Tag Archive for: PPE

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Mone Moans, But Still PPE Questions to be Answered

Over the holiday period, we heard a lot more about the case of Medpro, the firm that is being taken to court by the UK’s Department of Health and Social Care over the supply of PPE, gowns in particular, which allegedly turned out to be unfit for purpose. The beneficiaries of this, the high profile Michelle Mone, a member of the House of Lords, and her husband Doug Barrowman, produced a documentary arguing their side of the case, and gave an interview on the BBC. This came after the couple had originally denied publicly that Medpro was anything to do with them, with Mone lying to the press and then getting lawyers to issue threatening letters to various publications.

The general response to all this new self-generated publicity was not very favourable for the couple. The interview was called a “car crash” and was likened to the Duke of York’s famous “I was at Pizza Hut and I don’t sweat” interview with Emily Maitlis in 2019. There are some questions though which still need answering on the government’s side of the story.

  • Why is this the only legal case that the government appears to be pursuing? There have definitely been other examples of quality issues, and cases of firms that look at least as dodgy as Medpro winning major PPE contracts. Is there a logic to this or has the government chosen to pursue Medpro because of Mone’s profile, know there would be more publicity given her involvement and that would show the authorities were taking action?
  • Mone claims that she has an email from an official on the PPE team saying, “the gowns have been approved by technical”.  But that seems to be pre-delivery so the approval was before anyone had seen the actual delivered product, which seems odd. Maybe there were samples? But the gowns were apparently inspected by Uniserve, the logistics provider appointed by the government, from July 2020 in China.  And £122 million was paid out in the summer of 2020 for the gowns, which would usually suggest the buyer is content with what has been delivered. 
  • The government says that random testing in April 2022 found that 54 of the 60 randomly selected Medpro gowns weren’t sterile. But that is almost two years after delivery. Even if those tests were accurate, Medpro lawyers may argue that the gowns might have become unsterile in the intervening almost two years, perhaps because of sub-optimal storage conditions?
  • As a buyer, if I have inspected the goods, told the supplier they meet my specification, and handed over the payment as per the contract, then it is pretty unusual, and very difficult to go back a year or two later and say, “hang on a minute, I’ve had another look and I don’t like that stuff I bought from you after all”. In my experience, the supplier would be likely either to laugh or (if they valued my business) say something vaguely sympathetic such as, “Peter, you said it was fine – you must appreciate we can’t really do anything at this stage, terribly sorry”.

However, the fact that Mone lied about her and Barrowman’s involvement and personal gains from the deal is a major issue working against them. There is also the question of alleged bribery. This has been part of the investigation, but there has been no hint as to who it was that Medpro might have  bribed. Their political contacts? PPE procurement people? Other officials?  Flows of money are usually relatively easy to check, unless it is literally £50 notes in a brown envelope, so that’s still an  interesting unanswered question.

In any case, this is likely to be a big story through 2024, not least because Labour will emphasise “Tory sleaze” when it comes to the UK election. Labour has also promised to appoint a “covid corruption commissioner” to look into PPE contracts, so this story will no doubt run and run.

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PPE Dumped – An Unhappy Reminder

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.

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National Audit Office Won’t Sign Off UK Dept. of Health Accounts

The UK’s National Audit Office recently refused to sign-off the accounts of the Department of Health and Social Care (DHSC) for 2021-22.

“A lack of sufficient, appropriate audit evidence and significant shortcomings in financial control and governance” meant that NAO head Gareth Davies was unable to provide an audit opinion on the accounts of the UK Health Security Agency (UKHSA).  Even taking the “challenging context” into account, Davies called the UKHSA’s inability to produce auditable accounts “unacceptable”.

UKHSA replaced Public Health England in October 2021. That was a challenging time because of Covid, but even so, the financial management of the new organisation appears to have been chaotic.  

“UKHSA was unable to provide the NAO with sufficient evidence to support balances relating to £794m of stock, and £1.5bn of accruals from NHS Test and Trace, which were transferred from DHSC, or to support £254m of stockpiled goods transferred from its predecessor organisation, Public Health England (PHE). DHSC had not resolved issues with its management systems, financial controls and records, which the C&AG reflected in his report on DHSC’s 2020-21 accounts”.

