PPE Medpro: awarding of contracts during the pandemic

Introduction

1. As part of its response to the COVID-19 pandemic the Department of Health and Social Care (‘The Department’) needed to purchase a huge amount of personal protective equipment (PPE) very quickly. In the year 2020–21, it spent over £12 billion on PPE through what this Committee has previously found to be a “haphazard purchasing strategy”¹ including a series of contracts let with unproven, newly created, companies. The Department’s approach to contracting for PPE was rushed and outside the usual procurement route. This led to many risky contracts. The result was some £9 billion written off, including £4 billion of PPE that cannot be used in the NHS.

2. Because there was no national centralised model for procuring and allocating PPE to the health and social care sectors that needed it at the time, the Department established a parallel supply chain and a ‘High Priority Lane’ (known generally as the ‘VIP’ lane). This allowed referrals of potential suppliers from MPs, Peers, ministers, and senior officials. Later, in January 2022, the High Court ruled that the use of the High Priority Lane was unlawful.²

3. PPE Medpro was one of the private companies awarded valuable contracts having been referred through this High Priority Lane by Baroness Michelle Mone. PPE Medpro was set up on 12 May 2020. It was awarded its first contract, worth £81 million, a month later on 12 June to supply 210 million face masks. The Department awarded a second contract a couple of weeks later on 26 June, worth £122 million for sterile surgical gowns.

4. In January 2022, the House of Lords Commissioners for Standards announced that Baroness Mone was subject to an inquiry relating to her alleged involvement in procuring contracts for PPE Medpro leading to potential breaches of the House of Lords Code of Conduct. That investigation is currently on hold while related matters are the subject of criminal investigation by the National Crime Agency. It was announced that Baroness Mone would be taking a leave of absence from the House of Lords on 6 December 2022.

5. On 6 December 2022, the House of Commons debated and agreed that all papers, advice and correspondence involving Ministers and Special Advisers relating to contracts for PPE awarded to PPE Medpro by the Department should be released to the Public Accounts Committee.³

6. On 19 December 2022 the Government commenced legal proceedings against PPE Medpro on the second contract, worth £122 million for the supply of gowns. The Department has stated that it does not believe that these gowns were fit for use. This is a claim that PPE Medpro deny. Baroness Mone has publicly denied involvement with PPE Medpro.

1 Papers received by the Public Accounts Committee

7. Between 14 March and 2 June 2023, the Department of Health and Social Care provided the Committee with materials including documents and email chains identified between 1 January 2020 and 6 December 2023, covering the period during which the two contracts were awarded up to the date of the Order of the House (6 December 2023). The Department’s search included private office and ministerial email correspondence at the Department and Cabinet Office as well as personal email and electronic messages.

8. The Committee recognise that the material provided may be of relevance to ongoing investigations, including a criminal investigation by the National Crime Agency. We recognise the importance of those investigations. Our conclusions in this report are based upon the material provided but we have been careful not to disclose material that could impact on these investigations. For this reason, we do not currently intend to publish the information we have received.

9. The materials provided to the Committee show part of the picture of how Departmental officials and ministers operated in relation to procurement during the pandemic. We are aware that we have only seen a snapshot of procurement processes specifically relating to PPE Medpro. We do not, therefore, have a complete picture of either PPE Medpro or how other contracts were managed and whether PPE Medpro was treated differently to other companies in the VIP route.

Conclusions

10. The papers concerning the contracts with PPE Medpro do provide further strong indications of what this Committee has repeatedly found in our work on procurement failings during the pandemic. The Committee has seen evidence of officials working at very fast pace in extraordinary circumstances to procure the PPE which was urgently needed by staff working on the front lines of the pandemic in the health and social care sectors. The overall picture is of civil servants trying to fulfil the normal requirements of good contracting but without the time or structures in place to allow them to do this.

11. During the initial stages of the crisis, the Department solicited offers to provide PPE with no tendering process and received multiple offers from companies without any track record of delivering PPE and/or with varying track records and longevity. The Department then had insufficient time and resources to reflect properly on each offer, and under pressure caused by the sudden need for PPE, chose to accept very high levels of risk, as we have reported previously in our reports.⁴

12. On the basis of the material we have seen, the risk appetite appears to have been so high at the time that the Department does not seem to have responded to the information it was receiving as part of the contracting process in a way that would be appropriate in normal times. The Department had an overriding impetus to buy and though it conducted some checks, found aspects of bids or companies that were sub-optimal and put in place some limited safeguards (including assurances and payment on delivery), it then bought the products anyway. Colloquially, this might be called panic-buying.

