The UK’s COVID-19 PPE saga and lessons for future emergency procurements

Dr Miriam Mbah, who joined the OU as a Lecturer in Law in September 2020, has both a LLM and a PhD in Public Procurement Law.

Public procurement is a highly regulated government activity, governed by laws or circulars within a state. In the UK, the procurement of goods, works and services is regulated by The Public Contracts Regulations 2015 (PCR), with similar provision for utilities, concessions and defence procurement. 

General procurement procedures under the procurement regulations are rigorous, time-consuming and not appropriate for all acquisitions. For example, when procuring Personal Protective Equipment (PPE) during a pandemic. For this reason, Regulation 32 makes exceptions for direct awards without undergoing a formal competition as prescribed in the PCR. In response to COVID-19, the Cabinet Office issued procurement guidance informing contracting authorities that they are permitted to rely on Regulation 32(2)(c) ‘extreme emergency ground when procuring goods, works and services during the COVID-19 pandemic’.

Has this regulation, which was intended to enable contracting authorities to respond quickly to the needs of their citizens during emergencies, given ammunition for the government to not be transparent, accountable and reckless in awarding contracts to unsuitable suppliers?

The National Audit Office (NAO) summary investigation into government procurement during COVID-19 shows that by 31 July 2020, over 8,600 contracts had been awarded, with a value of £18 billion. New contracts accounted for 94% of those awarded (valued at £17.3 billion) to suppliers, with extensions and amendments to existing contracts accounting for the remainder. Out of the number of contracts awarded during the pandemic, £10.5 billion was awarded directly without any competition and PPE accounted for 80% of the contracts awarded.

Such contracts were awarded to companies such as Ayanda Capital that supplied unusable masks to the government, costing UK taxpayers £252 million. Contracts were also awarded to companies with no history of tendering or manufacturing PPE before the pandemic. For example, Aventis Solutions, an employment agency was awarded an £18.5 million contract to supply face masks, Clandeboye Agencies Ltd, a company that specialises in nut and coffee products was awarded a £108 million contract to provide PPE and Pestfix, a pest control company, was awarded £32 million for isolation suits (read the reports here). To add to the array of procurement scandals, a BBC report details how MPs contacts were prioritised when awarding contracts. This saga should indeed be turned into a Hollywood movie, as suggested by my OU Law School colleagues!

The continuous revelation of poor procurement and mismanagement by UK contracting authorities led to the NAO investigation which found that £1.5 billion contracts were awarded without undertaking financial and company due diligence, a crucial part of the eight-stage process for assessing the capability of suppliers. The NAO report also unearthed the inadequate documentation of decisions and management of risks, a poor audit trail of procurement decisions, and the award of contract after work had started, meaning that suppliers were performing contracts on their terms instead of a formal contract detailing the terms, conditions and scope of work.

Although these UK scandals are disappointing, to say the least, I do wonder if we are too critical of the government? Perhaps, we should cut them some slack, and count ourselves lucky that while thousands of procured products are unusable and collecting dust in storages, the media is not currently reporting about shortages of PPEs in hospitals or care homes …… as would have been the case had these items not been procured.

So, what can be done to address this series of poor procurement? I argue that there are lessons that should be learnt from the ongoing revelations to prevent such scandals from occurring in future COVID-19 procurements or future emergencies. These lessons are not limited to UK procurement but can be applied or adopted in other countries.

First, contracting authorities must stick to their own rules on emergency procurement. The Cabinet Office procurement guidance on COVID-19 and key controls put in place to ensure procurements are awarded to capable suppliers should be followed to the letter. Controls such as financial and company due diligence should be adhered to in every procurement. Past performance should be taken into consideration, excluding companies with poor performance from contract awards. Furthermore, high-value contracts should not be awarded to companies with no history of producing items before the pandemic or where such high-value contracts must be awarded, adequate risk assessment and mitigation must be performed.

Contract management is a key part of every procurement exercise, and contracting authorities should not take their foot off the pedal when it comes to emergency procurement. Many of the poor procurement that has been unearthed is due to poor contract administration and management. One of the ways to remedy this is to adopt a payment structure whereby a substantial proportion of the contract value will be paid when final checks have been carried out. It is essential for contracting authorities to retain control over the performance of public contracts and should approve all procurements before issuing the final payment.

Additionally, developing research on how governments can efficiently and effectively procure in emergencies will assist contracting authorities, as one of the issues identified as a result of the COVID-19 scandals was that contracting authorities were not experienced in dealing with emergency procurements. The OU has a PhD studentship looking to effective and efficient emergency procurement advertised to start from October 2021, supervised by myself and Dr Andrew Gilbert. It is envisaged that the research will not only contribute to existing literature but have a direct impact on government policies or legislation in the near future.

In closing, we are nine months into the pandemic, and the procurement of PPE has been infected by scandals and mismanagement of funds. This has to change for future procurements, for example, vaccines. The substantial amount spent on these items requires governments to be accountable, transparent, effective and fair.