UK’s PPE procurement failures could cost taxpayers £2.7 billion

A report out today from MPs on the influential Public Accounts Committee criticizes the British Government’s handling of securing and managing PPE contracts during the COVID-19 pandemic, which could result in taxpayers being lumped with a £2.7 billion bill. Failures include the lack of an effective stock management system, a departure from normal due diligence and poor record keeping. 

No-one can argue that the early days of the pandemic were unpredictable and securing PPE to protect healthcare workers was a huge global challenge, given the extreme demand from governments all over the world. However, this doesn’t mean that the British Government is beyond scrutiny, nor that lessons shouldn’t be learnt if and when we find ourselves in another pandemic scenario. 

The outcome of the government’s approach means that the Department of Health and Social Care remains in dispute with many suppliers it entered into contract with over the quality of the PPE provided and that some surplus stock will end up being incinerated. 

In response to the exceptional demand for PPE created by the pandemic, the Department awarded nearly 10,000 contracts worth £13.1 billion which are expected to deliver 37.9 billion items of PPE. 

Although the majority of contracts were awarded through the Department’s existing procurement partner, Supply Chain Coordination Limited (SCCL), 394 contracts, worth £7.9 billion, were awarded through two new procurement routes set up within the Department. 

One of these included the VIP lane, which considered referrals from government officials, ministers’ offices, MPs and members of the House of Lords, senior NHS staff and other health professionals. The VIP lane resulted in 115 contracts worth £3.8 billion being awarded to 51 suppliers. In order to help secure deals early on the Department paid £2.5 billion upfront to 298 suppliers before any PPE was received

Of the 37.9 billion PPE items purchased, just over 10% (3.9 billion) are no longer needed and many will have already expired their use by date. 

Much of the PPE still resides in storage locations, both in the UK and China, and the Department is spending approximately £7 million a month on storing the excess items. 

The Department is also currently in disrepute with suppliers over 176 contracts worth a total of £3.9 billion - where in the majority of cases this is due to the quality of PPE that was delivered. It estimates that it will not resolve issues in over a third of these contracts before 2023. 

Commenting on the evidence received, Dame Meg Hillier MP, Chair of the Public Accounts Committee, said:

The departure from normal approaches to due diligence, record keeping, decision making and accountability in relation to PPE contracts puts a stain on the UK’s response to the pandemic.

Even if you accept that some proper procedure will have to slip in times of crisis the complete collapse of some of the most well-established civil service practices beggars belief. The taxpayer will be paying for these decisions for years to come.

Lacking a fully integrated stock management system

One of the key problems that persists for the government is that the Department of Health and Social Care still lacks a stock management system that enables it to fully understand what PPE it has and where it is. 

The Committee asked the Department for assurances about the accuracy of its stock numbers because the National Audit Office has reported that it could not fully reconcile the numbers from the stock model with individual contracts. It therefore concluded that it was unable to gain assurance over the accuracy of the numbers. 

The Department’s response was that these differences should be attributed to the fact that the stock model was not intended to be a completely accurate account of all PPE stock. It was also adamant that it knows exactly where all stock is currently located. 

As noted above the stock is currently sitting in locations across the UK and China. 

However, the report states: 

We asked the Department, given this wide spread of PPE storage, what steps it is taking to introduce a modern stock management system for the PPE programme. We noted the importance of having a system where it knows exactly how much PPE it holds, where it is and what the expiry dates are, and is able to easily access it all.

The NAO reported one example of a contract where the Department seemingly did not know how much PPE it had received and amended the contract to 53.7 million items despite the fact that it had already received 54.3 million items.

Despite this, the Department told us that it was already able to say what stock it holds and the expiry dates of items. It also said that given that it is still distributing nearly 700 million items a month this is freeing up more space to then access the remaining PPE in storage. It did concede, however, that getting to a position where it has reduced down its stock to a level where it can reduce the number of storage locations would take some time.

However, the Committee states that the management data on total stock numbers has rarely been accurate. The report states that in order to make informed decisions about the appropriate amount of PPE to stockpile in future, the Department absolutely does need accurate and complete data on the stock it currently holds. 

My take

The circumstances of the pandemic were exceptional and no one can deny that the government was under pressure to deliver PPE to hospitals as the realities of COVID-19 were sinking in. However, it does appear that at the start and even now, the government hasn’t been or isn’t willing to adopt ‘good practice’. For instance, even though it’s understandable that due diligence was eased to secure the contracts for PPE at the beginning of the pandemic, basic principles such as checking the profit margins on supplier contracts or considering potential conflicts of interest were thrown out the window. 

And even now, the Department’s reluctance to concede that its data matching for stock isn’t up to par suggests that lessons haven’t fully been learnt just yet. 

This is all critical because if and when the UK next finds itself in the midst of a pandemic, an effective procurement management system being in place would be wholly beneficial. And hopefully next time taxpayers won’t be left with a larger bill than is necessary.