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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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Should the UK Government Be Transferring More Risk To Track and Trace Suppliers?

In episode 4 of my podcast, which you can now access from this website (see links below) I talk about fraud and corruption in buying, topics that feature heavily in the Bad Buying book. But I also get into the controversy over the UK government’s contracts with firms such as Serco and Sitel. These relate to the Covid “test and trace” process, which has not been a huge success in terms of its ability to identify contacts of people diagnosed with the virus or in persuading those folk to self-isolate.

The controversy has come first of all from the fact that private firms were awarded contracts to run the process without any competitive process, which raises issues of both favouritism and concerns about value for money. Competition is a key driver in terms of achieving value in public contracts, and without it, there are concerns that firms will make excess profits from the taxpayer funded work.

Whilst local government and NHS staff do some of this tracing work, many experts feel that they should have been asked to do more, and where comparisons can be made, the public sector seems to be out-performing the private. But the latest debate was triggered by questions to the health minister, Helen Whately, around how the private sector firms are being managed.

A conservative MP, David Davis, asked “What performance targets are in place for commercial providers of track and trace functions; what penalties can be imposed for failure to meet those targets; and what penalties have already been imposed for failure to meet those targets?”

Whately answered: “Contractual penalties are often unenforceable under English law, so they were not included in test-and-trace contracts with Serco or Sitel. Sitel and Serco are approved suppliers on the Crown Commercial Service contact centre framework and the contracts have standard performance and quality assurance processes in place. Some information on key performance indicators and service levels has been redacted from these published contracts as it is considered to be commercially sensitive.”

That has led to much discussion in the media around whether Whately was telling the truth. In the podcast, I conclude that this was a classic politicians answer – not a lie, but not giving the full picture either.

“Damages” as a type of contractual penalty can be unenforceable, the general rule being that they can’t be disproportionate to the value and nature of the contract. I can’t ask my builder for £1 million in damages if they don’t complete a small repair to my kitchen by the end of the month, even if we contractually agreed that timescale.

But there are certainly other ways of using “penalties”, in the sense of actions that will hurt the supplier if they don’t perform. Three clear options are:

  • Liquidated damages, agreed up-front (I might get £1,000 from my builder if we agreed that was a reasonable amount to compensate me for their failure to meet the timescale).
  • Service credits – a reduction in the  supplier’s subsequent invoices based on missed targets in this period.
  • Performance related contractual payments (“payment by results”) – putting it simply, the builder ain’t getting paid till the work is done!

I talk about all three in more detail on the podcast, but any (or all) could have been used in the tracing contract. Service credits are frequently used in government outsourced service contracts;  and in terms of performance-related payment, it would not have been unreasonable to have some element of the fee related to the number of people successfully traced by the firms, for instance. Perhaps that is in place; but surely Whately would have mentioned any performance mechanism if she could have?

Now, government procurement professionals aren’t stupid. I’m sure they would have considered these issues, and would have wanted to include performance clauses. But my suspicion is that the firms just refused to accept any serious performance penalties, and because of the urgency (and lack of competition), government backed off. You can have some sympathy actually for the firms – they may have argued that external factors that they don’t control would affect their performance, such as the robustness of the data they are provided with in order to do the tracking.

So it would not have been fair to transfer all the risk to them in terms of penalties. However, in an ideal world, we would always want the supplier to have appropriate incentives to perform well, and it is not clear those are really in place here.

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Boohoo Report on Leicester Sweatshops – Lack of Governance and Supplier Management

We should give Boohoo credit for commissioning an independent report from a top legal expert, Alison Levitt QC, to look into the Leicester “sweat shop” scandal.  Earlier this year, the Sunday Times exposed multiple factories that were paying staff well under the statutory minimum wage as well as raising issues around workers’ health and safety during the pandemic. Boohoo was perhaps the highest profile of the retailers that sold  garments made in these factories.

But the report makes uncomfortable reading for the Boohoo board and investors. The very first paragraph is striking. “One of the aspects that I have observed is a tendency by the Boohoo board to treat every piece of negative publicity about the Leicester garment industry as though it was the first time they had ever heard it.”

