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NAO reports highlight cronyism and bad process in Covid contract tendering

The National Audit Office (NAO) has investigated the process surrounding the awarding of contracts for services and supplies related to the Covid-19 pandemic. In November 2020, the NAO published two reports: an Investigation into Government Procurement during the COVID-19 pandemic and The supply of personal protective equipment (PPE) during the COVID-19 pandemic. Although couched in less sensational language than many of the media reports, their findings are no less shocking and they are highly critical of what took place over those first months of the pandemic. 

The process of awarding contracts is currently the subject of litigation by The Good Law Project, EveryDoctor, a doctor-led lobby group, and a cross-party trio of MPs. The NAO’s investigation was triggered by complaints it had received about contract awards from members of the public and MPs, raising concerns about the transparency of contracts, bias, conflicts of interests and that some contracts have been given to unsuitable suppliers. The high media profile of the litigation was also probably a spur to taking action.

The reports are based on an audit of the procurement processes that took place under an emergency procedure begun in March 2020 and covers the period early 2020 to the end of July 2020, at the end of November the NAO published two reports:

The two reports cover a period when new contracts worth a staggering £17.3 billion were awarded related to Covid-19 and the use of emergency procedures meant that £10.5 billion worth of these contracts were awarded directly to companies without any open competitive procedure taking place. A further £6.7 billion was awarded directly to companies that were already listed on framework agreements with the government. 

So what are the NAO’s conclusions?

Political connections can get you contracts

The NAO found that companies with political connections were ten times more likely to be awarded a contract than companies that did not have such connections.

The government split the procurement system into two channels – a high-priority channel for companies with political connections, such as links with government officials, ministers’ offices, MPs and members of the House of Lords, senior NHS staff and other health professionals, and a second channel for those companies without connections to such people. 

The NAO found that about one in ten suppliers processed through the high-priority lane (47 out of 493) obtained contracts compared to less than one in a hundred suppliers that came through the ordinary lane (104 of 14,892). 

Companies in the high-priority channel were automatically regarded as more credible, which is in contrast to normal practice when such contacts would be subject to additional scrutiny due to issues of conflict of interest. The NAO also found that there were no written rules for how the high-priority channel should operate.

Vital documentation to track contracts is missing

The NAO found that in many cases documentation was missing from the contract award system. The documentation covers such things as the justification for using emergency procurement, why particular suppliers were chosen, or how any potential conflicts of interest had been identified and managed. 

The NAO found that the lack of documentation was much worse in the high-priority channel; of the 493 suppliers referred to this channel by a political or official contact, less than 250 had the details of the individual who made the reference recorded in the government’s case management system.

In the cases where documentation was present 144 of the referrals came from the private offices of government ministers, including “referrals from MPs who had gone to ministers with a possible manufacturer in their constituency, and where private individuals had written to the minister or the private office with offers of help”. 

There were another 64 companies where referral was directly by MPs or members of the House of Lords, and a further 21 were referred by government officials.

The government has refused to publish a list of companies that benefited from being put in the ‘high-priority’ lane for Covid-19 contract work. It has also refused to reveal who were the individuals that recommended the companies be put in that lane.

The Liberal Democrat peer Lord Strasburger asked in the House of Lords whether the government intended to publish “a list of all companies who were contracted to supply PPE as a result of the high-priority lane” and if the name of the person who recommended the company would be published.

The answer from Lord Bethell, a minister in the Department of Health and Social Care (DHSC), was a resounding no, giving the reason for this as commercial implications.

Lord Strasburger told the Guardian that he was not satisfied with the government’s reason for its refusal to disclose the names of the companies. He said “It looks to me as if the government doesn’t want taxpayers to know which companies were given preferential treatment, often at the expense of more proven competitors. They also don’t want us to know which minister or MP was able to slip these companies into the fast lane and what their connection is with the company.” Lord Strasburger called for a full independent enquiry into how the contracts were awarded.

Contracts were awarded weeks or months after work had started

The NAO found contracts that had been awarded in retrospect. One example was one awarded by the Cabinet Office, a £3.2 million contract to support the cross-government PPE team’s procurement of PPE awarded on 21 July 2020, but which ran from 14 March 2020. 

Guidance on transparency was often not followed

The NAO was critical of the lack of transparency with the process. Over half of the contract awards were not published in the public domain within the time frame of 90 days set out in the guidance issued by the Crown Commercial Service. Of the 1,664 contracts awarded across government up to the end of July 2020 with a contract value above £25,000, 55% had not had their details published by 10 November. 

The government bought PPE that was useless and wasted millions of pounds

The government set up a parallel supply chain procurement process that was designed to enable rapid procurement. Processes were supposed to be in place to avoid waste, but the parallel supply chain managed to buy equipment that did not meet the correct specifications thereby “wasting hundreds of millions of pounds,” according to the NAO. These included 75 million respirator masks, with a total cost of £214 million, that the NHS will not use for the original purpose. The DHSC told the NAO that 195 million items are potentially unsuitable.

Government lack of preparedness led to paying a high price for PPE

The NAO reported that the stockpile of PPE kept before the pandemic was “inadequate” as it contained only two weeks’ worth of PPE. As the pandemic struck it soon became apparent that far more was needed and the government had to order vast quantities of PPE in a chaotic market with over-inflated prices.

The government was buying gowns and coveralls, which would have cost 33p each in 2019, for £4.50 each, an increase of 1,277%. One million body bags that would have cost £1 each last year were bought for £14.10 each.

The NAO estimates that the government spent £10bn more buying PPE in the inflated market conditions during the pandemic than it would have paid for the same products in 2019.

Much of the PPE ordered has not yet been delivered

At the time of the audit at the end of July less than 10% of the gloves, gowns, face masks and other products – ordered for a total £12.5bn – had been delivered to NHS trusts and other frontline organisations.

Of 32bn items ordered, only 2.6bn had been distributed by July and the report said, “with some of it [the PPE] not yet manufactured”.

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