NATIONAL AUDIT OFFICE
REPORTBY THE COMPTROLLERAND AUDITOR GENERAL
Ministry of Defence: Movementsof Personnel, Equipmentand Stores to and from the Gulf ORDEREDBY THE HOUSEOF COMMONS TO BE PRINTED 7 JUNE 1993
LONDON: HMSO 693 f8.95 NET MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUIPMENT AND STORES TO AND FROM THE GULF
This report has been prepared under Section 6 of the National Audit Act 1983 for presentation to the House of Commons in accordance with Section 9 of the Act.
John Bourn National Audit Office Comptroller and Auditor General 4 June 1993
The Comptroller and Auditor General is the head of the National Audit Office employing some 800 staff. He, and the NAO, are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources. MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUIPMENT AND STORES TO AND FROM THE GULF
Contents
Page
Summary and conclusions 1
Part 1: Introduction 11
Part 2: Control and monitoring of movements 15
Part 3: Chartering of civilian transport resources 23
Appendices
1. Relationships between key movements organisations during Operation GRANBY 38
2. Management information systems for movements activities operating during Operation GRANBY 39
3. Commercial systems for controlling freight movements 40
4. Key players and technical terms associated with ship chartering 42
5. Ports and Airheads in Europe 44
6. Ports and Airheads in the Arabian peninsula 45 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUIPMENT AND STORES TO AND FROM THE GULF
Summary and conclusions
Background 1 In response to the invasion of Kuwait by Iraq in August 1990, the United Kingdom and other Allied governments deployed Armed Forces to the Gulf. The British effort was known as Operation GRANBY (GRANBY). The failure of Iraq to comply with United Nation resolutions led to the outbreak of hostilities in January 1991, and culminated in the Allied liberation of Kuwait on 28 February 1991.
2 To support GRANBY, the Ministry of Defence (the Department) transported to the Gulf by air 46,000 personnel and 46,000 tonnes of freight; and by sea 14,700 vehicles, 87,000 tonnes of ammunition and loose freight and 7,000 containers. To achieve this, and to carry men and materiel back from the Gulf, the Department used nearly all their Air Transport Force aircraft, and ships of the Royal Fleet Auxiliary, and chartered aircraft for 490 flights and ships for 245 voyages at costs of E69 million and El43 million respectively [paragraphs 1.6-1.8, Table 1).
Scope of National 3 The National Audit Office examined the study Department’s arrangements Audit Office study for movements of personnel, equipments and stores to and from the Gulf, having regard to previous concerns on Service movements expressed by the Committee of Public Accounts (49th Report of Session 198.5-86 - HC 465). The main aspects addressed were:
l the effectiveness of control and monitoring of movements using the Department’s and civilian resources, with particular reference to management information systems: and
l the arrangements for the chartering of civilian resources to achieve good value-for-money.
4 The National Audit Office’s investigation took account of:
l the Department’s own reviews of the lessons learned from GRANBY, including extensive Internal Audit reports, and the action taken by them;
l reports by the National Audit Office’s consultants on best practice in civilian shipping logistics and management information systems and on the composition and costs of the civilian shipping chartered by the Department.
l the United States Forces’ experience of movements to and from the Gulf.
The National Audit Office’s examination of individual ship charters took account of investigations being undertaken by the Department’s Internal Audit and by the Ministry of Defence Police into possible irregularities in ship chartering. The National Audit Office supplied information to assist both these investigations and drew heavily on Internal Audit’s findings in compiling this Report [paragraphs 1.15, 1.17, 1.19).
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5 The National Audit Office’s detailed findings should be considered in the context of a highly successful military Operation, in which the movement of personnel, equipments and stores was a key element and quick and effective transportation was the prime consideration. The National Audit Office recognise the considerable commitment, professionalism and resourcefulness shown by many service and civilian and agency personnel involved with movements during GRANBY, while working long hours, often in poor working environments.
6 The National Audit Office’s main findings are set out below.
On the effectiveness Mechanisms to control and monitor movements of the Department’s control and 7 It would be uneconomic for the Department to have their own ships and monitoring of aircraft to cater for the movements required for all possible operations; they movements aim instead to have a balance between their own resources and chartering (paragraph 2.6).
8 Prior to GRANBY, the Department’s operational plans were based on the deployment of relatively small, light forces, which they considered would cover the most likely military eventualities. Consequently, there were no movements plans for a deployment or recovery on the scale required for GRANBY. Plans for that scale of operation had to be drawn up from scratch. The Department were not always able to recast the movement plans they developed sufficiently quickly to respond immediately to political decisions about force dispositions which, necessarily, were taken at short notice. This suggests that, while the Department coped well with the movements task for GRANBY, it may well be worth them considering the further development of contingency planning to place them in a better position to respond quickly to a wider range of operational possibilities than they had to cater for in the past. This development could draw on the experience of GRANBY, and on commercial approaches to movements planning and execution (paragraphs 2.5 and 2.13).
8 These suggestions are made in the light of the facts that the Department had systems to identify the availability of military aircraft and ships, but were not always able to obtain the reserve movements personnel or equipments vital to the movements process. Shortages of freight handling equipments, and also of personnel until January 1991, together with inadequate facilities at some airfields for the increased volume of activity, led to backlogs of freight and clogged facilities. A lack of heavy lift aircraft in the Air Transport Force was also a constraint on air movements. The problems reflected both the unforeseen size and distance of the United Kingdom deployment (paragraphs 2.6-2.10).
Movements 10 Most movements requirements arose from operational imperatives based requirements on military judgements and were subject to frequent change. A lack of information on circumstances in the Gulf during the early planning of deployments, and difficulties in anticipating the levels and timing of resupply necessary, also affected the Department’s ability to identify detailed requirements. In the absence of operational contingency plans for such a large out of area operation, complex movements requirements had
2 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUIPMENT AND STORES TO AND FROM THE GULF
to be compiled from scratch. Moreover, the time available to plan and execute movements was necessarily constrained by the timing of approvals of force levels (paragraphs 2.12-2.14).
Prioritisation of 11 Because of the need to provide a viable defence of Saudi Arabia and other movements Gulf countries under threat and, later, to allow United Kingdom forces adequate time to acclimatise and prepare for the operation, there was a military imperative to move items to the Gulf quickly. In doing so the Department made effective use of their own and chartered movements resources but operational needs generally had to take priority over economy. For example, the need to transport operationally vital items in specific timescales to support planned operations in the Gulf limited the choice of available civilian shipping, and thereby affected the price paid. High priority items, subject to size, tended to be moved by air. On a pound for pound comparison, this was 17 times more expensive than by sea.
12 A Departmental report suggested that too much freight was moved to the Gulf by air, mainly due to the lack of an effective system for determining movements priorities and the high priorities given to the re-supply freight. The Department pointed out that given the uncertainties about when the hostilities would start and their possible intensity and duration, all stores and equipment were moved as high priority, which undermined the effectiveness of the system. They considered that to make a priority system work required independent, experienced personnel at key points in the supply chain who had sufficient overall knowledge of the operation to make on the spot, impartial and acceptable decisions about relative priorities. (paragraphs 2.17-2.21).
Tracking of 13 The Department had adequate arrangements to track the aircraft and ships movements used for movements. But they could not readily track individual consignments of equipments and stores or individual items. There was also difficulty in tracking aircraft pallets and of the 3,400 used, 228, worth E680,000 including ancillary equipment, were unaccounted for at the end of GRANBY. Difficulty in tracking items led to confusion and some re-ordering of operationally vital items. The recovery of items from the Gulf was made more difficult by a lack of accurate records in theatre concerning equipment location and numbers. Tracking the 7,000 containers (which were often used more than once for different loads) was a particular problem in both the deployment and recovery stages -there were uncertainties as to container location and contents after arrival in theatre. Some 2,800 containers whose contents were unknown were returned to main depots for unpacking and about 80 containers remained unaccounted for and were subsequently written off.
14 The Department overcame some of these problems by establishing special teams to record and progress manually the most urgent items. Most of the problems arose due to the sheer volume of movements. The Department are addressing the asset tracking problems, and the Army and Royal Air Force plan new systems using bar coding and other automatic identification systems to improve stores management and track movements (paragraphs 2.9, 2.31-2.37).
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Management 15 Following concern expressed by the Committee of Public Accounts in information systems 1986, the Department had begun to improve their existing costing and management information systems and to develop new ones. However, their systems for movements are still under-developed, particularly in comparison to systems used by some commercial movements companies to assist movement planning, scheduling and estimation of resource needs, asset tracking and cost control. The Department’s systems are not integrated, and cannot interoperate or exchange data. This reduced their effectiveness during GRANBY, and increased the reliance placed upon manual systems and procedures.
16 The Department recognise the continuing deficiencies in management information systems. They are being addressed by each Service in the development of Information Technology strategies for the logistics function. The Department said that the comparative under-investment in integrated information technology systems reflected inherent funding difficulties. There are also technical problems to be overcome. The National Audit Office acknowledged the difficulties but noted that adequate support systems and staffing were essential to obtain maximum benefit from investment in front-line equipments (paragraphs 2.39-2.46).
United States 17 The United States Forces experienced similar problems to the United experience Kingdom. In particular: the American Forces’ priority system was overwhelmed; there was limited visibility of assets, especially those in containers; and information technology systems were immature, resulting in inefficiency of movements (paragraphs 2.11, 2.16, 2.22, 2.30, 2.38, 2.47).
Action points 18 The National Audit Office conclude that the following action is required: arising on the control and l The Department should review the scope of their contingency plans and monitoring of standing operational procedures for movements so that they are better movements able to respond to the wide range of operational eventualities which they may now face, and also seek the most cost-effective way to improve air freight handling facilities and equipments.
l The Department need better movements systems, which utilise information technology including the use of automatic identification systems such as bar coding and beacon marking where appropriate, for control of resources, movement planning, assessment of priorities, asset tracking and management and cost control. They are aware of this and are introducing improvements. . When developing future movements systems the Department should have regard to the benefits of interoperable or integrated systems and should also consider whether movements systems already in use in the business world could be adapted for military application or provide lessons for development or purchase of their own systems. The Department accept interoperability as a longer term objective, but see a need to continue with single service systems in the interim, using commercial packages where suitable.
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On the Department’s Need for and adequacy of chartering arrangements arrangements for the chartering of 19 As noted above (paragraph 7) the Department did not, by design, have civilan resources sufficient of their own aircraft or ships to meet the requirements of GRANBY and it was necessary to charter commercial resources. Air chartering and the limited amount of ship chartering for “wet cargo”, (for example, fuel and water), followed established peacetime procedures and were managed effectively. The Department established a Shipping Committee (for the first time) to handle the large volume of “dry cargo” ship chartering.
20 The Department did not provide detailed instructions to the Shipping Committee for organising ship chartering. The Committee decided which ships to charter to meet requirements specified by military staff but did not keep records of the basis of their decisions. This was because of the hectic pace of the Committee’s activities. The Department placed much reliance on the Government Freight Agent (the Agency) and the Government Freight Market Representative (the Representative), who were on the Committee and acted as charterers’ brokers for all dry ship charters, to provide expertise and secure value for money in dry cargo charters. A Department of Transport representative also sat on the Committee (paragraphs 2.6, 3.3-3.7, 3.25).
21 In 1992 the Department took initiatives to rectify the deficiencies shown in paragraph 20. In particular, Terms of Reference for the Shipping Committee and instructions on maintaining a detailed record of their business were issued. Full records of Shipping Committee business are being kept for Operation GRAPPLE -the deployment to the former Republic of Yugoslavia (paragraphs 3.5, 3.37).
Timescale of 22 The Department often had to act in a short timescale to arrange movements chartering to meet operational requirements following political decisions. For example, short notice of ship charter requirements for the first major sea deployment resulted in the large Roll on Roll off ships not being available which impacted on the costs incurred. When it became clear that a second major sea deployment was required, initiatives were taken in advance through the Agency and the Representative to ensure the availability of some larger, faster vessels. The Department confirmed that ship options were examined to determine the most cost-effective choice having regard to ship suitability and availability (paragraphs 3.12-3.14, 3.19).
Charter 23 In addition to shipping market constraints on availability, the Department’s specifications specifications for shipping placed restrictions on the size and type of vessels offered up by the market. For reasons of military judgement, the Department initially chartered smaller general cargo vessels partly to maintain a flow of freight but also to reduce the effect of the loss of a ship. The National Audit Office recognised that military shipping specifications involve careful assessment of war risk and the operational need to get men and equipment to the right place at the right time. But they noted that while general guidance on the need for financial scrutiny was issued to all concerned at the start of GRANBY, there was no specific Departmental guidance for military staff on the financial consequences of decisions on
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ship specifications. They also noted that the United States mainly used larger ships, partly because of their larger volume of cargo. The Agency said that those ships sometimes had relatively long unloading times in Gulf ports (paragraphs 3.14-3.20, 3.23).
Take-up of British 24 The Department stated that they continued to follow their peacetime shipping practice of chartering on the open market and taking up the most cost- effective suitable vessel, and that where two vessels were comparable in terms of availability, suitability and price, they gave preference to the British ship. The Department said, however, that few British ships were offered, and the Minister for State for Defence Procurement told the House of Commons on 9 July 1992 that the British shipping industry was at the time of GRANBY, “enjoying a high level of success and efficiency and, reasonably enough, did not want to disturb its existing charter arrangements” (Hansard, column 566). The Department also said that those British ships that were offered were often not of the type required or were not competitive. Five British ships out of a total of 162 were chartered. The National Audit Office did not examine the consideration given to use of British shipping for individual charters because of investigations by the Ministry of Defence Police into possible irregularities in ship chartering and the lack of records supporting decisions on which ships to charter (paragraphs 3.21 and 3.22).
