had to be done and sorted out would have been before purdah?
Lucy Chadwick
It would have been 26 April.
Layla Moran
And you feel confident that they would absolutely have been able to deliver to that deadline?
Lucy Chadwick
Yes, and we had assurances from Mott MacDonald—a major infrastructure company—that this was quite simple work that could be undertaken. We understood those dependencies and independences.
Caroline Flint
Can I touch on what was happening on the other side of the water? The mayor of Ostend expressed concerns about the proposed route soon after its announcement by the Department. Did your risk assessment flag up Ostend’s lack of readiness to host ro-ro ferries?
Bernadette Kelly
We had had much more positive discussions with Ostend port than were reflected in mayor’s comments. I think, Ms Chadwick, that you might be able to say a bit more about that. Our discussions at a working level were reflecting a different state of readiness.
Caroline Flint
Who was expected to fund the development of Ostend port?
Lucy Chadwick
This was all a matter of commercial arrangements between Seaborne, in terms of the operations, Ostend and Thanet. Seaborne is an operator that is bringing in revenues and paying ferry dues, and is a critical entity in agreeing all that. We looked at that, in terms of the plans and discussions they had had, and we undertook some of our own, separate discussions. The mainstay of them were done by Seaborne. We had reassurances. We have listened to the same conversations from the mayor of Ostend, and they are different from those we have heard from his officials and the port.
Sir Geoffrey Clifton-Brown
Given that getting goods in and out of this country by road and sea is probably the most important aspect of Brexit, this question is designed to probe when you actually thought about this specific aspect. Was it in your March workstreams and the RAG ratings that you were reporting through DExEU to the Cabinet Office? Was it in the May critical path analysis? If not, why not?
Bernadette Kelly
I may not be able to give a detailed answer on exactly those timelines, because I don’t have that information in front of me. Certainly from March, if not earlier, we had been looking at what our planning assumptions were about movement across the border, and what the impact might be of a no-deal Brexit. I can’t remember when we first started formulating those planning assumptions, but certainly through the summer, and possibly earlier than that, we were looking hard, given the information we had, given what we knew was happening on the ground and given what we know about modelling flows of traffic, at reasonable planning assumptions about the potential levels of disruption that we might need to plan for. As I said earlier, until rather later in the autumn, those assumptions were leading us to conclude that the level of disruption would not be as great as that which we subsequently thought we might need to prepare for.
Sir Geoffrey Clifton-Brown
Perhaps it might be useful if you could write to the Committee to give us a precise timeline for when you started to think about this matter, when it was in the reporting process for DExEU, and whether it was in that critical path analysis in May.
Bernadette Kelly
I will write with some more details. I don’t have the precise answer to your precise question. I am just trying to communicate the fact that we were certainly thinking ahead, and looking at and developing some planning assumptions around which to work from an earlier point.
Lucy Chadwick
What I would say is that we have always had a workstream around border disruption.
Chair
We are coming on to that.
Lucy Chadwick
As Ms Kelly said earlier, the context of this moved, in particular in terms of our understanding of where the French preparations were. As we looked at the reasonable worst case, and as we were war-gaming where we could find ourselves, that led us to consider whether there were further workstreams. We were already planning.
Chair
We are going to come on to the transport in a moment.
Layla Moran
Moving on a bit to the future, you had hoped that 11% of the capacity would be covered by the three. Am I to understand that the two contracts that are left would cover 7%? Is that correct?
Bernadette Kelly
The two contracts that are left will give us 6% of Government reserved capacity, if I can describe it in that way—i.e. we will determine how that capacity is to be used—and probably another 1% or 2% of market capacity on top of that.
Layla Moran
So up to 8%. The hope was up to 25%, so there is a bit of a gap.
Bernadette Kelly
That was a business case modelling assumption, and there was then a process of consideration about what was an appropriate level versus what was—
Chair
Which, I suppose, is what Ms Moran is asking.
Layla Moran
Yes, what do you need? What are you looking for?
Bernadette Kelly
Well, there was a debate. We needed to consider both what the market was prepared to bring forward and what the Government thought it was appropriate for them to procure. In the end, we were led by the market on this, probably because it came in at a lower level than our business case assumptions.
Chair
We are going to come on to Ms Moriarty, who has sat very patiently—my apologies to her. She could have had a cup of tea if we had realised we were going to take so long to get these answers, but there is a need for other Departments to have this capacity, which we are going to come on to. I will come to Ms Moriarty in a moment.
Layla Moran
Where are you going to get the rest of the capacity that you need? Is it going to be from Eurotunnel, for example?
Bernadette Kelly
We are still looking at options for whether Government could secure any further capacity, whether by ship or through the tunnel.
