PPE accounted for 80% of government contracts awarded © AFP/Getty Images
PPE accounted for 80% of government contracts awarded © AFP/Getty Images

PPE suppliers with political links '10 times more likely to win contracts'

18 November 2020

A “high-priority lane” was created by the government for personal protective equipment (PPE) suppliers referred by politicians and officials, according to the National Audit Office (NAO).

In a report into the government's controversial procurement of PPE, the NAO said the channel was set up a cross-government team for potential leads referred by ministers’ offices, MPs and lords, senior NHS staff and health professionals. 

Leads referred by these sources were considered “more credible or needed to be treated with more urgency”.

“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,” it said. 

“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,” the report said. 

The report said the government “lacked transparency” on contract awards and there was a lack of documentation on why particular suppliers were chosen or how the government identified and managed potential conflicts of interest.

The watchdog added there had been “inadequate documentation” in a number of cases on how the risks of procuring suppliers without competition had been mitigated. 

“We found examples where departments failed to document fully the consideration and management of risks, such 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 said. 

However it added: “In the examples we examined where there were potential conflicts of interest involving ministers, we found that the ministers had properly declared their interests, and we found no evidence of their involvement in procurement decisions or contract management.”

During prime minister’s questions, Labour leader Sir Keir Starmer referred to the NAO findings and the fact “suppliers with political connections were 10 times more likely to be awarded contracts”.

He called on prime minister Boris Johnson to provide “cast-iron assurance that from now on all government contracts will be subject to proper process, with full transparency and accountability”.

Johnson responded: “I think it is extraordinary he attacks the government for securing PPE in full quantities.

“At the time he bashed the government for not moving fast enough, now, absolutely absurdly, Captain Hindsight is trying to score political points by attacking the government for moving too fast.

“I am proud of securing PPE supplies and any government would have done the same.”

According to the report, the government awarded 8,600 contracts worth a total of £18bn until 31 July 2020, and £10.5bn of those were awarded directly without a competitive tender process.

PPE accounted for 80% (around 6,900) of the number of contracts awarded and 68% of the total value of contracts awarded (£12.3bn).

The NAO’s findings come as a non-for-profit organisation launched legal proceedings against the Department of Health and Social Care (DHSC) over a £250m contract awarded to to Saiger, a Florida-based jewellery company with “no experience of supplying PPE”.  

The contract the claimants are challenging was entered into on 4 June for £70.5m for the supply of 10.2m gowns which was “offered without any advertisement or competitive tender process”, the Good Law Project said. 

The Good Law Project alleged that the DHSC paid Saiger £7.05 per gown, despite leaked pricing benchmark analysis at the end of May which stated the average price for PPE gowns was £4.60. 

The Good Law Project said while it is unknown what profit owner Michael Saiger made, “it was sufficiently lucrative for him to pay a middleman named Gabriel Andersson approximately $50m to arrange the supply of the PPE”. 

Jolyon Maugham QC, director of the Good Law Project said: “At last we can all see – in simple black and white – the staggering sums flowing from public coffers to private pockets. Who could blame individuals for joining the queue if government is handing out free money? 

“We consider the award of this contract, as with so many others this government has entered into, to be unlawful. If the answers from government aren’t good enough, and we expect they won’t be, we will issue proceedings”. 

A DHSC spokesperson said it could not comment on the legal proceedings, but added “proper due diligence is carried out for all government contracts and we take these checks extremely seriously”.

Malcolm Harrison, group CEO of CIPS, said the NAO had uncovered “major failings” but the “unprecedented environment called for an urgency of response from the government to procure essential goods and services in constantly changing conditions”. 

“While there are many learnings that have been made and more that will come, it is important to remember that immediate action was essential in this situation. Across the procurement profession, undertaking due diligence and recording the findings remains a key factor in awarding contracts, ideally with multiple parties bidding for the work,” he said.

“We acknowledge that these were extreme circumstances where protecting the UK workforce took priority over regular process, however, it is clear that the government must be accountable for spending tax payers money and transparent in relation to public sector contracts. 

“Across procurement, within the broad public sector, we need increased transparency, more guidance on the risks surrounding the use of regulation 32 (2)(c) from the Cabinet Office, emphasis on the importance of due diligence before contract award in all situations and clear documentation for all contracts awarded.”

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