Chartering options, 25 The Department mainly chartered ships for a single voyage, although they financial scrutiny arranged some charters for periods of time. The National Audit Office and competition in believe period time charter, which was used extensively by the United chartering States, could have been cheaper but overall cost-effectiveness would depend also on utilisation of ships. The Department believe time charter would not have been cost-effective, mainly because of the difficulty of achieving full utilisation. The United States Forces make extensive use of commercial liner carriers. The Agency said they referred offers invited and received from such companies to the Shipping Committee. However, there were drawbacks to their use which led to most of them not being taken up. For example, it would have been necessary to carry cargo forward from the commercial carriers usual port of disembarkation to the final military destination, and this would have created further problems of control over cargo, and increased cost. The Department examined the possibility of using commercial carriers for GRAPPLE, but they proved to be more expensive than chartering dedicated ships. This situation might change in different circumstances (paragraphs 3.32-3.34, 3.38-3.39).
26 Decisions on type of charter were taken without a database record of commercial market rates. Nor were comparisons of voyage and time charter costs made, although both options were considered. The Agency said that they and the Representative gave the Shipping Committee regular advice on the financial implications of decisions being made. The Department stressed that costs had to be weighed against operational imperatives but the objective was to secure the most cost effective option to meet military priorities. However, they have recognised the need for a database of costing and other information to support decision-making, similar to that which existed for air charters and “wet” ship charters, for example oil tankers. They have now compiled such a database. The Agency were sceptical about
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the value of such a database and stated that data, on costs in particular, soon became obsolete. However, the database should support management decisions on a wider range of matters than charter prices (paragraph 3.24, 3.26-3.27).
27 With the United Kingdom and the United States both chartering many vessels, two distinct shipping markets developed. The “military market” was characterised by premium rates significantly above the “worldwide peacetime commercial market rates”, although the custom of “offer and counter offer” enabled the Agency and the Representative to achieve reductions in the prices initially offered. Although comparisons are not straightforward, the evidence available suggests that the United States Forces were less affected by this premium than the Department. The latter have pointed out that in some instances the United States entered the market before the United Kingdom, and so were able to secure cheaper prices, and that they also benefited from the contribution they made to their shipping industry (paragraphs 3.13, 3.28-3.31).
28 All requirements for the charter of aircraft were subject to financial scrutiny and competitive tendering. The National Audit Office also found that competition was secured for the ten “wet” ship charters let by the Navy Department. They undertook no examination of individual “dry” ship charters but noted that a finance officer had been added to the Shipping Committee in November 1990 to improve financial scrutiny. The Department’s internal auditors found no evidence that the market had been inadequately covered but recommended that future requirements should be circulated fully to the market both inside the Baltic Exchange and to those brokers/shipowners who operate outside it (paragraph 3.3, 3.24, 3.35, 3.37).
29 In the Department’s view the use of both the Agency and the Representative enhanced competition. These agents told the National Audit Office that they worked in a complementary way, covering different sections of the shipping market and consulting between them about 80 brokers. Internal Audit were satisfied that most of the 39 brokers approved by the Department on the Agency’s list were consulted most of the time. The Agency worked largely in the European shipping market and the Representative had access to all brokers operating on the Baltic Exchange. The National Audit Office could not check whether the consultations referred to provided full competition, because of the Ministry of Defence Police enquiries and the absence of Shipping Committee records, but noted that the Agency used four brokers for over 87 per cent of their 186 charters. The Agency explained that certain suitable fleets all came through the same broking route. The Agency and the Representative obtained similar prices on average for Roll on Roll off ships of comparable capacity (paragraphs 3.35-3.37).
Shipping contracts 30 Contrary to best practice, shipping contracts were not signed by the and commissions principals but by the Agency (who were contracted to protect the Department’s interests) and some by the owner’s broker. Some contracts allowed payment to the broker. The Agency stated that, whilst not company policy to do so, they signed contracts on the Department’s behalf, on instructions of the Department, and ships owners generally used their broker or specifically stipulated who should sign on their behalf. The Department stated that they had instructed the Agency to sign contracts
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because the Agency was contracted to ensure charters were properly conducted; also the Department had no record of advice from the Agency that it was not company policy to sign contracts on the Department’s behalf. (paragraphs 3.41-3.42).
31 Brokers’ rates of commission are, as in any market, fairly well established for particular types of business. Following the Internal Audit review, the Department asked the Agency about cases where total brokerage fees were unusually high. The Agency stated that commissions were paid by the ship owner, and that the Shipping Committee were aware that some total brokerage commissions were high but accepted this where the ship in question represented the best value for money. The Department said that they had, with two exceptions where the lowest price ship was unreliable, selected the cheapest offer but were not aware of the number of brokers or the total commissions involved. Also some El million of additional war risk insurance premium rebates remain potentially recoverable by the Department. The Department have now initiated a review of their charter party documents, contracts are now signed by the Department and, where possible, the ship owner, and investigations are underway into the fees paid to brokers and into refunds of additional war risk insurance premium rebates not yet received (paragraphs 3.43-3.48).
Visibility over 32 Following open competitive tendering the Department re-appointed actions of agents Hogg Robinson (GFA) Limited to act as the Government Freight Agent, with a five year contract effective from 1 January 1990. The contract covers worldwide forwarding of Government freight and movement of unaccompanied baggage. The former requires the Agency to charter ships; normally, in peacetime, these are relatively few in number. The contract provides performance incentives and for monitoring by the Department. Consideration of the final performance payment award for 1990 and payment for 1991 and 1992 is yet to be finalised by the Department. Prior to GRANBY the Department’s scrutiny under the contract had concentrated on the Agents’ freight forwarding and movement of baggage, in value terms some 75 per cent of the Agency’s peacetime business for the Department. Since GRANBY the Department have stengthened scrutiny of the Agent’s ship chartering procedures (paragraphs 3.48-3.52).
33 During GRANBY, therefore, the Department had limited visibility of the Agency’s actions, in that the scrutiny team were not engaged on ship chartering. Also, the Department could not oversee the Agents’ coverage of the shipping market, and the Shipping Committee were dependent upon the lists of ship options supplied to them by the Agents. The Committee had no oversight of how those lists were derived and there was no documentary evidence that they evaluated fully the bids for each charter requirement. This also applied to the Representative. The Agency said that the Department had total access to all relevant information under the contract monitoring procedures, but the Department’s internal auditors did not accept that the Agency’s records constituted an adequate audit trail. The Department believe that the Shipping Committee were diligent and effective in obtaining sufficient shipping but acknowledged that their staff on the Committee had limited experience and expertise to cope with the extraordinary demands during GRANBY. The Agency maintained that the early Department membership of the Committee did have experience of
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movement matters but the Department stressed that this did not extend to direct experience and expertise in the shipping market. The Department stated that they had looked to the Agency and the Representative for professional advice. The Department of Transport representative was also an important source of advice (paragraphs 3.3-3.4, 3.25, 3.52-3.53).
34 Currently the Department are reviewing their arrangements for ship chartering. The existing Government Freight Agent contract expires in December 1994 and the Department are now reviewing how all the tasks covered by the contract should be carried out in future, to achieve best value for money (paragraph 3.55).
Action points 35 The National Audit Office endorsed the Internal Audit conclusion that arising on improvements were needed in the Department’s arrangements for sea chartering movements and identified a number of points on which action was required. These were in line with the Department’s own analysis of action required and are shown below, together with the Department’s response.
l The Department should vigorously pursue investigation and, if appropriate, recovery of excessively high commissions and any other excess payments made during GRANBY. The Department told the National Audit Office that action was in hand for all cases.
l The Shipping Committee should maintain a record of the Committee’s activities, including details of ships offered, prices tendered, final price agreed and reasons for the decisions made. The criteria used for decision making should be specified, and included in the Committee’s terms of reference. The Department have stated that such procedures were introduced for ship chartering for the movement of British personnel and equipment to the former Republic of Yugoslavia.
l The Department need better market information on shipping to ensure value for money. They should analyse, market test, and cost options such as time period charter, commercial carriers and different sizes of ship for their normal requirements and as part of out-of-area contingency planning for operations, having regard to the experience of the United States Forces. The Department now undertake more analysis of movements options than they did for GRANBY. For example, they now seek quotations of time and voyage charter rates for ships, but have found that owners are reluctant to quote for both voyage and time charter or to quote time charter rates for periods of less that 15 days. Use of a liner service was considered for the movement of personnel and equipment to the former Republic of Yugoslavia.
l The Department need written guidance for the chartering of ships in peacetime and during operations. This should ensure that those making military judgements on shipping are aware of the economic consequences of decisions on types of ship to be used, and should cover the position of British flagged shipping when competing in the open market. The Department have acknowledged that up to date regulations are needed, and action is in hand to produce them. . The Department should complete their review of the arrangements for ship charter. Whatever arrangements are adopted for the future, they
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should ensure that Departmental staff have adequate specialist knowledge and advice. The Department are pursuing these actions. . Where agents are employed the Department should ensure that there are adequate arrangements and information available to monitor their activities, to ensure that good value for money is achieved and that any performance bonus payments are dependent on that. The Department are taking steps accordingly.
Overall conclusions 36 GRANBY was highly successful, and the movement of personnel and equipment to the Gulf was generally achieved effectively, despite problems. These stemmed mainly from the short notice, and size of the deployment, exacerbated by an initial shortage of movements personnel and insufficient air cargo handling facilities, compounded by difficulties with allocating appropriate priorities, tracking freight and inadequate information systems. Similar problems were experienced by the United States forces.
37 The Department have initiated actions to alleviate these problems. A successful outcome from these initiatives is important, especially given the setting up of the Rapid Reaction Corps, where movements effectiveness will be at a premium, and the fact that the United Kingdom forces may not always have a six month period in which to prepare for a conflict. Nor is the period available for preparation likely to be predictable any more than it was during GRANBY. The absence of suitable movements systems and expertise, including ship planning and chartering, could then have more serious consequences. In addressing the problems encountered, the Department should have regard to movements practices in industry.
38 The National Audit Office were not able to satisfy themselves that the arrangements for the chartering of civilian resources achieved good value- for-money where those arrangements concerned “dry” ship chartering. There were doubts concerning the size of some vessels used; the limited chartering options used; the lack of a comprehensive database to inform ship chartering; the lack of documentary evidence of full competition in chartering, although there was evidence that the Agency and the Representative obtained comparable prices for Roll on Roll off ships; and the continuing inquiries into the level of some commissions and other amounts paid. The Department have commented on each of these factors but their Police are continuing investigations into the propriety of chartering and prices paid for ships and the Department are reviewing comprehensively their arrangements for ship chartering. Their experience also emphasises the need, where departmental functions are carried out by a third party, for the parent body to have arrangements which enable them to ensure that satisfactory oversight and financial control is being exercised and that value for money is being achieved. The Department have taken action accordingly.
10 MINISTRY OF DEFENCE: MOVEMENTS OF PFRSONNE,., EQWPMENT *r.m STORES TO AND FROM THE G”LF
Part 1: Introduction
Background emergency, and, later, a United Kingdom Joint Force Headquarters including movements 1.1 On 2 August 1990, Iraqi troops invaded Staff in Riyadh. The latter coordinated Kuwait. The United Kingdom and other Allies movements within the Gulf and the recovery sent military forces to the Gulf, initially to operation after hostilities ceased. The deter attack on Saudi Arabia or other Gulf Department also made extensive use of States, but later with the objective of restoring existing peacetime movements arrangements Kuwait to its former status. The British effort and organisations. Appendix 1 shows the was known as Operation GRANBY relationships between the main movements [GRANBY). organisations.
