Government Contracts: Covid-19 Debate

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Department: Cabinet Office

Government Contracts: Covid-19

Julia Lopez Excerpts
Monday 21st June 2021

(5 months, 2 weeks ago)

Westminster Hall

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Cabinet Office
Fleur Anderson Portrait Fleur Anderson
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The hon. Member has made my case for me. If there is nothing to see here, let us have an inquiry. Members of the public have signed this petition in their thousands because they do not have confidence in these contracts, and they want there to be an inquiry. If everything is above board and all was fine, we will find that out through the inquiry, but it is public concern that has brought us here today. There are questions to be answered, there is a pattern of cronyism that the public are seeing, and that is why an inquiry would be the right response.

It is not good enough for Ministers to say, “We needed these items urgently back in March”—no question there—“so stop complaining about how we did it.” Of course we needed them. Of course systems had to be used to get our NHS staff all the safety equipment they needed then and there, but all checks and balances did not need to go out of the window. Ministers should still check their family connections, and they should still register interests. The best companies should not be overlooked in favour of Tory party donors. These emergency systems should not still be in place so long after they were needed.

Last year, 126,000 people signed this petition, and yet we are still uncovering more issues like those they were concerned about. They are right to feel ignored, and a public inquiry would listen to their concerns. Only a few weeks ago, it emerged that the Home Secretary lobbied the Chancellor of the Duchy of Lancaster on behalf of a healthcare firm trying to get a Government contract. She wrote to him expressing disappointment that the Government had not bought face masks from a company that had links to someone she knew. That glaring and flagrant breach of the ministerial code needs to be investigated.

Then, of course, there are the hundreds of millions of pounds handed to Serco to run the national Test and Trace system. Some £37 billion was earmarked, and it is reported that £277 million has been signed by now. Why is there the discrepancy here? What were those contracts for? Where did they go to? Will we get money back for the contracts that were not delivered?

The Local Government Association found last year that local contact tracing systems have a 97.1% success rate at finding close contacts and advising them to self-isolate. That is considerably better than a centralised system, so although rushing to go to the private sector would in many cases have been the right thing to do, was it always the right thing to do? Incidentally, only last week, Serco upgraded its profit forecast by £15 million thanks to its Test and Trace work.

It is not just Opposition MPs making these points. Transparency International has identified 73 contracts worth more than £3.7 billion—equivalent to 20% of the covid-19 contracts signed between February and November 2020—that raised one or more flags for possible corruption. It concluded that there was a systematic bias towards those with connections to the party of Government in Westminster. It found that 72% of the covid-related contracts awarded in the sample period

“were reported after the 30 day legal deadline, £7.4 billion of which was reported over 100 days after the contract award.”

In comparison, it took the Ukrainian Government on average less than a day to publish information on 103,000 covid-19 contracts after they were awarded during the same period.

On that point, the Chancellor of the Duchy of Lancaster at least owes us a statement to Parliament setting out where the UK has not complied with its legal transparency obligations, how they are being rectified and how these issues will be prevented in the future. When the Minister comes to respond, she will no doubt tell us that the Government and markets faced unprecedented global demand for PPE, and that in a short space of time the Government procured billions of items of PPE. That just does not wash anymore, which is why the public wanted this debate. The months preceding the first lockdown are a sorry tale of complacency and missed opportunities, leading to the scramble for PPE. There should never have been a shortage in the first place.

We need an inquiry to answer questions about what happened and to make strong recommendations about what to put in place in the future. It should assess the performance of companies that went through the emergency contracting procedures, such as Ayanda, Randox and PestFix, which other Members mentioned. It should speak to the companies affected and to the CEO of the UK Fashion and Textile Association, which represents 2,500 companies and first engaged with the Government on 18 March 2020. He said that the domestic procurement operation had been slow to grind into gear and failed to tap into industry expertise. Companies waiting to deliver the much-needed PPE were overlooked.

An inquiry must look into why the Government sidelined companies such as Arco, which had extensive experience of providing health-grade PPE prior to the pandemic. It provided PPE during Ebola, swine flu, avian flu and foot and mouth, but it secured only £14 million-worth of contracts over the past year during the pandemic. It could have fulfilled far more, and it is at a loss as to why it did not get into the VIP lane.

