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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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Why Do Complex Programmes Like HS2 Always Overspend – Conspiracy or Cock-up?

I was interviewed about my new Bad Buying book by Jeremy Vine on his UK Radio 2 BBC show last week – over 7 million listeners apparently. He seemed to have read at least some of the book which was surprising and pleasing, and said it was a “fascinating book … I haven’t read a book like it before”. Which you could interpret in a number of ways!

During the interview, the positioning from Vine was about governments wasting money, which was not my choice really in term of emphasis.  I believe private sector firms probably waste just as much money through bad buying (procurement) as public sector organisations. But it is not as visible, because there is no UK National Audit Office (or their equivalent in other countries) to keep an eye on private firms. And of course the private sector is only wasting shareholders cash, not that funding provided by every citizen via their taxes.

One issue we got onto during the interview was why major projects always seem to run way over budget.  HS2 is a good example. Some £30 billion was the initial budget – we’re now at around £100 billion and I’ll be pleasantly surprised if we come in at even that amount. But why does this happen?

One of the callers to the show identified a key issue. “If we’d known it was £100 billion from the start, HS2 would never have been approved,” he said. Another example is the Scottish Parliament building which amazingly went from initial estimates of around £40 million to a final cost of £414 million!  The eventual report into this said, “The figure of between £40 and £50 million originally put before the Scottish public was never going to be sufficient to secure the construction of a new Parliament building of original and innovative design”.  

My feeling is that there is little incentive for key stakeholders to be honest about costs at the early stages of major construction, technology or other programmes. The supply side wants the programme to be approved as they will benefit. On the buy-side, lots of civil servants, consultants and interim managers see a gravy train going on for years, maybe for the rest of their careers (in the case of something as mega as HS2).

The politicians want their vanity project to go ahead, knowing that when the chickens come home to roost and the overspends become public, they will have long gone to lucrative private sector jobs or the House of Lords.  (I’m sure some Scottish politicians just wanted a prize-winning new building, whatever the cost). So most of the key stakeholders are likely to underplay the potential costs, and overstate the benefits too (the HS2 business case is largely a work of fiction).

It is not just the UK that is vulnerable to this either. In 2019, Jean Nouvel, a celebrated French architect, started criminal action against the owners of the Philharmonie de Paris, the new concert hall he designed. He claimed fraud, embezzlement and favouritism, all in response to a 2017 claim by the owners as well as city and local government against him for payment of €170 million in damages for budget excesses and delays in the construction.

He was contracted to build the auditorium in 2007 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.

So in cases like this, do buyers really know the supplier isn’t to be believed, but everyone conspires to make sure the programme goes ahead? I’m sure this happen in defence projects, where the buy- side and sell-side are very cosy members of the same industry, and every major purchase seems to lead to a huge cost overrun.

The problem is, I’m not quite sure what we can do about this. Maybe more scrutiny up front, from NAO, the media, or opposition political parties? Or a “citizens convention” to review major spending ideas and bring a note of cynicism to the optimistic projections?  Or perhaps we will just keep spending a fortune, then wondering after the event how on earth it all happened. Again.

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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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The Explosion in Beirut Highlights Major Procurement and Supply Chain Failings

The explosion and resulting disaster in Beirut this week is a tragedy for all the people affected and for the entire city, as well as for the country of Lebanon.

According to the BBC, the ammonium nitrate which seems to be the cause of the blast arrived in Lebanon “on a Moldovan-flagged ship, the Rhosus, which entered Beirut port after suffering technical problems during its voyage from Georgia to Mozambique, according to Shiparrested.com, which deals with shipping-related legal cases. The Rhosus was inspected, banned from leaving and was shortly afterwards abandoned by its owners, sparking several legal claims. Its cargo was stored in a port warehouse for safety reasons, the report said”.

The ineptitude and corruption that taints Lebanese public affairs then led to years of inactivity. Apparently, the head of the port and customs authorities had warned the judiciary about the dangers of storing such dangerous material in the middle of a busy, industrial area, and asked for action, but nothing was done. Were backhanders and bribes involved at this point? The end result in any case was this disaster, which has killed over 100 people and devasted a city that was already on its knees because of the Syrian refugee crisis, the pandemic and economic collapse.

We have written previously about the dangers of corruption, and how it can lead to endemic problems in an organisation or even a country.  Lebanon appears to be an example of that, with corruption at the heart of its decline into virtually “failed state” categorisation. That’s why, if we are lucky enough to be in a country where corruption is not so much of an issue, we have to be really vigilant to make sure it stays that way.