1.2 The United Kingdom Government deployed Royal Air Force Tornado, Jaguar and other The movements task squadrons during August 1990. They decided in September 1990 to deploy 7 Armoured 1.6 Movement plans for the deployment and Brigade, and later decided to deploy support of assigned forces had to be prepared 4 Armoured Brigade and Divisional forces and implemented, to ensure that personnel from December 1990 to January 1991. They and equipment arrived in the specified order also augmented the Royal Naval task group in at the right time. It was a huge task to deploy, the Gulf, and, subsequently, the United resupply and recover such a large component Kingdom’s air forces contribution. of British fighting forces between the United Kingdom and the Gulf (3000 miles by air or 1.3 The failure of Iraq to comply with United 6,000 miles by sea). Table 1 summarises the Nations’ resolutions led to military action by main movements. the Allies. After a six week air campaign, and three days of land battle, hostilities ceased on Table 1 OperationGRANBY Movements 28 February 1991 with the successful Airlifb personnel 46,000 expulsion of Iraqi troops from Kuwait. The freight (Tonnes) 46,000 recovery of personnel and their equipments Sealilt: vehicles began in March 1991 and was completed by ammunition and loose August 1991. freight containers (Tonnes) Air movements: (sorties) Air Transport Force 2,300 chartered aircraft 490 Movements arrangements other Allied aircraft 160 Sea movements: 1.4 The Ministry of Defence [the Department) Royal Fleet Auxiliary ships appointed a Joint Commander to implement civilian ship charters 24: other Allied ships 2 the policy set down by Ministers on the basis of advice from the Chief of Defence staff. The Source: Ministrv of Defence and Government Freioht Aoenf Joint Commander established a Joint Most air movementswere undertakenby the Air Transport Headquarters staff who were, amongst other Force, but virtually all ship mwement~ were by chartered “BSdS things, responsible for planning and coordinating all movements requirements for 1.7 The Department dedicated virtually all of its the deployment and resupply of British forces. Air Transport Force to GRANBY movements. Although the numbers varied during the 1.5 The Department also activated contingency period, at the height of movements some 34 crisis management arrangements. They Hercules, nine VClOs and six Tristars were in established the Defence Operations use. Except for small numbers of vehicles and Movements Staff centrally, to identify, acquire freight moved by the Royal Fleet Auxiliary, and allocate movements resources during the virtually all sealift movements were
11 MlNSTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUIPMENT AND STORESTO AND FROM THE GULF
undertaken in ships chartered by the involving a Service fleet of aircraft, ships, Department. tankers and road vehicles, and the use of commercial carriers. The Committee were 1.8 The Department reported additional dismayed at the absence of basic cost data and expenditure of some 269 million on comprehensive management information movements for GRANBY, including f69 systems. They expected the Department to million and El43 million for the charter of implement information systems which would civil aircraft and shipping respectively (see enable them to determine the optimum size of their peacetime fleet and reach financially Table 21. The Royal Navy task group in the sound decisions. They also considered that Gulf was largely self-contained and did not there was scope for further rationalisation of involve any significant additional movements Service movements. costs. 1.10 Use of commercial carriers to move cargo by Table 2 Additional Expenditureon Movements sea was organised through the Government for Operation GRANBY Freight Agent, Hogg Robinson [GFA) Limited Charter of resources: f million (the Agency). The Committee considered it Shipping: dry cargo extraordinary that the Government’s business hire of containers ii with the Agency, then administered by the dock dues 11 Department of Transport, had not been chatters(l) 116 governed by a formal contract for almost 120 years. They were dissatisfied that the existing 136 arrangements provided no financial incentive Shipping: wet cargo 5 for the Agency to maximise value-for-money Aircraft 69 in placing shipments, that the Agency had not been given clear guidance on the use of non- Total for charter 212 British ships, and that there was no Other costs: competition for the Agency business. They Aviation fuel 44(2) recommended that a competitive contract, Hire of aircraft handling excluding a cost-plus profit formula, should equipments.and other resources be put in place, and the Agency’s rate of Roadfreight carriage and hire of commission should be reviewed before a railway wagons in Germany Roadfreight carriage and hire ot formal contract was let. railway wagons in the United Kingdom 4624 Sqn Royal Auxiliary Air Force 1.11 In the Treasury Minute dated October 1986 (Cmnd 9917) the Department accepted: the Total other costs 57 need to improve their management Overall total 269 information systems, and said that action was in hand: that further rationalisation of Service Notes: (1) Includes additional war risk insurance off 12 million. movements should be considered: and the (2) The Department’s Infernal Audit have pointed out that accurate apportionment of additional fuel costs is difficult importance of considering other contractors, because: fuel costs would have been incurred had the aircraft and of seeking competition, for the Agency. notbeen employed on GRAlvBY movements; reduced expenditure was repoiied in the UK while fuel rose in the Mediterranean due to increased FiAFand Coalition activity (with 1.12 Subsequently, the Department reviewed whom exchange arrangements operated): offsets were netted management information requirements, and Saudi Arabia provided fuel free under host nation support embarked upon a programme of arrangements. improvements to existing systems and the Source: “Operation Granby-the Aftermath’: a report by the development of new systems, and rationalised Ministry of Defence Internal Audit. dated February 1992, their arrangements for air and sea freight. updated for some actual costs. They took over responsibility for the Agency Additional costs of movementsfor OperationGRANBY totalled from the Department of Transport, and f269 million of which the largest elementwas for the charter 01 following competitive tendering a formal aircraft and shipping (f69 million and f143 million respectively). contract was awarded to Hogg Robinson (GFA] Ltd and became effective from January 1990. The Department informed the Committee of Public Accounts Public Accounts Committee of these new arrangements in August 1989. 1.9 In their 49th Report of 1985-86 on Service Movements (HC 465), the Committee of Public Accounts considered the Department’s arrangements for Service movements
12 ,’ MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUIPMENT AND STORES TO AND FROM THE GULF
House of Commons Select recovery from the Gulf to compare with the Committee on Defence British experience. 1.16 Part 2 of this Report covers the National Audit 1.13 The Committee reported in July 1991 on the Office’s examination of the Department’s “Preliminary Lessons of Operation Granby” control and monitoring of movements. This (HC 287/l, Session 1990-91). This report examination concentrated on the referred to movements along with many other Department’s main movements to the Gulf by aspects of the Gulf conflict, and recorded that air and sea [the deployment and resupply a signal victory was won. The Committee phases of GRANBY], but also reviewed the noted that: recovery arrangements. Part 3 covers the Department’s arrangements for chartering civil the Department did not have a aircraft and shipping. In Parts z and 3 the contingency movements plan for an Department’s performance is considered operation of the scale of GRANBY, and against criteria which the National Audit had to initiate planning from scratch; Office agreed with them at the start of the without Host Nation Support, including examination. The National Audit Office sophisticated dock facilities and acknowledged that they would also have to unlimited fuel, an exceptional length of take account of the exceptional operational time in which to deploy, and assistance in circumstances in which the movements kind of different sorts, the United occurred. Kingdom would have been stretched to provide logistical support; 1.17 The Department have reviewed the lessons learned from GRANBY and have acted or are the Department had to charter ships to taking action on many points, as shown in meet movements needs. The Department this report. told the Committee that they did not think that they had been overcharged; 1.18 I intend to provide the Committee of Public few British ships were chartered. Accounts with some additional information on a Commercial-in-Confidence basis. Scope of National Audit Office investigation Alleged irregularities in ship 1.14 Against this background, the National Audit chartering Office examined movements of personnel, 1.19 The Department’ s Internal Audit examination equipments and stores to and from the Gulf. of ship chartering, which formed part of a The main aspects addressed were: wider review of financial systems and procedures in operation during GRANBY, l the effectiveness of control and initiated immediately after the end of the monitoring of movements using Ministry conflict in March 1991, led to an investigation of Defence and civilian resources, with by the Ministry of Defence Police of possible particular reference to management irregularities. The Crown Prosecution Service information systems; and will decide in due course what action, if any, l the arrangements for the chartering of will be taken, and against whom. The Police civilian ~sources to achieve good value- investigations necessarily restricted the for-money. National Audit Office’s examination, as some documentation was impounded and some 1.15 To inform their investigation, the National individual ship charters were referred to the Audit Office engaged consultants (Jonathan Crown Prosecution Service. The National Packer and Associates) to advise on the extent Audit Office liaised closely with the Police to which commercial companies with and particularly with the Department’s Gulf movements functions have developed Audit Team, so that some of the latter’s management information systems; and on the recommendations [paragraph 3.56) reflect the overall composition and costs of the shipping National Audit Office’s findings: and they chartered for GRANBY. The National Audit provided the organisations with information Office also reviewed published material to assist their enquiries, notably on the costs relating to the United States’ deployment and
13 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUPMENT AND STORES TO AND FROM THE GULF
of ship chartering and the composition of the the Department, but discussed the issues with fleet chartered. Similarly, this report has them, and took account of their comments in drawn heavily on the work of the the audit. Department’s Gulf Audit team. The National Audit Office did not examine the records of 1.20 The Department’s Police Fraud Squad had the Government Freight Agent, which is a investigated allegations of malpractice in private sector company, nor those of the regard to a specific ship charter for Government Freight Market Representative ammunition movements in 1989-90. They who was also involved in ship chartering for concluded then that there was no evidence of any criminal conduct. MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUIPMENT AND STORES TO AND FROM THE GULF
Part 2: Control and monitoring of movements
Introduction movements organisations were generally well defined and understood but some areas 2.1 This part examines how the Department required fine tuning. controlled and monitored movements during GRANBY. In view of previous concerns of the Contingency movement plans Committee of Public Accounts (paragraph 2.5 Prior to GRANBY, the Department had not 1.91, the adequacy of management information had an exercise simulating the scale and systems is given particular attention. Where stresses of such an operation. They did not appropriate, comparison is made to have a contingency operational plan for such commercial management of movements, and a major operation, since there was no concept to the equivalent United States Forces’ of operations involving the strategic experience. deployment of a heavy armoured division outside Europe. Movements requirements and 2.2 My Report on the Costs and Receipts Arising plans therefore had to be drawn up from from the Gulf Conflict [HC 299, Session scratch. Similarly, because of the abrupt end 1992-93) has already dealt with various to the conflict and the Government’s decision aspects of the Department’s arrangements for to withdraw troops from the Gulf as soon as recovery from the Gulf. My Report on the possible, the Department had not prepared a Defence Appropriation Accounts for 1991-92 comprehensive movement plan for recovery. (Class I, Votes 1, 2 and 5) covered standards of Advice on stores accounting and a plan for stores accounting relating to the Gulf conflict. recovery were issued soon after the end of Additional findings on movements aspects of hostilities, but some problems were the recovery arrangements are included under nevertheless encountered (paragraphs the appropriate criteria below. 2.34-2.35).
First Criterion: There should be 2.6 The Department have a wide range of adequate mechanisms to identify movements resources, including aircraft of the the availability of necessary Royal Air Force Air Transport Force; ships of resources and to enable movements the Royal Fleet Auxiliary; passenger and to be actioned quickly and freight handling facilities and equipments; and movements personnel. Generally controlled in an emergency resources had not been provided for the exceptional levels of GRANBY movements 2.3 In the context of Gulf Movements, because the Department had not in the past mechanisms means organisations, plans, seen an operation of this size and scale in the procedures and systems. This particular Middle East as one they would be likely to criterion deals mainly with organisational have to discharge. For example, the aspects and plans. Procedures and systems are Department did not have heavy lift aircraft covered where appropriate and relevant under with the capability of moving outsize loads other criteria. such as helicopters without dismantling, which would have incurred unacceptable Organisations and responsibilities operational penalties. For the sealift, six ships 2.4 The key movements organisations and their of the Royal Fleet Auxiliary augmented the responsibilities during GRANBY are described existing Armilla patrol task group in the Gulf. at paragraphs 1.4 and 1.5 and Appendix 1. However, they were designed primarily for Both the Defence Operations Movements staff amphibious support and, for an operation and the Joint Headquarters worked effectively such as GRANBY, their capacity was in the context of movements, and the extremely limited. In these circumstances the respective responsibilities of these and other Department’s approach was to provide a level
15 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL. EQUIPMENT AND STORES TO AND FROM THE GULF
of movements resources capable of meeting ancillary equipment, remained unaccounted the most likely requirements and to charter for at the end of GRANBY. The Department the rest. This is obviously a sound approach had recognised the need for sufficient and since the Ministry cannot reasonably buy all reliable freight handling equipment before the aircraft and ships to cater for every GRANBY, and new equipment has been eventuality. procured or is under consideration.
2.7 But although systems existed to identify the 2.10 Movements facilities and infrastructure at availability of military aircraft and ships, the Marchwood Military Port had been partially Department were not always able to obtain the modernised in 1986-89, and generally were numbers of experienced movements able to cope during GRANBY. Facilities at personnel, freight handling equipments or RAF Lyneham and Brize Norton were pallets needed for the movements process. inadequate. RAF Lyneham had insufficient Because such mobilisation decisions were out freight holding and preparation areas and of their authority, the Department were aircraft parking space. Brize Norton passenger unable to control fully the availability of handling facilities were not designed for the movements personnel. There were increasing numbers of passengers carried on modern shortages of the latter at key points. These wide-bodied aircraft. The Department could shortages constrained the flow of aircraft and, do little quickly to offset these problems to a lesser extent ships, and contributed to which constrained the throughput of freight backlogs of up to four days worth passengers and freight. They released some of (2,000 tonnes) of airlift capacity. Air the pressure by: constructing additional movements problems eased when the Royal temporary air freight sheds at the two RAF Air Force movements reserves were called up stations: using civil airports for chartered in late January 1991. The Army’s movement aircraft flights: and by making up aircraft control, port and maritime reserves were not pallet loads at the Army’s Ordnance Depot at mobilised during GRANBY. The Department Bicester. attributed the delay in mobilisation of Royal Air Force personnel to difficulties in meeting Comparisons with the United States of the conditions required by the relevant America legislation (section 10 of the Reserve Forces 2.11 The United States had an operational plan for Act 1980). The Army Department were able to a Middle East conflict but had not worked out maximise the use of Territorial Army man a fully developed deployment plan. This training days to offset their difficulties and caused problems in moving men and did not find it necessary to mobilise equipment to the Gulf-there were reservists. uncertainties about who and what should go, and when. The United States mobilised large 2.8 The Department also suffered shortages of numbers of reservists, on whom they were freight handling equipments, particularly at dependent. Nevertheless in some cases the main airheads of RAF Lyneham and Brize movements depots lacked skilled employees Norton. Many equipments were old and had in critical supportareas, and, like the United poor serviceability, while new equipments Kingdom, they were not able to keep ports being developed were not ready to be brought and airheads free-flowing. into service. The Department hired a wide range of equipments to meet the shortages. Specialist equipment to handle the Tristar and heavy lift aircraft had to be airlifted to the Second Criterion: All requirements Gulf in a specifically chartered Antonov 124 for movements should be fully aircraft. justified and approved
2.9 The Department also had shortages of aircraft Movement requirements pallets. They were not being returned from the Gulf in sufficient quantities to maintain an 2.12 Most requirements arose from operational adequate flow, despite exhaustive searches. imperatives based on military judgements. RAF Lyneham was once within two hours of Movements staff were then responsible for grinding to ahalt. until pallets were borrowed seeing the requirements were met. The from the United States Air Force. Of the 3.400 National Audit Office found that generally pallets used, 228, worth f680,OOO including movements requirements were fully justified
L 16 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUIPMENT AND STORES TO AND FROM THE GULF
and properly approved. For the deployment, Planning and scheduling movements the Department had to plan carefully the 2.15 In the absence of dedicated movements desired order of arrival of personnel and information systems for the planning and equipments to ensure: the adequate scheduling of movements, matching preparation of bases in the Gulf: simultaneous requirements to resources, and assessing arrival of personnel (moved by air) and their additional resource requirements, the equipment (generally moved by sea); and Department had to rely largely on manual sufficient time for acclimatisation and training methods. However, communication systems of troops and preparation and modification of were adapted for movements purposes. The equipment. The Department also had to Army system was an invaluable tool and provide for the resupply of units subsequent enabled movements staff to identify to their deployment, including, for example, individual ship loads, and to communicate the replenishment of consumable stores and quickly and securely with staff in theatre. the provision of spare parts. However because of the short lead time for chartering the Department often did not know 2.13 The Department had to build up these the precise details of ships’ capacities or complex movements requirements from capabilities sufficiently in advance, which scratch. Because there was no operational necessitated last minute changes to load plans contingency plan for the crisis in the Gulf, and sailing schedules to ensure the most cost- understandably there was no related effective use of chartered shipping. For air movements plan. The time available to plan movements, the United Kingdom, Germany the movements and obtain additional and the Gulf were linked by a system covering movements resources was short, reflecting the passenger bookings and itineraries. There was urgency which Ministers attached to effecting no dedicated system for flow plans and deployments. Also movement requirements schedules, however, and those had to be were subject to frequent change and manually transcribed before transmission to adjustment. Uncertainties arose because of the Gulf using RAF communication systems. changes in the nature of the operation for which the Department were planning, changes Comparisons with the United States of in the composition and size of forces, and America uncertainties about when hostilities would start and about their possible intensity and 2.16 The United States experienced similar duration. difficulties in defining and scheduling requirements for movements. In addition, 2.14 Identification of detailed movements repeated changes in the choice and approval requirements was affected by three main of men and equipments for deployment led to operational difficulties. Firstly, the problems in getting the right men and Department lacked contingency plans setting equipment out to the Gulf at the right time. out the sort of logistic support required for a military operation of the scale and nature in the Gulf. Reconnaissance of the Gulf facilities Third Criterion: There should be a had been necessarily limited because system for the prioritisation of movement of operational staff was given priority over, for example, port and maritime movements specialists. Secondly, units could not always be suitably equipped initially for Gulf 2.17 Because of the need to provide a viable conditions, and needed additional equipments defence of Saudi Arabia and other Gulf and stores after they arrived. Thirdly, the countries under threat and, later, to allow Department were not able to forecast some United Kingdom forces adequate time to movement requirements for items procured acclimatise and prepare for the operation, under ‘Urgent Operational Requirements’ there was a military imperative to move items procedures due to uncertainty over the to the Gulf as quickly as possible. The quantities and timings of deliveries from Department did not have sufficient resources contractors. to airlift all equipment by the required dates, so they had to ensure that items were assigned appropriate priority. As a general rule, and subject to their size, consignments accorded the highest priority were sent by air.