But the firm knew about issues months (at least) before the story broke.  One auditor told the Board that the conditions in one factory were amongst the worst they had seen in the UK. Levitt says that there was no intenional exploitation by the firm, but rather that “governance” and processes were weak. Fundamentally, Boohoo felt no responsibility for the conditions in their suppliers’ factories. It was also unimpressive to see John Lyttle, the CEO, didn’t mention a trip he had made to “appalling ”factories when he was interviewed by Levitt. That only came out when she talked to others, which made Lyttle look somewhat devious or maybe just very forgetful …  

There is an interesting philosophical dilemma here of course. When I was a CPO in large organisations, I would have objected if you told me I had to take responsibility for every worker in every one of the thousands of firms and facilities that supplied NatWest or the Department of Social Security. So there is a question of scale and dependence here. But we have seen how the leading firms in the procurement with purpose movement (read our “Procurement with Purpose” interview with Unilever here, for instance) do step up when it comes to their major suppliers. They also look to intervene positively when important supply chains contain major sustainability-type risks and issues, whether they are environmental or social.

So suppliers of the clothes that are the main engine of Boohoo’s business should be defined as pretty strategic and worthy of more diligent supplier management from the firm than we saw in these cases. Boohoo has now accepted the review’s recommendations in full and apologised for failing to “match up to the high expectations we set for ourselves”.  The CEO also said the company would be a “leader for positive change in the city”, and promised to go further and faster to improve our governance, oversight and compliance.”

What about the business impact of all this on Boohoo? Well, the initial scandal certainly did have a negative impact, as the share price crashed by some 50%. But it is interesting to see that it is now back almost where it started, within 5% of so of pre-scandal level.  Does that suggest the group that is the main customer base for the firm – young females – has a short memory? Or do they think Boohoo has apologised and will take action, so everything is OK?   

Some of those customers are undoubtedly very committed to serious campaigning on purpose-related issues, from climate change to diversity. But (and sorry to sound like an old cynic here), it seems like many are happy to jump on a Twitter or Instagram controversy about transgender rights or veganism and express an instant virtue-signalling opinion, rather than do something more demanding and difficult – such as changing their buying behaviour and checking out the provenance of the clothes they buy.

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UK Government Spends Millions with Consulting Firms – Did Buyers Know What They Were Doing?

UK government procurement related to the pandemic continues to be a source of some concern and confusion. More consulting contracts were published on the Contracts Finder website last week, showing the vast sums of money that are finding their way into the pockets of the partners at major consulting firms.

Deloitte were awarded two further consultancy contracts, via a call off from a Framework Agreement, worth a total of £8.7 million for:  “Buy Support for Ventilators – ICU equipment & consumables, ventilator sourcing, hard to source products” (£6.7m) and  “Support programme delivery including the identification and procurement of PPE” (£2.2m).

Two other unusual consultancy contracts were awarded to Boston Consulting Group to support the chaotic Test & Trace programme. That represented £4,992,059 for “strategic support” and £4,996,056 for “digital support” (very precise values!)

We don’t know whether there was any competitive process – for those of you who aren’t public procurement experts, you are not allowed to simply choose a “random” or favoured supplier from a “Framework” in most cases without running a competition between firms who are listed on it. Did that happen here? I have my doubts but we don’t know. There have also been comments from within the NHS suggesting that no-one quite knows what Deloitte actually did in terms of ventilator procurement. But hey, it was only £6.7 million.

But there was some good news as well. Gareth Davies, who heads up the UK National Audit Office, was interviewed by the Guardian and amongst other points, he confirmed that a report into government procurement processes during the coronavirus pandemic would be published later this year.

“We’re looking at the procurement process, a lot of public comments and concern about the transparency of some of the procurement contracts around PPE and other areas. We’re doing a detailed piece of work,” he said.

So here are a few of the questions NAO might like to ask the buyers of those consultancy services if they choose to examine that area in particular.

  • Did you understand what it was you really wanted to buy?
  • Did you consider the market in an appropriate manner, and use competition to arrive at the best fit / best value supplier to meet your needs?  
  • Do you understand the difference between the three basic reasons or needs behind buying consulting services – specialist knowledge & skills, intellectual horsepower, or execution / implementation capability?   
  • Did you think about the different commercial mechanisms and models – fixed price, time and materials, target pricing and all the variations? Are you clear you chose the most appropriate for your contract?
  • Do you understand the economics of consulting firms and therefore did you use that to negotiate confidently on daily rates (or fixed price)?
  • If you didn’t use competition, how did you arrive at a fair price for the work?
  • Did you make the deliverables, outputs or outcomes that you were expecting very clear?
  • Did you define the contract management process and the interim reporting that you wanted to see from the firm, and then follow through with professional contract management practice?

