Source · Select Committees · Public Accounts Committee
Recommendation 22
22
Accepted
The Department did not monitor the profitability of Randox before deciding to award contracts to...
Conclusion
The Department did not monitor the profitability of Randox before deciding to award contracts to the company. The Department said that when contracts were awarded in 2020, it did not have the time or the ability to undertake this sort of monitoring.44 The latest accounts Randox has filed with Companies House are for the year to 30 June 2021, in which it reported a profit of £177 million for that year. This is more than a hundred times greater than the profit of £1.2 million that Randox reported for the 18-month financial period to 30 June 2020 (which included the first three months of the pandemic).45 In addition, the company’s external auditors have issued a Qualified audit report in respect of two matters relating to stock balances, which may mean the profit for 2020–21 was higher than stated in the accounts.46 Any further profits from the COVID-19 testing contracts we looked at will fall into future financial years. The Department said it was not in a position to answer whether Randox could have been in financial difficulty if it had not received government testing contracts. It noted that due diligence would have looked at hazards and risks associated with the financial stability of the company, but it was not able to confirm this had been the case as due diligence on Randox was not documented.47
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: PAC conclusion: The Department did not do enough work to determine whether Randox was making excess profits from its contracts with Randox. 6: PAC 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. 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. 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