It will no doubt be argued in a moment that the VIP lane was a perfectly reasonable, rational solution to the mass of offers to supply equipment at the start of the pandemic. However, the opposite was true. We have seen evidence presented in recent High Court hearings showing emails in which civil servants raised the alarm that they were drowning in VIP requests from political connections that did not have the correct certification or did not pass due diligence. For us as outsiders, it does not seem that the VIP lane worked. It should not be used in any future emergency contracting and should not be used in a future crisis, but an inquiry would tell us more and give us those recommendations.

As the Good Law Project puts it:

“This is the cost of cronyism—good administration suffers, efficient buying of PPE suffers.”

I, Members here, the British public and the petitioners want answers from the Minister on four key questions. Will there be a rapid-fire inquiry and will the covid contracts be part of the major covid inquiry? Secondly, what is her Department doing to claw back the cash from companies that provided the Government with millions of items of unsafe, unusable PPE at a time of unprecedented national crisis? What options do the Government have in the contracts—we cannot see them—in terms of clawback? It is important that we know.

Thirdly, will the Government finally, as the Opposition have been demanding for months, deliver full transparency on the VIP lane, including publishing the names of the companies awarded the contracts via the channel and who made referrals to it? Were there any conflicts of interest to be identified and addressed? It is important to know, otherwise the information will just keep dripping out bit by bit and we will find out partially what is going on. If there is nothing to see here, open up the light and let us know.

Finally, will the Minister commit her Department to auditing in detail all the contracts that have raised red flags and to publishing the outcomes of the audit? Given that her Department is formally responsible for improving transparency and ensuring better procurement across Government, we expect the Cabinet Office to take responsibility for what happened, to learn the lessons so that this never happens again, and to ensure that, if there is a future crisis, we have the best contracting facilities for the best companies to deliver what we need immediately. That is what the British public want to know.

Julia Lopez Portrait The Parliamentary Secretary, Cabinet Office (Julia Lopez)
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It is a pleasure to serve under your chairmanship, Ms Fovargue. I thank all hon. Members who have taken part in this evening’s e-petition debate for their valuable contributions. I also thank the petitioners for initiating it. The public are absolutely right to demand that we spend money with care when we procure vital goods, services and works; I agree with the hon. Member for Gower (Tonia Antoniazzi) and others on that. I have always set out to be open about the challenges that the Government had to navigate at the height of the pandemic in procuring goods and services in the most urgent of situations. We were required to move at great speed and in an incredibly complex operating environment.

I was on maternity leave in the first half of 2020 as covid took hold, so I began my ministerial role only this time last year. My time in office in relation to procurement, therefore, has been spent not only going back to understand what happened during the early stages of the pandemic, particularly in relation to PPE, but on how we can improve our future response to urgent challenges. I want to assure hon. Members that a huge amount of work is either under way or already completed, which should reassure members of the public who would like an inquiry. I agree with the hon. Member for Putney (Fleur Anderson) that we do not want to wait to learn lessons.

The work includes an external, independent and unbiased review by the National Audit Office, two internal Cabinet Office reviews that have now been published, the commitment to a public inquiry into covid that starts next spring, and—of particular interest—a new procurement Bill that my ministerial colleague Lord Agnew and I are drafting, which will provide commercial teams with many more extensive options in a crisis between direct award, which raises understandable transparency concerns, and full-fat procurement, which takes far too long to turn around. The fastest turnaround under the dynamic purchasing system is six to eight weeks to contract award, and on an accelerated basis the very quickest possible process would be two weeks. But that would assume that all bid documentation was in place at the start, so it can be seen that in urgent situations this presents a real challenge.

On that first aspect of my work, I stood in Westminster Hall last year and shared a candid account of my findings for the House, particularly in relation to the procurement of PPE, a subject raised this evening by the hon. Members for Gower, for Hornsey and Wood Green (Catherine West) and for Jarrow (Kate Osborne). Those matters have been scrutinised by this House in many other forums. I will go over some of that context again because it is incredibly important to understand the actual challenges that were faced. I am afraid I cannot address all of the other items raised, particularly in relation to some of the education contracts, because I have not personally investigated those, but, as I described at that time, from conversations with officials, the Government had to work at pace in a very competitive international market to secure unprecedented volumes of essential supplies in order to protect frontline workers. That required a colossal upscaling effort.

Some 450 people from across Government were moved into the Department of Health and Social Care to become a stand-up virtual team to assist with securing PPE. That team is normally only 21 people strong. In many ways, this was a really impressive feat, with a hell of a lot of people who did not know each other working remotely on a range of different IT systems. We all assume that the Government are one entity, but Departments work in very different ways, often with different IT systems. It can be difficult to move people around the system and to make those systems compatible with each other. They were dealing with a product they were not familiar with in a very highly pressured market. That led to lags in contract publication, as paperwork has been very tricky to join up across systems. That issue was raised by the hon. Member for Edinburgh North and Leith (Deidre Brock).

