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Politically connected firms were given 'high priority' for government COVID contracts, official report finds

Damning Whitehall spending watchdog report 'will do little to quell concerns about cronyism in UK government procurement'.

Adam Bychawski
18 November 2020, 12.15am
The government has awarded contracts worth millions for the supply of personal protective equipment to small firms with no previous experience in public health.
PA Images

Companies with political connections were directed to a “high-priority” channel for UK government contracts – where bids were ten times more likely to be successful, according to a damning report by the National Audit Office.

Around 10% of the suppliers referred to the channel by a political contact were awarded a PPE contract, the NAO reported. Suppliers without such links, by contrast, had only a 1% chance of winning a contract.

More than £10 billion of contracts were awarded without competition during this period, the spending watchdog found, with a special channel set up that allowed almost 500 suppliers with links to politicians or senior officials to pitch directly for work.

The Whitehall spending watchdog says it was prompted to act by a “lack of transparency and adequate documentation” over why particular suppliers were chosen or how the government identified and managed conflicts of interest. 

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The NAO – which examined whether government procurement followed due process – found examples of contracts, some for hundreds of millions of pounds, being awarded without basic documents that would normally be drawn up to protect against the misuse of public funds.

Bids from companies referred by a political connection to the scheme were taken more seriously, according to the NAO, with suppliers in the high-priority channel viewed as having been “pre-sifted for credibility by being referred by a senior credible source”.

The Department of Health and Social Care (DHSC) accounted for 90% of the £18 billion worth of contracts issued up to August, according to the report.

Since the pandemic began, openDemocracy has reported on numerous COVID contracts being awarded without competition, or with terms being kept secret, or other measures which bypass normal transparency requirements. Labour MP Dawn Butler, a member of the House of Commons science and technology select committee, labelled the absence of oversight in the procurement process a “national scandal”. 

“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,” Gareth Davies, Head of the NAO, said.

“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,” he added.

Suppliers referred by MPs ‘fast-tracked’

Since the pandemic started, an emergency exemption to procurement laws has allowed the government to award contracts without having to give different companies a chance to bid for them. 

Management consultancy firms Deloitte and McKinsey and outsourcing multinationals Serco and Sitel are among those that have been given millions without competitive tender to help the government oversee the crisis. 

The NAO said they had found examples where Whitehall departments had failed to explain why they chose a particular supplier or document possible conflicts of interest.

A number of firms given contracts without tender have later been found to have close links to the Conservative Party, prompting accusations of cronyism

One small, loss-making firm run by a Conservative councillor in Stroud was given a £156 million contract to import PPE from China without any competition, openDemocracy revealed last month.

The watchdog also raised concerns that the sources of referrals for prioritised suppliers were not always documented. In one case, a supplier, PestFix, was added to the high-priority lane in error without a referral.

The vermin control company – which is worth just over £19,000 – was given £108m to provide equipment such as gowns and face masks to the NHS. It was later revealed by the BBC that the protective suits supplied by the company were not tested to the correct standard and that there was “political” pressure to approve them.

The Good Law Project, a non-for-profit group of lawyers, has launched legal action against the government’s decision to award the contract.

“The National Audit Office’s focus on government procurement, including a number of contracts that Good Law Project are challenging in court, is as welcome as it is necessary," Jolyon Maugham QC, director of Good Law Project, said.

"Some of the findings reflect what we have been saying for months. Government failed to manage conflicts of interest, dished out public money to deeply unsuitable companies and has improperly shied away from proper scrutiny."

The government’s own internal auditor agency raised concerns that some suppliers were handed contracts despite having low due diligence ratings, following a review requested by the Cabinet Office.

“The existence of a fast-track for well-connected companies with links to ministers and officials will do little to quell concerns about cronyism in UK Government procurement,” said Daniel Bruce, chief executive at Transparency International UK. 

“Poor paperwork, uncompetitive tendering and large amounts of money create an environment where at worst there is increased risk of corruption – at best poor value for taxpayers' money,” he added.

Billions remain unaccounted for

The NAO also raised concerns over gaps in the documentation of COVID contracts. Just under half of contracts worth more than £25,000 awarded up to the end of July have still not been published. It was reported last month that of £11 billion in public money handed to private firms between April and September, £3 billion remains unaccounted for. 

Contracts are also not being published in a timely manner, according to the auditor. Only a quarter have been made public within the recommended 90 days after being awarded.

In October, outsourcing giant Serco, who run a number of contract tracing call centres, were given an additional £57 million to provide COVID test centres, openDemocracy reported.

Last week, openDemocracy revealed that £38.8 million has been given to Deloitte for its work on the NHS Test and Trace system.

No standalone contract or specification for the accountancy firm’s services have been published – the information was instead revealed in separate official departmental spending data that was quietly released shortly before the US elections.

No penalties for failures

MPs and transparency campaigners have criticised the government for failing to put in place penalty clauses in contracts for poor performance.

Several firms involved in the government’s test and trace programme were awarded fresh contracts despite concerns that the scheme was failing to reduce the spread of the virus.   

Labour shadow cabinet office secretary Rachel Reeves said: "This report confirms that this Tory government’s approach to procurement has fallen far short of what this country deserves. Lessons must be learned.

“The National Audit Office has shown how, at best, this incompetent government can’t even get basic paperwork right. At worst, that the government may be deliberately attempting to cover their tracks, avoid scrutiny or withhold information from the public while wasting taxpayer money.

“From paying for useless PPE to a maintaining Serco's failed contract tracing system, we have seen disastrous decisions which have squandered public money and held back our country's response to Covid-19. The country deserves to have confidence their money is being spent effectively by the government – and to know without doubt that friends and donors to the Conservative party aren't profiting from this pandemic.”

The Department of Health and Social Care has been contacted for comment.

When asked previously about the awarding of contracts, a Department of Health and Social Care spokesperson said: “All contracts to help with our fight against coronavirus have been awarded in line with public contracts regulations, which is consistent with Cabinet Office guidance. This allows the department to directly award contracts to procure goods, services and works with extreme urgency in exceptional circumstances. 

“Proper due diligence is carried out for all government contracts and we take these checks extremely seriously.”

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