Covid-19: NAO Report on Government Procurement

Debate between Dan Carden and Jane Hunt

Wednesday 9th December 2020 Westminster Hall

[Dan Carden]

Thank you, Ms Eagle. I absolutely agree with my hon. Friend. Story after story has come forward in a similar vein.

Public procurement regulations are designed to safeguard public confidence in the spending of public money. On 18 March 2020, the Cabinet Office implemented emergency procedures for procurement to allow for extreme urgency, including directly awarding contracts to suppliers without competition. That guidance referred to the need to keep proper records of decisions and actions on individual contracts; to have transparency and publication requirements; and to achieve value for money—basic requirements that the report and other information in the public domain now show the Government failed to meet.

The NAO highlights that, remarkably, the Cabinet Office guidance failed to give direction on managing the risks that should be considered as a result of using direct awards. The usual Cabinet Office spending controls on contracts over £10 million were not applied to the procurement of personal protective equipment. A clearance board was later set up, with an eight-stage process to approve PPE contracts over £5 million, but we know that £1.5 billion was awarded in contracts before proper processes were in place and before any financial and company due diligence process was standardised.

By 31 July 2020, over 8,600 contracts, worth £18 billion, had been awarded, of which £10.5 billion-worth were awarded directly without competition. Under the cover of the pandemic, billions of pounds of public money was handed to private companies, including Tory-linked firms, without competition, transparency or accountability.

[Jane Hunt (Loughborough) (Con)]

Does the hon. Gentleman agree that we were on daily calls at the time discussing the pandemic and how we could help our constituents and companies? People from all parties were there, including Labour Members who were rightly asking for PPE for care homes and other organisations in their constituencies.

[Dan Carden]

I will move on because I want to go through the ways in which the system was set up. I will move on to some of the case studies highlighted in the report. PestFix, a pest control supplier, was handed a contract worth £350 million for PPE. The Government contracted with PestFix to purchase 25 million FFP2 masks, which we now know did not meet the Government’s published PPE specifications at the time of the order. Only after 600,000 masks were completed and delivered did the Department communicate the problem to PestFix and alter the contract.

Ayanda Capital—a London-based investment firm whose senior adviser was Andrew Mills—was awarded a PPE contract worth £252 million. At the time, Mills was also an adviser to the Board of Trade, part of the Department for International Trade. The 50 million masks purchased from Ayanda Capital failed to meet NHS specifications and were never able to be used. The deal’s documentation failed to identify any conflicts of interest.

Other cases have come to light. P14 Medical, a small firm based in Stroud, Gloucestershire, which recorded significant losses in 2019, was handed a £156 million contract to import PPE from China. Its director is a Conservative councillor. PPE Medpro, which has already been mentioned and is run by Anthony Page, a business associate of Conservative peer Baroness Mone, was handed a £122 million contract weeks after it was set up. In fact, PPE Medpro was set up on the day that Page quit as secretary of the company that deals with Baroness Mone’s brand.

In another case, Spanish businessman Gabriel González Andersson received £21 million of taxpayer’s money for acting as an agent to an American jewellery designer who, despite the absence of relevant experience, received major contracts for the supply of PPE. The Health Secretary’s former neighbour, who runs a pub in his village and has no previous experience in medical supplies, was awarded a £30 million contract to make millions of plastic vials for covid tests. He first contacted the Health Secretary by WhatsApp.

It is not just in the procurement of PPE that the Government have serious questions to answer. Some £840,000 was handed to the communications company, Public First, to run focus groups. The contract for that work was awarded retrospectively. Public First was founded by husband and wife Mr Frayne and Ms Wolf in 2016. Both Frayne and Wolf have worked in senior positions at different times for the former Education Secretary, and now Chancellor of the Duchy of Lancaster and Minister for the Cabinet Office, the right hon. Member for Surrey Heath (Michael Gove).

The NAO stated:

“We found no documentation on the consideration of conflicts of interest, no recorded process for choosing the supplier, and no specific justification for using emergency procurement.”

The Government have tried to claim that the NAO report shows Ministers properly declared their interests and that there is no evidence of Ministers’ involvement in procurement decisions or contract management. The truth is that we just do not know what role Ministers played.