13. The risk of conflicts of interest from the High Priority Lane was also high by design and we have seen limited information on how conflicts of interest should be handled within the Department should they arise (although this was not a direct part of the documents requested for release in the humble Address). There seems to have been a lack of clarity about the purpose of officials checking whether conflicts of interest existed. These are serious defects in government’s stewardship of public money and the Committee has previously reported on this issue.⁵ However, from the evidence in the materials made available to us we cannot comprehensively conclude whether emails from Baroness Mone and the route through the High Priority Lane led to the PPE Medpro offer being treated differently by government than other offers made in the same way during those abnormal times.

2 Related investigations and legal proceedings

14. There are two ongoing investigations which significantly limit what we are able to comment on or publish at this stage. They are, as previously mentioned, a National Crime Agency investigation into PPE Medpro and the House of Lords Commissioners for Standards investigation into the conduct of Baroness Mone. There is also a civil case initiated by the Department against PPE Medpro seeking to recover taxpayer’s money in relation to the second contract. We are conscious of the need for scrutiny of these matters and of the Resolution of the House of 6 December that there should be “examination of the process by which contracts were awarded through the High Priority Lane”.⁶ However, as the Public Accounts Committee does not have access to all the relevant paperwork, other bodies are better equipped to investigate the specific circumstances of the awarding of contracts to PPE Medpro and whether any laws or rules were broken. We are mindful that the information we hold could impact on the outcomes of any of these serious investigations and this has informed our decision on publication.

15. We note that this is not the first time a Parliamentary select committee has had to manage scrutiny and been limited in its options on publication as a result of legal action. There is a wider challenge to day to day scrutiny and transparency because of this.

16. At this time the Committee has chosen not to publish the materials provided as a result of the Order of the House of 6 December, but we have made clear to the Department of Health and Social Care and the Cabinet Office that we reserve the right to do so in future.

3 Wider issues for government procurement

17. The Committee has raised problems with PPE procurement regularly since July 2020, problems which are illustrated by the example of the PPE Medpro contracts. We reported early on in the pandemic that there were fundamental flaws in central procurement and local distribution of PPE.⁷ We highlighted that the need to operate at speed was not a justification for rushing into contracts without adequate due diligence or regard for public money⁸ and that the approach adopted had opened up significant procurement risks. We found that the Department had already wasted hundreds of millions of pounds on poor quality and unusable PPE by the time of our February 2021 report on PPE and that the High Priority Lane had not been effective in sorting good from bad offers or identifying credible leads.⁹

18. In June 2022, over two years on from the start of the pandemic, we reported the Department’s poor track record of failure to follow public spending rules – not just in relation to the pandemic. We were by then particularly critical of the lax handling of conflicts of interest. In relation to the Department’s Annual Report and Accounts for 2020–2021, the Comptroller and Auditor General (C&AG) qualified a regularity opinion due to insufficient evidence to show that the Department’s spending, particularly on COVID-19 procurement, was not subject to a material level of fraud.¹⁰

19. When we looked at the management of PPE contracts in July 2022, we highlighted insufficient due diligence checks to prevent potential profiteering and to identify conflicts of interest. We noted that the Department was in dispute over many PPE contracts and had made limited progress in tackling potentially fraudulent supplies.¹¹

20. Last year we looked at how the Department had procured COVID tests with an individual company (Randox Laboratories Ltd) and raised concerns about inadequate records of how contracts were awarded and who had met with whom, failure to deal with conflicts of interest, a lack of scrutiny from senior officials or clarity on the role of ministers, and a lack of awareness of the scope for excess profits. There were also failures to hold the contractor to account for performance while entering into further contracts.¹²

