Government must ‘come clean’ as watchdog reveals details of £18 billion coronavirus contract awards
Ministers set aside normal standards of transparency as they scrambled to secure £18 billion of supplies and services in response to the coronavirus crisis, the public spending watchdog has concluded.
Firms recommended by MPs, peers and ministers’ offices were given priority as the Government raced against the rest of the world to acquire personal protective equipment (PPE) , the National Audit Office found.
Meg Hillier, chairwoman of the Commons Public Accounts Committee, said the failings uncovered in the NAO report may be the “tip of the iceberg” and called for ministers to “come clean” and publish all information about the contracts awarded.
The NAO’s investigation comes with the Government under intense pressure about claims of a “cronyvirus” culture which has seen allegations about key posts and contracts going to people linked to the Tory party.
The report found:
- By July 31 more than 8,600 contracts with a value of £18 billion had been awarded, including £10.5 billion without any competition process.
- A “high-priority lane” was established for firms referred to the PPE team by officials, ministers’ offices, MPs, peers and senior NHS staff, with about one in ten companies going through this route getting a contract, compared with one in 100 for those in the “ordinary lane”.
- Contracts were awarded retrospectively after work was carried out, including a £3.2 million agreement with Deloitte to support the PPE team and an £840,000 deal with Public First for focus groups.
- There was “inadequate documentation” in a number of cases on how risks, including potential conflicts of interest, had been managed.
- Many of the contracts awarded were not published in a timely manner.
NAO chief Gareth Davies said: “At the start of the Covid-19 pandemic in the UK, government had to procure large volumes of goods and services quickly whilst managing the increased risks this might entail.
“While we recognise that these were exceptional circumstances, it remains essential that decisions are properly documented and made transparent if government is to maintain public trust that taxpayers’ money is being spent appropriately and fairly.
“The evidence set out in our report shows that these standards of transparency and documentation were not consistently met in the first phase of the pandemic.”
The NAO investigation looked in detail at 20 contracts including:
- Public First, the owners of which have “previously advised or worked with” Cabinet minister Michael Gove (pictured).
- Artificial intelligence company Faculty, which Cabinet Office minister Lord Agnew owned £90,000 of shares in – although he has since ceased his interest in the firm – was awarded contracts worth almost £3 million.
- Ayanda Capital, a £253 million deal brokered by a businessman who was an adviser to the Board of Trade at the time, which resulted in the purchase of 50 million masks for £155 million, which cannot be used for their original purpose.
- PestFix, a pest control company, was mistakenly put in the high-priority route and given contracts worth £350 million, which included delivery of 600,000 masks which cannot be used for their original purpose.
The NAO concluded that “in the examples we examined where there were potential conflicts of interest involving ministers, we found that the ministers had properly declared their interests and we found no evidence of their involvement in procurement decisions or contract management”.
In both the PestFix and Ayanda deals, the masks complied with the BS EN149 standard and were in line with the contracts agreed with the suppliers, but did not meet the Government’s published PPE specifications at the time.
The spending watchdog acknowledged the pandemic required acting with “extreme urgency” and the Public Contracts Regulations allowed an emergency response, including awarding deals directly without a formal competition.
In March, the Cabinet Office issued technical guidance on urgent procurement, but “did not specifically set out the risks that should be considered” including “perceived or actual bias in awarding contracts or conflicts of interest, that may become more prominent when no competition is involved”.
The cross-government PPE team had an eight-stage process for evaluating offers of help, but began work before “key controls” were put in place, with contracts worth £1.5 billion signed “before the financial and company due diligence process was standardised”.
The NAO criticised a lack of record-keeping within the “high-priority lane”, which involved 493 suppliers, of which 47 were given contracts.
Fewer than 250 sources for the 493 leads were recorded, including 144 which came through the private offices of ministers, 64 directly from backbench MPs or peers and 21 from officials.
Labour MP Ms Hillier said: “The Government overlooked a serious conflict of interest, paid consultants for months before giving them contracts and purchased masks it knew weren’t up to scratch.
“It’s bad enough that it set up a ‘high-priority lane’ to fast-track companies with the right connections.