17 (I MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUlPMENT AND STORES TO AND FROM THE GULF
2.18 Movements were prioritised by military staff Comparisons with the United States of using the Department’s existing tri-service America Standard Priority System. This system was 2.22 The United States experienced the same supplemented by Royal Navy and Royal Air Force procedures used to designate problems. Logistics officials were consignments as operationally vital [for overwhelmed - virtually everything was example, critical spare parts for a ship or an labelled ‘high priority’. Movements teams had aircraft). Initially, the Army did not have no means of distinguishing between all the comparable arrangements, but by mid way high priorities, and in some cases resorted to through the deployment phase they had set up moving equipment on a ‘first in first out’ ‘priority airfreight sections’ at airheads to basis. assist in the prioritisation of items.
2.19 Units assigned the highest priority to their own equipment and 95 per cent of freight was Fourth and Fifth Criteria: (a) There ‘movements priority 1.' As a result, the should he centres of responsibility airfreight movements system was swamped, for executing movements so as to which, coupled with an initial shortage of be able to aggregate requirements movements personnel at the airheads, meant that operationally critical or vital items could from different sources; not easily be identified from other top priority (b) Movements should be organised freight. so as to make the most effective use 2.20 The Joint Headquarters set up a Priority of of the Department’s own transport Movements Committee to assess relative resources operational priorities, and to resolve conflicting pressures due to limited air freight 2.23 Following the Committee of Public Accounts’ capacity. They met daily during the peak comments that much scope existed for the periods of air movements, when 500 tonnes of rationalisation of Service movements freight was being flown per day at a cost (paragraph x.9), the Department established differential to sea freight, on a pound for pound comparison, of 17 to 1. A Departmental centres of responsibility in the Army and the report stated that a significant proportion of Royal Air Force for executing peacetime air this freight was made up of routine items to and sea movements of freight on behalf of all complete or make up stock holdings to 30 three Services. These centres played vital days or more. Had the Standard Priority roles during GRANBY, as did a number of System been working effectively, the lower Royal Air Force stations and Marchwood. The priority equipment which was air freighted need for those centres to support continuing could have been moved by sea with a peacetime movements during GRANBY, for resultant cost saving. The Department pointed example exercises in Norway, and supply to out that given the uncertainties about when the Falkland Islands, added to the pressures hostilities would start and their possible on the movements organisations. intensity and duration, all stores and equipmentwere moved as high priority which 2.24 The accuratepreparation and completionof undermined the effectiveness of the System. documentation at centres of responsibility was important to the aggregation of 2.21 The Services have reviewed the Standard requirements from different sources. The Priority System, and are considering ways to improve its effectiveness under operational Department had systems for air movements conditions and constraints. They told the management, flight departure control and National Audit Office that it was passenger reservation but did not have understandable that people would ascribe information technology support in preparing high priorities to items in a war situation: and individual ship or cargo aircraft load or to make a priority system work required stowage plans and manifests. and had to rely independent experienced personnel at key upon existing manual methods. For example, points in the supply chain who had sufficient loads were planned manually on scaled floor overall knowledge of the operation to make on plans on occasion, to ensure maximum the spot, impartial decisions as to relative utilisation of space within aircraft; and priorities. manifests were prepared by hand from consignment documents, load plans, or information stored on communications
18 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUIPMENT AND STORES TO AND FROM THE GULF
systems. Whilst manual procedures are still 2.28 The National Audit Office examined a sample best practice in certain tactical operational of individual movements and found that the environments, in strategic operations they can utilisation of aircraft and ship capacity was lead to duplication of effort, and errors in maximised in most cases. Where it was not, transcribing information from one medium to this was basically because of the operational another. need to avoid delays.
2.25 Marchwood did not have an information 2.29 In July 1991, the Department implemented a technology port control system. Movements Services Air Cargo System, based upon the staff had to rely on manual paper-based system used by the major airlines, which was methods which created some difficulties in commissioned in 1989 but not sufficiently accounting for vehicles, stores and developed for use during GRANBY. It ammunition moving from the port. In the case provides facilities for planning aircraft loads of ammunition, control was imperative to and automatically prepares flight manifests ensure that port safety limits were not using information on consignments already exceeded. These methods were time- stored in the system. Since GRANBY, the consuming and labour-intensive and could Department have also procured an aircraft not provide timely information. Prior to load planning system. This is expected to GRANBY, in 1990, the Department had improve effectiveness in preparing forward commissioned a report which suggested plans for managing the Air Transport Force. In annual savings of E338,OOO could be achieved addition the Army are developing two from the implementation of an integrated port systems which together will provide a full control system using information technology. monitoring and tracking system. A prototype The Department explained that because of of one is being trialled during Operation resource co&mints, implementation had GRAPPLE, the deployment of forces to the been delayed; however, the first stage of the former Republic of Yugoslavia. development was to be implemented in June 1993, with project completion in March 1994. Comparisons with the United States of America 2.26 Nevertheless, the Department’s organisation of 2.30 The United States planned to use all their movements had to be of a high standard in own available resources before recourse to order to maximise the contribution from their chartering. They generally achieved this, own assets, and to minimise the need for although some reserve shipping in the high-cost chartering of civil aircraft and ships. military fleet was unreliable and late in They did this to good effect. For example, embarking. Existing ‘dormant’ contracts they chartered commercial aircraft for allowing the take-up of civil aircraft and scheduled air movements (to Belize, for shipping in emergencies worked well. The example) to release aircraft from the Air Department said that they examined such Transport Force for Operation Granby. They proposals but concluded that such contracts chartered commercial aircraft only after using would not be cost effective for the United their own aircraft, or aircraft provided by Kingdom. Allied governments, to the maximum extent. Later, this practice was refined by operational needs, for example, to keep some Air Transport Force aircraft in reserve in case Sixth Criterion: Systems should civil aircraft and crew would not enter war maintain sufficient records to zones. provide visibility of and tracking of movements 2.27 The Department adopted a system for air freight which dispensed with the need for 2.31 During Operation GRANBY, ships typically consignees to await call-forward instructions. took about 25 days to sail to the Gulf. Air They monitored and were able to use the freight could take up to 5 days from leaving a backlog of air freight to ensure that they filled depot until delivered to the Gulf. The transit available aircraft. Similarly, at Marchwood times involved, and the importance of the military port, flexible application of call- equipment to the operation, set a premium on forward procedures and monitoring of the visibility and tracking of movements and backlogs of sea freight enabled space on ships items being moved. to be fully utilised.
19 MINISTRY OF DEFENCE MOVEMENTS OF PERSONNEL, EQ”rPMENT AND STORES TO AND FROM THE GULF
2.32 The Department kept adequate track of the the recovery phase. For example, containers, movements of aircraft and ships, which for security and camouflage reasons, had been regularly reported their positions. They did repainted and serial numbers had been not have a system to monitor effectively the obliterated or changed. On receipt in the progress of individual items or consignments. United Kingdom and Germany, many Although manual records of consignments containers had to be rerouted to their proper were maintained at the main stores depots, destination; and considerable numbers were these were not readily available to the unclaimed by units and had to await movements or receiving organisations; inspection by supply management teams. Of consignment documentation was often those, many had been packed originally by the simplified, so manifests of aircraft and ship issuing depots and on return to those depots loads did not record in detail what was being were therefore reasonably straightforward to carried. Also manpower was insufficient to unpack. However, because containers were carry Out detailed checking on arrival in the often used more than once for different loads, Gulf. This prevented the accurate there were some 2,800 containers whose reconciliation of discrepancies. contents were unknown and this took longer to deal with. The Department found that scme 2.33 The Department therefore could not say 80 containers (one per cent of the total used] precisely when consignments would arrive at remained unaccounted for at July and these operational units. When the priority of items were written off. had to be changed, they could not be readily located and rerouted. There was a particular 2.36 Prior to the emergency, the Department had problem with operationally critical items identified the need for better asset tracking which became ‘lost to view’, including facilities and had been working on a number satellite communications kit, up armouring of projects, including the use of automatic modification equipment for tanks, machine identification techniques such as bar coding. guns and weapon fuses. This led to duplicate However these projects could not be requisitions. introduced in time for use during the Gulf operations. Some existing systems were 2.34 Recovery of equipment from the Gulf was therefore modified to give scxne means of made nmre difficult by a lack of accurate tracking operationally vital items, and records in theatre of the location and numbers dedicated movements teams were set up in of equipments and stores to be recovered. January to keep track of and hasten the Containers were a particular problem. This highest priority consignments to the correct was tbe first occasion on which significant locations. numbers of containers moved beyond the normal depot-to-depot control system. 2.37 Operation GRANBY has given further impetus Although the Department had an inventory to the Department’s initiatives to introduce system to record the location and status of bar coding and other automatic identification their own containers, there were some systems to improve stores and transportation difficulties in coping with day to day management. The Royal Air Force are movements because of the changes and preparing detailed proposals for their variations in routings. Records were not kept Warehouse and Transport Management up to date when the containers moved within System and are considering the use of suitable the Gulf. Overview of some of the 7,000 commercial systems. The new Services Air containers used by the Department was lost in Cargo System allows tracking of individual air the Gulf. freight consignments once they enter the movements system. The Army are also 2.35 In addition to not always knowing where introducing systems to improve visibility over containers were, the Department were not and accounting for assets (paragraph 2.291. always aware of what was in them. Such details were often only maintained where the Comparisons with the United States of container was loaded and were not readily America available to the movements organisation, who 2.38 The United States experienced the same wanted to keep track of the container only, or difficulties. They lacked accurate and to the receiving organisation, who needed to complete inventory records, and had no track contents also. There were also visibility of many assets, notably of spare inadequate controls over containers during
20 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUIPMENT AND STORES TO AND FROM THE GULF
parts essential for maintainability. Some Part 3. There was no evidence that the receiving depots were unsure what items had Department used the cost data gathered on air been sent, where they were, or when they and ship chartering to temper decisions about would arrive, and this led to reordering of how freight should be moved. A Departmental items. This was deemed more expedient than report said that over 50 per cent of air freight to try and locate it&m ‘lost’ in the theatre, sent was made up of routine items which and contributed to the increased workloads could have gone by sea (Table 21, but the and backlogs at depots. Containers especially Department observed that at the material time, were a problem -there was no clear idea of the need to ensure a rapid response to the contents, many had to be opened frequently to threat made identification of such items more establish contents and some were lost. This difficult. occurred during the recovery phase as well. Many of the returning containers did not have the required documentation showing the Eighth Criterion: Where there are containers’ contents or the addresses to which different systems in place, the containers were to be delivered. Consequently personnel at the receiving ports information should be compatible, had to open nearly all of the containers to enabling exchange of information identify the cargo and disposition needs. or interoperability United States forces are now developing a uniform accountability system to track items 2.42 The Department have not yet developed from the depot to the user and back. comprehensive and integrated management information systems for movements. Appendix 2 shows the activities for which Seventh Criterion: Systems should systems were operating during GRANBY. As a maintain sufficient information to result they suffered the problems of communication with ships and between units, be able to determine the most limited ability to track assets, inaccuracy of economic means of transport records and limited ability to forward plan described in earlier paragraphs. During 2.39 At the time of GRANBY, the Department had GRANBY however, existing facilities were made some progress in improving movements adapted. For example, the established air seat financial management information and costing reservation system was used as an effective systems following concerns expressed by the unclassified communication system, and the Committee of Public Accounts, that the Army used interrogation facilities on existing Department be able fully to compare the costs stores systems to track major spares through of using their own movements resources RAF airheads. The three Services have each against using commercial carriers (paragraph developed secure communications 1.9). The Department had concentrated on information systems: the Department did not improving their control and monitoring of have a single tri-service system, and adopted road transport, but had also identified and the Royal Air Force’s Air Staff Management fulfilled a need for an air freight system Aid [ASMA) as the principal system for (paragraph 2.29). GRANBY. However the equivalent Army communications information system 2.40 The Department stated that for GRANBY the (MAPPER) was used extensively for sea prime consideration was to get personnel and movements data. equipments to the right place at the right time; but they sought cost-effective solutions in line 2.43 However, the systems used had limitations. with the tenor of central Departmental There was a shortage of additional terminals guidance. They said the need was primarily to for ASMA, because of the heavy demand. obtain sufficient additional resources, and There was only one terminal each at RAF there was not always time to compare their Lyneham and Brize Norton. The system could own costs with commercial analogues, which not easily handle numeric data, nor could they considered of little relevance in the data be interrogated. The Army system market that prevailed. provided facilities to input and manipulate numerical data, and allowed some 2.41 The main costs associated with GRANBY, the interrogation. It was not a user-friendly charter of aircraft and ships, are examined in system but trained operators were deployed in
