Source · Select Committees · Public Accounts Committee
Recommendation 13
13
We asked the Department what its assessment of fraud was amongst these contractual disputes.
Conclusion
We asked the Department what its assessment of fraud was amongst these contractual disputes. Although it conceded that some of the 176 contracts were of interest from a fraud perspective it was unwilling to give much information about any specific work it was undertaking beyond stating that it was working closely with internal fraud teams and the broader fraud authorities.35 As with the notion of contractual disputes being commonplace, it also argued that “fraud in contracting is a fact of life” and that the best it could do was to aim to minimise it and recover amounts when fraud is detected.36 When pushed on the timescales for any action that it might eventually take against fraudulent suppliers the Department simply said if that involves going to court then that “takes as long as it takes”.37 It told us that its current assessment is that these PPE contracts have 27 Q13–14 28 Q15 29 Q16 30 C&AG’s Report, Figure 14 31 Q58 32 Q61 33 Q60 34 C&AG’s Report, para 3.8 35 Qq19, 22 36 Q21 37 Q25 12 Management of PPE contracts been no more susceptible to fraud than the average across public sector procurement.38 The NAO reported that this assessment means that PPE fraud could be anywhere within a range of 0.5% to 5.0% of PPE expenditure. On contracts signed by the Department this could mean fraud worth as much as £400 million.39 PPE profits and conflicts of interest
Government Response
Not Addressed
HM Government
Not Addressed
3: PAC conclusion: The Department remains in dispute on 176 contracts for PPE with £2.7 billion of taxpayer money at risk and has made little progress in tackling potential fraudulent supplies of goods. 3b: PAC recommendation: The Department should also update us on how it is working with relevant authorities in assessing and acting on any fraudulent cases. 3.5 The government agrees with the Committee’s recommendation. Recommendation implemented 3.6 The department takes all allegations of fraud extremely seriously and, where appropriate, allegations are thoroughly investigated and the strongest possible civil and criminal sanctions sought. There will be a lead time for COVID-19 fraud to be identified, this particularly applies for PPE procurement, as it’s subject to ongoing contract management controls, active dispute resolution and recovery action. 3.7 Nevertheless, the department has proactively undertaken a significant amount of post event assurance (PEA) in relation to PPE procurement. This work deliberately focused on a subset of the overall population that had certain high-risk factors about them, e.g. those where 100% upfront payment was made. The subset made up over 28% of the overall population of contracts and the DHSC assessment showed that, of the subset1: • 4.8% is identified fraud and error risk2 (not loss) with a value of £111.7 million 1 All figures shown in this section are estimated and do not indicate an actual cash loss. 2 Reflects real risks to the department which, based on the civil law test of balance of probability, are classified as fraud and error. However, because these contracts were identified as higher risk at an early stage we were able to identify and mitigate risks, therefore, no actual loss occurred. 10 • 1.7% is risk of loss from fraud and error3 with a value of £38.4 million 3.8 This action taken by DHSC, and the approach of focusing on high risk contracts, has already led to audited savings of £157 million in prevention/recovery. This includes preventing some opportunities from reaching contract stage which are therefore not included in the overall population of contracts. However, as the department’s Anti Fraud Unit (AFU) subset focused specifically on high-risk contracts, it was not a completely random sample and therefore did not fully meet the Government Counter Fraud Function (which became the Public Sector Fraud Authority in August 2022) Fraud Measurement and Assurance standard. 3.9 To address this, the AFU is undertaking a small amount of further sampling for fraud detection (rather than measurement) purposes to provide additional insight into the non-high risk segment of the orderbook. The department continues to explore every available tool to bring those who commit fraud to account. Additionally, where action by the department and its partners have identified potential risk of irregularity relevant to other parts of government, appropriate information has been shared.