The Sunday Times has really got into its investigations recently, and after its excellent expose of the UK’s HS2 rail programme, last week it looked at another issue with a definite “Bad Buying” angle.

Babylon Health, set up in 2013, was going to revolutionise healthcare. Ali Parsa, the founder, is a serial entrepreneur whose previous venture, Circle Holdings, also had some issues (he stepped down from Circle before he set up Babylon). Circle ran Hinchingbrooke Hospital in England, the first fully outsourced hospital. Initially, it seemed to go well, and Parsa was a highly visible cheerleader for the operation, but after a couple of years, Circle pulled out leaving the NHS to pick up the pieces.

But with Babylon, Parsa seemed to have a real product that could benefit everybody. It was an AI powered diagnostic platform that could tell you what health problem you had after a short online consultation. The “app” scored better than doctors on medical tests, Parsa claimed, and could provide excellent diagnosis and care at a fraction of the current cost. For the permanently hard up health services in the UK and US, it seemed too good to be true – and of course it was. However, Parsa used political connections to win business, as the Times reported. Between 2015 and 2022, the company had 22 meetings with government ministers.

“Babylon’s deals with the NHS, which saw it receive at least £22 million over the past three years alone and helped it to woo investors, were in part due its links with the Conservative Party and the backing of Hancock, the health secretary from 2018 to 2021. The Tories received more than £250,000 in donations from individuals and companies with stakes in Babylon Healthcare, including Hancock, whose failed Tory leadership bid in 2019 received £10,000.”

However, the newspaper’s investigation found high-pressure sales techniques and some claims for the product that were simply false. For example, at the Royal College of Physicians in 2018, Parsa showed how Babylon’s AI used a phone’s camera to analyse the facial expression of a female patient to pick up subtle cues that a doctor might miss. This is how the Times describes it.

“This is a real consultation,” Parsa said on stage. “This is what we have built. None of this is a show.”

It was a show. The facial-analysis tool, a prop for a demo, never made it to market. The “patient” in the video was an executive assistant at Babylon… This sleight of hand was a small example of a culture fixated on form over substance, a trait common in Silicon Valley but dangerous in healthcare.” 

Indeed, the much vaunted AI was little more than a decision tree written in Excel based on doctors’ knowledge. Soon, sceptics began testing it and found that it could easily mistake a heart attack for a less serious panic attack, or an ingrowing toenail for gout. I remember various people on Twitter talking about how dangerous it was and calling out Babylon as a con.

But the firm managed to raise $1.2 billion from investors between 2013 and a stock market float in 2021, and at one point Babylon was valued at some $4.2 billion. But after that float, some badly judged deals started affecting the firm’s finances, just as more expert voices also pointed out the technical failings. For instance, the Royal Wolverhampton NHS Trust signed a ten-year deal for a digital-first GP service that would allow patients to use Babylon’s digital tools. But Babylon cancelled the contract in 2022, saying it just could not afford to invest in the service.

Finally in August this year, the firm collapsed into administration and the remnants were picked up by a couple of trade buyers. Parsa has pretty much disappeared, as has most of his own fortune.

It all reminds me a little of the Theranos scandal – the fake blood testing equipment launched by Elizbeth Holmes (who is now in a US jail). Babylon was not as fake as that, and Parsa is not accused of wrongdoing, but the principal of something that everyone wanted to work, but really was built on sand, is the same. And there is also FOMO – the “fear of missing out”. This is an extract from the Bad Buying book section on Theranos.

“Buying failure come into this because retailer Walgreen’s spent $140 million with Theranos over seven years, hosting around 40 blood-testing centres in their stores. They got very little benefit from that and recovered some $30 million after a lawsuit and settlement following the eventual disclosure of the issues.  Amazingly, as Bad Blood reports, Walgreens’s own laboratory consultant, Kevin Hunter, had seen early on that something wasn’t right with Theranos. But the executive in charge of the programme at Walgreen’s said that the firm should pursue the pilot because of the risk that CVS, their big competitor, would beat them to a Theranos deal.

Again, buyers wanted to believe that something was real, even in the face of mounting evidence that it wasn’t. This relates back to comments around believing the supplier … it is easy for a naïve or gullible buyer to be sucked into believing what the supplier wants them to believe.

Suppliers will take advantage of this tendency – whether it is the relatively innocent “yes, we can install this new IT system in six months” or the more dangerous “this equipment will find hidden bombs”.  And FOMO – the fear of missing out to the competition – is something else suppliers will use, and that can lead to bad decisions.  It’s not just physical goods either. The top consulting firm selling its latest “strategy toolkit” will mention that the potential client’s biggest rival is also very interested”.

