11.From 3 March, in response to the anticipated shortage of ventilators, the Department began to purchase as many ventilators as it could using existing NHS supply chain framework agreements, which are designed to ensure competitive pricing. It explained that as part of these initial efforts, it discussed the possibility of speeding up the manufacture of devices available through the framework, but found that this was not possible as the devices are normally built at the point of order and have complex supply chains. By 12 March the Department had managed to order an additional 2,400 mechanical ventilators. However, it recognised that this still left a ‘huge deficit’ in terms of what it thought would be needed.
12.From 13 March the Department, therefore, stepped up its efforts to purchase ventilators directly from overseas with significant help from the Foreign and Commonwealth Office and the Department of International Trade in China. The Department told us that while it was somewhat ahead of other countries in moving to international procurement, there was soon “huge competition” for devices as other countries quickly followed based on what was happening in Lombardy, Italy. We heard that this involved large daily price changes and that the Department was “gazumped” on several occasions as it would not go above certain price thresholds.
13.We recognise that given the circumstances the Department had to move quickly. However, regardless of the circumstances, government regulations require departments to carry out due diligence on the organisations that they buy from and exclude organisations that do not comply with various environmental, social and labour laws”. The Department told us that it did its best to confirm that ventilators were the correct specification and that sellers were credible—this included looking into suppliers’ financial records, any investigations they had been part of, and anything published about them. When asked specifically whether it had, for example, looked into the issue of modern slavery in its supply chains, the Department said that it was not aware of any links to modern slavery as far as the manufacturers of the devices were concerned. However, it acknowledged that it had not looked at exactly where every component in the machine was produced at the time. The Department agreed to check back through its wider supply chains as far as it could to establish whether any links to modern slavery existed. It cautioned that certain aspects of the supply chain may be difficult to investigate. The Department wrote to us one month after the oral evidence session, having considered the matter further. It stated that it and the British Embassy in Beijing had worked closely with external due diligence service providers, to carry out open source checks on Chinese suppliers of ventilators procured during the peak of the pandemic, It said that this due diligence included public records and media checks designed to flag legal, political or reputational risks, including on modern slavery, and assured us that procurement processes were all in line with UK procurement regulations during this time.
14.The Cabinet Office’s ventilator challenge, which encouraged UK businesses to develop new ventilators from scratch and increase the production of existing products or modified designs, was undoubtedly a significant achievement. In total, it produced around 15,000 mechanical ventilators in the space of just four months, over 1.5 times the number available to the NHS at the start of the pandemic. The Cabinet Office estimated it would normally take a decade to produce this amount and described it as a “terrific response” from British industry and designers.
15.However, it is important to remember that the challenge did not take place under normal circumstances. Ventilator Challenge UK, the consortium of businesses that worked together to produce the Penlon ES02 ventilators, described the process as “working against a backdrop of life or death urgency”. The Cabinet Office acknowledged that the scale and urgency of the task meant that designers and manufacturers involved in the challenge came together “in the most collaborative way” it had ever seen and that the Cabinet Office team were working “12 hour days, seven days a week for 14 weeks.” The Cabinet Office also explained that the focus of the programme was maintaining public health and that there was therefore a low emphasis on cost. This meant that it was able to fund multiple devices until it became clear whether or not the ventilator would be needed to meet demand.
16.Nevertheless, there are clearly elements of the challenge which could be applied to future programmes. For example, the Cabinet Office told us that it took a number of steps to ensure that suppliers costs were reasonable, such as working on an open-book basis using the Ministry of Defence’s Cost Assurance Analysis Service and working with participants to cancel orders for parts that weren’t needed or selling them on the open market. It also showed commitment to transparency and accountability, maintaining sufficient records of the programmes rationale, key spending decisions it took and the information it had to base it on.
17.In any government programme, departments should aim to work collaboratively across government and to involve people with the right skills from the outset. Yet this is not something we always see in the programmes we report on. In this case, we heard how the departments’ efforts to involve government departments that were best placed to carry out specific functions contributed to the programmes’ success.