The Government’s only explanation is that this was an emergency and they were sourcing PPE as quickly as possible. Yes, the Government had to source PPE quickly—a problem of their own making. During years of cutbacks, emergency stockpiles of PPE dwindled and went out of date. The Government ignored warnings from their own advisers to buy missing equipment, and pandemic planning became yet another casualty of austerity and incompetence. It took Ministers until March to realise that the NHS supply chain, fragmented by years of marketisation, could not distribute PPE quickly enough to meet demand, which left Ministers scrambling to source PPE from elsewhere and overpaying by tens of billions of pounds.

[Jane Hunt]

Will the hon. Gentleman give way?

[Dan Carden]

No, I do not have time.

Despite the enormous sums being spent, PPE was still not making it to the frontline. There was a huge disconnect between the boasts being made by Ministers in Parliament and the reality on the ground, where key workers were pleading for the kit that they needed to do their job safely. We all recognised that this was an emergency, but the need to act fast does not explain or excuse the Government’s actions. It does not explain why the emergency procurement rules should have been applied to non-PPE or non-emergency suppliers, such as public relations agencies, and nor does it justify why some consultants were paid in one week what a nurse earns in an entire year. It does not explain why rules around transparency, which were not suspended by the emergency procedures, were not followed, or why the Government still refuse to reveal basic information about who was bidding for contracts and how decisions about contracts were made.

Here is where the Government’s story really falls apart. We know that dozens of experienced local suppliers that offered to provide PPE were ignored. These qualified businesses had the capacity to produce large quantities of PPE quickly, but they were overlooked for contracts while businesses that had no prior experience were deemed fit. Ahead of this debate, I was contacted by reputable PPE suppliers that say they were crowded out during the pandemic by organisations that had no history of PPE manufacture or supply, some of which we now know had existed only for a matter of weeks. One established family-run company in Merseyside was forced to lay off staff after its offer of PPE to Government was ignored and then refused, as contracts instead went to Tory-linked firms buying from abroad.

The cronyism does not stop with contracts. We have also witnessed an opaque and troubling appointment process, whereby senior figures with close ties to the Conservative party have won public jobs that are of great importance in the national response to the pandemic. I pay tribute to Gabriel Pogrund and Tom Calver at The Sunday Times for their investigation, which was headlined, “Chumocracy first in line as Ministers splash covid cash”. Their investigation really is essential reading; it is extensive, and there is not time to do it justice in this debate, but it starts with the Prime Minister’s appointment of a close family friend, Kate Bingham, who is also the wife of a Conservative MP, to head up the vaccines taskforce. There was no formal appointment process, and Ms Bingham was appointed despite being a venture capitalist who had no previous experience in the field. She herself has said that her initial reaction to the Prime Minister’s offer was to say:

“I am not a vaccine expert, why should I be the right person?”

Bingham has spent £670,000 on consultants from a small PR agency with close links to the family of Dominic Cummings. She is also facing accusations that she shared sensitive Government information at a private equity networking event in the United States.

Then there is Lord Feldman, a former chairman of the Conservative party, who was secretly appointed as an unpaid adviser to the Department of Health. He sat in on discussions between health Ministers and Tory donor David Meller. Meller was later handed a £163 million contract for PPE despite his company having no track record of producing PPE. I wonder whether Mr Meller will be making any more donations to the Conservative party any time soon—he certainly must be flush for cash.

George Pascoe-Watson and Tory peer Lord O'Shaughnessy, chairman and senior adviser of the lobbying firm Portland Communications, were appointed as advisers at the Department of Health. They quite literally split their time between advising the Government on their covid response and advising their corporate clients on what was going on in Government. Lord O’Shaughnessy took part in calls with Boston Consulting Group, a Portland Communications client, which went on to be handed a £21 million contract from Government.

Of course, if anyone has a problem with any of this, they could take it up with the Government’s anti-corruption champion, the hon. Member for Weston-super-Mare (John Penrose), who is here with us today in Westminster Hall. He is also a Conservative MP and the husband of Dido Harding, the Conservative peer appointed to head the nation’s test and trace programme. Her appointment is now facing a possible judicial review.