Internal controls were lacking; there weren’t even effective bank reconciliations, something the smallest business would expect to have in place. “Shortcomings in the introduction of a new accounting system, combined with a reliance on temporary staff, meant that UKHSA was not able to provide the NAO with evidence to support key balances and transactions in the accounts”. So goodness knows what was happening in terms of errors or even fraud at that time.

Moving on to the wider Department, NAO “was unable to obtain the evidence needed to support £1.36bn of stock, due to issues related to inventory management”.

DHSC did not carry out end of year stock counts to check items including PPE (personal protective equipment) and Covid lateral flow tests, “as it was unable to access 5 billion items (which cost £2.9bn) that were stored in containers”. Whilst that might be excusable, or at least understandable, there was also a lack of adequate processes to check stock in warehouses, which is less so.

There was also a write-down of £6bn in terms of pandemic related purchases. £2.5bn of that is items already purchased but no longer usable, or where the market price is now way below what was paid. £3.5bn was a write-down on PPE, vaccines and medication which DHSC has committed to purchase, but no longer expects to use.

“Taken together with the £8.9bn written-down in its 2020-21 accounts, over the last two financial years, DHSC has now reported £14.9bn of write-down costs related to PPE and other items”. 

And if you are thinking, well, at least that’s it, there is more salt to rub into the wounds.

“DHSC estimates that ongoing storage and disposal costs for its excess and unusable PPE will be £319m. At the end of March 2022, the estimated monthly spending on storing PPE was £24m.”

So that’s £15 billion of taxpayer’s money gone. It has been in effect a huge transfer of wealth from the UK economy and citizens to a range of largely non-UK manufacturers and of course to a whole bunch of crooks, conmen, exploitative agents and middlemen, many with political connections, and the occasional genuine business person, all involved in the supply chain somewhere.  Every issue of Private Eye seems to have more examples – taken from the company accounts that are now emerging – of firms making huge margins, often 50% or more, on the PPE, tests and so on that were supplied during the pandemic.

We’ve discussed the reasons for this disaster many times over the last couple of years A failure to prepare and mis-management of the emergency PPE stocks; catastrophically bad demand planning which led to huge over-ordering;  incompetence in terms of drawing up specifications; a lack of even basic negotiation, cost analysis and supplier due diligence; political interference and nepotism; these drivers all feature. But as the NAO lays out the cold, hard numbers, we can say with confidence that when we construct the league table for the all-time costliest failures in UK public procurement, this is right at the top.

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A Mone About PPE (Again!)

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

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

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

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

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

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

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

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Covid Contracts – Hunting for PPE

I got a phone call a couple of weeks ago from a BBC Northern Ireland producer, who wanted to interview me for a programme about procurement of PPE (personal protective equipment) during the pandemic first wave last year.

I did a few smilar media appearances last year on Zoom, so said “yes – when do you want to do it”?

“When can you come into London so we can film you?”, he asked.

So not Zoom, but real life! Which was how I came to be filmed in a Pall Mall hotel meeting room – just me and a charming cameraman, whose wife works in procurement, strangely enough.  The interviewer asked the questions remotely via Facetime on a phone perched on a tripod a few feet in front of me which was rather strange.  I spent 45 minutes on the interview and another 15 being filmed “reading papers”… all for about one minute of screen time! And why they have to show those close-ups where you can verify my need for a better skin-care regime, I really don’t know.

The end result was a very good Spotlight documentary, broadcast first in Northern Ireland but shown on the BBC News Channel several times this week. It is the story of how a confectionery firm in Antrim, Clandeboye Agencies, landed orders worth over £100 million for PPE, and the confusion over whether the products supplied were actually fit for purpose. Were they “gowns” or “aprons”? And what did that  mean for the safety of those using the equipment?  

The journalists also tracked down some of the stock that was never used in the NHS and found it could be bought now for a fraction of the price paid originally by the government. It’s well worth 25 minutes of your time, although if you have followed the PPE story there won’t be much to surprise you, I suspect, other than that public availability of stock at cut prices now.

I have written several articles previously about PPE, so I won’t go through all the issues again. I did explain on camera that huge price rises were not unexpected when demand suddenly went up ten-fold or more. But just to re-state the problems, these are the broad topics I would be looking at if I ever do write the Bad Buying Book of PPE!