One day, there is little doubt that a real AI-powered system will be really useful in the world of medical diagnoses. So maybe Parsa was just ahead of his time?  But that is two of his “innovative” businesses that have cost health services time and money without much benefit in return. So I’d be very careful next time he announces he has a great idea…

Last week the Sunday Times ran an expose of the UK’s HS2 rail project. The programme is being severely curtailed now due to massive over spending against the budget.

Over several pages, the Times laid out a culture of overspending and bad financial forecasting, with those who tried to point out the problems often forced out or removed if contractors. The accusation is that senior managers knew that budgets were unrealistic but covered up the facts for as long as possible. Presumably that was to keep their lucrative jobs, and keep ministers happy. The thinking may have been that If the programme got to a certain point, then it could not be cancelled.

There was more in yesterday’s edition of the Sunday Times, including an interview with Stephen Cresswell, one of the whistleblowers.

This first phase was expected to cost £21 billion and yet his calculations suggested a fairer assessment was £30 billion — a huge discrepancy. “There were problems with the way the figures had been calculated and it was likely to cost an awful lot more,” he says. “I did the calculations pointing this out but I was told to concentrate my efforts on something else.”

Unfortunately this good piece of reporting did not get much discussion on national TV news certainly, perhaps unsurprisingly given the disaster unfolding in Israel and Gaza.  The report did say that the internal audit function at HS2 is looking into the allegations – but that isn’t good enough. We really need a detailed external review of what happened in HS2, to understand that specific case but more importantly, to see what lessons can be learnt that apply to other large capital programmes in the UK.  Maybe that is best done by the National Audit Office, although several ex-employees have written to the SFO (Serious Fraud Office) accusing HS2 of mismanagement of public funds, so maybe this will all turn more “criminal”. 

If no action is taken quickly, then we will have to see if Labour will have the appetite for driving a review if they do form the next government. After all, it was Labour and Lord Adonis, then Transport Minister, who kicked off HS2 and Adonis was a non-exec of HS2 for some years. But we really do need a review. We can’t allow huge expenditures where the people involved and responsible are pursuing their own goals rather than the taxpayers’ best interests. As Cresswell put it: “Costs, risks, timescales and benefits are being manipulated to suit individuals or organisational goals rather than the public interest”.

Another interesting point the Sunday Times highlighted last week is that Ministers appear to have lied to Parliament – or at best “misled” the house. Chirs Grayling was one, but a junior Minister is also accused.

“ On June 7, 2019, Cook sent a first draft of his report to Grayling. It suggested HS2 was billions of pounds over budget and years behind schedule.….  In July, the minister for transport, Nusrat Ghani, fielded questions during a Westminster Hall debate on HS2 before the Commons final vote on the bill to approve the Birmingham to Crewe phase two leg.  She said: “I stand here to state confidently that the budget is £55.7 billion and that the timetable is 2026 and 2033.” She repeated her assurances five days later, during the third reading debate in the Commons.

An FOI request exposed that she had been told 3 months earlier that the programme would breach its budget – so doesn’t that sound like lying to Parliament?  

It was good to see the shadow Chancellor, Rachel Reeves, announcing that a “covid corruption commissioner” will look into PPE procurement during the pandemic and the waste of billions of public money. In terms of waste, HS2 is at least on that scale, so surely that also deserves a very thorough and independent look at what happened there?

In recent weeks, it feels like I have been writing about pretty serious topics here – HS2, social value, fraud, failures in local government procurement in the UK and the like. So a story I saw recently was attractive as a topic because it wasn’t a matter of life, death or wasted taxpayer money. It was however (allegedly) about a waste of multi-millionaire rock star money. It was also an illustration of a key point that is forgotten surprisgly often when we’re writing specifications and talking to suppliers.

The band Coldplay has gone through an interesting critical trajectory. The hip and trendy NME made A Rush of Blood to the Head album of the year in 2002; but over the years, many started seeing them as purveyors of somewhat dull, middle-aged music. I’ve always thought they were fine songwriters although recent material is a little MOR for my tastes. But what no-one can deny is the level of their success – over 100 million albums sold and still the 14th most listened to band on Spotify today.

For some 22 years, their manager was Dave Holmes. Little is known about him, but more is coming out now as he and the band are busily suing each other. He started legal action in the summer, claiming £10 million from Coldplay in commission on earnings that (he sasy) they have not paid him. But the counter-case from the band is looking for £14 million from him, saying that he has wasted millions of their money. 