Layla Moran
Freight is where it is, so what is the plan?
Bernadette Kelly
As I say, we are looking at options, but it is fair to say that I do not think at this point in time it is likely that we will be able to secure a large amount of further Government reserved capacity. Precisely the reason we went through an emergency accelerated procedure before Christmas was because of the lead times and so on that we need to do this, so I would not want to mislead the Committee into imagining that there is a plan now that will lead to the Government securing a very large amount of further additional capacity.
Layla Moran
Can I just clarify: is that maritime freight specifically, or is it rail and air as well?
Bernadette Kelly
No, we are looking at rail and maritime.
Layla Moran
So what has happened with Eurotunnel? Why are they suing you?
Bernadette Kelly
There is obviously a legal challenge from Eurotunnel. I am afraid that I need to be quite circumspect in what I am able to say, given that it is a live case before the courts.
Chair
Well, it is not sub judice, so—
Bernadette Kelly
They are raising a legal challenge against our procurement process. That is obviously a matter for them to do. I am confident that our process was lawful, and obviously the Department and I acted on legal advice in determining how to take that process forward and what mitigations are needed. It is now up to the courts and Eurotunnel to determine what the next steps are. I am afraid that I cannot really say a great deal more than that while there is a case ongoing.
Chair
But it is not sub judice.
Layla Moran
It is not sub judice, but before that, is this not a catastrophic failure of stakeholder management?
Bernadette Kelly
I do not agree. In the end, Eurotunnel is a commercial entity. Many commercial entities will take whatever steps they can to seek legal redress when they see those opportunities arise.
Layla Moran
Yes, but all along, you have been saying that you understand the market—okay, freight, but I am assuming that you equally have an understanding or a communication with other markets that you are relying on. This is the main plan, so why have Eurotunnel taken these steps? It sounds to me like you waited to engage with them because the lead time was shorter.
Lucy Chadwick
No.
Layla Moran
That is not what happened?
Lucy Chadwick
No. We have regular discussions with them, and our assessments in terms of the market—going back to what we were looking at, it was those players in this market who are current operators. It is particularly ro-ro capacity, away from the short straits, that is important here. They are not currently players in that, nor do they have current plans to enter into that market. We talked with those individuals and we understood where they were. They may have aspirations, but getting operations in place in time for 29 March was the critical thing that we were looking for.
Layla Moran
Why did you not do procurement across the board? Why did you just do freight? I understand the lead time, but why just maritime freight? Why not freight across the board?
Lucy Chadwick
Because the equivalent ro-ro freight goes through the same short strait. It operates on the Eurotunnel arrangements; it goes through precisely the same routes that could potentially be disrupted by French action or inaction, and that was the thing that we were concerned about here. We were trying to make sure that we could look at routes—indeed, part of our procurement was looking at routes—that were away from those straits and did not have the same risks of French inaction causing difficulties. I should say that the French are now taking action, and there is a different context in which we need to consider whether there is any further need. Since December, particularly at the port of Calais—you will hear news coverage—they have undertaken, and are undertaking, quite a serious programme of work. It is in that context that we will need to consider whether we need to replace any of this.
Layla Moran
But at the moment you are not planning any large procurement with Eurotunnel or anyone else.
Lucy Chadwick
It would not be possible to complete a procurement and make it operational for 29 March.
Layla Moran
You have run out of time.
Bernadette Kelly
What we are focusing our efforts on now are—
Chair
You have run out of time, though. Just to be clear, you have run out of time.
Bernadette Kelly
To be clear, this freight capacity has always been part of a contingency measure—a suite of mitigations—but we are also working extremely hard through the border delivery group, with HMRC and with colleagues to ensure that the flow of traffic through the short straits is as smooth and effective as it can be. As my colleague was beginning to explain, we are now seeing positive evidence that on the French side arrangements are being put in place, which will ensure that some of our assumptions back in the autumn about a reasonable worst-case scenario do not materialise. So a lot of our effort is about minimising friction and disruption.
Chair
We will come on to that in the next bit of the session.
Caroline Flint
On page 8 of the memorandum from the NAO, under figure 1, it states: “In November 2018 the Department assessed nine options for intervention”. Under “Create new freight capacity on new and existing routes”, we see maritime. Yes, we have to make a decision on that, because to delay would “reduce chances of securing capacity for day one no deal.” And under “Rail and air freight” it says, “Recommended, but reserve for decisions at later date due to shorter lead times.” As a result of a risky procurement process and all the uncertainty around Seaborne, you are now saying, if I heard you correctly, that it is not that you don’t want to, but that it is just too late to run the procurement for more capacity through rail, or, for that matter, air.