  1. The NHS stockpile of PPE provided to be unsuitable for Covid, and was very badly managed in terms of stock control, expiry dates, easy accessibility… etc.
  2. The early forecasts for PPE demand proved to be way out, which led to major over-buying – which is why we ended up with containers sitting around for months, suppliers being paid to NOT deliver, stock sold off cheaply, etc.
  3. Whilst the situation was desperately urgent, more attention and effort should have gone into getting the specifications right before hundreds of millions of pounds was wasted on equipment that proved unfit for purpose.
  4. Proper due diligence took a while to set up, so some early contracts went to firms who should not really have been considered as suppliers.
  5. The “VIP route” should have been much more transparent, and firms with an existing track record of PPE supply should have gone to the top of the list for consideration rather than those recommended by an MP, senior  civil servant etc.
  6. Buyers should have insisted on getting a breakdown of costs to avoid profiteering by middlemen and agents.

Anyway, you can see the programme here on iPlayer for the next 11 months.

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PPE Procurement in Court, NAO Report and Radical Transparency (my thoughts)

The UK National Audit Office has published a report titled “Initial learning from the government’s response to the COVID-19 pandemic”. It draws on the various reports NAO has conducted over the last year or so, including those related to ventilator and PPE (personal protective equipment) procurement, and covers quite a range of topics including risk management, data, workforce issues and – most relevant to our interests – “transparency and public trust”.

It is timely, not least because the Good Law Project and EveryDoctor UK are currently in the midst of a court case concerning PPE procurement. Those organisations are challenging the way government awarded contracts to suppliers, with a particular focus on a handful of suppliers including Ayanda Capital and Pestfix. They also want the government to publish the full list of suppliers and (where relevant), disclose who put them forward to the “VIP list” that gave firms accelerated access to the procurement process.

Some startling information has already been disclosed in the court case. For instance, it appears that Ayanda did NOT pass the initial “due diligence” process, but somehow were still awarded contracts worth over £200 million. It is also clear that influential people were badgering the professional procurement staff to favour certain firms. 

In the case of Pestfix, evidence suggests that their executives told the government buyers that some of the payment was being used to bribe people in China to make sure supplies got through to the UK.  (Pestfix denies this but the emails seem pretty clear!) I’ve always suspected that was one reasons why the government didn’t want to deal directly with producers but involved agents and middlemen. Ministers and officials didn’t want to get their own hands dirty in what was a vicious battle to secure supply at the height of the shortages.

It is well worth keeping up with the developments in the case, but let’s revert to the NAO report and transparency. One of the main NAO learning points is the importance of transparency and clear documentation to support decision-making when measures such as competition, are not in place.

In more detail:

“ Transparency, including a clear audit trail to support key decisions, is a vital control to ensure accountability, especially when government is having to act at pace and other controls (for example, competitive tendering) are not in place. On the ventilator programmes, we found sufficient record of the programmes’ rationale, the key spending decisions taken, and the information departments had to base those on. However, in the procurement of personal protective equipment (PPE) and other goods and services using emergency direct awards during the pandemic, we and the Government Internal Audit Agency found that there was not always a clear audit trail to support key decisions, such as why some suppliers which had low due diligence ratings were awarded contracts”.

That due diligence issue relates back to Ayanda (and others) of course. As well as the lack of documentation, government was also slow to publish information.

“… many of the contracts awarded during the pandemic had not been published on time. Of the 1,644 contracts awarded across government up to the end of July 2020 with a contract value above £25,000, 75% were not published on Contracts Finder within the 90-day target and 55% had not had their details published by 10 November 2020. The Cabinet Office and DHSC acknowledged the backlog of contract details awaiting publication and noted that resources were now being devoted to this, having earlier been prioritised on ensuring procurements were processed so that goods and services could be made available for the pandemic response”.

We can have some sympathy here, as staff were under huge pressure, but given the large number of people (many of them expensive consultants) working on PPE procurement, it should have been possible to do a bit better than this.

In terms of transparency, I recently wrote a briefing paper with the Reform think-tank, titled Radical transparency: the future of public procurement.  The message is that the time is right for a step-change in transparency around public sector procurement. That is not just about public trust, important though that is. I believe the even bigger issue is that buyers, budget holders and commissioners in the sector have very limited visibility of what each other are doing.