21 1 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL. EQUIPMENT AND STORES TO AND FROM THE GULF
the Gulf. Since GRANBY, the Department detailed consignment records recorded in have implemented, or are developing, new the system; movements systems, including: the Services (d) to track individual consignments; Air Cargo System and an Automated Air Load Planning System (paragraph 2.29). and asset (e) to monitor continually the utilisation of tracking systems using bar coding and other their equipments; means of automatic identity (paragraph 2.37). (0 to identify and control the costs of their movements: 2.44 Nearly all current systems have been implemented separately to meet particular [gl to provide more effective management movement requirements and were not and control over their business functions. designed to be integrated or allow data to be 2.46 There is an increasing awareness in industry exchanged with each other or with other of the importance of information technology systems such as the Services stores or for controlling freight movements and many equipment inventory systems. Only recently of the companies maintain comprehensive have the Department begun to address the integrated database information systems to need for systems to interoperate. The assist them with these tasks. By comparison complexity of a single integrated system that the Department’s movements systems are would cover the large range of functions under-developed. but are being brought up to required by the three services presents date post GRANBY. Reference is being made technical problems. The Department stated to commercial systems, taking into account that they have recognised the continuing the very different military environment. deficiencies in management information systems but the comparative under- Comparisons with the United States of investment reflected inherent funding Aphids difficulties. The deficiencies are being addressed by each of the Services as part of 2.47 The United States had similar problems with the development of Information Technology information technology. Their main system strategies for their logistics functions. was immature, and could not cope with the frequent changes in movements requirements Comparisons with commercial systems and priorities. Not all necessary data was input, output was not always useful and there 2.45 The best commercial shipping and was a shortage of operators. Across the transportation companies maintain systems Services there were few interoperable (see Appendix 3): systems. Overall, the perceived lack of effective management information systems [al to enable them to identify the availability meant that arrivals and departures could not of, and control, their own and external be properly scheduled, resulting in clogged resources; airheads and ports, and backlogs of cargo. (b) to build up comprehensive details of Consequently, there was some inefficient use consignments; of movements resources, for example aircraft were sometimes idle at airheads, waiting to be (c) for the automatic preparation of load loaded. plans and manifests based upon the
22 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUIPMENT AND STORES TO AND FROM THE GULF
Part 3: Chartering of civilian tranmort resources
Introduction requirements was the Defence Operations Movements Staff. Satisfactory arrangements 3.1 This part examines de Department’s operated in both air and shipping sections to arrangements for the charter of civilian aggregate requirements and to identify and aircraft and ships for GRANBY at a cost of manage rescmrces to meet those requirements. some 212 million. It deals mainly with “dry” For chartering of civil aircraft, a contracts cell cargo ship chartering because: this was added to the responsible Directorate to represented the major expenditure, ~138 speed up the chartering process and a million; and the Department used third database of aircraft costs was compiled to parties, Hogg Robinson (GFA) Limited the assist it. Government Freight Agent (the Agency), and the Government Freight Market 3.3 For sea movements, the Defence Operations Representative on the Baltic Exchange (the Movements Staff were responsible for Representative] (a description of the role and maintaining an availability state of resources, status of these organisations and officers is at assessing the resources required for a given Appendix 4) to act as their agents in arranging task and obtaining shipping to meet the charters. The Government’s general business requirement. There were no dormant contracts arrangements with and handling of the for aircraft or shipping, and it was necessary Agency had been an earlier concern of the to charter ships from the commercial market, Committee of Public Accounts (paragraphs when Service assets were not available. This 1.9-1.12). Air chartering and “wet” cargo ship was the first occasion that the Department had chartering followed established peacetime ever had to charter a large number of ships procedures, and were managed effectively. (for the Falkland Islands operation 17 ships They are referred to below only where had been chartered and 45 requisitioned) and relevant to the points discussed. Ship the size of the task and the tight timescale chartering for “wet” cargos such as water and necessitated the setting-up of innovative fuel accounted for ten of sane 245 ship procedures. A Shipping Committee was charters. formed in the early stages to cover movements of “dry” cargo. Initially, the Committee consisted of: First and Second Criteria - Head of the Surface Resources Section of (a) There should be adequate the Defence Operations Movements Staff, mechanisms for chartering at short Ministry of Defence. notice to meet requirements in an Director Surface Operations, Government emergency. (h) There should be a Freight Agent. central focus of responsibility for Government Freight Market chartering within the Department Representative, Baltic Exchange. so as to be able to aggregate Representative of Domestic Shipping requirements coming from Policy Division, Department of Transport. different sources. Supporting staff 3.2 During GRANBY, movements were controlled The Committee’s aim was to cover the market under the arrangements described at as effectively as possible and to ensure that paragraphs 1.4 and 1.5 and Appendix 1. The the most suitable available ships were Navy Department continued to manage selected. The Committee was supplemented in movements of “wet” cargo under established peacetime arrangements. The focus for aircraft and ships charter to meet other movements
23 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUIPMENT AND STORES TO AND FROM THE GULF
November 1990 by a finance officer (Head of Comparisons with the United States forces Movements Finance (A), Ministry of Defence) 3.7 The Military Sealift Command had the ability to improve financial scrutiny. to activate ships from both the Regular and Reserve United States Navy Forces, as well as 3.4 The Committee kept records of the actual enter into contracts with commercial carriers. ships chartered but not records of competing They needed to charter ships for Operation ships, prices quoted and discussions leading Desert Shield/Storm and had sufficient to decisions. The Representative, as a expertise within the Military Sealift qualified ship broker, kept a record of all the Command to enable them to deal directly with offers he received but no comprehensive brokers and shipowners alike. record of the business of the Committee was maintained. The Department explained that this was because of the hectic pace of the Committee’s business. Steps have now been Third Criterion - The need to taken to ensure that records are maintained of acquire additional ships or aircraft all ships offered and the reasons why by charter should be clearly particular ships were chartered. justified. 3.5 The Standing Operating Procedures available to the Defence Operations Movements Staff 3.8 By November 1990 there were increasing during GRANBY were of a general nature and demands for freight to be moved by air. This did not cover Out of Area Operations. The reduced the Air Transport Force’s ability to Department stated that these had now been re- cope with surges such as emergency written and distributed. At the more detailed deployment of reserve units or formations. To level there were no instructions governing the free more aircraft for Gulf tasks, aircraft were specific workings of the Shipping Committee, chartered to replace the Air Transport Force although these have now been introduced and on other routes, and to augment Service implemented for Operation GRAPPLE aircraft during the main passenger (paragraph 2.29). deployments. Commercial air carriers, providing up to 14 flights per day, and SOIXW 3.6 The Department stated that the Committee allied aircraft were used to deploy both met as frequently as was necessary, sometimes personnel and freight. No aircraft in the Force daily, to decide on the type and tonnage of can handle outsize loads and United States ships required and to identify special Air Force CSAs, and chartered civilian Belfast requirements - for example the carriage of and Antonov aircraft were used. Aviation explosives or heavy armoured vehicles. The Authority licences for Antonovs in the United Agency and the Representative then trawled Kingdom and the United States have since the market through independent brokers and been temporarily withdrawn and Belfasts are the Baltic Exchange respectively and reported nearing the end of their useful lives. back to the Committee on the availability and asking price of suitable ships. These were 3.9 Given the composition of the Air Transport examined by the Committee taking account of: Force, chartering of civilian aircraft was fully flag; nationality of operators,officers and justified, and they were integral to the success crew: suitability; loading dates and cost. The of GRANBY.Their usedid howeverinvolve Department of Transport representative some loss of flexibility. advised the Committee on ship suitability, shipping options, United Kingdom 3.10 Royal Fleet Auxiliary ships were used from Government War Risk Insurance and the the outset. However they were designed for a interests of the British merchant fleet. From a specialist role and were too small and too few short list the lowest priced ship capable of in number to support an operation the size of meeting the requirement was selected. The GRANBY. Commercial shipping had to be Agency or Representative was then instructed chartered early in the operation and was fully to negotiate the ‘best and final’ price and, after justified. Roll on Roll off shipping was in confirmation with the Committee Chairman great demand because of the large number of (and, after his appointment in November vehicles to be moved. The Department had 1999, agreement by the finance officer), ‘fixed’ difficulty obtaining such vessels because they the ship for the required voyage. had to attract them away from scheduled services for voyages to the Gulf, and compete with other nations deploying to the Gulf.
24 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUIPMENT AND STORES TO AND FROM THE GULF
3.11 The Department pointed out that their the constraints imposed, on choice, by movements arrangements were geared to a specifications the Department used to meet major European war when shipping would be particular requirements. This could not be requisitioned and not a one-off out-of-area verified because of the lack of Shipping conflict. In the former circumstances, they Committee records. The Department would have access to the NATO pool of maintained however that ship options were shipping via the Department of Transport, for examined by the Committee to determine the which there are standing arrangements, in most cost-effective choice, having regard to addition to chartering. ship suitability and price.
3.15 There was no formal statement of the Fourth Criterion - Charter specifications to be applied, or any record of whether such specifications were met, requirements should be identified although there was a security specification for as early as possible. the types and flags of ships that could be taken up. The Department and the Agency 3.12 As the nature and task of the Forces in the told the National Audit Office that the Gulf evolved, the Defence Operations specifications used included speed, self- Movements Staff were frequently required to sustainability, capacity, configuration adapt the movements plan, often with actions (particularly for ammunition ships), needed quickly following political decisions. nationality or flag, crew, loading dates and A Departmental report stated that at no time costs. While general guidance on the need for during the movements planning phases was financial scrutiny was issued to all concerned an accurate prediction of the scale of the at the start of GRANBY, there was no specific ultimate task given or a formal advance notice Departmental guidance for military staff on of a requirement of any significance received the financial consequences of decisions on from Joint Headquarters. ship specifications.
3.13 Difficulty in reaching early decisions on 3.16 The self-sustainability specification appeared requirements prevented early action in restrictive in view of the facilities available at acquiring chartered aircraft and shipping. The the major Saudi Arabian ports. However the effect of this was mcwe noticeable on the Department told the National Audit Office acquisition of appropriate shipping. For that during the crisis there could be no example, although the deployment of 7 assurance that the facilities would remain Armoured Brigade coincided with the United intact in the event of Iraqi offensive action. So States forces deployment from the United the ships chartered had to be capable of States and Europe, the United Kingdom’s unloading themselves at other less well- decision was taken later than that of the developed ports or in congested situations United States. As a result, fewer suitable where there was a backlog of shipping waiting larger Roll on Roll off vessels were available, to use cargo handling equipment. The having been taken up by the United States National Audit Office agree that military Forces, and the Department had to select from judgement would be a key factor in smaller and slower vessels. determining such specifications.
3.17 The Department mainly used smaller general Fifth Criterion - Charter cargo vessels for the initial deployment. There was also a requirement for larger Roll on Roll requirements should be clearly and off vessels but initially these were not accurately specified - (for available. In chartering smaller vessels they example in terms of size.and type were not always able to meet their own specification on minimum speed. Vessels over of vessel/craft, handling/loading 10,000 tonnes took on average 20 days to the capabilities, dateskimescale Gulf, whereas the smallest vessels under 5,000 required). tonnes averaged 26 days.
