Spending watchdog hits out at lack of transparency and inadequate documentation in procurement during pandemic

The National Audit Office (NAO) has criticised a lack of transparency and adequate documentation of some key decisions, “such as why particular suppliers were chosen or how government identified and managed potential conflicts of interest”, in the awarding of some contracts while government was procuring large volumes of goods and services at high speed to respond to the COVID-19 pandemic.

In a report, Investigation into government procurement during the COVID-19 pandemic, the NAO said some contracts were also awarded after work had already begun, and many were not published in the timeframe they should have been.

The report revealed amongst other things:

  • By 31 July, over 8,600 contracts, worth £18.0bn, related to government’s response to the pandemic had been awarded. Individual contracts ranged in value from less than £100 to £410m. 90% of the contracts by value (£16.2bn) were awarded by the Department of Health & Social Care and its national bodies.
  • New contracts worth £17.3bn were awarded to suppliers, of which: £10.5bn were awarded directly without a competitive tender process; £6.7bn were awarded directly through pre-existing framework agreements (which would have involved a competitive bidding process when they were set up); and contracts worth almost £0.2bn were awarded using a competitive tender process or using a competitive bidding process from a framework agreement. Government also procured goods and services worth £0.7bn through amendments or extensions to existing contracts.
  • Personal protective equipment (PPE) accounted for 80% of the number of contracts awarded (over 6,900 contracts) and 68% of the total value of contracts awarded (£12.3bn). “PPE needed to be procured quickly during the first few months of the pandemic, when global demand far exceeded supply.”
  • The DHSC, supported by other departments, had established an eight-stage process to assess and process offers of support to supply PPE. It set up processes to rapidly check suppliers’ equipment against government’s PPE specifications and to undertake due diligence on the suppliers. Contracts were awarded to 71 suppliers, worth £1.5bn in total, before this process was standardised; 62 of these had been delivered, three had been cancelled and six remained ongoing.
  • The cross-government PPE team had established a “high-priority lane” to assess and process potential PPE leads referred by government officials, ministers’ offices, MPs and Lords, senior NHS staff and other health professionals. “The team considered that leads referred by these sources were more credible or needed to be treated with more urgency”. About one in ten suppliers processed through the high-priority lane (47 out of 493) obtained contracts compared to less than one in a hundred suppliers that came through the ordinary lane (104 of 14,892). “The sources of the referrals to the high-priority lane were not always documented in the case management system and the NAO found a case where a supplier, PestFix, was added to the high-priority lane in error.”

The NAO said: “For procurements where there is no competition, it is important that awarding bodies set out clearly why they have chosen a particular supplier and how any associated risks from a lack of competition have been identified and mitigated. This is to ensure public trust in the fairness of the procurement process.”

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The watchdog said that in a selected sample of 20 contracts, it had found examples where departments failed to document key decisions, such as why they chose a particular supplier or used emergency procurement, and failed to document their consideration of risks, including how they had identified and managed any potential conflicts of interest.

The NAO found that some contracts were awarded retrospectively after work had already been carried out. It gave as examples:

  • A £3.2m contract was awarded to Deloitte to support the cross-government PPE team’s procurement of PPE on 21 July 2020, with the contract effective from 14 March 2020.
  • The Cabinet Office’s contract with Public First, a research company, was awarded on 5 June 2020, with the contract effective from 3 March 2020.

“By asking for work to be delivered without a formal contract, risks such as underperformance are increased,” the NAO said.

The report also revealed that a clear trail of documents to support key procurement decisions “was sometimes missing”.

The NAO noted that the Cabinet Office had asked the Government Internal Audit Agency to review six PPE contracts that had attracted media attention. “The review found that while there was evidence for most controls being applied, there were some gaps in the documentation, such as why some suppliers which had low due diligence ratings were awarded contracts,” the NAO said.

The watchdog also criticised the fact that many of the contracts awarded over this period had not been published in a timely manner.

The NAO said it recommended that, “should the need to procure significant volumes of goods with extreme urgency arise again, government identifies and manages potential conflicts of interest and bias earlier in the procurement process. Government should ensure that basic information on contracts are published within 90 days of award”.

Commenting on the report, Gareth Davies, head of the NAO, 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.”

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