That means knowledge about great ideas and amazing supplier performance is not shared – and neither is the learning when something goes wrong. Radical transparency is the answer. The recent government Green Paper on public procurement makes a few comments in this direction but really does not go far enough. As soon as you see the rules on Freedom of Information quoted as a basis for disclosure you know there is no intention of getting anything really interesting into the public domain!

If you have a few minutes and you are at all interested in public procurement, do have a look at the Reform paper. I’d love to hear your comments and thoughts on the concept that transparency can be an effective antidote to public sector Bad Buying!  

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PPE Scandals hit Italian & German Business and Politics – Will the UK Follow?

There have been interesting developments in terms of procurement of PPE in several European countries.   Last month, the Times reported that magistrates in Italy had ordered the seizure of property worth more than €70 million (£60 million) including a yacht, a Harley-Davidson motorbike, watches and several apartments from eight middlemen.  They are accused of exploiting the desperate shortages of PPE last year at the height of the pandemic.

The allegation suggests that a group of businessmen earned commissions worth €72 million on the purchase of 800 million facemasks from China. Those masks cost the Italian government some €1.2 billion. The suspects are accused of “illicit influence trafficking, receipt of stolen property and money laundering”. There is some cronyism involved here too. One of the accused is Mario Benotti, 56, a journalist and general director of two technology companies, and someone who knew Domenico Arcuri, 57, the Covid commissioner.  But Benotti says that he intervened to help his country and because Arcuri asked him to.  He acknowledges getting €12 million but says he earned it.

It has to be said that a margin or commission of €72 million sounds a lot. But on a spend of over a billion, that is “only” 6%.  Is that really exploitation?  A BBC Panorama programme this week suggested that firms such as Ayanda Capital made significantly more than that supplying the UK with PPE – a margin of 15.8% according to Tim Horlick, the boss. But in any case, if 800 million masks cost €1.2,  that is €1.5 per mask, which shows just how crazy the market got last year.

In Germany, the scandal is deeper and more shocking. Several leading politicians have been forced to resign because of the money they made personally from the pandemic shortages. Earlier this month, two members of the parliament and of Angela Merkel’s ruling CDU party resigned this week because of the scandal.

It appears that Georg Nüßlein and Nikolas Löbel both personally profited from government contracts for face masks. Löbel is alleged to have received €250,000 in payments for brokering a deal between a Chinese supplier of masks and the German cities of Heidelberg and Mannheim. Nüßlein is accused of making €660,000 through a consultancy firm for lobbying the government on behalf of a supplier. Mark Hauptmann, from the eastern state of Thuringia, is the latest to go. He is stepping down due to his alleged links concerning medical supplies and Azerbaijan. It all seems somewhat opaque, but Hauptmann has admitted that Azerbaijan and other countries paid for adverts in a newspaper he publishes.

Coming back to the UK, we also don’t know if any of our politicians took their cut for promoting PPE suppliers onto the “VIP” path, which greatly enhanced the firms’ chances of winning contracts. We still don’t know how Ayanda Capital and others were chosen to be awarded contracts, or why each got the size of contract they did.  This week, the BBC Panorama programme looked at how some very odd firms won huge contracts or acted as facilitators, such as an upmarket dogfood business! It also exposed that details of some contracts awarded last spring and summer have still not been published.

But there only four possible options in terms of the process used in the UK to select suppliers.  

1. There was an actual selection process. I don’t mean the due diligence assurance which was carried out once a firm had been chosen – I mean the process for choosing which firm would get which volume. But if there was such a process, we still don’t know what it was.

2. It was random. All the names in a hat …

3. It was literally first come, first served. The first firms that got their offers in won the work, until all the volume needed was covered.

4. It was fundamentally corrupt.  

We still don’t know which of these is the most accurate explanation, and until we do, we can’t rule out the possibility of more scandal emerging in the UK, as we have seen in these other nations. This story isn’t dead yet.

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UK National Audit Office Looks at PPE Again – Just Why Did We Buy So Much?

The second UK National Audit Office report on pandemic procurement was issued recently. Titled “The supply of personal protective equipment (PPE) during the COVID-19 pandemic” it focuses entirely on PPE. It has received less media coverage than its predecessor, which looked at wider procurement issues, although it too had a lot of PPE-related content.