“But the failure to track how half the companies had ended up on it made it impossible to ensure proper safeguards were in place.
“The Government needs to come clean and immediately publish all the contracts it’s awarded so far.”
Cabinet Office Minister Julia Lopez said: “We have been dealing with an unprecedented global pandemic that has posed the biggest challenge to the UK in a generation.
“As this report rightly recognises, we needed to procure contracts with extreme urgency to secure the vital supplies required to protect frontline NHS workers and the public and we make no apology for that.
“We have robust processes in place for spending public money to ensure we get critical equipment to where it needs to go as quickly as possible, whilst also ensuring value for money for the taxpayer.
“It is important to maintain the public’s confidence in how we manage their money, and we welcome the NAO’s scrutiny of our processes and recommendations on how they can be improved.”
Deals examined by National Audit Office
PestFix
The pest control firm was awarded contracts worth £350 million to supply personal protective equipment (PPE). It was initially wrongly included in the “high-priority lane” of offers to supply PPE, the NAO said, giving it a fast track through the system.
The Department of Health and Social Care denied that it had been dealt with as a priority by mistake.
The Government signed a £59 million contract to supply 25 million masks, based on a design which complied with the BS EN149 standard but not the Government’s published PPE specifications.
The masks were of the specification that had been agreed with the supplier, though, and the mistake was not spotted until 600,000 had been delivered. They will not be used for their original purpose but may be used for other purposes or resold.
There was no documented financial and company due diligence at the time of the original contract award in April, and when this was carried out in June PestFix was given an “amber” rating on the traffic light scale.
Ayanda Capital
A PPE contract with a value of £253 million was agreed, the NAO said. The offer of support was processed through the high-priority lane, following a referral by an NHS official.
The offer of support was from a business person who was an adviser to the Board of Trade at the time and a senior adviser to Ayanda.
The Government contracted with Ayanda to purchase 50 million FFP2 masks for £155 million based on a design which complied with the BS EN149 standard, but was not in line with the Government’s published PPE specifications.
The masks ordered and delivered were of the design that was agreed with the supplier, but will not be used for their original purpose.
Deloitte
The Cabinet Office awarded a £3.2 million contract through a framework agreement to Deloitte to support the cross-government PPE team’s efforts to secure supplies.
The contract was awarded retrospectively on July 21, four months after Deloitte had begun working on the project.
The NAO said it found no evidence that the Cabinet Office documented its reasons for its choice of supplier.
The procurement strategy stated that other firms on the framework may be able to provide the service and it accepted the risk of a legal challenge.
Public First
In March 2020, the Cabinet Office asked the firm to provide focus group research on an informal basis, agreeing to pay the supplier for each set of groups without a formal contract.
The firm’s founders, James Frayne and Rachel Wolf, have previously advised or worked with Cabinet Office Minister Michael Gove, although there was no evidence he had been involved in the contract.
On June 5, the Cabinet Office awarded a retrospective contract for a maximum £840,000 to Public First to cover work already carried out and to cover the value of potential future work. The firm invoiced for £550,000 in total.
The NAO said there was a lack of documentation recording the process for choosing the supplier, the justification for using emergency procurement, or any considerations around potential conflicts of interest.
Mr Frayne said: “It has suited opponents of this Government to omit this fact but, as the NAO finally makes clear, no great contract was ever agreed in advance with us.
“We agreed a pay-as-you-go deal where we could be terminated at any point if they weren’t happy with our work.
“The reason we worked with Government for so long was because we provided useful insight, particularly amongst the hardest to reach groups.”
Faculty
Three contracts were awarded to Faculty, an artificial intelligence firm in which Government minister Lord Agnew had £90,000 of shares at the time.
The minister declared his interest in Faculty on the Register of Lords’ Interests as required, the NAO noted, and there was no evidence he was involved in the contracts.
The contracts were £400,000 with the Ministry of Housing, Communities and Local Government for data scientists, £264,000 with the Department for Business, Energy and Industrial Strategy for analytics and £2.33 million with NHSX.
Only the NHSX deal has any documented consideration of conflicts of interest, and no potential conflicts of interest were identified.
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