NAO slams lack of transparency in Covid procurement

The National Audit Office (NAO) has hit out at a lack of transparency and adequate documentation in the way the government handled £18bn of procurement of goods and services to cope with the outbreak of Covid-19

The audit watchdog said there was a dearth of information about why particular suppliers were chosen, while some contracts were also awarded after work had already begun, and many were not published in the timeframe they should have been.

For example, Deloitte was awarded a £3.2m contract to support the cross-government PPE team’s procurement of personal protective equipment (PPE) on 21 July, with the contract effective from 14 March, and the Cabinet Office’s contract with Public First was awarded on 5 June, with the contract effective from 3 March.

The NAO said by asking for work to be delivered without a formal contract, risks such as underperformance are increased.

Its report found that by 31 July, over 8,600 contracts, worth £18bn, related to government’s response to the pandemic had been awarded. They ranged in value from less than £100 to £410m.

The majority (90%) of the contracts by value (£16.2bn) were awarded by the Department of Health & Social Care (DHSC) and its national bodies.

In comparison DHSC awarded 174 contracts worth £1.1bn in 2019-20, which represents less than 7% of what it and its national bodies awarded between January and July 2020 in response to the pandemic.

New contracts worth £17.3bn were awarded to suppliers. Of this, £10.5bn were awarded directly without a competitive tender process.

A further £6.7bn 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 £0.2bn were awarded using a competitive tender process or using a competitive bidding process from a framework agreement. Goods and services worth £0.7bn were procured through amendments or extensions to existing contracts.

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

DHSC, supported by other departments, established an eight-stage process to assess and process offers of support to supply PPE.

However, contracts were awarded to 71 suppliers, worth £1.5bn 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 lane to assess and process potential PPE leads.

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 NAO said the sources of the referrals to the high-priority lane were not always documented in the case management system. In one case, a supplier, PestFix, was added to the high-priority lane in error.

According to the NAO PestFix, a small pest control company in Littlehampton, was awarded PPE contracts totalling £350m.

On 18 May, contract documentation was initially published for a contract for £109m. This included items of PPE which the department had decided not to buy. It published a corrected document on 10 July for the actual value of £32m, by which time it had awarded further contracts to PestFix. There was no documented financial and company due diligence at the time of the original award, with this due diligence retrospectively carried out in June.

In another example, a £253m contract for PPE was awarded to Ayanda Capital, whose representative in discussions was a business person who was an adviser to the Board of Trade at the time.

The government contracted to purchase 50m FFP2 masks for £155m based on a design which complied with the BS EN149 standard but was not in line with the government’s published PPE specifications at the time the contract was signed.

The masks ordered and delivered were of the design that government had agreed with the supplier. The masks received will not be used for their original purpose but may be able to be used for other purposes or resold. Ayanda is assisting in these discussions.

The NAO report 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.

In a selected sample of 20 contracts, 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.

The NAO said for many of the contracts awarded over this period, basic information about the detailed was not published within the agreed timeframe of 90 days.

Of the 1,644 contracts worth more than £25,000 awarded up to the end of July, 55% had not had details published on Contracts Finder by 10 November, 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.

Gareth Davies, NAO head, 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.’

NAO report:

Investigation into government procurement during the Covid-19 pandemic

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