That reduced attention was probably because it lacks some of the obviously newsworthy headlines the first reported generated, around contract awards to firms such as Ayanda Capital and Pestfix, who have been in the news for a while, and discussions of potential conflict of interest at Ministerial level. But that’s a shame, because there are some very interesting findings in the more recent report too, although it still leaves a couple of key questions outstanding.

The report gives more visibility of the process as the pandemic struck in the spring. It clarifies some of the failures we saw around the existing pandemic stockpile, which was a combination of sheer incompetence and a more forgivable lack of preparedness for this type of virus.  Once it became clear that the normal NHS channels, such as Supply Chain on the procurement side and Unipart for delivery couldn’t cope, we saw Lord Deighton getting involved, bringing in people he knew (including HR support through another questionable contract).  We know Clipper won a huge distribution contract, also without any competition, although they seem to have done a pretty good job all in all.

The Parallel Supply Chain buying operation was set up in late March, with one team looking at extending UK manufacturing and another sourcing PPE globally. McKinsey supported the Department in putting together a demand model to predict how much PPE was going to be needed. The teams then went off and agreed contracts with some of the thousands of suppliers who had expressed interest – some of whom came though the “VIP route”, already exposed previously.

That takes us into our three big outstanding issue though.

  1. We still don’t understand the process by which suppliers were selected from those that put themselves forwards. Why did Ayanda Capital win a contract for £250 million? Why not £50 million? Or indeed £500 million? Why did 47 suppliers win contracts, with value ranging from less than a million to the hundreds of millions – was there an overall strategy of some sort, or was it literally the buyers accepting the first offers that were made that got through the approval process?  We know that process was flawed early on by the lack of real due diligence, but we’ll park that for the moment. But the process used for selecting suppliers and determining quantities per contract is still opaque.
  •  Why has the demand model turned out to be just so inaccurate? We are now in a situation where, as NAO says, if the recent rate of use of PPE continues, then the 32 billion items that had been ordered by the Parallel Supply Chain by 31 July could last around five years (with variations across the different types of PPE). The Parallel Supply Chain’s initial estimate of the PPE that would be required nationally anticipated an enormous increase compared with pre-pandemic use, but actual use has been lower than this (although still far higher than pre-pandemic use). What went wrong?
  • There is still some doubt over how much PPE is unusable or at least does not meet original specification. From the report – “The Department (of Health and Social Care) told us that it had identified 195 million items which were potentially unsuitable, which was equivalent to around 1% of the items it had received to date. However, it has not provided us with sufficient information to be able to verify these figures because, it told us, this would compromise its ability to resell the PPE”.   In other words, NAO can’t be sure the Department isn’t fibbing.

Coming back to the demand issue, did the model assume that the absolute peak of PPE usage in March / April would continue forever, and that there would be no reduction in cases as we went into lockdown? Was it the move away from putting patients on ventilators, as clinicians learnt more about optimal treatment pathways?  Were contingencies built on top of contingencies? I understand that the model did initially include the devolved countries (Scotland, Wales, N Ireland) who then went their own way on PPE, but that factor isn’t enough to explain the huge quantities ordered. It’s a shame the NAO report didn’t dig onto this issue a little more deeply, I feel.

By the time that the PPE team was “professionalising” through the summer and bringing in more people with real public procurement experience, I’m told that it wasn’t really a buying job any longer. The vast majority of the contracts were placed in May and June. Through the autumn, teams have been focused more on how to manage this huge over-ordering situation. That’s one of the reasons why UK ports are struggling – they are clogged up with billions of items of PPE, ordered earlier but for winter delivery.

My prediction is that soon, there will be stories of suppliers being paid off – they’ll get the majority of the contract value paid but be told not be bother supplying what is not yet delivered.  There is also a very serious problem here, as a range of new UK- based manufacturers were encouraged to move into this market. But if there is 5 years’ worth of stock (or committed orders) already, who needs more from these possibly expensive UK manufacturers?

I do have sympathy with the people involved here. Predicting demand in the peak of the pandemic must have been a difficult task, that is undeniable. But how did smart civil servants and McKinsey consultants (charging a fortune, no doubt) get it so wrong?  That demand model has cost the taxpayer billions. We have bought far too much stock, and even if it does get used eventually, it was bought at the top of the market, at prices several times the norm in many cases.

