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More on the NAO Pandemic Procurement Report – Failure in the Cabinet Office

The NAO report on UK government procurement through the pandemic came out recently and we wrote about it here, focusing mainly on the PPE (personal protective equipment) issues it identified and analysed.

Today, we’ll look at some of the other non-PPE contracts that the NAO investigated. It’s worth highlighting that the auditors looked at 20 contracts and did not find problems with all of them by any means. So their list includes examples from the Department of Work and Pensions and different bodies within the health sector for instance, and in most cases, there were no serious issues identified.

However, the real villains sit in Cabinet Office, where three contracts were examined and each was a case study of (certainly) incompetent and (arguably) unethical procurement. That is ironic, as that Department also houses the HQ of the Government Commercial Organisation and Gareth Rhys-Williams, the government’s Chief Commercial Officer. His role is to promote better procurement across the whole of central government and his influence runs even more widely. But it appears to be a case of, “listen to what I say, don’t look at what we actually do in the Cabinet Office” if the NAO report is anything to go by.

The three contracts were for £3.2 million with Deloitte, the consulting firm, for support to the PPE programme. The second was a contract for a maximum of £840,000 with Public First, for running focus groups around the pandemic – although there were stories initially that there was some link with Brexit work too. Then the third was worth £1.5 million and was awarded to Topham Guerin for “publicity campaign coordination services”.    

The first problem is that in all three cases, the supplier was engaged and indeed started work some months before a contract was actually put in place, without any form of competitive process to support the choice of supplier. Work started in March but contracts weren’t in place until June or July.  

I suspect anyone reading this will understand why this is bad news; if you haven’t formally agreed what the supplier is going to do, how they will be rewarded, how any risks will be managed (from confidentiality to termination provisions), then you shouldn’t be starting the work really. We can only assume our old friend “urgency” is again the excuse here. But doing a few focus groups or a bit of publicity is hardly the same level of urgency as finding life-saving PPE.

Then we have faults that are familiar from our previous article covering the PPE issues in the NAO report. There was no documentation available in each of the three cases to explain why and how the supplier was chosen. The cynics amongst you might say the answer is clearly “because they were our mates” but I couldn’t possibly comment. Again, it is bad practice at best, and something more sinister at worst.

Then we have the conflict of interest issues. Topham Guerin and Public First have previously worked with Cabinet Office Ministers such as Michael Gove and advisers including Dominic Cummings. According to the Guardian, Public First “is owned by the husband-and-wife team James Frayne, previously a long-term political associate of Cummings, and Rachel Wolf, a former adviser to Gove who co-wrote the Conservative party manifesto for last year’s election”.  But in that case, the NAO “found no documentation on the consideration of conflicts of interest, no recorded process for choosing the supplier, and no specific justification for using emergency procurement”.

So procurement process, policy and propriety in the Cabinet of Office, at the centre of government, has been corrupted. It appears that somebody senior – that could be a Minister, a special adviser, or a civil servant – either just engaged supplierd themselves with no procurement input, or told procurement to “JFDI”.  Either procurement is not in the loop and doesn’t even know what has happened till after the event, or the function and procurement leadership is too weak to say to the budget holder, “that’s not the way we should do things”.

In either case, it does not speak well of the Cabinet Office’s own procurement team, I’m afraid. Even more embarrassingly, we have the fact that the department is supposed to be showing the rest of government how procurement should be done. But Rhys-Williams, the government’s Chief Commercial Officer, is going to struggle now I suspect when he tries to tell other departments how they should be doing procurement. Yes, they’ll say, we’ll follow the best practice guidelines – just like your lot did on that Public First contract …

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NAO Pandemic Procurement Report Sticks the (Well-Judged) Boot In

This week saw the publication of the UK National Audit Office’s second report concerning government procurement during the pandemic. The first, all about ventilators, raised some interesting issues (which I discussed on a Podcast here) but was not overly critical of the procurement process.

This new report is very different. It’s a strong but fair report, with plenty of detail and insight, and impressive given the pressure NAO must have been under itself (in terms of staff, politics, and time). In measured and factual tones, it exposes some very questionable practices, processes and actions taken this year, principally but not exclusively in terms of buying PPE (personal protective equipment).  It does not get deeply into PPE performance – there’s another report on the way shortly looking at that in more detail, apparently.

We wrote here about the VIP route for PPE, whereby firms with connections could get fast-tracked as potential suppliers, and the NAO report highlights just how beneficial that was for those firms who accessed that channel. They had a 10% chance of winning contracts, some (like the Ayanda Capital deal) for £100 million or more. Your chances if you weren’t on it were less than 1%.