And this is where it gets Bad Buying interesting. Much of the claim is around preparation for the huge global Music of the Spheres tour, for which Holmes held ultimate responsibility. By the way, that tour took $617.8 million in ticket sales alone. (Ever thought you are in the wrong business?)  The band claims that costs escalated  and say that equipment was not suitable or was bought at inflated prices. As the Times reported;

Examples in the claim are eye-watering. They include, “16 bespoke stage pylons” for lighting and video that, it allegedly soon became apparent, would be unjustifiably expensive to even use. However, it was too late — €10.6 million had already been chucked at the pylons.

A “visual project known as Jet Screen” was commissioned for $9.7 million, with a huge chunk of that cost, the band claim, personally authorised by Holmes. The problem was that … the dimensions given to the manufacturers for the Jet Screen were wrong — and it was too big. It was only used for ten concerts in Buenos Aires.

Yes, it’s another “Irish government printer” faulty specification story!  In the Bad Buying book, we have the case study of the Irish government buying a state of the art printing machine that simply did not physically fit into the building that was supposed to house it. That was a reminder that sometimes getting the specification right is not a matter of highly complex technology or difficult outcome-based definitions – it can be as basic as the physical measurements!

The Times draws a parallel with the classic Stonehenge scene in the best comedy film of all time, Spinal Tap, where the band commission a model to use on stage – and when it is delivered, it turns out to be tiny. But in this case, the Jet Screen was just too big.

Holmes is also accused of not opening “the shared online Dropbox which contained the designs for the Music of the Spheres Tour at any time between August 2020 and February 2022”.  Rock and roll madness right there! More interesting is his relationship with Live Nation, the promoters of the tour. Holmes had taken loans from Live Nation at what look like preferential terms and the band say he owed some £27.5 million when he was negotiating terms for the tour with the firm. This, say Coldplay, was an inherent conflict of interest, and if those facts are acccurate, that does have some validity in my opinion. It is an interesting situation without a doubt – I certainly wouldn’t want one of my procurement managers negotiating with a supplier if she owed them money.

So we’ll see what happens next. And just remember, if you’re buying anything in the equipment line, just make sure you know how big you really want it to be! Many elements of the specification may be much more complex in many situations, but let’s face it – size really does matter.

It was tempting to write again about the HS2 rail programme given recent events and the question of whether it is going to ever get to Manchester – or indeed to Euston.  It will go down in history as one of the great British public sector disasters, perhaps costing us even more than NPfIT, the NHS IT programme a decade or more ago which certainly cost us billions.  From the very beginning, it was clear to me that the business case was a con in order to justify the programme, which was enough for me to think it was a misjudged idea.

But the wider question is this – why are we so bad in the UK at capital projects and programmes? A recent article in The Times from chief culture writer Richard Morrison highlighted that failure in the specific area of arts-related building projects. The renovation of the Colston Hall in Bristol – to be renamed the Bristol Beacon – is now expected to cost £132 million, against an initial budget of £48 million. In Manchester, the Aviva studios opens soon, with the price-tag of around £240 million, more than double the original cost estimate. In Edinburgh, the redeveloped National Galleries of Scotland is a relative bargain, a mere £38.6 million, only £22 million over budget.

In East London, there is the new East Bank cultural quarter on the former Olympic Park at Stratford. That was supposed to be £385 million, now we are looking at £628 million and still rising. As Richard Morrison said, we might wonder “what difference this glitzy arts campus will make to ordinary lives in London’s poorest borough”. Political vanity projects in London aren’t new of course. Remember Boris Johnson’s “garden bridge” fiasco?

Is it optimism bias we are seeing time and time again?  Is it simply incompetence in terms of properly defining the specification and carrying out costing exercises up front? Can we just blame inflation?  Is it poor contract management and a lack of control that allows suppliers to escalate prices through the project?  Or lack of control on changes in specification, changes which genuinely cause costs to grow?

The other possibility is conspiracy. It is in everyone’s interest for a project to look like a bargain when it comes to justifying it through the business case process. Your new concert hall (or railway) looks like a good investment at £x whereas it wouldn’t look good at £2x. so the sponsors, the professional services, engineering and construction firms involved, perhaps even local people, all want the case to be approved, so let’s make sure it is estimated at x and not 2x.  Everyone also knows that once it is underway, it is very difficult to stop these projects even as the costs escalate, as we are seeing with HS2 now.

This was discussed in a long running legal case over the new concert hall in Paris, which featured in the Bad Buying book. The dispute between the authorities and the architect, Jean Nouvel, got rather nasty before the case was eventually settled in October 2021.  Here is an extract from the book.