3.14 The National Audit Office analysis of the 3.18 An analysis, based on Agency data, of 233 dry availability of shipping during GRANBY ship charters for which the required suggested that the Department did not fully information was readily available is shown in review all the options for ship charter Table 3. This shows that over 80 per cent of available at the time. This was due in part to general cargo vessels chartered were below
25 MINISTRY OF DEFENCE: MCWEMENTS OF PERSONNEL. EQUfPMENT AND STGRES TO AND FROM THE GULF
10,000 tonnes and that in general the average Table 3 Relationship between ship size and cost cost per deadweight tonnage or lane metre reduced as the size of ship increased. The Break Bulk General Cargo and Container Vessels National Audit Office therefore concluded -Average Cost Per DeadweightTonne (a) that significant savings would have been Group DWT No. of Average Average Average achieved by using larger self sustaining Charters DWf Cost(f) Cost per general cargo ships, and very large Roll on in Group DWT (0 Roll off ships, provided that sufficient cargo <5.000 87 3,318 203.414 61 5,000-10.000 25 7,008 340,820 49 had been available in each case to fill most of 10.000-20.000 15 14.613 426,367 29 the ship. However they accepted that 20.000-30.000 1 27,720 470,000 17 operational and market factors would constrain the selection of vessels and affect the actual savings achieved. The Department Roll on Roll off ships-Average Cost Per lane stated that their assessment of the balance of Metre lb) risk favoured the choice of smaller vessels I I Group R.%IQe No. of Average Average AVW~Q~ because of problems of port limits on the (Lane metres) Chalters Lane cost (E) cost per loading of explosives, a reluctance to commit for Group Metres Lane too much vital equipment to a single ship, and Metres a desire to maintain a steady flow to achieve 400 8 385 330,000 856 economy of movements and to ease logistics 600-l ,200 23 948 438.391 462 problems in the Gulf. The National Audit 1.200-l ,800 41 1,426 569,341 399 1,800-2.400 14 2,065 826,429 400 Office noted that ammunition could comprise >2400 19 3,437 925,263 269 a part of a load on a larger ship or be loaded Sources: Agency data and National Audit Office consultant’s outside port areas and that the extra loading report on the composition and costs of suitable shipping at the time for large ships might be offset by shorter time of the Gulf conflict. sailing times. The Department pointed out Notes: (a) Deadweight tonnage, is the weight, in tonnes, of the that loading outside port axns was slow and carQo,snips srores, rue6 passe"Qer*a"bcrewcarrledOya sn,p expensive and dependent on weather when loaded to its maximum summer loadline. The average cost conditions. per DWTassumes that the ship was fully loaded. Any reduction in the utilisation of capacity increases the cost per DWT. 3.19 The National Audit Office noted that: the (b) For Roll on Roll off ships, on which vehicles were the main cargo. lane meterage is a more appropriate measure ofship choice of ships was limited, particularly in capacity than tonnage. Although the average cost per DWT the first phase of the crisis [paragraph 3.13); generally reduced with the increase in ship size. only the very the use of smaller ships would have increased largest or very smallest vessels showed any significant variation overall cost: and the Department took up a in cost per lane metre. number of larger and faster ships early for the Table 3 shows the average costs per voyage in relation to ship second major deployment. The latter was size, and indicates that economies of scale were significant for achieved partly by the Shipping Committee general cargo/containervessels but less Significantfor Roll on Roll off ships. The National Audit Office had earlier undertaken asking the Agency and the Representative to their own equivalent calculations based on less accurate focus in advance of immediate requirements available data. Although these produced different figures in the on owners with large Roll on Roll off ships in end column, the overall pattern was the same. ie the average cost per deadweighttonne and the average cost per lane metre their fleets. The Department realised that the reducedas ship size increased. larger,faster ships would: not be available later given the compelition for civilian 3.20 The slow transit speeds and susceptibility to shipping from other nations in the coalition; bad weather of the smaller vessels affected increase the speed of deployment: and be arrival dates and caused problems. A degree more suited to sailing round the Cape should of flexibility had to be built into the plans for the Suez Canal be closed. This resulted in the coordination of the movement of reductions in the number of vessels chartered personnel by air, their kit by sea and the and the time taken to complete the move. combat readiness training programme. Figures 1 and 2 illustrate the size of ships Defence Operations Movements staff received used by the Department to carry equipment to and from the Gulf.
26 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUIPMENT AND STORES TO AND FROM THE GULF
Figure 1: Charters 01General Cargo Ships
DeadWeight Tonnage I under5000 5,000-10.000 10.000-20.000 0 20,00~30.000
Source: Ministry of Defence and Agency Data The chai reflects the Depaltment’s use of mainty small cargo ships to cariy equipment to the GUM,for the reasons shown at paragraph 3.18 (Percentages are by number of chatters).
Figure 2: Chartersof Roll on Roll off Ships
Source. Ministry of Defence and Agency data The chart reflects the Department’s use of mainly small and medium sized roll on roll off ships to cany equipment to the Gu/t for the reasons shown at paragraph 3.18. (Percentages are by number of charters).
27 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUIPMENT AND STORES TO AND FROM THE GULF
no reports of unacceptable delays but one Shipping) in November 1990 and February artillery unit reached the Gulf area on 1991 of the opportunities for their members. schedule but without guns, which arrived two weeks later. As a result, they had not fired 3.22 In the event only five British vessels were their guns when the major formation deployed chartered out of the 162 different ships used. and the unit had to move forward later after For the reascms stated in paragraphs 1.19 and essential training had been completed. 3.4, the National Audit Office could not However, the problems need to be put in the examine the consideration given to the use of context of over ZOOvoyages carried out over a British ships for individual charters. 6,000 mile journey. The Department pointed out that large ships also had problems Comparisons with the United States Forces (paragraph 3.23). 3.23 The United States Military Sea Lift Command appeared less restrictive on particular Take-up of British shipping specifications, notably on self-sustainability, 3.21 The Department have stated that during the and tended to favour larger, faster ships. They Gulf Conflict they continued to follow their are required by law to use American flagged peacetime practice of chartering on the open ships for charter and liner services operations market and taking up the most cost-effective, when available, in peacetime as well as war. suitable vessel. They therefore saw no need to The Military Sea Lift Command also have issue any specific written directive, their own sealift assets, in contrast to the instruction or guidance on the use of British United Kingdom forces. Eight fast sealift ships shipping. They also said that: (Roll on Roll offs and container ships capable of 33 knots) are always on standby for use they gave very serious consideration to during emergencies and are kept ready to sail British Flagged vessels and would have at 96 hours notice. These ships performed preferred United Kingdom Flagged or well, often being ready to deploy in 48 hours, owned ships: and transporting smne 13 per cent of total unit cargo. However one of the eight ships failed. It value for money took a high priority in had 120 main battle tanks on board, part of the evaluation of bids: where two vessels the main Armour Reserve from the United were comparable in availability, States, and this caused considerable suitability and price, they gave preference disruption to the American deployment to the British vessel; programme. The Agency said that smne fast however it became clear at the outset of sealift ships also spent long periods unloading GRANBY that insufficient British vessels at Gulf ports. would be available to meet the requirement because of a variety of factors, such as the lack in the United Sixth to Ninth Criteria - Selection Kingdom fleet of small self-sustaining should have regard to the most general cargo vessels required to carry ammunition;and economical method of charter consistent with meeting where British ships were offered they were often not of the type required or operational requirements; charter were not competitive. of civilian resources should be The Department said however, that few ships undertaken by competitive were offered by British ship owners. The tendering; adequate records should Minister of State for Defence Procurement told be maintained of all chatering the House of Commons on 9 July 1992 that the actions including details of British shipping industry was, at the time of GRANBY, “enjoying a high level of success unsuccessful offers or bids; and the and efficiency, and, reasonably enough, did costs of individual movements not want to disturb its existing charter should be identified and recorded arrangements” (Hansard, column 566). The in appropriate detail. Agency told the National Audit Office that they had advised the General Council of 3.24 The chartering, tendering and contracting British Shipping [now the British Chamber of process for aircraft followed normal peacetime
28 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUIPMENT AND STORES TO AND FROM THE GULF
practice and procedures through a Contracts which to make informed decisions. A full Branch and competition was secured. record of prices of individual ships available Adequate documentation was maintained, for charter was not maintained. The Agency including details of bids, copies of contracts, provided the Committee on some occasions and summary costing information on a daily with data of ships chartered, prices basis. Aircraft were chartered for a specific negotiated, brokers used, and sailing times. A number of days and a total number of return database showing each ship offered and flights. The Department’s air charterers had chartered, together with the relevant pricing substantial expertise and experience of the and other appropriate information, is now market and their databank of past transactions maintained for GRAPPLE and for other dry was helpful in informing air chartering cargo charters. Such a record, together with decisions. The Navy Department secured their other comparative information on prices by requirements for tanker ships by trawling volume, lane metreage or weight depending directly with up to 20 brokers to ensure on ship type, would have assisted the competition, advice being sought from the Shipping Committee during GRANBY. Also if Representative when considered necessary. average daily running cost information, based Adequate records and documentation were on time charter costs for certain vessel types, maintained. had been available it would have provided a basis of comparison with quoted voyage 3.25 Established peacetime procedures were not prices. Such information would have enabled sufficient for the volume of dry cargo shipping the Shipping Committee to evaluate more required and the Shipping Committee was closely the bids submitted for each charter. therefore established. The Department acknowledged that their staff on the 3.27 The Agency stated that the Shipping Committee had limited direct experience and Committee had information before them on expertise in the shipping market to cope with ship availability and prices, and that a costs the extraordinary demands during GRANBY. database would only have been of limited The Agency said that the early membership of value as data, in the market then operating, the Committee had experience and expertise would have quickly become obsolete. The in all surface movement matters including Agency regarded a more comprehensive chartering but the Department stated that this database as a sophistication and a did not include direct expertise in ship commitment that would increase staff costs in chartering. In accordance with established the Agency or the Department, and that would arrangements, the Department relied heavily have limited relevance-ultimately the price for advice on the Agency staff, who were available in the market at any given time was required to provide this as part of their the key determinant of which ship to charter. contractual commitments as agents, and the The National Audit Office recognise that prior Representative. The Agency pointed out that to GRANBY the Department had not had a some advice to the Committee was not substantial volume of chartering on which to necessarily taken. They considered that the build a database, and that during GRANBY GRANBY Limited War scenario was outside chartering had been subject to time and the scope of the Government Freight Agency market pressures. However, they noted that a contract. The Department maintained that the database can be used not just to inform tasks undertaken by the Agency during the decisions on individual charters, but also to conflict fell within the scope of the contract help management make decisions on the (see paragraph 3.51). In November 1990, overall shipping programme; fleet during GRANBY, the Secretary of State for composition; choices of ship sizes, Defence received, on request, an assurance time/voyage charters, cwners and operators from the Chairman of Hogg Robinson (GFA) and their reliability; and efficiency Ltd that the company “would continue to seek maximisation/cost-minimisation. It is the best possible value for the Department as necessary to have regard to the costs of the shipping requirements developed”. preparing and maintaining a database in relation to the size and nature of the expected 3.26 The Department said that operational chartering programme, and to cost savings imperatives had to take priority over cost, that might result from informed decision although value for money was taken into making. account, but recognised that they needed a database of costing and other information on
29 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL. EQUIPMENT AND STORES TO AND FROM THE GULF
3.28 To assess overall prices to the shipowners for Office calculation, but did not quantify the the different types of ships chartered and to difference. Also they pointed out that the compare prices paid with the prevailing rates “military premium” for Roll on Roll off ships being paid by commercial shippers, which are was similar for vessels chartered by the quoted in time charter rates per day, the Agency and the Representative. The National Audit Office’s consultants converted Department and the Representative also did lump sum voyage charter rates into time not accept the basis of the calculations. The charter equivalent rates. This hypothetical National Audit Office’s consultants view was calculation showed that, had it been possible, that worldwide comparisons were valid in the .’ paying the worldwide peacetime ‘commercial shipping market and that their calculation market rate’ rather than the actual wartime was a conservative estimate of the military military market rates would have reduced the premium. The National Audit Office Department’s chartering costs (see figure 3). acknowledged that the calculations were of On outward sailings the wartime military necessity not straightforward nor, in that they “premium” the Department had to pay was sought to recreate a market, could they be about 5.5 to 70 per cent above (on average) for exact, but they gave an indication that the general cargo vessels and 160 to 200 per cent prices the Department had to pay were well above for 62 Roll on Roll off charter voyages. above peacetime commercial market rates. On recovery sailings the Department paid less than the market rate for general cargo ships 3.30 The main market reasrms for the “military but a 55 to 70 per cent “premium” for 41 Roll premium” were a limited overall availability on Roll off charter voyages. These premiums of the vessel type specified by the Department accounted for scameg30 to f38 million of the (small, self-sustaining cargo vessels) and a Department’s vessel charter costs of f116 general shortage of Roll on Roll off ships. For million [Table 21, excluding charters arranged the latter ships in particular, premium rates by the Navy Department. The Department’s were needed to entice owners and operators to Internal Audit, on the basis of a limited release vessels that were already fully sample exercise using a different methodology employed on established routes. Competition from that used by the National Audit Office for shipping, notably from the United States, consultant, also concluded that, whilst they also contributed to the picture of a “seller’s” had reservations about extrapolating their market. The worldwide commercial market result across the total number of ships would have included many ships that because chartered because of the difficulty of of flag, existing business or the short notice of recreating the precise market conditions of requirements which the Department were able GRANBY, the Department may have paid to give, would not, in any case, have been sfxne f38 million wartime military premium eligible for charter by the Department. Also, above the worldwide peacetime commercial charter shipping had to carry dangerous market rate. goods, the Gulf was mined and shipowners had no assurance of a return cargo from the 3.29 Whilst not disputing that a “premium” was Gulf during the deployment phase. The paid the Agency did not accept the principle National Audit Office recognised that two of such a calculation, in so much that in distinct markets formed. A wartime premium ‘; comparing the worldwide peacetime will always be payable for shipping in commercial market rate with a wartime emergencies such as GRANBY and any military market, like was not being compared comparison with the peacetime commercial with like. They did not think it was possible market at the time must take this into into to express the “military premium” in account. I monetary terms. They also stated that using actual data on ship speeds and voyage times 3.31 The Department believed that the prices paid rather than that available to the National for ships were reasonable given the factors Audit Office consultants would reduce the described in paragraph 3.30. The system of time charter equivalent rate per day. They “offer and counter offer” which is normal in further stated that a comparison between the ship chartering enabled both the revised time charter equivalent rate per day Representative and the Agency to obtain and actual commercial rates in the North reductions from the originally offered prices. European/Gulf market during the period of For the Representative these averaged 7 per the military conflict produced a significantly cent. The National Audit Office noted that the different result to that of the National Audit Agency’s calculation gave a similar result.
30 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUIPMENT AND STORES TO AND FROM THE GULF
Figure 3: Difference during the deployment phase between the rates the Departmenthad lo pay for shipping and the “market” rate
400
300
200 Generalcargo ships
100 Worldwidepeacetime commercial market rate
0 I I I I I
sepffoct NW/D&? Jan/Feb Mar/April MayNun
1990 1991
Soorce: National Audit Office consultad’s report Note: Worldwide market rate (base 100) includes ships which were not available to the Deparrment for reasons of flag, location or suitability. The tigure indicates that two distinct markets existed during the crisis. The rates the Departmenthad to pay becauseof the “military premium” (paragraph 3.28) were higherthan the worldwide market’ rate, shown above at base 100
-.
