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A Mone About PPE (Again!)

Reports in the Guardian last week suggested that Michelle Mone, business woman and member of the British House of Lords, benefited directly from PPE contracts which the government awarded during the pandemic.

Mone and her husband had denied that they gained personally from £200 million worth of PPE contracts, following disclosures that they lobbied politicians including Michael Gove for PPE Medpro to be awarded the business. That enabled the firm to secure a place on the government’s “VIP lane”, which prioritised certain companies that were offering to supply PPE. Many of the firms in that group were recommended by politicians, although others came via recommendations from civil servants, advisers or other prominent people.

Mone’s lawyer last year said she “did not benefit financially and was not connected to PPE Medpro in any capacity”.  But already there was evidence that she was involved, and now leaked documents produced by the bank HSBC appear to show that her husband, Douglas Barrowman, was paid at least £65 million from PPE Medpro. Funds were then distributed via offshore accounts and trusts, and some £29 million of that ended up in a trust benefitting Mone and her children.

Separately, PPE Medpro is being investigated for fraud by the National Crime Agency. It is not clear if that is linked to the government’s dispute with the firm over the quality of gowns supplied as part of the contract, which did not meet quality standards (according to the NHS).

Leaving aside the specifics on Mone and Barrowman, who appear to encapsulate the moral bankruptcy of many of the PPE “middlemen” and agents who exploited the pandemic to make excess profit, the case does highlight again some of the weaknesses in PPE procurement. It is easy to be wise after the event of course, but with billions made by some very dodgy people, it is not unreasonable to ask what went wrong. Here are a few of the key issues – we have previously discussed much of this of course!

  1. The PPE procurement team was slow to ensure that the specifications provided to suppliers were exactly what NHS users needed. That meant it was not the suppliers’ fault that some unusable goods in the early days of Covid did meet those specifications. In other cases, it may be that the supplier was at fault, but the waters are muddy. And whilst time was of the essence, surely samples of items should have been provided before huge consignments were shipped and paid for. It also took a while to get basic supplier due diligence in place.
  • The idea of having some sort of prioritised potential supplier system to evaluate offers was in itself reasonable, given so many firms were approaching the buyers. But it should have been a totally transparent process, with the “rules” in the public domain, and it should not have been based primarily on “knowing the right people”.  A simple pre-qualification process with a handful of questions would have worked better than what was put in place. I am also amazed that no senior civil servant spotted that the focus on MPs’ mates would look unfair or worse once exposed. The “Private Eye” test (how will this look on the front page of the Eye / Guardian / FT)  should have highlighted the issue here.
  • Again, whilst acknowledging the pressure to secure supply was incredible, I don’t understand why buyers didn’t delve a little deeper into the cost structures of the suppliers and establish how much margin was being made by those intermediaries. That would have enabled at least some attempt at negotiations to moderate the margins. The lack of curiosity there fuels the conspiracy theories that the buy-side was complicit in helping firms and individuals to rip off the public purse. Just saying “oh, we paid the market price” – which was in effect itself determined by whatever price was offered by those exploitative firms – was not good enough really.

Finally, I have still seen no real explanation of why the estimates of PPE requirements early on were so far out and led to the huge over-ordering of stock, with at least £4 billion worth wasted. That is still costing us now, as PPE is sold off cheaply, or even burnt, whilst we still pay millions for storage. It may be that there was nothing malicious or incompetent behind that, but it would be good to understand how we went so wrong. After all, that was a clear error, one that cost the taxpayer billions.

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Beware – Conflict of Interest Ahead!

I had the honour to speak at the Procurement Lawyer’s Association (PLA) annual dinner last week in London. 140 lawyers in a room together – actually a surprisingly lively and friendly audience, I’m pleased to say.

I was looking at their website before the event and noticed a paper the PLA produced a couple of years ago, all about conflicts of interest. It has a particular focus on public sector procurement, although many of the comments and recommendations apply just as well to the private sector. It runs to 56 pages, but the “Practical Guidance” summary (page 26) gives you most of the “meat” of the report, and is sensible and thoughtful advice. 

On reflection, I should have said more on that topic in my Bad Buying book. Although it is mentioned in the section on fraud and corruption, there is more I should have said. Talking to one of the lawyers at my dinner table last week, we agreed it is a major topic that is not discussed enough. We also each had some examples that indicate different aspects around the issue.

I remember as an interim CPO having a conversation with a relatively new Chief Executive in a large government organisation. He had joined from a large consulting and services firm, who were about to bid for a very large contract with our organisation.  I needed him to make a conflict of interest declaration, but initially he didn’t see the point as “I don’t work for them any more”.

Do you still have equity in the firm, I asked? Yes, was the reply. Do you still have friends, relatives, or lovers who work there? Yes, he said (to the “friends” at least)!  To be fair, I did get through to him why this mattered, and he agreed that his involvement with the procurement would have to be pretty arm’s length.