Let’s hope those responsible for spending money with these firms avoided Bad Buying and can answer these questions confidently and robustly.

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Track and Trace – Serco Won’t Tell Us Who Is Doing The Work

Private Eye always has some interesting stories, and its coverage of the pandemic has been exemplary  – its medical writer has given some of the best advice and most balanced analysis I’ve seen anywhere.

But one article in the current edition shocked me. The magazine has been trying to find out more about the “track and trace contract”, awarded to Serco. Private Eye has had Serco in its sights since the tagging scandal some years ago, and coincidentally, four ex G4S managers are currently standing trial for fraud in connection with that same scandal.

So the magazine has been interested in how the firm is managing this new contract, which obviously is critical to how Covid is being handled in the UK. There have certainly been questions about how effective the service is proving, with reports that less than half the contacts are successfully traced, and tracing staff complaining of having nothing to do for days on end.

However, it appears that the vast majority of the actual people who are doing the work (such as it is) aren’t employed by Serco, but by sub-contractors. The firm is subcontracting operations to 29 other companies, and 85% (9,000 of a total of 10,500) of staff are apparently not employed directly by Serco. 

But when Private Eye asked which firms were acting in that role, the Department for Health and Social Care (DHSC – the department that “owns” this contract), refused to tell them. So under Freedom of Information rules, the magazine got hold of various documents. They showed that when the Labour Party’s Helen Hayes had asked the same question, the Department didn’t know the answer – and had to ask Serco!

Even more amazingly, it appears that Serco wouldn’t tell the Department the answer. The company’s response (that Private Eye saw) referred to a “panel of 29 subcontractors” and said that  those firms selected are either from a Crown Commercial Services framework or are “known providers”.

It is disturbing is that DHSC didn’t have this information at its fingertips when the question was first asked, and even more so if the supplier doesn’t actually have to disclose who they are using.  This is obviously an absolutely key contract, worth an awful lot of money and critical to the nation’s handling of the Covid crisis. How could you put this in place and not insist on knowing who your prime contractor was using as key sub-contractors? That sounds like a very weak contract and very poor contract management.

I know contracts have been let in haste, for understandable reasons in some cases at least. But there is no excuse for not having a grip on the key aspects of  how major suppliers are delivering the services. Understanding the supply chain must be part of that, and this failure is certainly a contender for Bad Buying – The Sequel!

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HS2 Construction Starts – The Money Pit Gets Deeper

Construction of the HS2 high-speed railway network in England started formally last week. Some will be cheering – not me. At a time when working patterns have been changed because of Covid, perhaps for ever, and everyone is getting used to Zoom, Teams and the like, it seems crazy to be building new rail capacity so businesspeople can go to meetings. Other possibilities such as autonomous road vehicles make also make this very much a 20th century option.

HS2 is basically a job creation scheme, but an incredibly expensive one. The projected cost was initially £1-36 billion, but we’re now looking at £106 billion, incredibly.  The National Audit Office (NAO) report in January said this in summary. “In not fully and openly recognising the programme’s risks from the outset, the Department and HS2 Ltd have not adequately managed the risks to value for money”.

Does anyone really think that those “risks to value for money” will be achieved through the rest of the programme? Look at Crossrail, where the project is now three and a half years (at least) behind schedule, and the cost has risen to at least £19 Billion, some £5 billion over budget.

The business case for HS2 was always highly questionable. It relied on ascribing a value to the extra 20 minutes or so the passengers would have because of their somewhat faster journey from London to Birmingham. It assumed that the journey time was “wasted” from a benefit point of view, which is clearly not true (have they never heard of smartphones or laptops?), and also assumed that passengers wouldn’t use the extra 20 minutes by staying in bed a little longer!

This is an example of a vanity-driven Bad Buying project, and there are others described in my new book, Bad Buying – How organizations waste billions through failures, frauds and f*ck-ups,  published by Penguin on October 8th (you can pre-order it here). Politicians love to spend money in a way that they feel will provide them a “legacy”, assuming that posterity will thank them for their initiative and forget the huge waste of taxpayers’ money once a few years go by.

Another problem with huge programmes of this nature is the lack of anyone in a controlling position who has a vested interest in really managing costs. The engineering and construction firms are probably smart enough to avoid signing up to onerous fixed price deals, so they would like the construction to go on for ever. Likewise the well paid HS2 staff, including thousands of “contingent labour” workers (including procurement people) no doubt earning a very good day rate. The longer the better for them.

