What is the public sector's procurement exposure to Russia?

4 March 2022

The UK’s largest public sector buying organisation is being quizzed by local authorities over links to Russia as councils launch reviews into contracts.

Yorkshire Purchasing Organisation (YPO), the UK’s biggest publicly-owned central purchasing body, said members wanted to know the extent of Russian involvement in public contracts following the invasion of Ukraine.

A spokesperson for YPO told Supply Management: “YPO is receiving questions from customers regarding Russian links within global supply chains and we are responding to these queries, alongside our colleagues across the public sector, to ensure there is a robust response to the war in Ukraine. 

“Supply chains across the world are reacting to this ongoing crisis and we will be sure to update our customers with the information and solutions they need to navigate this appropriately, allowing local authorities to maintain vital services whilst taking necessary actions if needed.” 

Local councils have said they are reviewing their gas, pension and procurement contracts to ensure they are free from ties with Russian companies. 

North Yorkshire County Council said it is reviewing “all investments, contracts and procurement arrangements” to ensure it is not trading with Russian companies. The council said it will take “immediate action to end contracts if necessary”.

Council leader Carl Les said: “We stand ready to do whatever is necessary to help Ukrainians in this war and to cut any ties we may have with Russia. We do not believe we have such contracts, but we are going through our procurement records with a fine toothcomb.”

Westminster City Council (WCC) is reviewing its pensions and contracts for financial links with Russia. 

Cllr Paul Swaddle, cabinet member for finance at WCC told SM: “Like much of the rest of the world we have looked on in horror as events have unfolded in Ukraine following Russia’s abhorrent and unprovoked attack on this sovereign nation.

“However, we do, along with many other local authorities, have a small number of investments in Russian companies within our pension fund.

“We are in the process of extricating ourselves from these in line with government sanctions that are due to become law by the end of March.”

Meanwhile, health secretary Savid Javid has reportedly said the NHS must stop using energy from the Russian firm Gazprom, after various councils terminated contracts with the firm.

According to PA Media, a source said: “Sajid has spoken with NHSE and been clear that trusts need to stop using Gazprom as a supplier. He has also requested a wider review of any Russian role in supply chains across the health service.”

NHS contracts with Gazprom were worth £16m in 2021, according to public procurement data firm Tussell

Public procurement contracts, according to Tussell, have totalled £107m since 2016, with NHS buyers spending £77m. A fifth (22%) of NHS spend on energy was with Gazprom. 

Former health secretary Jeremy Hunt tweeted: “It’s clearly unsustainable for a humanitarian organisation like the NHS to have any commercial links whatsoever with Putin’s murderous regime.”

Local authorities had contracts worth £29.5m with Gazprom between 2016-2021. 

Newcastle upon Tyne Hospitals NHS Foundation Trust had the largest contracts with the firm, with the trust’s contract totalling £15m in this period.  

Manchester City Council told SM it had a contract with Gazprom that expires at the end of the month, and it is looking to find an alternative provider. 

A spokesperson said: “We share the world's horror at the Russian invasion of Ukraine and sense of solidarity with the people of Ukraine.”

Mark Allison, Labour leader of Merton Council, told BBC Radio London he was “not at all comfortable with having any relationship with a Russian-sponsored firm on the scale that we are at the moment”.

He encouraged government to change rules so local authorities could “refuse to do business with such firms based on their moral or social suitability”.

The UK Universities Purchasing Consortia (UKUPC) told SM a number of universities had approached the organisation regarding contracts and connections with Russia following the invasion. 

A UKUPC spokesperson said: “Our members need to review their own supply base and look for any risks that appear, taking appropriate action depending on their own legal and supply chain situation.  

“The biggest impact we are aware of currently is energy, with a number of contracts in question and alternative sources currently being explored.”

Top 20 UK public sector Gazprom customers (total contract value):

1. Newcastle upon Tyne Hospitals NHS Foundation Trust – £15m 

2. Sheffield Teaching Hospitals NHS Foundation Trust – £8m 

3. Northern Care Health Alliance Group – £6m 

4. Countess of Chester Hospital NHS Foundation Trust – £5m 

5. Shrewsbury & Telford Hospital NHS Trust – £5m 

6. Suffolk County Council – £5m

7. Bolton NHS Foundation Trust – £4m 

8. Manchester City Council – £4m 

9. Wrightington Wigan & Leigh NHS Foundation Trust – £4m 

10. Wirral University Teaching Hospital NHS Foundation Trust – £4m 

11. Salford City Council – £4m

12. North Tees & Hartlepool NHS Foundation Trust – £4m 

13. Westminster City Council – £3m 

14. York Teaching Hospital NHS Foundation Trust – £3m 

15. Southport & Ormskirk Hospital NHS Trust – £3m

16. Bristol City Council – £3m 

17. Tameside Hospital NHS Foundation Trust – £2m 

18. Rotherham, Doncaster & South Humber NHS Foundation Trust – £2m

19. Stockport Metropolitan Borough Council – £2m 

20. University Hospitals of Morecambe Bay NHS Foundation Trust – £2m

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