Department for Transport permanent secretary Bernadette Kelly has insisted her department conduced all necessary due diligence on the startup company Seaborne Freight before it was controversially awarded a Brexit contingency ferry contract that was axed at the weekend.
Kelly told members of parliament’s Public Accounts Committee that the decision to award the £13.8m contract to the firm to provide roll-on, roll-off services between Ostend and Ramsgate had not needed a ministerial direction from transport secretary Chris Grayling.
Kelly asked last May for a ministerial direction to approve around £25m of spending on Brexit-related projects before they received royal assent, and politicians including former cabinet minister Lord Adonis and Baroness Randerson, the Liberal Democrat transport spokesperson in the House of Lords, have questioned whether one should have been sought in the Seaborne case.
Asked by MPs if she sought one in this case, Kelly said she did not.
“My assessment as an accounting officer was that it met the requirements of Managing Public Money,” Kelly said of the deal and its acceptability in terms of public-spending guidance. “And that a direction was not required.”
Kelly declined to speculate on whether she would have reached the same conclusion if the contract had been unrelated to Brexit contingency planning.
However she accepted that the demise of the deal, axed at the weekend after shipping operator Arklow – one of Seaborne’s major backers – pulled out, would mean that the additional cross-Channel freight capacity the contract sought to deliver had been lost.
“I do not think at this time that it is likely we will be able to secure a large amount of further government capacity,” she told MPs.
“Precisely the reason that we used an emergency accelerated procurement before Christmas is because of the lead times that you need to do this.
“I wouldn't want to mislead anyone into the impression that there is a plan now that will lead to the government securing very, very large amounts of additional capacity.”
Seaborne Freight’s contract – terminated on Feburary 9, was one of three government contracts awarded to ferry companies in December. The others were to experienced operators DFDS and Brittany Ferries and had higher values.
PAC members quizzed Kelly on the level of due diligence DfT conducted into Seaborne, which notoriously does not own or currently operate any ferries. Arklow was due to provide two ferries for the Ramsgate-Ostend service, MPs were told.
“We did due diligence and that did not uncover any reason for us to think this was not a fit and proper entity for us to contract with,” she said.
Kelly said the department’s due diligence had consisted of looking at whether Seaborne and its directors had any winding up orders or disqualification orders.
“We knew they had some credible backers, specifically we new Arklow was a prospective backer with serious intent,” she said.
However Kelly conceded that DfT had only received a letter formally confirming Arklow as a project backer in January, the month after the contract had been awarded. Prior to that, she said, the department had relied on assurances from Seaborne.
MPs asked Kelly whether she had any paperwork to show that Arklow was going to be the backers of Seaborne.
“We certainly did have evidence during the course of December,” she said, “evidence that confirmed they were a backer.
“They had presented evidence to Seaborne. Words to the effect that ‘[we] look forward to working with this company as a trading partner’.”
Kelly said a letter from Arklow to Grayling had only been received on January 15.
PAC member Sir Geoffrey Clifton-Brown said it was “incredible” that government could consider letting a contract for ferry services without receiving solid confirmation that the vessels to provide the services were going to be available.