18.For example, the Department explained that both the Department for International Trade and the Foreign and Commonwealth Office helped it to purchase ventilators directly from China, which it viewed as the largest untapped market for ventilators. Both departments played a substantial role in assessing offers, which meant that the Department was able to secure orders relatively quickly and at a similar level to normal market prices. Similarly, the Cabinet Office sought advice from the Ministry of Defence’s Cost Assurance and Analysis Service as part of its process to gain assurance that suppliers’ costs were reasonable. It told us that this approach mean it spent an average of £10,000 excluding VAT on the ventilators that were manufactured, which it said was comparable to those bought on the open market.
19.The Cabinet Office also drew on external expertise where required. We heard that the Chief Commercial Officer happened to have a background in running engineering and product development companies that meant he was well placed to develop and initiate the programme. Additionally the Cabinet Office’s ‘technical design authority’, put in place to support decision making as part of the ventilator challenge, drew on the expertise of NHS clinicians, the Medical and Healthcare products Regulatory Agency and PA consulting (acting as a programme manager) as well as other government departments; it also drew on data from device-testing experts. The Cabinet Office emphasised that it believes it was having cross-functional teams working on the project from the beginning that “really proved successful”.
20.From the outset, Cabinet Office’s strategy was to support a number of both new and existing designs. This was to provide it with insurance against new designs not meeting the regulatory standards on time and the likelihood of it facing global competition for parts and components used in existing designs. The Cabinet Office told us that its approach of connecting smaller companies with specialist design knowledge with larger manufacturers that had the ability to scale-up production of the designs worked “very well”.
21.In total the Cabinet financed 18 devices from 17 challenge participants over the course of the challenge; the majority of which were either completely new designs or modifications of existing designs. Through its technical design process, which eliminated devices based on whether they met regulatory requirements or were needed to meet government’s targets, it identified just 3 participants whose products were required. The remaining 14 designs were not manufactured; of these the Cabinet Office believes that 5 could have gone on to meet the regulatory requirements had they been needed.
22.Designs are a type of intellectual property (IP), which if protected, can provide value for the owner. The Cabinet Office told us that it owns the IP for the designs it paid for and that it either owns all or a “substantial chunk” of the IP for the majority of the designs it could have made but chose not to. We asked the Cabinet Office how it plans to maximise the value of the IP that it owns. It told us that, where it paid for a manufacturer’s design work as part of the challenge it will get a royalty if a manufacture uses the design to take a unit to market. However, while it acknowledged that this was something it would need to check on, it told us that there was no set process in place to do this and that it currently relies on the goodwill of manufacturers. In response to our wider concerns that the government is in the habit of giving away technology without seeking to gain value from it, Cabinet Office agreed that it would look at how government contracts consider the issue of intellectual property.
17 Qq 50–51; C&AG’s Report, paras 3.2, 3.3
18 C&AG’s Report, para 3.10 & Figure 4
19 Qq 66,79
20 , sub section 7
21 Qq 71, 74–75
22 Letter from Second Permanent Secretary, Department of Health and Social Care, to PAC Chair, dated 9 November 2020
23 Q84; C&AG’s Report, Figures 3 & 10
24 Ventilator Challenge UK consortium (SOV0002)
25 Qq 57, 126
26 Q85, C&AG’s Report, para 16
27 Q85, C&AG’s Report, paras 25, 4.20
29 Q 77
30 Q 77; C&AG’s Report para 3.10
31 Q 85
32 Q 48; C&AG’s Report, paras 15, 4.8 & 4.10
33 Q 126
34 Q 126; C&AG’s Report, para 4.3
35 C&AG’s Report, paras 4.8–4.12 & Figure 6
36 , ‘Intellectual property and your work’, accessed 28 October 2020
37 Qq 90, 135
38 Qq 136–138
39 Q 139