Sometimes the conflict can be more subtle and can even veer into real corruption. I knew of one independent consultant who had a good reputation for leading procurement projects in local government for a particular service – let’s say it was catering (it wasn’t, but it was that sort of thing). Oddly, it seemed that all the procurement exercises he ran ended up with the same catering firm winning. I then discovered that between his assignments for different councils, he always went back to consulting work with the same firm!  (Who knows whether he did real work with them or just got paid for his loyalty).

My lawyer friend highlighted a somewhat similar case – an independent consultant leading a procurement exercise who suggested that an unsuccessful bidder should perhaps engage him to provide them with training in how to write better bids. That could have been genuinely well meaning of course – but the price for his training was a lot more than you might expect. The implication seemed to be that employing him might well mean the bidder would do better next time the consultant was in a key project role.

So one point from all that is to look at conflicts of interest for anyone involved with the procurement process – internal staff, consultants or yes, even lawyers! We’ve also talked about the very difficult issue of “future” potential conflicts of interest. Mathew Syed in the Times called this “retroactive inducements” and it covers those cases where someone on the buy side favours a company because they believe, hope or expect that the favoured firm will help them personally in the future, with a great job or other benefits.

We’ve seen that in the procurement world but also more widely with other senior managers and even with politicians and special advisers. George Osborne, ex-UK chancellor, got a ridiculously lucrative job with Blackrock, an investment firm he had been responsible for regulating. That struck me as an unacceptable example of exactly this problem. We’ve regularly seen civil servants and advisers involved in awarding lucrative UK government and health service contracts to consulting or IT firms, then jumping ship for senior roles in the same firm.

Anyway, take a look at the PLA paper fi you are interested in this topic. And if you are running procurement processes, before you get going, don’t be afraid to explain to your colleagues (whoever they are) why this matters and why you need to know if they are conflicted in any way.

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Waitrose Denies that New Systems are Causing Stock Issues

We write pretty regularly about public sector procurement disasters, probably more than we cover private sector failures. When I was researching and writing the Bad Buying book, I found it easier to find stories about government entities than those featuring major private sector firms.

There are a number of reasons for that. Some areas of government spending – such as defence – are just very difficult and complex.  So it is a challenge in any and every country to execute that type of  procurement well. There is also the political factor, politicians who want to leave a “legacy” for instance, or who want to pursue a certain policy despite the fact that there is no procurement solution that is likely to work.

But the biggest reason is probably just the nature of government, meaning there is a higher probability that a disastrous IT system implementation will get into the public domain. So we find out about numerous tech failures in the UK public sector, going back to the DSS ICL “Benefit Card” fiasco, to the ongoing Home Office/Police Airwave failure.

So it was interesting and unusual to see a high profile private sector firm mentioned in the press recently for a significant IT problem. According to the Times, Waitrose, the upmarket supermarket chain and part of the John Lewis Group, has seen problems with stock management in recent months, which is being blamed on the implementation of a new Oracle / JDA ERP system.

But it is an odd example, because although the Times report was quite detailed, Waitrose has strenuously denied that there is a problem. So the newspaper says, “The idea is to replace the partnership’s antiquated systems with the Oracle system. But during the switchover, when the two systems have to temporarily “talk” to each other, the Oracle system has been producing incorrect numbers. Every time a new part of the system is introduced, more problems emerge… “

The report says that product availability has slipped from 3/94% to around 91%  compared to an industry average of 92%. Well, to be honest, that does not sound like a major problem, although many readers did comment on the article to back up the claim, complaining about lack of product in their local stores. Particularly cheese …

Waitrose then denied that there is a particular problem or that there are system issues, claiming that their product availability is still better than several major competitors. But one point which did make me wonder was the statement that the implementation has been ongoing for 6 years now. That does seem like a long time – even given Covid – to get a new system in place.  

Coincidentally, I heard from a friend the other day about another organisation in a very different industry (but one that will be well-known to most readers here) that has had major Oracle implementation problems this year. Now clearly many ERP implementations do succeed, or Oracle and SAP would not have grown to be two of the largest tech firms in the world. But it is also clear that things can go wrong.

I included a salutary tale in the Bad Buying book, all about FoxMeyer, a US pharma distributor. That ERP implementation appeared to set off a train of events that ended up with bankruptcy, and illustrated a number of common failings in IT disasters. The case study seemed to show defining the requirement wrongly; relying too much on external consulting-type expertise for the implementation; several suppliers sharing unclear accountability and blaming each other when things went wrong; trying to integrate different systems that did not really want to integrate; and poor programme management. We all probably recognise some of those warning signs.

So whatever the truth about Waitrose, if your organisation is planning or going through a major systems implementation, be very careful. Get the right expertise lined up, including at a minimum, some internal “intelligent client” resource even if you are using consultants for much of the work.   Be cautious, do your risk management properly, define accountabilities, never assume different systems will integrate easily (e.g. consider the data architecture), plan carefully, put the governance and reporting in place….

It is a long list, so good luck!

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