Investigation into government procurement during the COVID-19 pandemic

18 November 2020

Today the National Audit Office (NAO) reports a lack of transparency and adequate documentation of some key decisions, such as why particular suppliers were chosen or how government identified and managed potential conflicts of interest, in the awarding of some contracts while government was procuring large volumes of goods and services at high speed to respond to the COVID-19 pandemic. Some contracts were also awarded after work had already begun, and many were not published in the timeframe they should have been.

By 31 July, over 8,600 contracts, worth £18.0 billion, related to government’s response to the pandemic had been awarded. Individual contracts ranged in value from less than £100 to £410 million. 90% of the contracts by value (£16.2 billion) were awarded by the Department of Health & Social Care (DHSC) and its national bodies. In comparison, in 2019-20 DHSC awarded 174 contracts worth £1.1 billion, less than 7% of what it and its national bodies awarded between January and July 2020 in response to the pandemic.

New contracts worth £17.3 billion were awarded to suppliers, of which: £10.5 billion were awarded directly without a competitive tender process;1 £6.7 billion were awarded directly through pre-existing framework agreements (which would have involved a competitive bidding process when they were set up); and contracts worth almost £0.2 billion were awarded using a competitive tender process or using a competitive bidding process from a framework agreement. Government also procured goods and services worth £0.7 billion through amendments or extensions to existing contracts.

Personal protective equipment (PPE) accounted for 80% of the number of contracts awarded (over 6,900 contracts) and 68% of the total value of contracts awarded (£12.3 billion). PPE needed to be procured quickly during the first few months of the pandemic, when global demand far exceeded supply.

DHSC, supported by other departments, established an eight-stage process to assess and process offers of support to supply PPE. It set up processes to rapidly check suppliers’ equipment against government’s PPE specifications and to undertake due diligence on the suppliers. Contracts were awarded to 71 suppliers, worth £1.5 billion in total, before this process was standardised; 62 of these have been delivered, three have been cancelled and six remain ongoing.

The cross-government PPE team established a high-priority lane2 to assess and process potential PPE leads referred by government officials, ministers’ offices, MPs and Lords, senior NHS staff and other health professionals. The team considered that leads referred by these sources were more credible or needed to be treated with more urgency. 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). The sources of the referrals to the high-priority lane were not always documented in the case management system and the NAO found a case where a supplier, PestFix, was added to the high-priority lane in error.

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. In a selected sample of 20 contracts,3 the NAO found examples where departments failed to document key decisions, such as why they chose a particular supplier or used emergency procurement, and failed to document their consideration of risks, including how they had identified and managed any potential conflicts of interest.4

The NAO found that some contracts were awarded retrospectively after work had already been carried out. For example, a £3.2 million contract was awarded to Deloitte to support the cross-government PPE team’s procurement of PPE on 21 July 2020, with the contract effective from 14 March 2020. The Cabinet Office’s contract with Public First was awarded on 5 June 2020, with the contract effective from 3 March 2020. By asking for work to be delivered without a formal contract, risks such as underperformance are increased.

A clear trail of documents to support key procurement decisions was sometimes missing. The Cabinet Office asked the Government Internal Audit Agency to review six PPE contracts that have attracted media attention. The review found that while there was evidence for most controls being applied, there were some gaps in the documentation, such as why some suppliers which had low due diligence ratings were awarded contracts.

Many of the contracts awarded over this period have not been published in a timely manner. Guidance issued by the Crown Commercial Service recommends that basic information about the award of all contracts is published within 90 days of the award. Of the 1,644 contracts worth more than £25,000 awarded up to the end of July 2020, 55% had not had details published on Contracts Finder by 10 November 2020 and only 25% were published within the 90-day target. For contracts of a higher value which are required to be published to the Official Journal of the European Union, DHSC published 89% of 871 contracts. Transparency is a key control to ensure accountability for decisions taken.

The NAO recommends that, should the need to procure significant volumes of goods with extreme urgency arise again, government identifies and manages potential conflicts of interest and bias earlier in the procurement process. Government should ensure that basic information on contracts are published within 90 days of award.

“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.”

Gareth Davies, head of the NAO

Notes:

1.As permitted under the emergency procedure allowed by regulations. A price comparison mechanism was set up for contracts in the rapidly moving PPE market.
2.Leads came into to a dedicated mailbox. There were no written rules that determined what went into this box. The existence and nature of the mailbox was publicised across the PPE procurement programme and to relevant private offices across government and Parliament.
3.The full list of contracts included in the sample can be found in Appendix One of the report. The NAO selected this sample on a risk basis, considering factors such as concerns raised (for example, by correspondents or the media), as well as the size of contracts and the complexity of their subject matter.
4.For a Cabinet Office procurement for focus groups and communications with Public First, the Cabinet Office failed to document why it chose this particular supplier, why it used emergency procurement and failed to document any consideration of any potential conflicts of interest. For three government contracts for data services with Faculty, the awarding bodies failed to document any consideration of any potential conflicts of interest in two cases and in one case failed to document why the supplier was chosen. For a DHSC contract for PPE with Ayanda, DHSC failed to consider a potential conflict of interest for a person associated with the company.
5.Press notices and reports are available from the date of publication on the NAO website. Hard copies can be obtained by using the relevant links on our website.

Source: NAO

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