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Poor oversight plagues £18bn PPE procurement spree

The National Audit Office found “diminished public transparency” and could not give assurance that the government mitigated the risks of its £18bn emergency procurement programme during the Covid-19 crisis.

19th Nov 2020
Editor in Chief (interim) AccountingWEB
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NAO looks into UK PPE procurement deals
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The government spending watchdog responded to pressure from MPs and members of the public with an investigation into more than 7,000 Covid-related contracts awarded up to 31 July 2020. Most of the deals came from the Department of Health & Social Care for personal protective equipment (PPE) amounting to £16.bn. Contracts amounting to £1.8bn were awarded by other government departments.

Just £200m worth of Covid procurement contracts went through competitive tendering, while just over a third £6.7bn went through traditional public sector framework agreements. The remaining £10.5bn were awarded without any competition, the NAO found.

Normally, the Cabinet Office vets all government contracts worth more than £10m, but it opted not to apply the controls due to the speed needed to secure PPE in competitive international markets and the seniority of the staff awarding them. In place of Cabinet Office oversight, the DHSC created a clearance board to approve PPE contracts more than £5m.

The NAO report acknowledged that public sector bodies were attempting to procure goods with extreme haste to respond to the pandemic, but the study flagged up how the resulting lack of controls and transparency failed to identify potential conflicts of interest and gave deals to unsuitable suppliers.

The alternative control mechanisms proved vulnerable to a variety of shortcomings, the NAO found, including:

  • Contracts awarded retrospectively.
  • Lack of adequate documentation, particularly in regard to potential conflicts of interest.
  • Details not published in a timely manner.

All of these shortcomings were addressed by NAO recommendations to prevent further flaws in future emergency procurement exercises.

Example cases

In August, the Cabinet Office asked the government Internal Audit Agency to review six contracts that had aroused media attention. This exercise found that some controls were being applied, but there were gaps in the documentation to explain the decisions, or why suppliers with low due diligence ratings were awarded contracts. The NAO followed up with an investigation of 20 sample contracts out of 7,000+ and found similar gaps.

Out of this sample of 20, the NAO found three that had been awarded retrospectively after work was carried out, including:

  • A £3.2m contract awarded on 21 July to Deloitte through a framework agreement to support cross-government PPE procurement of PPE – effective from 14 March. “We found no evidence that the Cabinet Office documented its reasons for its choice of supplier. The procurement strategy stated that other suppliers on the framework may be able to provide the service and it accepted the risk of a legal challenge,” the NAO noted.
  • In March 2020, the Cabinet Office asked Public First, a communications agency already working on another project to provide focus group services from. This service was covered by a £840,000 contract awarded on 5 June.
  • The Cabinet Office awarded a contract to Topham Guerin with an initial maximum value of £1.5 million for publicity campaign coordination services on 7 May 2020, with the contract effective from 17 March 2020.

Each of these examples were accompanied by a lack of documentation recording the selection process or any considerations around potential conflicts of interest. “By procuring work without a formal contract setting out full details of work and how it is managed, government increases risks including underperformance,” the NAO said.

In an echo of complaints surrounding private sector audits, the government auditor didn’t appear to include digging more deeply into potential frauds. But the report does provide a useful overview of some of the more questionable contracts it did encounter.

Ayanda conflict of interest

One case cited in the report concerned a £253m deal awarded by the DHSC to Ayanda Capital to purchase 50m face masks for clinical use.

According to the Good Law Project’s research, Ayanda is a finance and investment company owned by the Horlick family through an entity based in Mauritius. The initial interest was registered by Prospermill, which includes among its directors Andrew Mills, who also sits as an adviser on the government’s Board of Trade and identifies himself on LinkedIn as a “board adviser” to Ayanda. He also signed the DHSC contract on the company’s behalf.

The Ayanda consignment was one of the notorious cases where the specification agreed in the contract did not meet the government’s published specifications for PPE. They were delivered, but could not be used for the intended purpose. Ayanda is assisting in discussions to reuse or resell the masks, the NAO analysis noted.

The auditors also summarised: “The only documented consideration of conflicts of interest by the awarding body was a standard new supplier form declaring no conflicts of interest with the Department of Health & Social Care, and due diligence checking for political connections for Ayanda directors. The due diligence checks, carried out on 2 May 2020 as part of a second round of due diligence on Ayanda, did not include Ayanda’s senior adviser and did not identify any conflicts of interest.”

When the leader of the opposition Sir Kier Starmer raised the issue during Prime Minister’s question time in the House of Commons, Boris Johnson replied via a video link from Downing Street: “We were facing a very difficult situation where across the world there were not adequate supplies of PPE

“Nobody had PPE. We shifted heaven and earth to get 72bn items of PPE into this country.  I'm very proud of what has been achieved.”

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