“In 2007, he (Nouvel) was contracted to build the auditorium for €119 million, but the final cost was estimated at €328 by the owners and €534 million by the regional state auditors (which in itself seems like a big discrepancy). Le Monde reported Nouvel saying that the €119 million was quoted purely to match the ceiling set for the public tender, and was not really a genuine cost estimate. He claims that €100,000 per seat was the established cost for similar concert halls, and the €119 million total would have required spending only half that much, so it was never realistic. He also claims that everyone knew that the real cost would be much higher – “this is pretty usual in France in public tenders for cultural projects”, he was quoted as saying. His lawyer also says Nouvel is being made responsible for failures in project management”.

So might HS2 have been a case of a conspiracy to reduce the predicted cost in order to get the project approved?  Is this happening in too many UK projects?  If Labour does win the next election, I would suggest an immediate and wide ranging review of why we seem to be so hopeless at building stuff to budget. You’ll need people who are genuinely independent or maybe folk who will blow the whistle on what really goes on! Because the answer can’t just be “a bit of inflation”. Something is going wrong on far too regular a basis in the UK.  

Increasing numbers of local authorities (county, city and town councils) in the UK are facing financial crisis. The latest is Birmingham, England’s second largest city, which has issued a Section 114 notice – in effect declaring itself bankrupt. Commissioners will be sent in from central government to take over the running of the authority.

The core reason is an equal pay claim going back years. Women employed by the council weren’t paid as much as men doing similar jobs. But it seemed for some years that financial provisions had been made to pay those affected and all was well. But there appear to be more claims now, which suggests the original problems weren’t sorted out when they should have been. There should have been a serious job evaluation programme but somehow that hasn’t happened. Infighting amongst the ruling Labour Party has not helped either, some observers claim.

However, there also seem to be other reasons for the crisis. Birmingham spent over £100 million hosting the Commonwealth Games last year – good for motivating the locals perhaps, and maybe it brought cash into the city, but a lot of many to spend when you’re in a bad financial position.

Now we are moving into “bad buying” territory too, with  accusations of money being wasted in the procurement area. A report in the Daily Mail says, “calls for police probe into bankrupt Birmingham Council’s £11M payments to tiny taxi firm charging £200 a day to take one pupil to school”.  This firm, Green Destinations Ltd, (GDL) has grown rapidly in recent years to become the main beneficiary of  school transport contracts, and there is a suggestion that it might have been “close” in some way to executives who had influence on the contracts.

Now we have to be careful with headline reports. £200 a day might be for a special educational needs pupil who needed accompanying in the taxi and so on. But competitors also claimed that council officials told their drivers they might be better off working for the favoured firm in question. And the table of fares quoted by the Mail does seem to show very high fees compared to standard taxi rates. No doubt more will emerge on this.

However, there hasn’t been any suggestion that procurement in Birmingham is generally useless or corrupt. But I did feature the authority a couple of times in my Bad Buying book. The first was a call-centre contract with Capita, which an enquiry into the service pointed out did not incentivise Capita very sensibly. They were paid on a per call basis, so had no incentive to sort out problems first time or take the required time to do that.  (However, it was the council itself that wasn’t very good at sorting out the underlying problems, to be fair to Capita).

The other mention in the book was the disastrous road maintenance contract with Amey, which ended up with the firm paying £215 million to get out of a 25-year PFI deal. The relationship between the two parties had broken down completely, with a famous report that the council tried to charge Amey penalties of £48.5 million because the firm didn’t repair two bollards quickly enough. All of that was not necessarily the council’s fault, but you have to wonder why you would get into a 25 year contract for any service really. (Maybe it would have some logic for a large construction PFI, but not for roads maintenance). Put those two together and you might perhaps draw conclusions about naivety and a lack of commercial nous in Birmingham.

Anyway, the city may now need to sell art galleries, housing and land to try and balance the budgets, which is very sad for what is a great city. Of course, the national Conservative government is loving this, claiming it is an example of “Labour failure”. But in fact, it is just the latest in a long line of local government waste, corruption, bad buying and financial problems, a line that runs through Liverpool, Northamptonshire, Somerset, Thurrock, Slough, Surrey Heath, Woking, Croydon and more – both Tory and Labour authorities.  Reduced funding from central government is one reason; but there are also too many incompetent or corrupt people in our local government system, it seems.

