There was a total spend of £569m across both departments’ on ventilators © Ian Forsyth/Getty Images
There was a total spend of £569m across both departments’ on ventilators © Ian Forsyth/Getty Images

How the UK lost £115m in ventilator procurements

The UK government prioritised speed over cost when it procured ventilators in response to Covid, according to the National Audit Office (NAO). 

An NAO report investigating how the government increased ventilator availability revealed the Cabinet Office (CO) and Department of Health and Social Care (DHSC) put speed of delivery and success over risk and costs, resulting in an estimated loss of £115.2m. 

Two government programmes were conducted to increase supply of ventilators: the DHSC’s overseas procurement (£292m), and the CO’s scaling up of UK manufacturing through the ventilator challenge (£277m).

The government met its target of 30,000 ventilators in early August, but at a total cost of £569m across both departments’ programmes. 

According to the NAO, the CO’s ventilator challenge was not based on “traditional procurement competition on most economically-advantageous tender grounds” and it “accepted higher levels of risks than normal”. 

There was “no direct competition on costs” between bidders for the ventilator builds, and contracts were entered into before designs were identified as successful, based on an approach “to maximise chances of success, before considering cost”. 

The report said: “Cabinet Office committed to covering participants’ reasonable direct costs and indemnified them against legal actions from inadvertently breaching intellectual property rights, competition and procurement law, and some aspects of product failure.

“It estimates it will spend £113m (excluding VAT) on design costs, components and factory capacity for ventilators it did not buy because the design was not viable or not needed to meet the government’s targets, including around £11m for an order for 15,000 additional Penlon devices that was later cancelled.”

The DHSC sourced mechanical ventilators from overseas after establishing that all available stock had been bought from established NHS suppliers. There was “increasing global competition” with rising prices as stock became scarce. 

The report said: “The DHSC made purchases primarily on the credibility of the offer, not price. It did not set a maximum price it was willing to pay but weighed up a number of factors in each case including: speed of delivery; the credibility of the supplier; and the clinical suitability of the devices.”

Only one incident resulted in losses as a result of the equipment being inappropriate for use, when 750 transport ventilators were purchased for £2.2m, said the NAO. 

“Reasonable steps” were taken to control costs, and the CO consulted the Ministry of Defence’s Cost Assurance and Analysis Service over suppliers’ costs. 

The CO estimated it had recovered about £36.3m by “working with suppliers to cancel orders early and recover costs of components brought in preparation for manufacture”, said the NAO.

By the end of June, the government had around 24,000 mechanical ventilators, with 2,600 purchased from global suppliers, mainly China, and 12,300 built through the ventilator challenge. 

However, as “anticipated urgent demand did not materialise” by mid-April, only 2,150 mechanical ventilators have been distributed to the NHS, while the rest are being stored in government warehouses “as reserves against possible increased demand in the future”.

The investigation focused on the government’s approach to decision-making for purchasing the ventilators and did not audit individual contracts. The NAO said that it is in the process of investigating government procurement during the pandemic, including the use of emergency procurement regulations, and will publish a report later this year. 

Gareth Davies, head of the NAO, said: “The government acted quickly to secure the thousands of ventilators it thought it may need to safeguard public health. In the event far fewer ventilators were required than was anticipated during the first phase of the pandemic, resulting in a stockpile that may be needed for future peaks in clinical need.

“As with all aspects of its pandemic response, the government should ensure that the learning from this experience is used to enhance its contingency planning for future public health emergencies.”

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