COVID-19: Government procurement and supply of Personal Protective Equipment Contents

---

1Government’s approach to procurement during the pandemic

1.On the basis of two reports by the Comptroller and Auditor General, we took evidence from the Cabinet Office, Department of Health & Social Care (the Department) and Public Health England about government procurement during the COVID-19 pandemic and the supply of personal protective equipment (PPE).1 As part of our inquiry, we also took evidence from Care England, the British Medical Council, the Royal College of Nursing, and UNISON.

2.Government was required to react with urgency in response to the COVID-19 pandemic and as part of this departments and public bodies were required to procure new goods and services. By 31 July 2020, government had awarded over 8,000 contracts in response to the pandemic, with a value of £18 billion. The Cabinet Office issued information and guidance on public procurement regulations in response to the pandemic. This included Procurement Policy Note 01/20, which highlighted to departments and public bodies that they were able to procure goods, services and works with extreme urgency using regulation 32(2)(c) of the Public Contracts Regulations 2015. The regulation allows departments and public bodies to make direct awards of contracts to any supplier if they have an urgent requirement for goods, services or works due to an emergency, without undergoing a formal competition, subject to meeting certain criteria.2

3.The largest proportion of government’s spending, over £12 billion, was on the purchase of PPE. PPE is vital during the pandemic to protect its users in the health and social care services and elsewhere from catching COVID19 from contact with other people, and to help protect patients against onward transmission. COVID-19 has had an extraordinary impact on global demand for, and supply of, PPE. From March 2020, demand for PPE rocketed in England and across the world while the overall global supply fell. Where government required PPE, it therefore had to buy it in a difficult and uncertain market.3

Failures to address procurement risks

4.Government awarded contracts worth more than £10 billion without competition and made extensive use of emergency procurement regulations to very quickly make direct awards of contracts. The NAO found that this opened up significant procurement risks, including increased risks of unequal treatment of suppliers and poor procurement processes. In the absence of competition, other measures such as increased transparency and clear documentation of decisions become even more important than in normal circumstances to ensure public trust is maintained.4 Many of the risks materialised. These included only conducting due diligence on suppliers of PPE after already awarding them contracts, and retrospectively awarding other contracts months after work had begun. The Cabinet Office backdated approval for a £3.2 million consultancy contract with Deloitte for support to the PPE supply chain. We asked whether this posed an unacceptable risk for large amount of taxpayers’ money. The Cabinet Office was unable to tell us how many contracts had been awarded retrospectively in this way and accepted that there had been a lack of transparency over the contracts.5

5.The NAO also found cases where departments failed to document why they were using direct awards and not using competition to buy goods or services, or why particular suppliers were chosen. In other cases, departments failed to properly document potential and perceived conflicts of interest and how they managed them, particularly in circumstances where ministers held cross-cutting responsibilities.6 The Cabinet Office explained that there were well established procedures across government to manage conflicts of interest and confirmed that the emergency procurement procedures did not remove Departments’ responsibility to manage these. It accepted that while the NAO report did not find any evidence of conflict of interests through Ministerial involvement, the evidence of how conflicts had been managed was not as clear as it should be. It similarly recognised that being able to overtly show how it had managed conflicts of interests would be crucial to maintaining public trust.7

6.Departments failed to meet targets to publish basic information on contract awards within 90 days of the award being made. For contracts awarded before the end of July with a value over £25,000, less than half had their details published by 10 November, and only 25% were published on Contracts Finder within the government’s target of 90 days.8 The Cabinet Office admitted that it had taken too long to publish contract award notices, and that the backlog in publishing award notices was not prioritised as much as the actual procurement. The Cabinet Office told us that most contracts had now been published and the Department added that all the PPE contracts had now been published.9

7.In December 2020, the Cabinet Office published the Boardman review into two of its COVID-19 communications services contracts that had been let during the pandemic. Although the report focused on a specific area, it reported wider findings and recommendations, and noted that its findings were consistent with those of the National Audit Office’s procurement report.10 The Boardman report contained 28 recommendations covering the Cabinet Office’s procurement processes and the way government manages actual and perceived conflicts of interest. The Cabinet Office told us that it had accepted all 28 recommendations. We asked when the Cabinet Office expected to have implemented these recommendations. The Cabinet Office told us that it had already started implementing some of the recommendations, such as those relating to desktop guidance and providing additional training. It explained that some of the recommendations, such as creating a searchable cross-government database of potential conflicts, would take a little longer to put in place and it had given itself six months to implement most of the recommendations.11

High-priority lane

8.As the scale of the challenge to supply the required PPE became clear, the Department created a parallel supply chain to identify suppliers that could provide PPE, to support new UK manufacturers that had not previously made PPE, and to distribute the PPE to NHS and social care providers. This became operational at the beginning of April.12 In response to government’s call for offers to provide PPE, the parallel supply chain received over 15,000 offers of support.13 It established an ordinary lane to assess and process the majority of these offers and a high-priority lane to separately assess and process leads that it considered more credible. Both lanes used the same eight-stage process to assess and process offers. However, the Cabinet Office noted that leads that went through the high-priority lane were handled better and that the parallel supply chain team ‘held their hands’ through the process. Around one in ten suppliers which came through the high-priority lane were awarded a contract compared with one in a hundred for the ordinary lane. The Cabinet Office told us that the total value of contracts awarded to suppliers through the high-priority lane was £1.7 billion.14