Without fanfare or comment, in the middle of the holiday season, the UK government recently published the data for spend with SMEs (small and medium enterprises) for 2021/22.  This covers central departments, and some associated bodies, although the definition of what is in and what is out is not always clear. The data is given as direct spend – money that goes straight to the small firms – and indirect, the spend that goes via larger firms that then use SMEs in their supply chain.

It is not unusual for it to take over a year from the end of the period in question before data is published. That is in part because it does take a while to gather the data, but I suspect the publication might have happened sooner if there had been a positive story to tell.

But the headline number was that SME percentage spend declined in 2021/22 compared to 2020/21.  The total was down from 26.9% to 26.5%, and the direct spend was down from 14.2% to 12.3%. That does not look good against the government target of 33% of spend.

Indirect spend was up by 1.4% but that was not enough to compensate for the drop in direct spend.  It looks like the main reason for the overall decline was a big drop in the Department of Health and Social Care (DHSC) SME spend year on year. I suspect that is the “PPE effect” – as we know, there was lots of PPE bought in 2020 and 2021 from smaller firms. They were often crooks, chancers and friends of ministers, but they were SMEs, nonetheless.

Until the pandemic, the DHSC spend was relatively small compared to MOD and Transport – the two “traditional” big spenders.  Most health spend was out in the Trusts so not captured in this data. But the huge amount of “central “ buying, on PPE but also track and trace and other projects, pushed up the significance of DHSC in the overall numbers.

In 2019/20, DHSC spend was just £3.1 billion against MOD’s £21.1 billion. But the figure shot up to £13.3B in 20/21 (MOD was £19.5B) and was still £11.5B in 21/22.  In 20/21, 23.3% of the DHSC total was direct SME spend, so that made the year look better, but by 21/22 that dropped to 14.2%, pulling down the whole percentage.

I’m going into some detail there because it does demonstrate how ridiculous looking at the overall number actually is. When one factor – PPE – in one Department can skew the whole data set, it is pretty useless. But let’s go back in time and look at how this target emerged.  

Supporting smaller firms was one of the first “social value” type issues government embraced. I worked in the Office of Government Commerce (part of Treasury, the UK finance ministry) as a consultant back in 2009 on the implementation of the 2008 Glover report – “Accelerating the SME economic engine: through transparent, simple and strategic procurement”.  (That link took some finding!)

But Sally Collier (OGC’s Policy director) and I didn’t really like the idea of targets for spend with SMEs for various reasons. One was the difficulty of setting sensible targets, which really needed to vary by department to be meaningful. We were interested in departments and buyers simply doing the right things, and therefore also worried that targets would mean effort going into the data, not the real action. But our advice was ignored and after the 2010 election a 25% target was set. 

It quickly emerged that 25% was unachievable. The Ministry of Defence and the Highways Agency (Transport) accounted for almost half of central government procurement spend and there was no way an SME was going to build a warship or the M25 motorway.  So the target was changed to an “aspiration”, a classic Francis Maude fudge, and then indirect spend was included to make it easier to hit the target.

But many of the first-tier suppliers to government have no idea really how much they spend with SMEs, so the data is pretty dodgy. Then the 25% target – which had never been achieved – was stupidly changed in 2015 to 33%, purely because the Cameron government wanted to say something positive for the “small business” lobby in their election manifesto.  And 33% is unachievable too, as we’ve seen, even including indirect spend.

The other issue is whether supporting SMEs is the right target today. We have become much more sophisticated in the 15 years since Glover and now most large private firms are interested in supporting diverse suppliers, not simply small firms.

So why not shift the focus to using government procurement to support charities and social enterprises, minority owned firms, innovative businesses, firms in deprived areas or those that employ lots of disabled people?  You don’t see Unilever or other admired private sector businesses defining some prospective suppliers as special just because they are small. Indeed, many SMEs are small because they want to be, or because they just aren’t very good.

But there has been good work in government over the years in terms of helping SMEs. For example, even back in 2009, MOD led some impressive initiatives to promote SMEs through their supply chain. But really, this element of public procurement policy is crying out for a refresh, a more nuanced set of objectives and – if we must have targets – something that is realistic and motivating, not a painful data collection exercise that is bound to end in failure.  

I’ve decided that I’m going to win the 100 metres sprint at next year’s Paris Olympics. I believe the benefits for the UK economy will be huge and I will inspire millions with my efforts. My wife has pointed out that my best time for the event was 13.8 seconds, recorded at Houghton School some years ago (many years ago to be honest). I need to beat that by some 4.5 seconds next year, but I am quietly confident.

However, in her annual report on my planned activities, Jane has had the temerity to rank my chances of success as “red”.  That red rating indicates that “successful delivery of the project appears to be unachievable.” That means “there are major issues with project definition, schedule, budget, quality and/or benefits delivery, which at this stage do not appear to be manageable or resolvable”.