Facing exceptional levels of global demand, the usual vendors in China who service the NHS’s central procurement function very quickly ran out of supply, and the world descended on a few factories in that country to bid for available items. In that market context, the Government needed to procure with extreme urgency, often through direct award of contracts, or risk missing out on vital supplies. I pay tribute to officials for what they achieved, because it was quite remarkable in the circumstances. The Government never ripped up procurement rules. Regulation 32(2)(c) of the Public Contracts Regulations 2015, which predates the pandemic, explicitly allows for emergency procedures, including direct award. In a situation of genuine crisis and extreme urgency where offers had to be accepted or rejected in a matter of hours or days, it simply was not viable to run the usual procurement timescales, even by taking advantage of accelerated processes.

There was concern about the level of PPE that might be required to deal with covid. The Prime Minister put out a call to action, as many Members will recall. With huge commitment and energy, the British public and business responded. But that also meant that, in very short order, commercial teams were dealing with more than 15,000 offers of help. Frankly, leads were coming in much faster than they could be processed. When they were rejected, or if they were delayed, people started chasing through their MPs. To manage that influx of offers, a separate mailbox was set up to handle this area of work, and to sift credible offers.

The most important thing to note is that all PPE offers, no matter from where they came, went through the same eight-stage checks. The PPE team compared prices to those obtained in the previous two weeks, to benchmark the competitiveness of those offers. Separate approval and additional justification were required for any offers that were not within 25% of an average considered for possible approval. It is also important to note that of the 493 offers that came through that priority mailbox, I understand that only 47 were taken forward—in other words, 90% were rejected. My hon. Friend the Member for Gravesham (Adam Holloway) highlighted the absurdity of some of the claims of impropriety being made.

Adam Holloway Portrait Adam Holloway
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On Samir Jassal, the supposedly important pillar of corruption, I remember running into him and him telling me that he had offered some PPE, when we were screaming for it. I think he had spent over a month being triaged to see whether it was suitable stuff. This is really preposterous.

Julia Lopez Portrait Julia Lopez
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It is interesting to know that. The hon. Member for Gower mentioned the company Arco, and I appreciate her for raising that. It was raised by the MP for Arco’s constituency, the hon. Member for Kingston upon Hull West and Hessle (Emma Hardy), in a Westminster Hall debate to which I referred earlier. If the hon. Member for Gower and I swapped seats, I wonder whether I would be suggesting that it was improper to put that forward. People were in very difficult circumstances; if she had been told that there was a company that could support the national effort, would she not have put it forward for review? We have to ask ourselves that question.

The focus on those early procurement challenges secured some tremendous successes under pressure. We have established one of the largest and most diversified vaccine portfolios in the world. We have ordered 32 billion items of PPE and provided more than 15,000 ventilators to the NHS. It is important that we do not obscure those achievements with some of the understandable concerns that have been raised about transparency. None of us wants to sit here answering questions about cronyism. The challenges I cited about the recording-keeping across Departments are real ones that we are trying very hard to address. I understand why people ask questions; I have asked many of them myself, and I have been reassured by the answers that I have received from officials.

Deidre Brock Portrait Deidre Brock
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The Minister at the time did not answer my questions about record-keeping between Departments and trying to establish costs that were being clawed back from contracts that had not worked out. Is the Minister suggesting that that is being worked on and that we will be able to ask those questions in future and get some understanding of where the Government have pursued costs that have been inappropriately awarded to companies that have not come up with the goods?

Julia Lopez Portrait Julia Lopez
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I believe there are cases where that is happening. I would have to go away and double-check, but I am happy to write to the hon. Lady.

We have always made it clear that there would be opportunities to look back and analyse, and to address some of the shortcomings that I have listed on all aspects of the pandemic. As hon. Members will know, the Prime Minister has confirmed that an inquiry will be established on a statutory basis, with full formal powers. That will begin work in spring 2021. As I said earlier, however, procurement during the pandemic has already been extensively reviewed, and Members will be familiar with the NAO report published in November, which I spoke about previously.