9.Access to the high-priority lane was based on recommendations coming from government officials, ministers’ offices, MPs and members of the House of Lords. The NAO found that there were no written rules which determined the basis on which suppliers should be recommended for the lane, meaning that it was left to the judgment of individuals putting forward the leads. Committee members noted that when MPs passed on leads they were not necessarily based on personal experience or expertise in PPE procurement and therefore not in a position to vouch for the validity or credibility of the lead. The NAO found that the process did not clearly record information on referrals. The Cabinet Office confirmed that of the 47 suppliers which came through the high-priority lane and were awarded contracts, 12 were introduced from MPs, seven from Peers and 18 from officials. In five cases, the source of the referral was not known and one referral was put in the lane in error. Although the lane was established for more credible leads, the Department admitted that in practice it was a convenient way to make sure offers were getting picked up in a way that it could then explain back to MPs or others that they were being looked at.15

10.The British Medical Association and the Royal College of Nursing told us that their organisations did not have access to the high-priority lane, even though they were being contacted by, and therefore would have been able to put forward, credible leads based on the knowledge of their members. The British Medical Association also noted that suppliers which had contacted them, including suppliers trusted by doctors, tried the normal channels of reaching out to the Government but had “hit a brick wall”. Care England told us that it had similarly shared the details of potential suppliers but there had been no follow-through. The Department was unable to confirm whether the British Medical Association had access to the high-priority lane and committed to checking this.16

Volumes of PPE procured

11.Between February and July 2020, the Department ordered 32 billion items of PPE. The Department told us that it was seeking to avoid shortages in the event of a potential second wave and had deliberately looked to build up a stockpile equivalent to four months’ usage across all lines of PPE. It also told us that the model this was based on was cautious and that other types of usage would increase. However, the NAO found that if PPE was to be used consistently at the rate it was used between March and July 2020 at the peak of the pandemic, about 503 million items per month, the PPE ordered could last around five years (with variations across different types of PPE). We asked how the Department would ensure that its stockpile was properly managed so that none of the PPE would be wasted or go out of date. The Department assured us that it was committed to ensuring this was the case.17

12.Government’s PPE strategy aims to build a UK manufacturing base so that there is a resilient domestic supply. The Department explained that 70% of PPE (excluding gloves) that it expected would be supplied between December 2020 and February 2021 should come through contracts set up under the Department’s UK Make programme. It cited contracts for this programme as one of the reasons that the number of orders it made peaked in June, after the initial pandemic peak. We were concerned that this domestic production risked being undermined by surpluses of PPE and asked whether it would need to consider reducing its existing contracts. The Department explained that some of the PPE stocks were of items such as aprons and gloves which the sector used in high volumes, but accepted there was a bigger challenge for other types of PPE such as respirator masks.18

13.The Department asserted that while it had deliberately secured a significant stockpile of PPE, it was not clear it had over-ordered as the stock would be needed for the ongoing COVID crisis. It admitted that it did not have full information about how much PPE had been provided by suppliers outside the parallel supply chain. Additional PPE was also used by staff who were not treating known COVID19 NHS patients but were supporting the ‘reopening of the NHS’. It also told us that the PPE it had ordered can be used to support primary care and social care and might also be needed for the programmes to test people for, and vaccinate people against, COVID-19. Not all of the PPE purchased had yet been delivered and the Department told us it would consider whether some of its PPE contracts could be reduced or cancelled. The Department also said that it was looking at sharing or selling some PPE with its partners.19 The Department wrote to us after our evidence session and told us that to date it had, for a multitude of reasons, cancelled or curtailed contracts to the value of around £400 million.20

Problems with the quality of some PPE procured

14.Not all of the PPE the Department bought can be used. The Department told us that only 0.5% of the 18 billion items of PPE it had received and checked so far had failed to meet clinical safety standards and therefore could not be used at all. However, this figure is not complete, both because the calculation does not include PPE which the Department hopes to use for different purposes to that for which it was intended, and because much PPE is yet to be received or tested. The Department accepted that this figure would change as it finished its process of checking. The NAO report found that the Department had identified 195 million items of PPE that were unusable or potentially unsuitable, which would be around 1% of the items received to date.21 The Department explained that this included a wider group of products, including those which could not be used for their intended purpose but could be used in other ways.22 In its letter after our evidence session, the Department stated that its updated estimate was that 1.3% of the items bought were not fit for the original intended purpose and that 0.4% were not fit for any purpose. The letter did not provide information on the number of items tested to date.23

15.The Department had not calculated the value of unusable or potentially unsuitable items but told us that it was currently undertaking work to estimate this and committed to coming back to us with a timetable for when this would be complete.24 It told us that it was investigating potential fraudulent activity and acknowledged that while the levels of fraud were very low, the costs could run to millions of pounds. It told us that its PPE contracts contain clauses which allow it to reclaim costs for substandard PPE or PPE that was not provided, but it could not tell us how many of these contracts it was pursuing or how much progress it had made. The NAO reported the value of potentially unusable items will amount to hundreds of millions of pounds.25

16.The Department accepted that the urgent need for PPE meant it accepted greater risks when buying PPE than it usually would. The Department maintained, however, that it did not ask the Health and Safety Executive to lower standards. It told us that it bought millions of FFP2 respirator masks which did not meet government’s published safety standards because it was concerned it would run out of FFP3 respirator masks. It explained that it was in discussions with the Health and Safety Executive about changing that standard to permit the use of these particular FFP2 masks. FFP2 masks of the type the Department bought were then not permitted to be used for their original intended purposes.26