Covid-19: NAO Report on Government Procurement

Published date : 09 December, 2020

It is a pleasure to serve under your chairmanship, Ms Eagle. I add my own words of congratulations to the hon. Member for Liverpool, Walton (Dan Carden) for securing the debate. In his opening remarks, he did an absolutely excellent job of dissecting the morass of contracts that have risen to public attention for all the wrong reasons and do not, on any objective measure, pass the sniff test.

We have heard much about what the report does tell us, so before the Minister responds, let us be absolutely clear about what the NAO says the report does not tell us. Page 44 of the NAO report states:

“This report should not be considered as offering positive assurance over aspects of any of these contracts which are not detailed in the report, or as offering any legal opinion on the use of public procurement regulations… We have not drawn any conclusions regarding the value for money of the procurement”.

The report was drawn up on the basis of a risk-based examination of 20 contracts, which are a fraction of the 8,600 new contracts that had been awarded by 31 July. To be clear, there is absolutely nothing wrong with taking that risk-based approach. That core analysis is done to find what issues emerge, and my goodness, what issues have emerged. It seems that the NAO knew exactly where it should be sticking its spade in the ground when it started this work.

Of those new contracts, £0.7 billion-worth were awarded through contract extensions; £0.2 billion-worth through competitive tendering; and £6.7 billion-worth through existing framework call-offs. Those contracts are not the ones that should cause anyone any particular concern. Rather, scrutiny should rightly focus on the £10.5 billion-worth of contracts that were direct awards with no competition.

Obviously, the Government have to have the ability to give direct contract awards in situations of extreme urgency, as the law allows. Rightly, however, strict conditions are attached to that. I do not think that anyone would disagree that those conditions are likely to have been met in the very early weeks of the crisis, but what came thereafter is an entirely different question. Within those contracts, whenever they were awarded, it is important to be able to get a sense of what was proportionate, where conflicts of interest may have arisen, how those conflicts of interest were managed, what steps were taken to mitigate the risks and how value for money was ensured as far as possible. All too often, as the report highlights, inadequate records were kept, which means that transparency has been diminished and, in many cases, it is not possible to demonstrate how particular decisions were reached and why.

I accept that, in cases of urgency, sometimes processes need to be circumvented. The law allows for that. Certain corners will be cut; certain niceties might be overlooked. The fact that this took place does not overshadow the many genuine efforts of Government employees to procure swiftly under conditions of urgency and great difficulty, but the importance of record keeping is absolutely key to maintaining transparency, so that we know that the right decisions were taken for the right reasons. The fact that the Government are still citing the need to procure with extreme urgency as a reason for persisting with this method of procurement, even after the summer, does not wash at all.

As we have heard, there are serious public concerns about certain contracts that were awarded. In some cases, those who were awarded the contracts were unable to fulfil them either at a reasonable price or to the required level of quality. In some cases, those who won them already enjoyed a closeness with the Government and some members of the Government, which was inappropriate at best.

It is remarkable that people with no experience of manufacturing, who were simply acting as middle men looking for a slice, could find themselves in a priority queue for consideration. The fact that there was a priority queue is a matter for concern. Although both lanes were supposed to be using the same gateway and scrutiny process, a stark set of numbers emerge from that analysis: 47 out of 493 contracts, or 9.5%, of those in the priority lane went on to secure a contract award, compared with only 104 out of 14,892, or less than 0.75%, of those in the normal lane.

Many contracts were awarded without any kind of financial due diligence being undertaken on the companies. In some cases, due diligence was done after the awards were given and came back as an amber or red condition. I accept that in times of urgency one may need to press on and take the chance. However, the further one goes into the process, the less justifiable it is to take that risk. To do financial due diligence in that way on contracts worth not only tens of millions of pounds, but in excess of £100 million, is a bit like going bungee jumping and only worrying about whether the cord is attached after embarking on the journey downwards. Frankly, it is beyond belief that this was allowed to happen.

The differentiation between the lanes was not based on evidence of any ability to deliver, nor was the aim to speed up the procurement process; it was preferential access, pure and simple. I was not the first Member to refer to suspicions of a crony virus working in Government, but the suspicion lingers. For too long, too many people too close to the centre of Government have won too many contracts, of which too few are properly documented or can demonstrate adequate value for money.

On 15 March, the Health Secretary said:

“Our approach to tackling coronavirus is to be as clear and transparent as possible—because all that matters is getting this response right ”.

In her summing up, the Minister will no doubt seek virtue in the fact that the Government were, in their own eyes, getting on with the job at an incredibly difficult time in a global pandemic. We must be clear: if that is the defence mustered for the content of this report, it is an excuse that is beginning to run on empty. The report stated:

“This has diminished public transparency, and the lack of adequate documentation means we cannot give assurance that government has adequately mitigated the increased risks arising from emergency procurement or applied appropriate commercial practices in all cases. While we recognise that these were exceptional circumstances, there are standards that the public sector will always need to apply if it is to maintain public trust.”

There is an urgent need for openness in these processes so that the public can maintain their trust in them and trust can be restored in the Government’s approach. That is why today I repeat the SNP’s call for a full public inquiry into the awarding of tenders and into those who had access to UK Government meetings preparatory to procurement awards throughout the health emergency. The Government absolutely must also accept unreservedly, without any qualification and in full, the recommendations made in the National Audit Office report. If they are to escape the suggestion that they have been allowing preferential access and enrichment to a select few under the cover of an unprecedented emergency, they can really do no less than that.

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