Source · Select Committees · Public Accounts Committee
Recommendation 4
4
The Department had insufficient due diligence checks at the outset of the pandemic to prevent...
Recommendation
The Department had insufficient due diligence checks at the outset of the pandemic to prevent potential profiteering and to identify conflicts of interest. We recognise that the Department had to act quickly at the start of the pandemic to secure vital supplies of PPE but believe that there was still scope to perform appropriate due diligence, particularly on potential new suppliers. The Department acknowledges that before May 2020 not all due diligence checks on areas such as financial, commercial and legal issues were completed before awarding contracts. A formalised eight-stage due diligence process was established in May 2020 but 46 out of 115 contracts awarded through the VIP lane pre-dated this. The Department believes that it had the necessary due diligence checks considering the circumstances and environment of the COVID-19 pandemic in which it was purchasing PPE. At no point was consideration given to the extent of the profit margin that potential suppliers would be taking on payments for PPE. Neither was consideration of any potential conflicts between individuals making referrals through the VIP lane and the companies they were referring. We are therefore unsurprised to see the reports of excessive profits and conflicts of interest on PPE contracts. Recommendation: The Department should set out in its Treasury Minute response how its commercial reset will ensure that sufficient processes are now in place to prevent such issues occurring again.
Government Response
Not Addressed
HM Government
Not Addressed
4: PAC conclusion: The Department had insufficient due diligence checks at the outset of the pandemic to prevent potential profiteering and to identify conflicts of interest. 4: PAC recommendation: The Department should set out in its Treasury Minute response how its commercial reset will ensure that sufficient processes are now in place to prevent such issues occurring again. 4.1 The government agrees with the Committee’s recommendation Recommendation implemented 4.2 In responding to COVID-19, government officials used legally compliant award procedures designed for use in emergencies. The department has well-established policies, processes and due diligence systems for use outside of emergencies. All tendering activities comply with the relevant standards, processes and criteria set out in the Public Contracts Regulations. 4.3 In May 2021 the Cabinet Office published Procurement Policy Notice (PPN) 04/2021, covering the issue of conflicts of interest in awarding contracts and interpretation of the relevant exclusion provisions where contractors commit certain breaches. The department has completed implementation of this PPN, having introduced a clear process ensuring that conflicts of interest are considered throughout the procurement lifecycle. 4.4 Where additional procurement activity may be needed to meet future pandemic requirements, it will be conducted in accordance with departmental policy developed specifically for emergency responses. New PPE procurement will be undertaken by category experts in SCCL. 4.5 As part of the Commercial Reset, the department has taken steps to improve governance and support to policy teams when spending public money, especially in an emergency situation. In addition, in May 2021 Government published The Sourcing Playbook, providing further enhanced guidance covering risk allocation, pricing approaches and assessing and monitoring the financial standing of suppliers to enable better understanding of cost-drivers and profit margins. 4.6 Further information, including the department’s commercial capability activity, is set out in a letter sent to the Committee in parallel to this Treasury Minute.