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Mon 29 November 2021

Firms that have won large Coronavirus contracts have paid millions of pounds in fines from Government regulatory bodies in the past decade

Three leading management consultancy firms contracted to deliver key public health services during the Coronavirus crisis have been fined £100,953,770 collectively since 2010. 

Data from Good Jobs First’s recently-launched ‘Violation Tracker’, reveals how the companies have paid fines for misdemeanours around pensions, labour conditions and accounting fraud or deficiencies. 

Deloitte, KPMG and PricewaterhouseCoopers (PwC) have all won major Government contracts throughout the pandemic – often without having to go through the usual tendering process – for activities ranging from supporting Nightingale hospitals to managing the ‘Test and Trace’ system.

The Government has previously admitted that it has employed an army of private sector consultants on Test and Trace. In January, officials said that consultants, primarily from Deloitte, were being paid £1,000 a day for their work on the operation. Byline Times had revealed a few months earlier that 2,300 consultants were working on it – more than the total number of civil servants working for the Treasury (2,260) and for the Department for International Trade (2,290).

The Government subsequently committed to reducing the number of consultants working for the scheme – run by former management consultant Baroness Dido Harding. However, in June, it was revealed that the number of consultants had in fact increased from December 2020 to April 2021. 

Analysis of Government contracts published between October 2020 and August 2021 shows thatDeloitte, KPMG and PwC had won £235,059,317 worth of contracts related to public health – awarded by the Department of Health and Social Care (DHSC), NHS England, NHS Digital and individual NHS trusts. 

Deloitte was awarded contracts worth a total of £205,296,505. This included a £145,000,000 contract for “general management consultancy services” to the DHSC, in order to expand COVID-19 testing capacity.  

Many of the KPMG contracts were for accounting and financial audits, as well as contracts from NHS England to support the Nightingale projects in response to the Coronavirus crisis. 

The PwC contracts included a £2,032,122 deal with the DHSC for a new team responsible for community testing. Other contracts related to audits, including a data security and protection toolkit audit for NHS Digital, worth £196,253, published on 2 March 2021. 

However, as the companies won Government contracts, they were also paying out fines to Government regulatory bodies. 

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The Fines

In 2020, Deloitte was fined £20,635,014; £1,815,000; £362,500 and £16,270 for violations related to “accounting fraud or deficiencies”. In total, it has been fined £36,674,464 across 10 cases since 2010, including one labour standards violation. 

The fine was imposed by the Financial Reporting Council “following an investigation in relation to the audit of the published financial reporting of Autonomy Corporation Plc for periods between January 2009 and June 2011”.

KPMG has been fined a total of £36,048,694 since 2010, across 22 violations. In 2021, KPMG Audit PLC was fined £15,450,000 for accounting fraud or deficiencies, as well as paying a separate fine worth £8,295. The same year, KPMG Audit PLC paid a fine of £58,260.

The £15,450,000 fine related to conduct towards the Silentnight group of companies. The tribunal asserted that the company failed “to act solely in its client’s interests, acted in fundamental respects contrary to those interests and in those of a party whose interests were diametrically opposed to those of Silentnight”. It added that “KPMG acted with a lack of integrity including in their dealings with the Pension Protection Fund (‘PPF’) and the Pensions Regulator (‘tPR’)”.

While it was winning contracts in 2020, KPMG paid a fine of £455,000, and KPMG LLP paid fines of £9,585 and £6,243. All were classified as “accounting fraud or deficiencies”. 

PwC has been fined a total of £28,230,612 across six offences since 2010, most recently a £30,612 fine in 2020 imposed on PricewaterhouseCoopers LLP for “accounting fraud or deficiencies” following a complaint that the organisation issued an unqualified audit report that did not meet standards.

Its biggest sanction was a £10,000,000 fine paid in 2018 in relation to the 2014 audits of BHS and the Taveta Group following an investigation under the accountancy scheme opened in June 2016. The retailer BHS went into administration in 2016, with a pension deficit of £571 million. When it finally closed, 11,000 people lost their jobs. 


Addictive Personalities 

The normalised use of consultants has meant that bringing in external advisors has become fashionable, with a promise of ‘blue sky’ thinking and fast answers. But, while the use of consultants increases, critics warn that efficiency may be decreasing in public services, including in the NHS. 

Research has suggested that the increasingly embedded role of consultants in public services is creating a “consultocracy” and that clients using management consultants risk seeing rising transaction costs associated with extra contract negotiation, drafting and enforcement. 

It has also suggested that rising demand for preferred suppliers could lead to hidden costs as a result of “over-embeddedness”, whereby “the social aspects of exchange supersede the economic imperatives”.

Over-reliance on management consultants can undermine in-house capability as well as “have negative implications for allocative efficiency at the organisational level”, according to the research.

The researchers offered a case study of the NHS, and “found a significant and positive relationship between expenditure on management consultants and lower efficiency levels,” in its models.

Deloitte, KPMG and PricewaterhouseCoopers refused to comment.

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