I am disgusted by this lack of positivity. My gold medal will lead to transformational benefits for generations to come, improving connections and helping grow the economy. And I have already spent billions on food supplements, very expensive training programmes and massages, so you wouldn’t want to waste that money, would you?

That is pretty much the situation with HS2, the high-speed rail programme that is going to link London with other cities in England. The latest report from the Infrastructure and Projects Authority (IPA), which sits within the government’s Cabinet Office, has given the first two phases (1 and 2a) of the HS2 programme an unachievable “red” rating, defined as above.

There is no mention of HS2 anywhere in the report’s various narrative sections, despite the fact it is the biggest single programme in the UK in terms of cost.  In the table that list all 250+ projects, all it says next to the red rating is this. “A new railway connecting the country’s biggest cities and economic regions enabling rebalancing and regional growth in the Midlands Engine and Northern Powerhouse – through a high capacity, high speed and low carbon transport solution”.

And the Department for Transport’s response is also pretty much as above.

Spades are already in the ground on HS2, with 350 construction sites, over £20bn invested to date and supporting over 28,500 jobs. We remain committed to delivering HS2 in the most cost-effective way for taxpayers. HS2 will bring transformational benefits for generations to come, improving connections and helping grow the economy”.

That really is treating us as idiots. No attempt to actually respond to the undeliverability issues, or explain how “red” will turn to amber and green, just that they’re committed to it and we’ve spent a sh** load of money already, so hey, let’s spend another £50 billion or so. At least.  

Clearly, all those supposedly super-clever people in Treasury and Department of Transport have never heard of the sunk cost fallacy. Well, of course they have heard of it but this is politics. Civil servants just have to do what their masters tell them, but you can be sure HS2 will be disappearing from a lot of senior peoples’ cvs on LinkedIn in a few years’ time. This is just a terrible, disgraceful and ridiculous waste of public money, from the beginning when the business case was manipulated to appear positive, and my daughter’s generation will be asking questions for years to come about just how we allowed this to happen.

William Hague in The Times agreed.

“If I were still in government, I would be climbing the walls about this. I would want to stop all work on HS2 today, but I know I would be told that the contracts signed for its construction make that impossible. I would want to fire somebody senior, but I would be informed that the chief executive of HS2 Ltd already quit last month so that satisfaction would be denied me.

Then I would say that if we can’t cancel it we should at least make sure that the bits that haven’t been abandoned will work well, but I would be told that the cost of making it start in Euston has doubled recently, that no one could decide how many platforms they wanted to build, that this crucial part is currently unaffordable and that the transformational, high-speed connection of Birmingham to central London might not even reach the latter. And then I would want to scream”.

Indeed, the IPA report is generally disappointing. It is full of case studies of successful projects and programmes (244 now in the portfolio), with little or no discussion on the problems. And I’m not sure how the rapid charging fund for EVs can be seen as a success when you read this. Most of the case studies have a few initial issues but are turned round thanks to the IPA to deliver success.  It reads in the main like a marketing document from a consulting firm. (I actually wonder whether privatisation is on the cards?)  I suppose we shouldn’t be surprised, at the end of the day, the IPA is not truly independent, it is part of government, so it does have to toe the party line.

It is also noticeable that so many projects are rated amber – no less than 80%. That can be a bit of a cop-out rating really. It says there are issues, but nothing too much to worry about. I think when the IPA or its predecessor first started, there were amber/red and amber/green ratings too, but I suspect that put too many projects into the (at least partially) red bracket, which is embarrassing for the government. But really having 80% of the projects ranked at the same level reduces the usefulness for any external scrutiny.  

Anyway, in the couple of hours it has taken me to write this, another £4 million or so has been spent on HS2. What a waste.

The US Government Department of Justice recently issued a news release.  

Booz Allen Hamilton Holding Corporation has agreed to pay the United States $377,453,150 to resolve allegations that it violated the False Claims Act by improperly billing commercial and international costs to its government contracts. Booz Allen, which is headquartered in McLean, Virginia, provides a range of management, consulting, and engineering services to the Government, as well as commercial and international customers”.

I do love the precision of the final $150 on that number! Couldn’t they have rounded it slightly?

The accusation was that between 2011 and 2021, the consulting firm charged costs to its government contracts and subcontracts that should instead have been billed to its commercial and international contracts. That particularly applied to some indirect costs. So the government was allegedly paying for activities and services that had nothing to do with the work the firm was actually doing for government organisations.