31 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUIPMENT AND STORES TO AND FROM THE GULF
This resulted in final prices totalling f31 why their services were not used. Several million and E73 million respectively being companies said they contacted Movements paid for ships chartered by these agents, Staff and the Agency to offer space but they I excluding additional war risk insurance. were never invited to quote. The Agency confirmed that they had invited and conveyed 3.32 The Shipping Committee chartered most ships these offers to the Shipping Committee. The on a single voyage basis with only five ships Department stated there was little opportunity taken on period time charter. Internal Audit to use scheduled commercial carriers on the reported that decisions were taken in the outward journey, because having to transfer to I absence of a basic level of costing information a second ship or overland transport to carry i or any significant degree of market information forward to the final military destination and analysis, but found no evidence that the would have added complications and created market had been inadequately covered. The problems of control and increased cost. Navy Department used time chartering for National Audit Office analysis indicates that seven out of their ten charters and the United there was a substantial volume of scheduled States used time charter extensively. The container capacity available to the Red Sea National Audit Office’s examination indicated Coast and that the container shipping lines that time charter could have been cheaper than themselves regularly use feeder ships into the voyage charter over the medium term and the Arabian Gulf and elsewhere. The Department eleven months from deployment to completion pointed out that extra transport might have of recovery appeared to offer scope for time been necessary to move cargoes overland to charter, which can be for any period of time. the war zone, and that they used scheduled The Agency agreed that time charter may have services on two occasions during the Recovery been cheaper. They said that they had pressed phase for containers. They stated that they the Department to consider a three month time examined the possibility of using liner charter option but requirements were too services for GRAPPLE, but they proved to be I uncertain to pursue this. Also, the Agency did more expensive than chartering dedicated not have the infrastructure to manage easily a ships. The Agency confirmed this but stated large number of time charter ships, which that different circumstances and markets require more staff resources and expertise of might produce a different result. the charterer than voyage charter, and they believed the Department would also have 3.35 The Department’s internal auditors found no required resources to manage and supervise evidence that the dry cargo market had been payments. inadequately covered. However they recommended that the Department’s business 3.33 Overall cost-effectiveness depends not just on must more clearly be seen to be on offer to the ship prices. Other factors include utilisation market place generally and future of ships, that is the extent to which ships are requirements should be circulated fully to the loaded to capacity, and the number of cargo market both inside the Baltic Exchange and to carrying sailings achieved during the period those brokerslshipowners who operate outside for which ships were chartered. The it. Advance notice of requirements is now Department observed that in almost every case given to industry as soon as possible. Brokers their ships were fully loaded. They also are circulated simultaneously by telex when stressed that the decisions to use voyage or the cargo has been accurately identified, time charter should be considered in the light providing much faster communication than of details available at the time. They stated the previous system. The Agency have now that initially the time between the decisions been authorised by the Department to on major deployments and the requirements circulate future requirements quarterly to for those forces to be operational did not brokers within and without the Baltic allow for more than one voyage to the Gulf by Exchange and, on instructions, have posted a any ship. However, when it became clear that permanent notice on the Exchange’s trading a re-supply programme would need to be set floor directing enquiries to the Agency. up for the enlarged force, three vessels were chartered on a time basis, each for six months. 3.36 The Department said that the use of both the Agency and the Representative enhanced 3.34 The Department made little use of scheduled competition, in that these agents dealt with commercial carriers, who told the National different sections of the shipping market. Both Audit Office that they could not understand
32 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUIPMENT AND STORES TO AND FROM THE GULF
were asked to seek offers for each shipping comprehensive cost-effectiveness comparisons requirement, but once the Shipping of the American and British prices by also Committee had decided which offer to accept examining utilisation of the vessels chartered. the individual charter was handled by the This information was not available. The agent who had presented the successful Agency did not accept that the British military owners bid to the Committee. Both said that premium was higher than that paid by the their activities were complementary rather Americans. than competitive. The Department said that, together, they covered the market widely and 3.39 United States commercial liner carriers increased the number of ships available to the handled 29 per cent of all the United States Department. The Agency consulted 39 military dry cargo that moved by sea to the brokers, approved by the Department, mainly Gulf. Operation Desert Storm/Shield was the in the more restricted shipping market outside first major operation to take advantage of the the Baltic Exchange, and arranged charters cost benefits of the commercial integrated mainly for Roll on Roll off ships and smaller transport container system, although there ammunition general cargo vessels. The was some initial reluctance on the part of the Representative consulted 30 to 40 brokers and military user. concentrated on larger Roll on Roll off ships, container ships and general cargo vessels. The 3.40 The General Accounting Office reported that Representative employed 13 different brokers competition was secured for ships chartered to arrange 49 ships. The Agency used four by the United States during Operation Desert brokers to arrange over 87 per cent of their Shield/Storm. The Military Sea Lift Command 186 charters they explained that this was sought offers from an average of more than primarily because certain suitable fleets all 100 potential suppliers for each of their came through the same broking route. The chartered ships and received on average offers Department’s Internal Auditors were satisfied of about 16 ships from eight suppliers. that most of the 39 brokers on the Agency list were consulted most of the time. Tenth and Eleventh Criteria - 3.37 In the absence of adequate Committee records Where chartering action is (paragraph 3.4). the National Audit Office could not verify the extent of the shipping undertaken by outside agency, the tendering process, the number of ships Department should have clear offered, the prices tendered or that the most visibility of the action of the agency suitable and economical ships had been in securing offers and letting acquired for consideration. However, they noted that the average prices obtained for Roll contracts; and there should be on Roll off ships chartered by the Agency and adequate visibility and scrutiny of the Representation were E377 and E381 per commissions paid to brokers and lane metre respectively for ships which were other agents. of comparable capacity on average. The Department stated that proper records were Shipping contracts being maintained for GRAPPLE. 3.41 A Charter Party is a document which Comparisons with the United States Forces represents written evidence of the legal contract between the Charterer and the owner 3.38 The United States Military Sea Lift Command, of a ship. Best practice in contract completion, in marked contrast with the Department, used according to the Baltic Exchange, is for the time charter extensively to ensure continuing principals involved, namely the charterer and use of and control over the ships they needed, ship owner, to sign the charter parties. To do and opted for larger ships, partly because otherwise leaves open the possibility of a distances and their volume of cargo was second charter party between the broker, who greater. They paid premiums for Roll on Roll signs on behalf of the charterer, and the ship off ships averaging about 67 per cent above owner and can result in loss of charterer the rate paid by commercial shippers but less visibility. The charter price should be paid than was paid by the Department. However directly to the ship owner unless specific they also paid a retainer to their shipping alternative arrangements are made in writing. industry. It would only be possible to make
33 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUPMENT AND STORES TO AND FROM THE GULF
3.42 Charter parties arranged by the Agency during direct to the Baltic Exchange, which pays the GRANBY were signed by the Agency for the salary and other costs of the Representative. Department and, in some cases, by the broker for the ship owne*. They also allowed 3.44 For each “wet” cargo charter by the Navy payment to the broker where well known. The Department, one set of fees payable by the Agency told the National Audit Office that ship owner was paid to the broker who they had signed charter parties on the proposed the ship chartered, ranging from Department’s behalf on the specific 1.25 to 1.5 per cent, the standard commission instruction of the Department, against Agency for tankers which is traditionally lower than policy, and that given the complex nature of in the dry cargo markets. modern commercial ship owning, it was not always a simple matter to identify owner 3.45 Commissions paid exceeded 5 per cent (6.25 principals and obtain their signatures: ship per cent in each case) in two cases out of 49 owners o* principals stipulated who would where large deep sea ships were chartered sign on their behalf. The Department said that through the Government Freight Market they had instructed the Agency to sign charter Representative. He was unable to recall the parties because the Agency was contracted to circumstances of the two cases but agreed that ensure charters were properly conducted, and excessive fees should normally be challenged. that as the signatory of the charter party the The Department have noted that, during Agency was obliged to protect the GRANBY, more ships were chartered by the Department’s interests. Now that it was clear, Representative than expected. As a result, the in the light of the Internal Audit Report, that total commission paid to the Baltic Exchange principals should sign charter parties, the in respect of the Representative’s ship Department sign them. They added that they chartering activities was well outside the had no record that the Agency had advised normal expectancy of the current them that signing on behalf of the Department arrangement. The Baltic Exchange told the was against Agency policy. National Audit Office that GRANBY required exceptional effort and dedication and there Commissions was no question of excess earnings -the Baltic Exchange had received appropriate 3.43 Ship brokers are remunerated for their commission. Because the volume of chartering services by a brokerage commission paid by business conducted during GRANBY was the ship owner o* principal, which as an exceptional, total commissions payable to the expense of the latter will influence the price Baltic Exchange were higher than in previous paid by the charterer. Broker’s rates of years, when commissions may barely have commission are, as in any market, fairly well covered costs. The Department have asked the established for particular types of business. Department of Transport, who appoint the The Baltic Exchange advised that the usual Representative, to seek a detailed explanation market practice was for the total commission from the Baltic Exchange as to how they to be split between the charterer’s broker account for their earnings during GRANBY. [normally 1% to 2X per cent of the charter price) and the ship owner’s broker (normally 3.46 As a result of the Internal Audit review, the 1% to 2% per cent-sometimes shared with a Department have questioned the level of ship further broker if necessary). Although it is in brokerage fees for 56 of the 186 charters by the his authority, it should not normally be Agency. Excluding their standard necessary for an owner to pay more than 5 pm commission, which was foregone by the cent in total commissions: in practice, Agency, the fees in these cases ranged commissions above 5 per cent are paid in between 3.00 and 8.5 per cent. In 31 cases out some markets, particularly that for small of 186, two o* more brokers were involved. ships, where the Agency were most active. The Agency stated that they were most active The Contract Management Fee includes an in the small ship market, where commissions element for the Agency’s brokerage costs. Any over 5 per cent were not uncommon. brokerage fees o* commissions which would Commissions we*e paid by the owner, who normally become due to the Agency as a had to consider the impact of the number of result of the Department’s requirements, are brokers in the chain and total commissions on foregone. For ships obtained by the his competitive position. The Agency stated Representative, any commission earned goes that the Shipping Committee were aware that some commissions were high, and accepted
34 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUIPMENT AND STORES TO AND FROM THE GULF
this when the ship in question represented the Twelfth Criterion - The best offer on the table. The Department stated Department’s agency contractual that, with two exceptions (when the lowest priced ships were unreliable] they selected arrangements should follow the cheapest ship offered, but were not aware competition, should include of the number of brokers or total commissions incentives for the agent to secure involved. The Representative did not recall value for money, and should be any discussion of commission levels within the Committee. The Department are pursuing regularly monitored and the points in this and the preceding periodically reviewed. paragraph. Government Freight Agent contract 3.47 Danish vessels involved in Gulf charter were (Appendix 4 paragraphs 13) required by the Danish War Risk Fund to pay 3.49 Historically, the Government Freight Market high premiums for war risk insurance but a Representative arranged whole ship chartering rebate (77 per cent in 1991) became payable of Government cargoes, and movements by all once the vessel in question left the war zone. surface means were arranged by the Internal Audit reported that premium rebates Government Freight Agent. However the of the order of El million might remain to be involvement of the latter with ship chartering recoverable by the Department from the became sufficiently established in the 1980s Danish War Risk Fund or ship owners. The for that requirement to be included by the Departmnnt’n I.egal Adviser has passed the Department in the ‘Tender Specification for matter to the Treasury Solicitor Litigation the first contract for appointment of the Division for them to pursue recovery of the Government Freight Agent, although the premium rebates. The Agency has been number of ships chartered was small in informed of this action. The Agency stated relation to the level during GRANBY (186 that although they did not consider that giving charters). Hogg Robinson [GFA) Limited, the specialist Additional War Risks Insurance existing agents under an interim contract with advice fell within their contractual the Department of Transport since 1 April responsibility, they had alerted the 1987, won the five year contract. It became Department to the situation as soon as it effective in January 1990. The Government became known to them and the current action Freight Market Representative continued to followed their investigation and advice. The provide support to the Department for Department maintain that the Agency could GRANBY until July 1991, and again during have taken action earlier, when the first owner GRAPPLE. refused to make a refund. 3.50 The National Audit Office noted that: 3.48 The Agency also said that they had, at the outset of GRANBY and GRAPPLE, advised the the competition was conducted on the Department to appoint an insurance expert to basis of a tender specification which was the Shipping Committee and that the prepared with the assistance of the then background to Danish ship war risk insurance Agent Hogg Robinson (GFA) Limited. The was not generally known outside Denmark National Audit Office accept that it was and was not openly disclosed by the Danish reasonable in the circumstances for the War Risk Association. The Department stated Department to enlist the help of their that they expected the Agency to have advisers in this way; knowledge of the Danish War Risk Fund. They said the Agency should have protected the [b) the tender specification detailed how Department’s interests by ensuring the charter things were to be done rather than parties made it clear that only net payments focussing on deliverables, but that the would be made and that refunds had to be Department is considering the latter returned to the Department. approach in the tendering exercise for the next contract; (c) Hogg Robinson (GFA) Limited were not the cheapest tenderer but were unanimously judged by the Departmental Evaluation Team of five unanimously to
35 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL. EQ”IPMENT AND STORES TO AND FROM THE GULF
offer the best overall value for money, GRANBY. Copies of invoices were sent to the taking account of technical competence. Department for scrutiny. 3.51 The remuneration payable to the Agency 3.53 According to the Agency, copies of charter under the contract is subject to a maximum parties were batched on a regular basis and price. This price comprises a basic taken to the Shipping Committee. management fee, which includes the usually Subsequently they were held by the Agency. small amount of brokerage work undertaken, The Agency pointed out that under the terms plus an incentive arrangement under which of their contract, the Department had access to the Agent may receive a” additional Agency records, including charter parties, and performance payment which is a percentage the Department could, therefore, have see” of the basic annual fee. Under a Contract these documents at any time. The Department Change Note for Army unit moves to and from maintain that only limited monitoring of North West Europe, a performance payment charter parties was possible until they were which is a percentage of the annual fee for the formally copied to the Department in October Change Note can be earned. A Change Note 1991. The Department’s auditors did not was also raised by the Agency, following the accept that the Agency’s records during Department’s refusal to accept the Agency’s GRANBY constituted a” adequate audit trail. submission for a payment outside the They Agency said they were not told of this at contract, to cater for the additional workload the time of the audit or in subsequent associated with GRANBY. The Agency discussion of findings with the Department. initially sought to recover payments outwith The latter maintained that the Agency were the contract but, following discussions with required to keep adequate records as part of the Department. accepted that the work their contractual obligations. required fell within the scope of the contract. The Agency stated that they had adopted the 3.54 The system has now been revised and all change note procedure under protest. The charter parties are signed by the Department Department maintained that this was not the and copies retained for immediate scrutiny case. Full and final settlement for the work and subsequent audit. To confirm compliance undertaken, in the form of a one-off payment with the terms and conditions of individual based upon actual extra costs reasonably charter parties, the Department have incurred, has been made. As there is no risk completed a full review of all bills for involved, incentive arrangements did not GRANBY. They have also accepted a” Internal apply. These Change Notes are dealt with Audit recommendation that the peacetime under the relevant procedures defined in the procedures for the scrutiny and payment of contract. A provisional performance payment bills should be kept in force during a” has been made for 1990. Consideration of the emergency. The Scrutiny Team were fully final performance payment awards for 1990 involved in the Internal audit of shipping for and payment for 1991 and 1992 has still to be GRANBY and instrumental in some of its finalised by the Department. main findings. 3.52 In 1990 the Department set up a Scrutiny 3.55 A Departmental Report dated February 1992, Team under the terms of the contract with the reviewing the Government Freight Agent Agency to monitor the latter’s performance. Contract, recommended a more detailed study The main task initially was to examine sub of four options for the provision of shipping contracting and the checking of bills. and freight forwarding. These range from Subsequently, terms of reference were drawn continuing a Government Freight Agent up and responsibility for the Scrutiny Team contract. suitably revised and modified, to a was transferred departmentally to strengthen full in-house system with a tri-service independent financial scrutiny. They were not organisation. Since the original study further specifically involved in GRANBY before work has been carried out on the range of October 1991, or ship chartering prior to Agency tasks. Ship Chartering is now being November 1991, because they were fully examined separately and options include the occupied on scrutiny of baggage handling and training of staff to develop shipping expertise freight forwarding, in value terms some 75 per and the recruitment of a full-time ship broker. cent of the Agency’s routine business with the Department which continued through
36 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUIPMENT AND STORES TO AND FROM THE GULF
Report by the Department’s Internal Audit 3.56 In July 1992, Internal Audit reported on the movement of freight by sea during GRANBY. They made 60 recommendations. The main recommendations have been referred to in this report. As a result of the close liaison with the National Audit Office during their investigation (paragraph 1.19), some of Internal Audit’s recommendations reflected the National Audit Office’s preliminary findings and Internal Audit’s work informed the National Audit Office’s analysis.
