Source · Select Committees · Public Accounts Committee
Recommendation 14
14
We wanted to understand the Department’s view of profits made by PPE suppliers and intermediaries,...
Conclusion
We wanted to understand the Department’s view of profits made by PPE suppliers and intermediaries, particularly on contracts that have failed to deliver adequate PPE, many of which came through the VIP referral route. Reports continue to emerge of the vast profits that some individuals and companies made through supplying PPE despite much of it being not fit for purpose. One example that we asked about was PPE Medpro, a company that did not exist until May 2020, yet was reportedly able to secure a £76 million profit supplying PPE to the Department.40 The Department was reluctant to give any specifics on this case but said that all of the PPE contracts signed “went through exactly the same due diligence process” and that the decision to award a contract to PPE Medpro would have been made on the basis of the price it was offering compared to other market prices.41 We note that since giving evidence to us, further reports suggest that the National Crime Agency has launched an investigation into this contract with several properties related to the company searched and documents seized.42
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.