We might assume that the politicians have an interest in managing costs, but the problem here is both the relative timescales and the asymmetry of information. Even the Transport Minister has no idea whether they are being spun a line by the experts who are closely involved in the programme. And most Ministers last less than 3 years in post so they know that they probably won’t be around themselves to carry the can – and later Ministers can blame their predecessor! So who really represents the interests of the poor old taxpayer in this? NAO perhaps, but their reports, although excellent, tend to be put together well after the event.

The only positive I can see is that if I do write a sequel to Bad Buying, I’m sure HS2 will give me some good stories. But I’m not sure that offsets the likely spending of £5,000 for EVERY family in the UK, to build what may well become a major white elephant.

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Care Homes in the UK and Beyond – Bad Buying by Omission

One of the first disasters of the current Covid crisis in the UK was the transfer of thousands of people out of hospitals into nursing and care homes, without checks as to whether they had the virus. That put the focus again on the social care sector, and although most of the staff in homes have conducted themselves with great dedication and bravery since then, many issues remain.

I wrote an article on the topic some 5 years ago – here is an excerpt.

What market presents the biggest single challenge in public sector procurement? It has to be Social Care. A spend category worth some £20 billion a year in terms of local authority third-party spend. A category almost totally outsourced now, where funding is being cut by local authorities as their grants from central government are slashed. That is causing a reduction in supply, which in turn is driving severe problems for the NHS as record numbers of ”bed-blockers” are stuck in hospitals because of the lack of a social care-supported  alternative at home. A market where major providers have gone bust and more are teetering on the brink, with the vultures of private equity waiting in the wings.

Since then , we’ve seen more major providers going bust, and yes, the private equity firms have moved into the sector. Many homes rip off their privately paying residents, charging them far more than they charge those funded by councils who use their negotiating power to beat down prices. Meanwhile, too many staff are badly paid, staff turnover is high, and the quality of care is variable.

But these issues are not restricted to just the UK. In the Observer yesterday, Will Hutton wrote about the private equity sector in general and the care home issue in particular. He described the tragic death in a home in Spain of an 84 year old man, Zoilo Patiño, whose body was found in a locked room 24 hours after he died.

“The subsequent investigation into the management company – DomusVi, which had been contracted to operate the home – showed it had been stripped down to a “fast-food version” of healthcare by years of cuts: there was only one care worker for every 10 residents, with not even the PPE to help cope with a dead body”.

But DomusVi, Spain’s largest care home operator, is actually owned by ICG, a British private equity company. As is usually the way with private equity, the company was refinanced and is loaded up with debt – that leverage being one key way in which private equity makes its money. Stripping out costs, or “increasing efficiency” if we’re being kind, is another route often followed. For instance, Hutton claims that Care UK, backed by Bridgepoint private equity, has reduced staff numbers by a third while doubling the number of beds provided in the homes it operates.

Social care services, including care and nursing home provision, are bought by dozens of local authorities around the UK.  Many do a good job in a difficult situation, but this is a spend category that really cries out for some serious national thinking and strategy. We need to ask whether this is a suitable sector for private equity investment; whether there should be more scrutiny of the financial state of providers; what minimum standards might be imposed; and perhaps how to encourage more local, third sector and diverse suppliers into the market – as well as sorting out the funding of care, which is an issue that goes well beyond procurement.  

But the UK central government has never shown any appetite for this sort of involvement on the procurement front. This is in effect, national “Bad Buying” by omission. Whilst over the years, huge amounts of effort, skill and money have been spent putting together strategies and collaborative approaches to buying stationery (!), energy, cars or laptops, OGC, CCS, YPO and all the other collaborative bodies have shied away from social care, as have the strategists in Cabinet Office, the Department for Local Government (whatever it is called this week) or Treasury. 

Perhaps the promise of a new approach to social care funding will provoke some serious action on the procurement and market side as well. We can only hope so.

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Fraud, Charities and Steve Bannon – Where’s the Money Going?

The arrest of Steve Bannon, President’s Trump ex-adviser, hit the headlines this week. Along with several other men, he is accused of siphoning off funds that were given to a charity which sought private donations to support the building of the Trump-promoted wall (fence, barrier, whatever) between Mexico and the USA.

Without getting into the mentality of the donors who would give their hard-earned cash for that cause, the case does point out the difficulties of knowing exactly where you money is going when you had it over to any charity.  There have been many examples over the years of charities that do genuinely support good causes, but appear to be just as interested in spending money on fancy offices and big salaries for executives.

