Procurement Bill [HL]

Lord Strasburger Excerpts

2nd reading
Wednesday 25th May 2022 Lords Chamber

[Lord Strasburger (LD) [V]]

My Lords, I will focus my remarks on what went so badly wrong with the procurement of PPE and how it should inform our approach to this Bill. I will also take this opportunity to share with the House one particular PPE contract that ended in suspicious circumstances that should concern us all.

The first problem with PPE procurement was that the UK started the pandemic from a bad place. Much of our stockpile of PPE items had been neglected and allowed to fall out of date, making it unusable due to the risk that it would fail to protect its users. The stockpile was created in 2009 at a cost of £500 million, following an outbreak of swine flu. Sadly, during the eight months prior to Covid being declared a health emergency of international concern, 200 million items in our stockpile went out of date, including 80% of the respirators, and the stockpile included no gowns, visors or testing swabs. So the flying start we should have had in tackling the pandemic was lost.

The next problem was that the Government were slow to respond to this crisis. They were advised several times to build up PPE stocks, but by the time they eventually started looking for PPE, it was well and truly a seller’s market and prices had gone through the roof.

These procurement failures intensified the scale of the challenge our country faced to protect healthcare staff and other key workers. The Government scrambled to make up for lost time, and this involved abandoning all the measures designed to prevent corruption in procurement and ensure that taxpayers get value for money. Not only was competitive tendering dropped; until May 2020, the eight-point due diligence process was also suspended.

Worse still, with its secretive decision to set up the VIP lane for companies recommended by politicians and officials, the Government exposed the process to potential cronyism and corruption on a massive scale. Firms in the VIP lane had a 10 times better chance of winning a contract, but they had no special qualities that justified that priority—other than their political connections. In fact, the actual performance of the VIP lane contractors appears to be worse than that of those who had no priority. The Department of Health and Social Care estimates that overall, 53% of VIP lane suppliers delivered PPE not fit for front-line services, compared with 11% of all suppliers.

Billions of pounds-worth of orders were funnelled into the VIP lane companies run by friends and associates of Conservative politicians. For example, the noble Lord, Lord Feldman of Elstree, recommended four successful companies; the then Health Secretary, Matt Hancock, recommended four as well, including his local pub landlord; while Michael Gove referred Meller Designs, a firm run by David Meller, who has donated £60,000 to the Conservative Party, including funding for Mr Gove’s leadership bid.

I will not bore the House with the full list of generous politicians, but many successful bidders for PPE contracts were set up on the spur of the moment and had flimsy balance sheets. Many had no prior experience of supplying PPE, or had a controversial history, including tax evasion, fraud and human rights abuses. Trade Markets Direct, a dormant company run by a former bookmaker, was awarded a £3.8 million contract. Michael Saiger, a Miami-based jewellery designer, was awarded £250 million of PPE business and £108 million went to a pest control company, again with no experience of PPE.

Other unlikely companies to benefit from government largesse were a hotel carpeting business, a naval design firm, a luxury packaging company and a month-old firm owned by offshore finance specialists. Transparency International estimates that 20% of the contracts awarded between February and November 2020 contained one or more flags for possible corruption. Some £255 million- worth of contracts went to companies that did not even exist 60 days before they won the business. Meanwhile, many well-established companies with a long history of supplying PPE, but without the seemingly essential ingredient of political clout, could not get a look in. Some offered products several times but never heard back from the Government, presumably because resources had been diverted to the VIP lane.

How has all this frenetic activity turned out for taxpayers? The answer, I am afraid, is not very well. The Department of Health’s annual report for 2020-21 reveals that it spent £12.1 billion on emergency PPE and, of that, £8.7 billion—70%—has been written off because the price has fallen, the PPE is unsuitable or it is past its expiry date. This is waste on a monumental scale, brought about by the Government’s failure to maintain adequate stocks before the pandemic and their tardiness in getting into the market, despite being advised to do so before prices took off.

These serious blunders were compounded by the chaotic way procurement was managed. As Gareth Davies, head of the National Audit Office, puts it, the department’s procurement was vulnerable to fraud due to large numbers of contracts being awarded to new suppliers, many of which came through the controversial VIP lane. He also points to a lack of checks on the quality of goods received and poor inventory management. If you add the wasted £8.7 billion to the £4.3 billion lost in fraudulent Covid grants, it comes to £1 billion more than the Government expect to raise from the increase in national insurance. To put it another way, if PPE procurement and Covid grants had been properly managed, we could have avoided wasting £13 billion of taxpayers’ money—and avoided the increase in national insurance at a time when people are struggling with the cost of living crisis.

