PPE suppliers referred by ministers and civil servants marked 'high priority' in pandemic

Businesses in high-priority lane 14 times more likely to win contracts, NAO finds
Photo: Peter Byrne/PA Wire/PA Images

Companies with connections to ministers and civil servants that were bidding for personal protective equipment contracts during the coronavirus pandemic were referred to a “high-priority lane” where they were 14 times more likely to win contracts than other suppliers, the National Audit Office has revealed.

The revelation comes in a report that describes a “lack of transparency and adequate documentation of some key decisions” in the awarding of government contracts during the coronavirus crisis, and poor compliance with guidance on publishing contracts.

The investigation examined emergency measures put in place to award contracts outside normal procurement rules. By 31 July, the government had awarded more than 8,600 contracts, worth £18bn, to support its response to the pandemic. The Department of Health and Social Care was responsible for 90% of the contracts’ total value, and 68% of the contract spending was on PPE.

The vast majority of coronavirus-related contracts were new, totalling £17.3bn – of which £10.5bn were awarded directly without a competitive tender process. Just £0.2bn were awarded using a competitive tender or bidding process, and the remaining £6.7 billion were awarded through pre-existing framework agreements.

However, the NAO found departments had in some cases failed to document why they used this emergency procurement route to award contracts rather than a competitive tender process – as well as other key decisions including why particular suppliers had been used or how risks had been identified and managed.

The report found some contracts had been awarded after work had already begun – which it said increased the risk of underperformance. In one example, Deloitte started work in March on its £3.2m PPE procurement contract, which was not signed until July.

Another pressing concern was the lack of transparency around how officials identified and managed potential conflicts of interest in some contracts, the NAO said.

The watchdog found businesses that had been referred to the cross-government PPE team by government officials, ministers’ offices, MPs and Lords, senior NHS staff and other health professionals were funnelled into the high-priority track because they were deemed “more credible” or urgent than other suppliers.

Around one in 10 of those high-priority lane suppliers – 47 of 493 referred – were awarded PPE contracts. Around one in 140 suppliers that bid through other channels were awarded contracts – 104 of 14,892 that bid.

In one notable case, Pestfix, a company that made headlines for winning a £350m contract despite just having 16 staff and £18,000 in net assets, was added to the high-priority lane in error.

As well as uncovering the preferential treatment of some companies, the NAO found record-keeping was inconsistent and the sources of the referrals to the high-priority lane were not always documented in the case management system.

“A clear trail of documents to support key procurement decisions was sometimes missing,” the NAO report added. A Government Internal Audit Agency review of six PPE contracts that had attracted media attention found “some gaps in the documentation, such as why some suppliers which had low due diligence ratings were awarded contracts”, it said.

The scarcity of documentation outlining how and why decisions were made in some cases is potentially damaging to public trust, the NAO said.

“For procurements where there is no competition, it is important that awarding bodies set out clearly why they have chosen a particular supplier and how any associated risks from a lack of competition have been identified and mitigated. This is to ensure public trust in the fairness of the procurement process,” the watchdog said.

Adding to the concerns about transparency, many of the contracts that have been awarded during the pandemic have not been made public within a timely manner.

Of the 1,644 contracts worth more than £25,000 awarded up to the end of July 2020, 55% had not been published online by 10 November – despite this being well past the 90-day deadline recommended by the Crown Commercial Service. Only 25% hit the 90-day target.

'Standards were not consistently met'

NAO head Gareth Davies said: “At the start of the Covid-19 pandemic in the UK, government had to procure large volumes of goods and services quickly whilst managing the increased risks this might entail.

“While we recognise that these were exceptional circumstances, it remains essential that decisions are properly documented and made transparent if government is to maintain public trust that taxpayers’ money is being spent appropriately and fairly.

“The evidence set out in our report shows that these standards of transparency and documentation were not consistently met in the first phase of the pandemic.”

A Cabinet Office spokesperson said all bids had been subject to due diligence processes and that the NAO had uncovered no evidence of conflicts of interest in the cases it reviewed.

Cabinet Office minister Julia Lopez said: “We have been dealing with an unprecedented global pandemic that has posed the biggest challenge to the UK in a generation. As this report rightly recognises, we needed to procure contracts with extreme urgency to secure the vital supplies required to protect frontline NHS workers and the public, and we make no apology for that.

“We have robust processes in place for spending public money to ensure we get critical equipment to where it needs to go as quickly as possible, whilst also ensuring value for money for the taxpayer.

“It is important to maintain the public’s confidence in how we manage their money, and we welcome the NAO’s scrutiny of our processes, and recommendations on how they can be improved.”

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