Very Inefficient Process: Watchdog Exposes Government’s PPE Failures

VeryInefficientProcessWatchdog Exposes Government’s PPE Failures

The National Audit Office has produced more shocking statistics on the £13 billion of contracts awarded to personal protective equipment suppliers, reports Sam Bright

The story is well known by now – especially to readers of Byline Times. At the outset of the Coronavirus pandemic, with the UK’s stockpiles depleted due to years of austerity, the Department of Health and Social Care (DHSC) engaged in an emergency effort to procure personal protective equipment (PPE).

The situation was dire. Nurses and doctors were dying on the frontline, suffering the worst mortality rates in Europe, forced to wear makeshift masks as they treated highly infectious patients. In mid-April 2020, more than half of doctors surveyed by the British Medical Association reported a shortage or no supply at all of FFP (filtering face piece) masks.

So, eschewing normal competition rules, the DHSC awarded contracts worth billions of pounds to prospective suppliers – many of which seemingly had little or no experience in supplying medical equipment.

For example, multi-million-pound PPE deals were awarded to a hotel carpeting company, a naval design firm, a Florida fashion designer, a four-month-old DNA analysis firm, a one-year-old ‘micro’ firm, a small “luxury packaging” company, a one-month-old firm owned by offshore finance specialists, a dormant firm, a company owned by an individual listed in the Panama Papers, a fast-fashion supplier, and a lifestyle company with no employees or trading history.

The DHSC set up a ‘VIP’ lane for companies with links to officials, ministers and MPs, designed as a way – in theory – for Government contracts to be funnelled towards trusted firms. Your business was 10 times more likely to win a contract if it was processed through the VIP lane, than through normal channels.

The High Court has ruled that it was unlawful for the Government to award contracts to two firms through the VIP lane. Contracts were awarded through this channel to firms with close links to senior ministers, including one firm owned by a close ally of Michael Gove, that won PPE deals worth some £170 million.

This was a sellers’ market in which governments across the globe were bidding frantically for a finite amount of equipment. As has been reported previously, the UK Government’s lack of preparedness cost the nation £10 billion, due to inflated PPE prices.

Today, the National Audit Office – the Government’s independent spending watchdog – has released a new report, adding more shocking statistics to this sordid tale.

In total, the DHSC has awarded almost 10,000 PPE contracts with a planned expenditure of £13.1 billion. These contracts are expected to deliver 37.9 billion items of PPE.

Out of this figure, contracts awarded through the VIP lane totalled £3.8 billion and are expected to deliver 7.8 billion items of PPE.

The NAO report covers the wasted spending of the Government on PPE – particularly on storage, and goods that were ultimately unusable. It also expands the ways in which the VIP lane failed to deliver on its promise. Rather than providing a route for reliable suppliers to supply goods to the Government, the VIP lane appears to have been plagued by problems.

Indeed, in additional evidence uncovered by Byline Times but not mentioned in the NAO report, of the £670 million of PPE procured by the Government that cannot be used, half (£360 million) was purchased through the VIP lane.

“It turns out that the Government’s VIP lane for PPE contracts was not just unlawful but was also a colossal waste of taxpayer’s money. More than half of the companies that won contracts through the VIP Lane supplied PPE that is not currently fit for use on the frontline,” Jo Maugham, director of the Good Law Project, told Byline Times.

“It doesn’t take a genius to work out that, although prioritising companies based on their political connections is great for them, it is also likely to be terrible for taxpayers. An honourable Government would apologise to the public and promise that this will never happen again.”

The NAO report says that…

• 46 of the 115 contracts awarded to VIP lane suppliers did not go through the eight-stage due diligence process that was later implemented by the Government, as these contracts were awarded before May 2020.

• Of the 31.5 billion items of PPE received in the UK, 14.1 billion items remain in UK storage, including: 6.3 billion items stored across its 50 warehouses, and 5.6 billion in containers. The department estimates that purchase price of items yet to be distributed is £8.6 billion – out of a total planned expenditure of £13.1 billion.

• By November 2021, it had cost the DHSC £737 million to store PPE, which included £436 million of penalty charges due to the department being unable to remove items from shipping containers on time.

• The DHSC is currently spending an estimated £7 million a month storing 3.9 billion items it does not need, while storage costs peaked at £103.1 million in November 2020, including £89.3 million on penalty charges.

• The department has identified some 3.6 billion PPE items that it has concluded are not currently suitable for front-line services, equivalent to 11% of all the PPE it has received. These items were purchased at a cost of £2.9 billion.

• 53% of VIP lane suppliers provided some PPE items that are classified as not currently suitable for front-line services.

• The department estimates that it has 3.9 billion more PPE items than it needs – around 10% of the total PPE purchased – and is trying to dispose of these items through sales (305 million items), donations to other parts of the public sector (253 million items) and recycling (232 million items).

• The expiry date is estimated to have passed on 1.5 billion items of PPE. The estimated cost of these expired items is £619 million. Of the 3.9 billion items of excess stock, the DHSC estimates that 51% have an expiry date that is less than six months away.

• The department is yet to assess 1,000 of the 30,000 containers of PPE it has received.

• There are 176 contracts where the Government believes it may not achieve full value for money, with an estimated £2.7 billion at risk. Some 57 of these 176 contracts were awarded through the VIP lane, with an estimated £1.4 billion at risk (37% of the total value of all VIP lane contracts).

• The department has identified five contracts with pre-payments – deposits paid before the equipment was delivered – worth a total of £19 million, where it believes there is still a risk of non-delivery of the equipment.

• The DHSC did not consider profit margin when awarding contracts, “meaning it did not know if intermediaries were making significant profits on these contracts”. It took this approach because potential contracts were “on the table for hours or a day”, meaning “there was no time to secure a detailed breakdown of costs” at the time, officials told the NAO.

• On 38 contracts, the department has reduced volumes or initiated cancellations and expects to secure £572 million in reduced costs as a result. “The department is still working to secure some of these savings so it is not certain that all of them will be realised,” the NAO says.

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A National Emergency

These are staggering sums of money. As calculated previously by the Byline Intelligence Team, the Government had spent some £54 billion by July 2021 on private contracts related to the COVID-19 pandemic, worth more than the GDP of 140 countries and territories. This figure includes spending on other areas of the pandemic response – including testing and contract tracing – not merely PPE.

The UK’s spending on PPE – topping £13 billion – will comfortably exceed the UK’s international aid budget in 2021, £11.1 billion. Rishi Sunak’s controversial National Insurance hike is only expected to earn the Treasury £12 billion every year.

The Government has repeatedly insisted that it did everything it could to supply essential equipment to health workers on the frontline of the pandemic. But this involved a high degree of risk, overspending, and cronyism. Meanwhile, it was only necessary because the Government had eroded its PPE stockpile over a number of years, and because it failed to act rapidly when the virus struck our shores.

As PPE supplier Sarah Stoute told the Public Accounts Committee last year: she warned officials in December 2019 that they could expect a shortage of equipment in the coming months, yet she wasn’t given the go-ahead to supply the Government until April 2020. “Weeks went by when nothing was happening”, she said.

When history writes up the Government’s record during the pandemic, these facts must be at the centre of the report card.