This huge scandal has passed most of our press by. With a couple of honourable exceptions, the mainstream media has been shamefully silent. The only thorough report I have seen appeared in the New York Times in December 2020, and none of our papers picked it up, with the exception of the Guardian and Byline Times. Most papers have maintained a strict omerta.

Who has carried the can for this massive scandal? Which Ministers or officials have fallen on their swords or been fired? As we all know, nobody has taken responsibility; nobody has even apologised. As is always the way with this Government, seemingly no-one is to blame—which leaves us exposed to similarly poor performance when the next crisis arrives. It also means that the relatives and friends of the NHS workers and the staff and residents of care homes who perished through lack of PPE will get no explanation or apology.

As I promised at the start, I shall now tell the fascinating and deeply worrying story of Adrian Buckley, a gentleman from Yorkshire who has been trading with China for 32 years and has a full-time sourcing manager based in China on his payroll, not merely an agent. I am recounting his experiences in the summer of 2020 as an illustration of what can go wrong when competitive tendering is abandoned and individual Ministers and officials are given too much untrammelled discretion to select contractors.

In May 2020, Mr Buckley’s company, Buckley Healthcare Ltd, fulfilled an order for 1 million surgical gowns for a hospital trust in Yorkshire. The procurement director was so satisfied that he recommended Mr Buckley’s company to the NHS procurement officer, who informed Mr Buckley that he was putting his company forward to the Cabinet Office to supply 24 million gowns nationally. Mr Buckley and his sourcing manager scoured China for a factory with the capacity and skills to handle such a large order. They also thoroughly checked that the factory had access to the necessary raw materials and that the factory and its staff could meet the required specification for the products. After some time, they found a factory that met all the requirements, which was no mean feat in the frenzied market that existed at that time.

On 4 June 2020, Mr Buckley sent full details and prices to the NHS procurement officer, who forwarded them to the Cabinet Office. After a two-week silence, the details were re-sent to the office of the noble Lord, Lord Deighton, who was managing PPE procurement for the Government from the Cabinet Office. The email included the full specification and photos and videos from inside the factory.

On 25 June, three days after the company had been told that its proposal had been sent for approval, it was informed that the contract had been placed elsewhere. The company was surprised and disappointed, but assumed that it had been outbid and accepted the outcome.

A few days later, however, the company received an agitated phone call from the owner of the Chinese factory saying that he had been contacted by an agent for a company of which he had never heard concerning an order identical to the one he had planned with Mr Buckley. From the naive questions being asked, it was clear that this new company had no experience of buying PPE. Now suspicious that his company’s extensive investigation work and detailed proposal had been passed by the Government to another company—a debutant in the market—Mr Buckley emailed the noble Lord, Lord Deighton, asking what was going on. He received a reply from a civil servant offering first one and then another phoney reason for rejecting the Buckley bid, both of which were quickly dispensed with.

On 12 September, the contract with the other company was published, 30 days later than it should have been. It revealed that the contract had been awarded to a company called Inivos, which appears to have no previous experience of PPE. But the most startling revelation in the contract details was that the price paid to Inivos was £12 million higher than Mr Buckley’s proposal. So, there is every reason to suspect that the details of Mr Buckley’s supply arrangements were passed to Inivos, and that taxpayers have been robbed of £12 million in the process.

There is a full audit trail of all communications between the Cabinet Office and Mr Buckley’s company to support his version of events. I should say, by the way, that Mr Buckley and I have totally different political outlooks. He was a strong advocate of Brexit—although his serious problems with the new Brexit bureaucracy are causing him to think again—but he and I share a strong distaste for corruption and dishonesty. Many years ago, he donated £50,000 to the Conservative Party, and we both wonder whether he would have suffered the same fate from the Cabinet Office if he had kept up his payments to the Tories.

Will the Minister initiate an independent and forensic inquiry into whether a Minister or official in the Cabinet Office behaved unethically and passed to Inivos Mr Buckley’s gold-dust information on where and how to acquire the goods? Where is the extra £12 million? Did it remain with Inivos as super-profit, or was it shared with whoever disclosed the details of Mr Buckley’s supply arrangement with the Chinese factory—if that in fact happened? We also need to audit the other PPE contracts to find any other instances of similar behaviour.

Returning to the Bill, it lacks the necessary provisions to guarantee the integrity of the Government’s procurement process, as identified by the good people at the UK Anti-Corruption Coalition. Clauses 40 and 42 appear to give the Government the opportunity to discard the checks and rules, as they did for PPE procurement with such disastrous consequences. Transparency seems to have mysteriously slipped backwards since the Green Paper. These shortfalls, and others, must be rectified as the Bill passes through this House so that we never see a repeat of the cronyism and possible corruption that happened with the PPE contracts.