Even an organisation as reputable as the Australian Red Cross ran into controversy recently when it had to defend its decision to spend up to 10% of bushfire relief donations on administration costs. That doesn’t seem too unreasonable to me, but in the past, it had promised to put 100% of all money raised directly to a cause.

Then there are the actual fraudulent “charities” that act as a front for criminal activities. For instance, four men were found guilty recently of fraud in the UK when they expropriated over £500K of donated money rather than using it for genuine purposes.  Collectors in camouflage trousers and “Save Our Soldiers” shirts rattled collection tins and conned people at railway stations into thinking they were giving to support disabled troops. But the  money went to fund the lifestyles of David Papagavriel, Terence Kelly,  Ian Ellis and Peter Ellis. That’s the reason I never put money in collecting tins if I don’t know the charity, by the way, even if it looks like a great cause.

The third type of charity-related fraud comes when a charity itself is the victim. Every organisation that sees large amounts of money flowing through it can be a target for what I define as “procurement related fraud”, and charities are no exception. There are some interesting examples of this in my new book, Bad Buying – How organisations waste billions through failures, frauds and f*ck-ups (to be published by Penguin Business on October 8th).

The fraud may originate from outside the organisation, but often there are insiders involved, or in some cases it can be a purely internal affair. For example, one story in my book covers the exploits of the CEO of an education charity, Philip Bujak. He was sentenced to six years in jail in 2018 at Southwark Crown Court in London for swindling some £180,000 out of his organisation. Using a company credit card, false invoices to Fake “suppliers” and other routes he got the charity to fund his honeymoon, and family events at hotels. One bill for a “charity conference” was really his mother’s 80th birthday party, and he was also keen on buying and restoring paintings.

So don’t think that everyone who works within a charity is automatically a good person. There can be the odd bad apple, which means that charities (like every other organisation) need to take strong anti-fraud measures to protect against internal or external villains. I haven’t got the space here to go through all those suggested steps, but my book goes into that in more detail, with seven key principles to avoid buying-related fraud and corruption listed and explained.  And we will come back to those here at a later date as well.

Meanwhile we will watch the Bannon case with interest …

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Ayanda Capital Facemasks Contract – Were Basic Procurement Principles Forgotten?

It is a while since I wrote about the PPE (personal protective equipment) process in the UK government and health sector, but the stories continue to emerge and some are troubling to say the least.

The case of the contract with Ayanda Capital to supply face masks is one that continues to develop. Andrew Mills was the CEO of Virtualstock (a supply chain software firm) until 2018 but has acted as an unpaid government adviser since then. He secured production capacity for masks from a Chinese factory, but asked Ayanda Capital Ltd (an investment firm, registered in Mauritius but based in London) to “front” the proposal and then contract with government, as Ayanda had more experience in handling foreign payments.

The contract is worth at least £150 million, but now product has been delivered, fifty million masks can’t be used in hospitals because of safety fears. The masks use ear-loop fastenings rather than head loops, which means they may not fit tightly enough to be effective.

So did Ayanda fail to meet the specification? In normal cases, a product that does not meet the specification simply means that the supplier does not get paid.  No, says the firm, it’s not our fault.

“The masks supplied went through a rigorous technical assurance programme and met all the requirements of the technical specifications which were made available online through the government’s portal,” they say. If true, that suggests the technical specification given to suppliers was simply incorrect.

But why is the government not challenging this? We can only draw two possible conclusions.

  1. Ayanda is correct. The specification was wrong and the error was the fault of the government procurement team.
  2. The government wants Ayanda to have the money even if they have failed in some way – for whatever reason, maybe to avoid more embarrassing debate – and simply wants to ignore the apparent specification problem.

The Good Law Project is challenging the government through the courts on this and some other questionable contracts that have been let during the crisis.  Jo Maugham QC is leading the challenge, and on Twitter he has suggested, based on analysis of market prices, that Ayanda may have made over £50 million profit on this deal.  That leads to another question. What measures did the procurement team take to ensure that the supplier was not going to make “excess profit” out of this deal?

Was there an open book provision, so the cost price from the factory was visible? Clawback provisions? Maybe even a cost-plus pricing formula? Or was the Ayanda price simply accepted without analysis, benchmarking, negotiation or questioning?