I understand why there was a desire to look at more credible offers first, but the way it was done simply meant that it was literally a case of “who you knew”, not what you had done historically or were offering now.  That was clearly unfair and broke the fundamental principles of fairness and equal treatment that underpin public procurement.

Urgency was the reason why normal processes could not be followed, and I do understand that, but there were ways in which proposals could have been assessed without this blatant favouritism (and before anyone says, “so how would you have done it”, I have an answer for that – maybe a future article. Or Cabinet Office can pay me for a few days consulting and I’ll tell them. I’m a lot cheaper than McKinsey or Deloitte).

The failure to track where the 500 referrals came from in many cases (only half were noted) and apparent lack of awareness or concern about conflicts of interest also leave a bad taste here.  Indeed, a lack of documentation to support decisions is a theme running thought the NAO report.

Then, even after the NAO report, it is still not clear how the suppliers were chosen or the size of the contract determined. So there was a decent enough general process documented in the report for evaluating the suppliers and their offer in terms of credibility, but that doesn’t explain why Ayanda was given a £250 million contract while another firm might have been awarded a £1 million deal. Was it simply that they bought whatever the supplier offered once they got through the process? Was it first come, first served in some sense until the requirement was met – but that still begs the question, how did firms get to the front of the queue?

And remember, there were many credible suppliers complaining at the time that their offers of PPE weren’t even being considered. Did they fail simply because they didn’t know the right people? Did the team actually work through all the offers, or just focus on the VIP offers until they had ordered enough stock?

Given these issues, that lack of documentation around why suppliers were chosen for contracts is disappointing and unforgivable really, given the lack of competition and the size of many contracts. It broke the government’s own March 2020 Cabinet Office guidance as well, which said that buyers should keep good records of how and why suppliers were chosen.

We might speculate as to why it happened – incompetence? Arrogance? Lack of time to keep notes (with 450 people in the team, including highly paid consultants, that doesn’t feel like a good excuse)? Or corruption of some sort? The suspicion of bribery of officials remains, given this report. There must have been people who had the power to move suppliers to the front of that queue and we have no evidence of safeguards in place to ensure that wasn’t done for the wrong reasons.  

The lack of clarity on the “due diligence” process is also worrying – it wasn’t in place at all initially by the sound of it and then seems questionable, given some suppliers seem to have got through despite very dubious backgrounds. The stories in the press this week about jewellery manufacturers with “consultants “ in Spain being paid £20 million, or a young woman somehow winning a contract for almost a million pounds with no relevant experience whatsoever don’t fill us with confidence that due diligence was very effective.

Another issue was the buying of masks with the wrong specification. That appears to have been  a ”human error”, incompetence if we’re being unkind, somewhat excused by the time pressures. It has proved to be a very expensive mistake though – with the caveat that perhaps the masks can be found a useful purpose somewhere.

The report doesn’t really cover whether the prices paid were reasonable, so perhaps that will crop up in the next report. The margins being made by traders, middlemen, agents and spivs generally still haven’t been disclosed either, although the stories emerging such as the jewellery firm example seem to suggest some people made an absolute killing.

All in all, and even given the time pressures, this was not public sector procurement’s finest hour, I’m genuinely sorry to say.  In part 2, well look at some non-PPE contracts that NAO examined in the same report, and I’m afraid there is even more concerning Bad Buying to discuss there!

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Advertising Spend Can Be Bad or Brilliant Buying – Consider Kevin the Carrot!

(Picture courtesy of my phone and a very old carrot from the back of the fridge)

Let’s have a rest today from pandemic related buying failures, (potential) frauds and so on, and look at something more heart-warming.

Advertising is a fascinating field when it comes to bad – or good – buying. That’s because of the multiplier effect. It is one of those spend categories where the impact of the spend can be out of all proportion to the amount of money actually paid out. That can be either a positive or negative impact, it is important to say.

So if I am buying cleaning services, or packaging, or raw materials, then as long as there isn’t a major fraud (contaminated material, perhaps) probably the worst that can happen is we “lose” the value of the expenditure.  The packaging doesn’t work on our production line, or the cleaning service is hopeless. Even then, I may well be able to recover something from the supplier. But if I spend a million on a brilliant advertising campaign, that spend could generate tens or even hundreds of millions of “brand value” in terms of future sales and profit. And if I make a lousy buying decision, we might lose similarly large amounts of value.  

There’s a great seasonal example right now with supermarket group Aldi and their “Kevin the Carrot” campaign, which first was aired in 2016, five Christmases ago.  I don’t know how much Aldi paid for the creative genius behind Kevin, but it was money very well spent. Aldi now receive millions of pounds worth of free advertising as the media highlights the adventures of Kevin without the firm paying a penny for much of the coverage.