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NAO Pandemic Procurement Report Sticks the (Well-Judged) Boot In

This week saw the publication of the UK National Audit Office’s second report concerning government procurement during the pandemic. The first, all about ventilators, raised some interesting issues (which I discussed on a Podcast here) but was not overly critical of the procurement process.

This new report is very different. It’s a strong but fair report, with plenty of detail and insight, and impressive given the pressure NAO must have been under itself (in terms of staff, politics, and time). In measured and factual tones, it exposes some very questionable practices, processes and actions taken this year, principally but not exclusively in terms of buying PPE (personal protective equipment).  It does not get deeply into PPE performance – there’s another report on the way shortly looking at that in more detail, apparently.

We wrote here about the VIP route for PPE, whereby firms with connections could get fast-tracked as potential suppliers, and the NAO report highlights just how beneficial that was for those firms who accessed that channel. They had a 10% chance of winning contracts, some (like the Ayanda Capital deal) for £100 million or more. Your chances if you weren’t on it were less than 1%.

I understand why there was a desire to look at more credible offers first, but the way it was done simply meant that it was literally a case of “who you knew”, not what you had done historically or were offering now.  That was clearly unfair and broke the fundamental principles of fairness and equal treatment that underpin public procurement.

Urgency was the reason why normal processes could not be followed, and I do understand that, but there were ways in which proposals could have been assessed without this blatant favouritism (and before anyone says, “so how would you have done it”, I have an answer for that – maybe a future article. Or Cabinet Office can pay me for a few days consulting and I’ll tell them. I’m a lot cheaper than McKinsey or Deloitte).

The failure to track where the 500 referrals came from in many cases (only half were noted) and apparent lack of awareness or concern about conflicts of interest also leave a bad taste here.  Indeed, a lack of documentation to support decisions is a theme running thought the NAO report.

Then, even after the NAO report, it is still not clear how the suppliers were chosen or the size of the contract determined. So there was a decent enough general process documented in the report for evaluating the suppliers and their offer in terms of credibility, but that doesn’t explain why Ayanda was given a £250 million contract while another firm might have been awarded a £1 million deal. Was it simply that they bought whatever the supplier offered once they got through the process? Was it first come, first served in some sense until the requirement was met – but that still begs the question, how did firms get to the front of the queue?

And remember, there were many credible suppliers complaining at the time that their offers of PPE weren’t even being considered. Did they fail simply because they didn’t know the right people? Did the team actually work through all the offers, or just focus on the VIP offers until they had ordered enough stock?

Given these issues, that lack of documentation around why suppliers were chosen for contracts is disappointing and unforgivable really, given the lack of competition and the size of many contracts. It broke the government’s own March 2020 Cabinet Office guidance as well, which said that buyers should keep good records of how and why suppliers were chosen.

We might speculate as to why it happened – incompetence? Arrogance? Lack of time to keep notes (with 450 people in the team, including highly paid consultants, that doesn’t feel like a good excuse)? Or corruption of some sort? The suspicion of bribery of officials remains, given this report. There must have been people who had the power to move suppliers to the front of that queue and we have no evidence of safeguards in place to ensure that wasn’t done for the wrong reasons.  

The lack of clarity on the “due diligence” process is also worrying – it wasn’t in place at all initially by the sound of it and then seems questionable, given some suppliers seem to have got through despite very dubious backgrounds. The stories in the press this week about jewellery manufacturers with “consultants “ in Spain being paid £20 million, or a young woman somehow winning a contract for almost a million pounds with no relevant experience whatsoever don’t fill us with confidence that due diligence was very effective.

Another issue was the buying of masks with the wrong specification. That appears to have been  a ”human error”, incompetence if we’re being unkind, somewhat excused by the time pressures. It has proved to be a very expensive mistake though – with the caveat that perhaps the masks can be found a useful purpose somewhere.

The report doesn’t really cover whether the prices paid were reasonable, so perhaps that will crop up in the next report. The margins being made by traders, middlemen, agents and spivs generally still haven’t been disclosed either, although the stories emerging such as the jewellery firm example seem to suggest some people made an absolute killing.

All in all, and even given the time pressures, this was not public sector procurement’s finest hour, I’m genuinely sorry to say.  In part 2, well look at some non-PPE contracts that NAO examined in the same report, and I’m afraid there is even more concerning Bad Buying to discuss there!

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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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