Source · Select Committees · Public Accounts Committee
Recommendation 6
6
Accepted
The Department did not do enough work to determine whether Randox was making excess profits...
Recommendation
The Department did not do enough work to determine whether Randox was making excess profits from its contracts with Randox. Randox’s published accounts do not yet cover the entire period of the contracts we considered, but they already show how Randox has substantially increased its profits and expanded its business since the start of the pandemic. Randox reported a profit of £177 million in the year to 30 June 2021, more than a hundred times greater than its £1.2 million profit for the 18 months to 30 June 2020. The company’s net assets also increased ten-fold in one year, from £17 million in June 2020 to £171 million in June 2021. However, the Department did not conduct like-for-like benchmarking of the price offered by Randox or consider supplier profit margins before awarding Randox its first testing contract. The Department told us that there was a more developed market of suppliers offering testing services by the time it awarded Randox’s contract extension in October 2020, but it again could not provide any evidence of negotiations on price or benchmarking conducted at the time. The Department was therefore unable to offer a view on whether there had been profiteering on testing contracts. Recommendation: The government should strengthen its commercial guidance on ensuring that profits are not excessive, by including profit level expectations and obligations to benchmark in contract decision making. 8 Government’s contracts with Randox Laboratories Ltd 1 Record-keeping and transparency
Government Response Summary
The Government Commercial Function has published the The Sourcing Playbook which sets out the key commercial principles that underpin commercial activity across Government and provides commercial, finance, project delivery, policy and other professionals with comprehensive guidelines, rules and principles that will help them to get more projects right from the start.
Government Response
Accepted
HM Government
Accepted
6.1 The government agrees with the Committee’s recommendation Recommendation Implemented 6.2 The Government Commercial Function has published the The Sourcing Playbook which sets out the key commercial principles that underpin commercial activity across Government and provides commercial, finance, project delivery, policy and other professionals with comprehensive guidelines, rules and principles that will help them to get more projects right from the start. 17 6.3 The Sourcing Playbook describes the activities to be undertaken by commercial teams throughout the commercial lifecycle, with a series of supporting guidance notes covering delivery model assessments, bid evaluation and cost modelling tools. 6.4 There is further enhanced guidance covering risk allocation and pricing approaches and assessing and monitoring the economic and financial standing of suppliers to enable commercial teams to better understand cost-drivers and profit margins. 6.5 The standards to be achieved are specified within published Government Functional Standards: • GovS 008 Commercial • GovS 002 Project Delivery • GovS 006 Finance