Now allocating overheads can be a tricky issue, as many of us know. And Booz Allen issued a statement, as you might expect.

“Booz Allen has always believed it acted lawfully and responsibly. It decided to settle this civil inquiry for pragmatic business reasons to avoid the delay, uncertainty, and expense of protracted litigation. The company did not want to engage in what likely would have been a years-long court fight with its largest client, the U.S. government, on an immensely complex matter. The company fully cooperated with the government and is pleased to move forward.”

So there is no admitting liability or guilt here. I can understand why the firm does not want a long, expensive fight – on the other hand, if you were 100% sure of your position, many firms would choose to take it further rather than handing over quite such a large amount of cash.

The most amazing element of this story is this. The investigation was sparked by a whistleblower, a former Booz Allen employee, Sarah Feinberg, who tipped off the authorities about the alleged misconduct from 2011 to 2021. And now she will receive no less than $69,828,832 as a thanks (it’s that precision again…)  

$69.8 million!  Good grief, I’m going to have a good think now about every firm I’ve ever worked for and whether they might have done anything “naughty” in their dealings with the US government …  

The moral of thee story is simple. Check your billing from professional service firms. I once took on a senior interim commercial/procurement role in government with an organisation that had around 100 consultants from one firm working on its major programme. That was £500K A WEEK we were paying this firm (it better be nameless…)  

I took a look at the invoices – incredibly there was no contract manager for this contract – and found that amongst other things, we were being billed for the senior partner’s assistant. The partner was only working about a day a week on our project, but we appeared to be paying a grand a day, every day, for his PA. We were also billed for the whole day for the whole team when I knew they had stopped work at lunchtime for their office Christmas Party! “An unfortunate error” I was told.  I saved £50K with one phone call there…

Of course, if you can structure any professional services assignment on a fixed price basis, most of these issues are avoided. That approach is usually – although not always – better for the buyer and actually arguably for the provider too. That is another question in this Booz Allen example. Why was so much government work being done on what sounds like a pretty loose “time and materials” basis?

There was an unhappy reminder of the pandemic and the PPE Bad Buying saga recently when several hundred pallets of PPE (mainly aprons, it seems) were discovered apparently dumped in Calmore, near Testwood Lakes Nature Reserve in the New Forest (near to Southampton). No-one knows how it got there…

Some of the material involved was identified as coming from a supplier caller Full Support Group (FSG). Now there is an interesting story about that firm. It was relatively late in the PPE saga when it became public that it was in fact the largest single supplier of PPE in the UK into the health system, with estimates that close to £2 billion had gone to FSG to buy huge quantities of PPE.  It was not immediately apparent though because the firm was already a major supplier to the NHS pre-Covid, so the pandemic purchases were made using existing framework contracts, which did not show up on registers of new contracts.  (That’s a weakness of the transparency rules by the way, but let’s save that for another day).

I had some personal communications with the founder and CEO of the firm, ex-nurse Sarah Stoute, and I’m still not really clear whether FSG and its leaders are amongst the heroes of the pandemic or the villains. In terms of heroes, the owners took huge risks when they saw the pandemic starting, and committed to buy PPE mainly from China at their own risk in late 2019 and early 2020 as prices started rising. That could have literally bankrupted the firm if the market had moved the wrong way but those stocks helped the NHS get through the crisis – and of course prices went up and up, benefiting the firm’s bottom line.  

The owners also tried to advise the NHS and the PPE buyers about the suitability or otherwise of some of the new sources of PPE that started coming on board. Now that might be seen as self-serving – “buy from us rather than these unsuitable new suppliers”. But Stoute was proved right on some occasions where (as we now know) the government bought PPE that was unsuitable or didn’t meet specifications – or was bought from firms that turned out to be run by crooks, basically.

The counter argument basically runs that the owners made huge profits as shortages grew and bought themselves a Caribbean villa for £30 million, an equestrian centre and a country mansion in the south of England for £6 million.  As I say, they took substantial risks, but maybe buying villas wasn’t the most tactful thing to do quite so quickly. I think I might have waited a couple of years at least!

But back to this dumping of stock. Clearly that was nothing to do with FSG or with the NHS or individual NHS trusts. However, we do know that the NHS some time ago appointed firms to help with disposal of unwanted PPE, most of which was sitting in shipping containers around the country (some was still being held by suppliers to).

So the most likely explanation is that someone was contracted to dispose of PPE, they probably then passed on the task to another firm, and maybe another one again, util it ended up with a bunch of criminals who offered a cheap price for disposal then simply dumped it.