37 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUlPMENT AND STORES TO AND FROM THE GULF
Appendix 1 Relationships between key movements organisations during GRANBY (Report paragraph 1.5)
( Chiefsof Staff 1
k;;elpe;tid
I Air movements Seamovements Joint OperationsCentre
Directorateof DefenceOperations Movements ShippingCommittee Transport,Movements Staff I and Petroleum(RAF) I I I GovernmentFreight Agent Departmentof ContractsBranch Transoort
GovernmentFreight Market Representative Joint Headquarters Headquarters:;;:;;I$ LogisticsControl RAFGermany Cell Headquarters:United Kingdom LandForces Airlift Coordinating British Army of Centre the Rhine
RAFBrize Norton Directorof TransportOperations RAFLvneham : MovementsControl Centre : MarchwoodMilitarv aoort MobileAir Movements r Squadron 1 Air TransportForce ( Joint ForceHeadquarters (GULF) Joint Transportand MovementsStaff
ForceMaintenance
Source: Minishy of Defence Note: v-‘denotes a direct command and control relationship
38 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUIPMENT AND STORES TO AND FROM THE GULF
Appendix 2 Management Information Systems for Movements Activities operating during GRANBY (Report paragraph 2.46)
Activity Air Movements Sea Movements Equipment
:inventory !A= Yes :tracking no no
Requirements: noPI “0 consignment used communications used communications bookings, and system system estimates of resource needs
Planning and Yes used communications scheduling of movements system
Stowage planning noI21 no and preparation of manifests
Tracking of consignments noPI PI noPI
Communications Yes Yes
Passengerbookings Yes
Seat Planning and Yes preparation of manifests and aircraft documentation
Tracking of passenger Yes mOwlEnt Notes: [/] A Services Air Cargo system has been implemented (Reporfparagraph 229) [Z/An Aircraft Load Planning system has been procured (Report paragraph 2.29) (31 Consignment tracking systems using bar coding are under development (Report paragraph 2.37)
39 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUIPMENT AND STORES TO AND FROM THE GULF
Appendix 3 Commercial systems for controlling freight movements
1 The National Audit Office with the aid of their consultants, examined the systems in use in industry.
2 The best commercial shipping and transportation companies maintain comprehensive database information systems to enable them to identify the availability of, and control, their own and external resources. A typical database system would include equipment stock and location records, details of schedules and availability, and technical and operational data on aircraft or ships. Some of the larger companies also maintain their own, or make use of proprietary, databases on the availability of such assets from the market. This information enables management to control and monitor their assets effectively, to identify other sources of assets, to maximise utilisation of resources, to forecast future needs and minimise disruption of activities caused by potential shortages.
3 Many commercial operators use integrated database information booking systems to build up comprehensive details of consignments. Commercial shipping lines start to build up the manifests as soon as bookings are received. Some sophisticated systems build up experimental complete load plans and manifests based on cargo forecasts up to six weeks prior to a scheduled sailing in order to plan for additional space, to allow priorities to be adjusted, and to plan for equipment positioning. Large shippers work on a forward plan based upon their forward sales programmes. Two-way communications are used during the build-up planning and matching process to optimise the scheduling and chartering programme, by consolidating cargo, combining shipments, and assigning suitable vessels to specific shipments.
4 Commercial shipping companies place great importance on being able to track individual consignments. Systems have been developed where consignments are tracked using unique equipment reference numbers, and status is reported each time the unit has a ‘status level change’, or passes a gateway or milestone. Integration of equipment control systems with consignment tracking allows interrogation to determine consignment details and routing instructions. It also facilitates the automatic checking of the discharge manifest against discharge records at the port terminal. Such systems are considered vital to meeting customers’ enquiries, to reducing duplication of, and errors in, movement records and documentation, and to ensuring that consignments are moved as planned.
6 Commercial shipping lines continually monitor the utilisation of their equipments, and compare forecasts against actuals. Larger operators have equipment control systems integrated with systems for bookings and projections, which allows them to reposition equipments or acquire additional space to meet shortfalls in capacity. Medium sized lines tend to run nmre joint services, and swap their own and chartered space with other lines, in order to adjust their capacity in line with their achieved market share. Since most of these companies generally operate regular services or schedules, much of this is fine tuning a pipeline shipping flow.
6 Software packages are available to generate ship and aircraft stowage plans. These systems are used to maximise utilisation of ships and aircraft. They point to the increasing awareness in industry of the importance of information technology for controlling freight through the port/airhead and could have military application.
40 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL. EOUIPMENT AND STORES TO AND FROM THE GULF
However, industry still places great reliance upon experienced loadmasters and cargo superintendents to oversee the actual loading process.
7 Commercial movements companies have developed a wide range of integrated systems to provide more effective management and control over their business functions. These systems are considered vital to maintaining profitability by the identification and control of costs of movements operations. Such systems also provide important management information, assist in the planning of movements, enable capacity to be maximised, and allow the tracking of consignments. Some companies are also developing techniques such as Electronic Data Interface for the automatic transfer of data between their own systems and those of their customers.
8 The benefits of the systems developed include: staff savings, greater accuracy, less duplication of effort, and better utilisation of resources. The benefits, and other continuing savings achieved are generally considered to have more than offset the initial costs of implementing the systems.
41
I MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUIPMENT AND STORES TO AND FROM THE GULF
Appendix 4 Key players and technical terms associated with ship chartering
The Government 1 The Government Freight Agent was established in 1870 to provide the Government Freight Agent of the day with a shipping and freight forwarding agency worldwide for the benefit of the Admiralty. The original agreement based on an exchange of letters remained intact for 120 years although handled by various Departments. It finally rested with the Department of Transport who assumed responsibility for the activities of the Government Freight Agent in 1983. The Department of Transport then had responsibility for arranging the movement of Ministry of Defence material by sea in commercial vessels by procurement of cargo space or by chartering whole ships. They used Hogg Robinson (GFA) Limited as their shipping agent for all matters relating to commercial shipping. Increasingly, this included the chartering of whole vessels. The Government Freight Market Representative on the Baltic Exchange is also involved in chartering ships for the Department.
2 In their 49th Report of Session 1985-86 (HC 465) the Public Accounts Committee expressed concern that a business then involving government expenditure of smne f50 million a year should not have been governed by a formal contract for some 120 years, and that no other contractor seemed to have been considered. As a result of the Committee’s Report, the Department of Transport, the Department then dealing with Hogg Robinson (GFA) Ltd, the Government Freight Agent, placed an interim contract with Hogg Robinson designed to secure better value for money. The Department of Transport also initiated a competitive tender process to open up the agency business [freight forwarding, including ship chartering, and the movement of unaccompanied baggage], so that an Agency could be selected by 31 December 1989, the date of the expiry of the interim contract with Hogg Robinson. As the main supplier of movements business, [98 per cent), the Ministry of Defence took over responsibility for the competition and the proposed new contract from the Department of Transport. Financial responsibility formally transferred on 1 January 1990.
3 14 firms were invited to bid against a tender specification which Hogg Robinson had helped the Department to prepare. The Department accepted that this was unusual but considered it necessary because this was the first time the task had been fully defined for the purpose of a contract and it was important to ensure that every single facet of the Agency operation was properly covered. They did not believe this conferred an advantage on Hogg Robinson in preparing their own bid but accepted that they were in a strong position as the in-situ contractor. The tender specification detailed how things should be done rather than focussing on deliverables. The National Audit Office accept that, in the circumstances, it was reasonable for the Department to enlist the help of Hogg Robinson to prepare the tender specification. Five firms submitted tenders. On the basis of a full commercial and technical appraisal conducted by an evaluation team of five Departmental staff from five branches, it was deemed that Hogg Robinson [GFA) Limited provided the best value for money to the Department. In making this assessment, it was considered that the firm had considerably higher technical competence than their rivals. The Department acknowledged in their appraisal that Hogg Robinson, as “sitting tenants”, had understandably demonstrated a thorough understanding of the Department’s peacetime unaccompanied baggage and freight forwarding requirements.
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The Government Freight 4 The Government Freight Market Representative, also known as the Government Market Representative Shipping Broker, is appointed by the Department of Transport to charter ships and shipping space on behalf of Her Majesty’s Government. He is a professional broker and a member of the Baltic Exchange. He is expected to provide the best possible service to whichever Department requires his services. No formal contract exists between the Government Freight Market Representative and the Department of Transport or the Ministry of Defence, but a specification for the Representative’s role was drawn up by the Baltic Exchange and the Department of Transport. The Representative’s appointment, while not covered by any formal terms of reference, is official and honorary.
5 He can cover the full range of Ministry of Defence commercial shipping requirements albeit working through other brokers as necessary. During Operation GRANBY, he concentrated on Roll on Roll off ships, container ships and larger cargo vessels although asked by the Shipping Committee to seek offers for all shipping requirements.
The Baltic Exchange 6 The Baltic Exchange is a limited company providing the facilities for and regulation of a City-based, international freight market. The origins of the Exchange can be traced to a club established in 1823 representing the users of the Baltic Coffee House, which existed in 1744. The Baltic merged with the London Shipping Exchange in 1900 to form the Baltic Exchange. The Exchange is governed by a Board of Directors with disciplinary powers over members.
7 The Baltic Exchange does not own ships, however, it provides facilities for ship owners and ship brokers to meet and carry out their business in a professional manner. The Exchange provides a focal point for a London based international market in the sea transport of all commodities. Some 60 per cent of all open market sea-borne trade is handled there at some stage. Through the market ships are chartered, cargoes and ships matched, and ships bought and sold.
Charter Parties 8 A charter party is a document which represents written evidence of the legal contract between the charterer and the owner of a ship. It records the terms and conditions which each party is required to meet together with the amounts payable for the charter. There are a number of standard charter parties used by the shipping industry and the specific document used depends on the type of cargo carried. The Agency and the Representative normally use the documents with the code names GENCON 1976 and BALTIME 1939 for voyage and time charters respectively. These documents are approved by the Baltic and International Maritime Council and are widely used by the dry cargo trade. The documents are amended to meet specific Ministry of Defence requirements for particular charters.
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Appendix 5 Ports and Airheads in Europe
Major Poti 5 Marchwood 6 Bremerhaven 7 Emden 8 Amsterdam 9 Rotterdam 10 Antwero
Source: Minishy of Defence Appendix 5 shows the major ports and airheads used by UK forces in the Gulf during GRANNY
44 MINISTRY OF DEFENCE: MOVEMENTS OF PERSONNEL, EQUIPMENT AND STORES TO AND FROM THE GULF
Appendix 6 Ports and Airheads in the Arabian Peninsula
Key: e Airhead 1 Dubai 2 Yanbu Major Airhead 3 Jeddah 4 King Khalid Military City q port 5 King Kahalid International Airpail and Riyadh Military Airbase Major Pori 6 Al Jubayl 7 Bahrain 9 SeeblMuscat 9 Tabuk 10 Dhahran 11 Minhad 12 Thumrait
source: Minisfly of Defence Appendix 6 shows the major ports andairheads used by UK forces in the Gulf during OPERATIOM GRANtJY
45