There is even a range of Kevin-related soft toys, and demand is so great that “to help reduce crowds in the current climate, this year Aldi has introduced a digital queuing software that’s also used by music festival Glastonbury”, according to Wales Online’s coverage of Kevin!

But we might imagine the first meeting when the agency pitched this to the Aldi marketeers… “ a talking carrot? Are you sure? I mean, carrots aren’t even very Christmassy really”? 

“Yeah, but a cute talking turkey might not work…”

Anyway, marketing and advertising can go the other way too. Remember the backlash in 2017 when the Pepsi ad with Kendall Jenner seemed to suggest that public demonstrations would all turn into happy, cheerful love-ins if Kendall just shared some Pepsi around the police and the protesters? That was withdrawn and although Pepsi got free publicity too, just like Aldi, it wasn’t quite as positive.

There’s an older example in my Bad Buying book, with the case of Schlitz Beer. It’s a multi-part story really, because the firm’s problems started with a sequence of recipe changes to the beer, which didn’t go well in terms of customer reaction. With sales falling rapidly, a new advertising campaign was the answer.

Unfortunately, the creative contribution was the opposite of the inspired talking carrot, as Schlitz used a boxer who got upset when someone offered him a beer that wasn’t Schlitz. His anger at this proposal was not very appealing however, and it went down in history as the “drink Schlitz or I’ll kill you” campaign!  The firm was eventually bought at a knock-down price by a competitor, as sales continued to slide.

That was an example of advertising spend having that negative multiplier I described earlier and I’m sure we can all think of ads that made us feel less rather than more inclined to buy a product. But in the meantime, enjoy Kevin, and I’ll see you in the queue for the Giant Kevin the Carrot Plush Toy! (too late, sold out already…)

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Why “VIP Routes” for PPE Suppliers Is a Slippery Slope

In our latest Bad Buying podcast, I interviewed Les Mosco who was Commercial Director at the Ministry of Defence for 7 years in the “noughties”, as well as being a CIPS President and holding top procurement jobs across the banking, oil and gas, and rail industries.

We talked about procurement in the pandemic, and touched on whether a “Tory councillor from Stroud” would really get preferential treatment when it came to offering to supply PPE. We both doubted whether his position would carry much weight at the centre of government, and Les said that in his time in MOD he found politicians and senior colleagues were pretty careful to declare conflicts of interest and the like.

However, the latest information from the Good Law project, who have taken legal action against the government to find out more about some of the “odd” looking contracts that have been awarded, does suggest that there may have been special treatment for some firms.

A flow chart they obtained shows the way the government’s PPE sourcing team handled the thousands of offers for help that came in from all sorts of firms and individuals. The noteworthy element is a box on the chart that says, “Refer China, Donation, VIP or Make cases to correct contact”.  There is also a note saying, “Support provided from high profile contacts, require a rapid response and managing through the process. Therefore are managed through the High Priority Appraisals Team”.

There is no definition as yet of exactly how a “VIP” was defined. There is no clear evidence that being a donor to the ruling Tories or knowing a Minister / special adviser meant you were a VIP.  But that of course is the suspicion, in the absence of any more clarity about the process.  Or it may be that the VIP designation was just intended to make sure important people were handled carefully. They may not have been given any priority in terms of winning business, but perhaps it was just to make sure they did at least get a reply to their offer quickly. Let’s face it, if the Queen had offered to knit a few masks, you would have wanted to reply pretty quickly to her email!

However, the concerns remain that it may have been more than this. Were VIPs helped through the system, and were their offers to supply moved to the top of the priority list? It is also interesting to note that the Daily Mail, a supposedly loyal Tory newspaper, gave this story major coverage.  And we still haven’t had the answer to the key question. Exactly how did the PPE buyers choose the firms to supply PPE – in some cases, awarding contracts worth over £100 million to firms with no track record in that supply area.  

Now some will say that doesn’t matter anyway which firms won, as long as they did actually come up with the goods. But it does matter. Not only would unfair selection processes and queue-jumping for VIPs break the fundamental principles and regulations of public procurement (UK, not just EU), but the whole concept of privileged access is also a root casue for and enabler of wider corruption in organisations or even countries.  You may think that the UK couldn’t go down the route that many other countries have unfortunately followed, but we have to be vigilant. If it becomes who you know, rather than what you can do, we are ona slippery slope in terms of public procurement.

Anyway, do take a listen to the interview with Les – he also offers some great advice to procurement professionals about how we should behave when facing tricky situations. And I’ll be talking more about the “slippery slope to corruption” in my next podcast, out later this week.   

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