Sara Stoute has also said that the reason this stock is surplus is that it wasn’t stored correctly – their lawyer said, “the PPE became unusable because of the way it was stored after delivery, not due to wrongdoing on their part”. If that is true, that is another indictment around the whole story of mismanagement we’ve seen unfortunately from the beginning of this saga.  As well as the money (and time) wasted, the disposal issue highlights the “wasted” carbon emissions embedded in the product and now the pollution and waste disposal risks and costs around it.  Not a happy tale, all in all.

The trivialisation and celebritisation of British politics continues apace.  The headlines are dominated by why Nadine Dorries didn’t get her peerage (and why Charlotte Owens did – anybody got any ideas)? It is all about personalities and in particular our own Trump wannebee, Boris Johnson, the man who had damaged the UK more than anyone I can think of since 1945.

Meanwhile, stories that should be causing debate, analysis, and angry mobs with flaming torches marching in the streets, get limited coverage and little real analysis other than by a few dedicated journalists. For instance, we’ve mentioned before the billions wasted by a number of local authorities (councils) in the UK, including Thurrock, Liverpool, Slough, Croydon, and my own council, Surrey Heath.

But Woking – only 10 miles from my home – might turn out to be as big a scandal as any. The “bad buying” in this case is firmly in the property sector, as the Tory-led council “invested” in major developments both in their own town and more widely. Apparently, the idea was to make Woking the “Singapore of Surrey”, an idea so far-fetched you have to wonder what the council executives and elected representatives were smoking. (as the Guardian asked!)  The council is now bankrupt, and I would be furious if I lived 10 miles down the road.  

Woking has core revenues of around £16 million a year, and debts of around £1.8 BILLION currently. That debt to income ratio is the biggest we’ve seen so far in failed councils.  It is likely that something around £600 million, maybe more, will need to be written off in terms of current asset valuations. A review into how this happened found that within the overall figure, the council borrowed £160m for purposes outside regulations and had “sub-optimal record keeping.”  A huge amount was borrowed from the central government controlled Public Works Loans Body (PWLB) and total debts may end up at over £2 billion. A Section 114 notice has halted all spending on non-essential services.

As the Guardian said: “In Woking’s case, the 114 notice shows the council had advanced the colossal sum of £1.3bn – money borrowed from the PWLB – to joint venture companies, notably Victoria Square Woking Ltd, in which the council held a 48% stake and a Northern Irish developer, Moyallen Holdings, held the majority. Then the value of the assets fell”.

There are also questions about why Woking partnered with Moyallen, a relatively small property company, for the Victoria Square development. That venture still operates, but the Bank of Ireland placed four of Moyallen’s other operating units into administration – including two entities used to control the Peacocks Centre at Woking.  The council’s former chief executive was allowed to operate far too independently, it seems. An “acquisition opportunity fund” allowed him to spend up to £3m on regeneration projects without formally approval from the council or executive, and that led to purchases including farmland for £1.5m, and £2.3m on two pubs, one of which burnt down!

Primary responsibility must fall with characters who have all moved on now – previous Tory Leader of the Council, David Bittleston, Chief Executive Terry Morgan, and Finance Director Leigh Clarke.  It would be good to see those three in court charged with malfeasance in public office. However, all the councillors who failed to raise the alarm also share some blame. One councillor tried to sound the alarm about the dealings but was shouted down in council meetings.

But other stakeholders who deserve a lot more criticism than they are getting are those in central government. The majority of the loans came from the PWLB – a central government body within the Treasury that lends money to local councils. Concerned observers had contacted Treasury and the Department responsible for local government – currently called the Department for Levelling Up, Housing, and Communities (DLUHC) – about Woking but were ignored. In 2017, the Times  “raised the alarm about reckless council spending” but were told by central government that “ that there were “strong checks and balances” in place to protect taxpayers’ cash”. 

Well that was clearly total nonsense, so Treasury and DLUHC must share some of the blame for this fiasco. Partly because of that, government will have to bail out the council. There is no way local taxpayers can cover the debt (without bankrupting them personally) so this will effectively end up as a wider taxpayer debt write-off.

In recent years, we’ve seen both Labour and Tory councils getting into trouble around bad investments, bad buying and criminality at times too. This is about personal and systemic failures, not really party politics, although central government has failed to monitor the gross incompetence of these councils.  So given the outlook for the next general election, and if Labour are serious about giving more power to local councils, we really need some new parallel measures put in place. We have to make sure more power does not simply lead to more huge failures, with more crooks and incompetents wasting or stealing huge amounts of our money.