In the heat of the PPE crisis, we might forgive a certain amount of unusual procurement in terms of the selection of suppliers and perhaps less focus on track record and capability than we see in normal times, in order to simply get access to product.

But if the procurement team really did fail on the specification, that is very disappointing. “Getting the specification right” is literally Chapter 1 in my new book, (out in October) because it is so fundamental. Equally, a failure to negotiate or construct a robust commercial arrangement in order to allow a supplier to make a reasonable but not excessive profit is really pretty basic procurement work.

If failure on these two fronts has led to the taxpayer losing millions, and undeserving businesspeople making millions, then this truly will be a contender for the 2020 Bad Buying Trophy.

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Satellite of Love? The Perm Sec Doesn’t Think So…

A ”Ministerial Direction” sounds like a very dry and boring aspect of civil service bureaucracy, but that is far from the case. It happens when a government Minister in the UK (an elected politician) insists that their most senior civil servant (the “Perm Sec”) takes an action that the civil servant believes is against the principles of good value for the taxpayer.

Or, as the Institute of Government puts it, “Ministerial directions are formal instructions from ministers telling their department to proceed with a spending proposal, despite an objection from their permanent secretary”.

They are unusual; through the nineties and noughties, a couple a year was the average. There were more around the banking crisis, and we have seen a not unexpected flood of directions in recent months around Covid-related issues. But often, they are not really reflecting a genuine disagreement between the Minister and the mandarin. It is more that the spending can’t definitely be seen as good value, so the permanent secretary has to seek the direction to protect themselves, even if they are wholeheartedly in agreement with the Minister in terms of the actual action.

Much of the Covid spending in areas such as the furlough scheme for instance may prove to be poor value ultimately, and cannot be clearly justified upfront; but I suspect civil servants were right behind the Chancellor and fully supportive of the actions he took.

However, very occasionally you get a direction which reflects a real disagreement, where the Perm Sec is basically saying “I think this is a waste of money and I am doing it because you are forcing me to, you idiot”. Put in nicer words of course. And one such case came to light this week, relating to the UK investment in proposed purchase of OneWeb, a (bankrupt) start-up company whose ambition is to provide global broadband. $500m in equity investment is being considered to co-finance the purchase of OneWeb from US Chapter 11 bankruptcy proceedings.

Perm Sec at the Business Department, Sam Beckett, says in her letter to Alok Sharma, the Minister, that while in one scenario “we could get a 20 per cent return, the central case is marginal and there are significant downside risks, including that venture capital investments of this sort can fail, with the consequence that all the value of the equity can be lost”.

There is more in terms of the issues, and Beckett does recognise that this could prove to be an opportunity for the UK, but she feels this would be an unusual investment for a public body, and you have to wonder why it would be attractive for the UK government if it is not to other more experienced investors!

Is this Bad Buying though? Well, you could argue that we won’t know that until we see if OneWeb succeeds or fails. But actually, good decision making is NOT really related to outcomes.  If I make the decision to stand out on the golf course in a thunderstorm with my umbrella up, and I stay dry and don’t get hit by lightning, that does not make it a good decision. It was a bad decision, because based on the facts available at the time it was made, it was the wrong choice (assuming that staying alive is high on my priority list).  You might argue it was successful in terms of outcome, but it wasn’t right at the key moment.

Sharma’s reply says that “I have been informed that even with substantial haircuts to OneWeb’s base case financial projections the investment would have a positive return”. But other experts have suggested that the chances of success here are pretty low. One attraction of the investment is to provide an alternative space system for GPS services to the EU’s Galileo system (the UK is leaving the EU of course). But some believe the OneWeb satellites are not fit for that purpose (follow the link for more techie debate!)

The Guardian talked to Dr Bleddyn Bowen, a space policy expert at the University of Leicester, who said “the fundamental starting point is, yes, we’ve bought the wrong satellites.” (This from Forbes is a pretty balanced view of the technology issues if you want to get into more detailed pros and cons).

That Bowen comment sounds like “getting the specification wrong”, which is literally chapter one in my new book, Bad Buying, out in October.  A good spec as any procurement professional knows is an essential starting point to a successful contract.  So, whilst I don’t understand all the aspects of this, it looks like this is the wrong decision based on risk and opportunity.

It may of course turn out to be a successful decision in terms of outcome – but that still won’t mean it was the right decision, if the facts at this stage suggest a high probability that the UK taxpayer will lose out. And on that basis, we nominate it indeed as an example of Bad Buying.

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