Giving the odd low value government contract to a firm run by our friends without a competitive process might not seem like a big deal – but it is the “slippery slope” argument that I find relevant here. If that is OK, then what is  the next step? And the next? And the next? And before you know it, those in power are saying, “who needs public procurement rules really … just trust us”.

Anyway, there is more around corruption in my forthcoming book of course, which doesn’t mention Lebanon actually but does have stories from Brazil, Russia, the US, the UK and many other countries. But aside from corruption, and indeed the issue of who had purchased this marial from whom and what commercial deals lay behind it, there are two other important Bad Buying lessons to be learnt from this event.

  1. Supply chain risks, problems and even disasters don’t just occur in the core supply chain processes (farming, mining, processing, manufacturing). They can also happen during the logistics processes that are also key to the overall supply chain cycle – shipping, storage, transportation and so on.
  2. Bad Buying and bad supply chain management can affect a much wider group of stakeholders than simply the buyer and seller in the transaction. In this case, hundreds have lost their lives, and thousands have had their lives changed in a terrible way. All because the management, storage and shipping of the products involved were not managed properly.
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Health Minister in Zimbabwe Arrested Over Alleged PPE Procurement “Fraud”

All over the world, medical staff have struggled to find enough PPE (personal protective equipment) to meet their needs and protect themselves in a time of pandemic.  The problems have extended out and affected other users too, in care homes, local government, the police even.

That has led to some buying activities and processes that were far removed from the usual formal public procurement approaches. In the UK, we have seen huge orders placed with firms that normally would not have made it beyond the first basic company checks. Money was paid up-front in some cases, something else that would never happen in normal times.

We’ve been hesitant to call this Bad Buying  given the emergency situation, although at time of writing, there is some evidence that the UK may now have over-ordered at the top of the market and paid more than perhaps we needed to. But let’s reserve judgment on that for now.

But as well as issues of competence, there have also been accusations of bias, nepotism and even fraud. Sometimes those are far-fetched; the fact that the CEO of a small firm supplying PPE once attended a Conservative Party charity dinner should not mean his firm can never be a government supplier again!

In some countries however, the issue has gone much further. Recently, the BBC reported on the arrest of the Zimbabwean Health Minister, Obadiah Moyo, as “the government came under pressure from the opposition and on social media over a scandal surrounding the procurement of coronavirus tests and equipment”.

Moyo faces charges related to a $20 million contract for PPE and other virus-related kit awarded to a firm registered in Hungary, allegedly made without going through the proper procurement processes.  The company, Drax Consult, was only registered two months before the contract award, and the firm’s representative in Zimbabwe, Delish Nguwaya, has also been arrested. Africa News reported that “local journalists exposed how Moyo allegedly chose the company to sell medical supplies to the government at inflated prices that included face masks for $28 each”.

The President, Emmerson Mnangagwa, has made much of his anti-corruption drive but one of his sons was forced to issue a statement denying a link to the company after pictures emerged of Nguwaya with the president, his wife and sons at several events. Meanwhile doctors and nurses have been on strike demanding to be paid in US dollars as inflation is running at over 750% and incomes are virtually worthless in this struggling nation.

Coming back to the UK, the recent controversial government contract for market research (running focus groups) actually seems to me more dubious than most of the PPE buying activity. Giving a firm with “conflict of interest” type links to adviser Dominic Cummings and Cabinet Office Minister Michael Gove a contract for almost £1 million with no competition simply seems wrong. The “urgency” claim made in that case does not hold water really when a quick competition could have been run in days. But at the moment, the British people don’t seem inclined to riot in the streets or start arresting Ministers.

That’s because corruption in public life is not perceived as a big issue in the UK, unlike in Zimbabwe. That is probably a reasonable stance today; but my fear is whether the public would notice or care if matters started getting worse.  The situation can decline rapidly, and once corruption becomes embedded, it is devilishly difficult to root out. Corruption is not the only cause of Zimbabwe’s decline in recent years, but it is certainly one driver of the economic woes the country has experienced.  So, even in nice, apparently honest western democracies, we need to “stay alert”, as somebody told us recently … 

(And of course there is much more about fraud and corruption in procurement in my new book,  “Bad Buying – How Organizations Waste Billions Through Failures, Frauds and F*ck-ups”, available to pre-order now).

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