21. The two Boardman reviews conducted in 2020, of Cabinet Office COVID-19 Communications Procurement¹³ and government procurement in the pandemic¹⁴ also recommended improvements to due diligence procedures, including verifying that a suggested supplier is appropriate for the requirement, accurate and timely record keeping, and creating a clear process for managing risk regarding conflicts of interest (actual or perceived). The final report on procurement recommended improving information available to procurement teams on technical specifications. The Government has accepted the Boardman recommendations and has said that it is in the process of implementing them.¹⁵ The Government has also accepted recommendations of the National Audit Office in relation to procurement practices and managing contract risks.¹⁶

22. Now we have considered the Department’s 2021–22 Annual Report and Accounts, it is clear that it has still not got adequate inventory controls, is running up large storage and disposal costs (for unused or unusable PPE) and needs to do more to maximise the amount it can recover from contracts and suppliers who had not delivered what was required.¹⁷

23. When we reported on the Department’s 2020–21 Annual Report and Accounts, we noted that the Department was unable to verify its stock at year-end to check the quality and quantity of the inventory it owned.¹⁸ From October 2020 onwards the Department had a quality and technical function with a market surveillance authority to check the quality of PPE against essential technical specifications. However, by January 2022, it was yet to assess 1,000 of the 30,000 containers of PPE it had received.¹⁹

24. The recurring themes from the Department’s approach to procurement over recent years have been inadequate financial controls, governance, documentation, and transparency, and poor management of due diligence and conflict of interests. We have already made many recommendations to government on how it can improve these areas as well as the detection and pursuit of fraud, technical expertise in procurement and the role of regulation.

Formal minutes

Thursday 13 July 2023

Members present:

Dame Meg Hillier

Olivia Blake

Sir Geoffrey Clifton-Brown

Ashley Dalton

Mr Mark Francois

Anne Marie Morris

Nick Smith

PPE Medpro: awarding of contracts during the pandemic

Draft Report (PPE Medpro: awarding of contracts during the pandemic), proposed by the Chair, brought up and read.

Ordered, That the draft Report be read a second time, paragraph by paragraph.

Paragraphs 1 to 24 read and agreed to.

Summary agreed to.

Introduction agreed to.

Conclusions and recommendations agreed to.

Resolved, That the Report be the Sixty-sixth of the Committee to the House.

Ordered, That the Chair make the Report to the House.

Ordered, That embargoed copies of the Report be made available, in accordance with the provisions of Standing Order No. 134.

Adjournment

Adjourned till Wednesday 19 July at 9.30am.

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Footnotes

1 Public Accounts Committee, Department of Health and Social Care, Annual Report and Accounts 2020–21, Sixth Report of Session 2022–23, HC 253

2 DHSC 2020–21 Annual Report and Accounts, page 16, paras 66–67, page 132, paras 683–684

3 HC Deb, 6 December 2022, col 277

4 Public Accounts Committee, COVID-19 Government procurement and supply of Personal Protective Equipment, February 2021, and Public Accounts Committee, Department of Health and Social Care 2020–21 Annual Report and Accounts, Paras 19–20

5 Public Accounts Committee, Management of PPE contracts, July 2022, Para 16 and Public Accounts Committee, Department of Health and Social Care 2020–21 Annual Report and Accounts, Para 5

6 HC Deb, 6 December 2022, col 277

7 Public Accounts Committee, Whole of Government Response to COVID-19, July 2020

8 Public Accounts Committee, Covid-19: Supply of ventilators, Nov 2020

9 Public Accounts Committee, COVID-19: Government procurement and supply of Personal Protective Equipment, February 2021

10 Public Accounts Committee, Department of Health and Social Care 2020–21 Annual Report and Accounts, June 2022

11 Public Accounts Committee, Management of PPE contracts, July 2022

12 Public Accounts Committee, Government’s contracts with Randox Laboratories Ltd, July 2022

13 Boardman Review of Cabinet Office COVID-19 Communications Procurement

14 Boardman Review of Government procurement in the COVID-19 pandemic

15 Gov.uk, Findings of the Boardman review into pandemic procurement (at 16.06.2023)

16 National Audit Office, Investigation into the management of PPE contracts, March 2022

17 Public Accounts Committee, Department of Health and Social Care 2021–22 Annual Report and Accounts, July 2023

18 Public Accounts Committee, Department of Health and Social Care 2020–21 Annual Report and Accounts, June 2022

19 Public Accounts Committee, Department of Health and Social Care 2021–22 Annual Report and Accounts, June 2022, National Audit Office, investigation into the management of PPE contracts