Poor tender process: Government to pay £33m compensation over Brexit ferry contracts

By Allan Watton on April 9, 2019

The no-deal Brexit ferry scandal has been rumbling along in the media for months now. In summary, an agreement was made in December to handle the potential additional need for roll-on roll-off lorry freight capacity in the event of a no-deal Brexit. It was with three ferry companies – Brittany Ferries, DFDS and Seaborne Freight. However, one attracted more media attention than the others: Seaborne Freight.

This article looks into what went so wrong with the tender process for the government’s Brexit contingency plans that included land and sea shipments. We outline why it’s advisable to follow correct procurement procedure at all times, even when there’s an ‘extreme urgency’ to get a supplier on board.

What, no ferries? A poor tender process…

Soon after the agreement was signed, which reportedly would have been worth £13.8m, the BBC broke the news that the company the government had tasked with managing our potential freight needs had, in fact, no ferries. Transport Secretary, Chris Grayling, was put under a significant amount of pressure over this and the media had a field day. However, in the background another problem was brewing for Mr Grayling: a very disgruntled Eurotunnel.

Against the backdrop of an ever-increasing murmur about wasted money and perceived government incompetence in the Brexit arena, none of this looked very good. Firstly, the award of a ferry contract to a company with no ferries, then the high-profile cancellation of that agreement and now a multimillion-pound payout to Eurotunnel all add to the poor ‘optics’ of the situation and a very poor tender process.

Why were these contracts needed?

As the Brexit circus has continued its three-year run (and counting) it has become clear that not enough was being done to plan for the possibility (or probability, depending on your perspective, politics and time of day you’re reading this article) of no deal being agreed between the UK and the EU. In a flurry of effort, and in recognition that with additional border checks there may be significant delays and congestion at Dover should a no-deal Brexit ensue, the government had to find alternative port and ferry solutions.

Why did Eurotunnel sue the government?

Eurotunnel is upset because they had previously run a ferry service and felt, therefore, that they should have been in contention for the new contracts. The irony is that it was the government who ruled that Eurotunnel’s share of the market was too big and, therefore, they were no longer allowed to run their MyFerryLink business, which they then had to sell in 2015. In the same year the BBC reported that one of the other companies that was offered a contract in December 2018, DFDS, said that it was losing £10m a year on the Dover to Calais service, which brings into question whether they were in a better position to handle the no-deal Brexit scenario than a ferry company with no ferries.

On the matter of why Eurotunnel was not invited into the tender process, Chris Grayling’s representative in court was reported on the BBC as saying that Eurotunnel “could never have provided that capacity” and “could not have complied” with the terms of the contracts.

Eurotunnel’s barrister, Daniel Beard QC, reportedly said the firm only found out about the deal which did not include them “when contract notices were published”.

Words like ‘distortionary’ and ‘anti-competitive’ were banded around by Eurotunnel, but in Supply Management it was reported that the DfT justified the direct award of contracts because of the ‘extreme urgency’ of the situation.

However, it’s reported that the DfT paid out the £33m just before a four-day court hearing was about to commence. Had the trial gone ahead, the DfT was to face accusations that there was in fact plenty of time for a public tender process, had events been organised better in the Brexit process. Unnamed sources cited by the BBC, said that the government were being “held over a barrel” by Eurotunnel and had no choice but to settle.

Conclusion, what now?

Perhaps predictably there have been calls from the Labour front benches for Chris Grayling to resign and calls of ‘shoddy’ and ‘complete mess’, but he is still in his position as Secretary of State for Transport.

Eurotunnel won their case – and the money, which they say will allow for the “development of infrastructure, security and border measures that will guarantee the flow of vehicles carrying urgent and vital goods and that will keep supply chains essential to both industry and consumers moving”.

The government, worried that Eurotunnel lacked a process by which to ensure a better flow of traffic, should no-deal be the way we go, have now engaged them to fix this problem.

And DFDS may have an opportunity to prove that they can run a ferry service between the UK and the EU that might be more profitable than they reported their Dover to Calais service was.

Unfortunately, just like the actual Brexit discussions going on across the country, we’ll just have to see whether any of these decisions were smart ones, and whether this contingency plan will need to be enacted at all. Watch this space…

Photo credit: cassandra, iStock

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