Lucy Chadwick
We are considering very carefully the air freight and rail propositions. What I was trying to describe is that they can achieve very different outcomes. There is a set of outcomes that they achieve, as much as “Can you manage the procurement in the time?” My apologies; what I was trying to say was that they achieve quite different outcomes, and we are assessing those very carefully at the moment in the case of air freight.
Caroline Flint
What do you mean by “different outcomes”? Can you give me a specific example, please?
Lucy Chadwick
I mean what goods you can carry on them, and how easy they are to operate. In terms of the Eurotunnel shuttle services, those are very much roll-on, roll-off, but, as I said, those do not actually achieve some of the strategic objectives of relieving the pressures that we looked at. If you look at some wider rail freight, they operate on different routes, but they are more complex to operate. You have to have haulage companies effectively pick up from freight distribution centres at either end, and that is a more complex supply chain to manage. At the moment we are continuing to have very clear discussions in terms of whether they could work, and we have not yet concluded on that. In terms of air freight, we have looked very carefully at that. Indeed, a judgment and decision has been made by the Department of Health that they will consider their own contracting arrangements around that. So these have been considered in terms of options; and actions, as appropriate, are or are not going to be taken. But they are different questions.
Chair
We will come to that in a minute.
Lucy Chadwick
I was talking about the ro-ro style output, and that has a set of particular timescales and constraints around it.
Layla Moran
Finally, my last question. Ms Kelly, how much has this cost the taxpayer? Please don’t say “nothing”.
Bernadette Kelly
The important thing is that Seaborne have received no money.
Chair
That is not the question Ms Moran asked.
Bernadette Kelly
I know, but I none the less put it on the record. The money that this will have cost the taxpayer is the cost of the procurement exercise that we have carried out and the work leading up to it, so that will be the work, time and effort that colleagues in my Department have put into this, plus the legal and other independent advice that we have sought in order to support our decision making. I don’t have a precise figure for that, but it will be the cost to my Department of carrying out a procurement exercise. That is the principal cost.
Chair
And there was the potential cost of major works at Ramsgate.
Bernadette Kelly
At the moment, we have not concluded that those major works will go ahead and that we will pay for them. That decision gets taken at the point—
Chair
If the contract with Seaborne had not been dropped on Saturday, you would have still been looking at paying money—
Bernadette Kelly
We absolutely would have been doing so.
Chair
So add that to the bill.
Bernadette Kelly
And in due course, if other operators come forward, we might yet consider whether we would support investment in that port. That is a slightly separate decision from the procurement decision; it was obviously interlinked with it, but it is a slightly separate decision. But clearly we have not committed now to the spending of that money.
Layla Moran
Would you be able to write to us with the estimate for exactly the points you have raised and the apportionment?
Bernadette Kelly
I could probably give you a broad-brush estimate, apportioning time and therefore money to the totality of the procurement exercise.
Layla Moran
A broad-brush apportionment.
Chair
I am going to bring in the Comptroller and Auditor General, but what we have seen unfolding since the contract was quietly awarded in December is an extraordinary tale. The fact that nobody got through the first round of bidding and then in the second round three got through and two of the three did not manage to comply, but all still went ahead because DFDS sorted it out fairly straightforwardly, makes us worry as a Committee about some of the preparations for Brexit. Are there any other issues like this that will be coming up from your Department, Ms Kelly?
Bernadette Kelly
You can talk to me and ask me questions now on all the other aspects of our Brexit planning.
Chair
We will come on to some of the other aspects.
Bernadette Kelly
I go back to the argument that I will continue to go back to: yes, it was an accelerated process, because we were acting in novel and exceptional circumstances and doing something that was novel and exceptional in terms of a Government intervention. That did require judgments to be taken about a balance of risks and benefits, but we believe the benefits of capacity were appropriate therefore for us to proceed.
Chair
And the benefits, as we see, came nowhere near materialising.
Bernadette Kelly
We still have two contracts in play.
Chair
Two out of the three, but the one that was difficult—the one we are talking about—did not manage to get through. I will bring in the Comptroller and Auditor General very briefly.
Sir Amyas Morse
I understand there has been some dredging at Ramsgate. For whose account, ultimately, will that be?
Bernadette Kelly
A degree of dredging has already taken place.
Sir Amyas Morse
At whose cost?
Bernadette Kelly
Seaborne’s.
Sir Amyas Morse
And that will remain at their cost?
Bernadette Kelly
We have not entered into any agreement otherwise.
Chair
We are going to move on now to the wider issues.
Caroline Flint
Ms Kelly, is it still the case that the Department has 28 internal projects under way to ensure that the UK transport system will remain fit for purpose in the event of no deal?