The vexed question of conflict of interest in public sector procurement came up the other day with reports that a senior executive in the National Health Service digital team had been doing rather well out of that organisation.
The HSJ reported that NHS Digital (NHSD) paid over £3 million to a small technology firm, Axiologik, one of whose owners was working as a Board-level interim director in the organisation.
“The money was paid to Yorkshire-based tech support company Axiologik, whose co-founder and director Ben Davison also served as NHS Digital’s executive director of product delivery – for which he received annual pay of £260,000, working as a contractor, in 2020-21.”
A number of issues arise from the HSJ investigation. Firstly, it appears that no other candidates were considered for the position when Davison was appointed. That seems odd, to say the least.
Then nine months after his appointment, Axiologik was appointed to provide programme management support for the Covid booking service, followed by more work (according to HSJ) “to lead NHSD’s “tech and data workstream” which involved “portfolio level executive leadership across citizen-facing digital services” run by NHSD such as the NHS App, NHS.uk website and 111 Online”.
In the current year, turnover of the firm is set to grow from £6.5 million to £15m, not surprisingly. NHSD say that they put measures in place to avoid conflicts of interest – Davison had no involvement in the procurement process, or delegated authority for contracting or spend approvals. But as a top-level interim executive, how could he hold a supplier to account in any meaningful way if he was also a director of that supplying firm?
Another issue arose because Davison was paid in the £260,000 – £265,000 band in 2020-21 according to the NHSD accounts, making him the highest paid person in the NHS. But there is more. The Treasury then got involved because his appointment broke the rules on getting approval for contractors who work for more than six months! (The engagement of two other NHSX contractors also broke the rules). That led to Treasury withholding £645,000 of allocated funding to NHSD because they have been such naughty boys and girls.
But perhaps the most important question is this. Was Axiologik appointed after a competitive process? The HSJ does not make that clear – presumably because they do not know – although they report that the firm was appointed from the government’s G-Cloud framework.
There are many frameworks used in the public sector covering a wide range of goods and services. They enable users to bypass much of the formal “legal” public procurement process and can be very useful when used properly, retaining the ability to achieve value for money but simplifying the process. The Cabinet Office’s Crown Commercial Services (CCS), which runs G-Cloud, is the biggest manager and promoter of such contracts.
But too often, frameworks are being used today to award contracts without any real competitive process, leading to potential shortcomings in terms of value or even corruption. In most cases, for example, users should (legally) run some sort of competitive process between at least some of the firms on any given framework to select the supplier that can provide best value. But in practice, users at times just pick their favourite and justify it on spurious grounds that “they are clearly the best…”
Some framework managers don’t really have an interest in whether the process is run properly either. They make their money as a percentage of the spend through their frameworks paid by the supplier, so CCS for instance is targeted on increasing its “sales”. If they put controls on usage, or police this issue of further competition too strongly, then users might just switch to another framework and CCS loses income. Indeed, the funding of CCS and other major framework managers leads to a range of perverse incentives in terms of ultimate taxpayer value – something I’ve been saying for many years.
Anyway, to be fair, we don’t know whether Axiologik was engaged without a competitive process, so maybe all this is irrelevant here. But in any case, someone at NHSD was very naïve about conflict of interest issues, and very ignorant when it comes to Treasury rules on interims. So definitely a contender for the next volume of Bad Buying!