Neale Hanvey Portrait Neale Hanvey
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I would like to ask for the Minister’s view on whether there is a perceived or actual impropriety in the way some of the contracts have been handled. I will read you the information that has just come out from the Good Law Project:

“Uniserve Limited is a logistics firm controlled by Iain Liddell. Prior to the pandemic, the firm had no experience in supplying PPE, yet the firm landed a staggering £300m+ in PPE contracts from the DHSC and an eye-watering £572m deal to provide freight services for the supply of PPE. The company shares the same address as Cabinet Minister Julia Lopez MP and is based in her constituency.”

Does that not give you a sense that there might be something in this? The whole issue around conflict of interest is not whether it is real, but whether a member of the public might assume that there is a concern.

Yvonne Fovargue Portrait Yvonne Fovargue (in the Chair)
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Order. I remind the hon. Gentleman that interventions should be shorter and that “you” refers to the Chair.

Julia Lopez Portrait Julia Lopez
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I appreciate the hon. Gentleman’s raising that contract, because it has been a challenge to me as a Minister. As I said earlier, I began this role only in June 2020. I had not been allocated a private office, and I had not been given a portfolio. Then I found myself in a procurement role, and questions are being asked about the company from which I rent a constituency office. As I say, I was not actually in post at the time that that was being decided. The challenge is that questions have been raised that I cannot fully address, because I do not have all the information. I was not party to the contract, so it is a considerable challenge. It is something that my hon. Friend the Member for Gravesham also raised.

Neale Hanvey Portrait Neale Hanvey
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It is all about perception.

Julia Lopez Portrait Julia Lopez
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I appreciate the hon. Gentleman’s concern about perception, but it should actually be about fact. I am happy to address any concerns that he has. I find it extremely challenging to have people raising questions about my integrity in this space, when I do not feel that I have done anything improper. I am happy to get back to him on any questions that he might have, which I have also tried to address in other forums.

We have made it clear that there are opportunities to come back, analyse the situation and conduct reviews. Government procurement during the pandemic has already been extensively looked into by the National Audit Office. The report recognises that the Government needed to act with extreme urgency. The NAO found no irregularities and potential conflicts of interest involving Ministers in the awarding of contracts. The report underlined the importance of transparency in the Government’s procurement activity.

The Government take such matters extremely seriously, and we remain committed to continually improve our processes. To that end, as I mentioned earlier, we have had two independent expert reviews carried out by Nigel Boardman. They were initially internal reviews, but we have published them fully. In the first, he focused on a small number of contracts in the Government Communication Service and made 28 recommendations, 24 of which have already been implemented. The remaining four will be met by the end of the calendar year.

I have been tracking progress on this issue, including the publication of contracts, very closely. Better training of contract managers and commercial and communications staff has begun and there is now a requirement, at the point when a contract recommendation is made, that senior civil servants, special advisers and Ministers declare any interest that is either real or apparent. In his second, wider review, Mr Boardman has identified 28 further recommendations for improvements to procurement processes across Government. Progress is under way to begin the implementation of those, and a full update of progress will be provided to the Public Accounts Committee by July 2021. We are very grateful to Mr Boardman for his ongoing work. That review sits alongside a wider programme of work to reform public procurement, which I am leading.

In December, the Cabinet Office published our Green Paper on this issue, which sets out radical reform to our procurement regulations that will drive much better value for money for the taxpayer. The proposals, which have long been in development, address several areas highlighted in the NAO report, especially mandatory transparency requirements that would ensure that processes and decisions can be monitored by anybody who wishes to do so. The proposals aim to simplify complicated processes, reduce bureaucracy and create a fair, open and competitive system. They will strengthen transparency through the commercial life cycle, from planning and procurement to contract award, performance and completion. We also intend to clarify the rules on procuring in times of extreme urgency or crisis, learning from the difficult experience of this pandemic. The Green Paper consultations resulted in more than 600 responses, which are now being analysed in detail.

It is already Government policy to adopt and encourage greater transparency in commercial activity. Central Government buyers must publish all qualifying tender documents and contracts with a contract value of more than £10,000 on Contracts Finder, but we recognise and regret, as I have expressed already, that there have been delays to publishing some contracts, as raised by the hon. Member for Hornsey and Wood Green. Teams continue to work on publishing all contracts as soon as possible.

Since the High Court’s judgment in relation to the DHSC’s failure to publish some contracts, it has made significant progress. It has now published all known contract award notices and the contract documents for all historical covid-related contracts. As the permanent secretary for the Cabinet Office confirmed to the Public Accounts Committee earlier this month, all Cabinet Office contracts that related to the regulation 32 procedure on direct awards have been published.

The hon. Member for Kirkcaldy and Cowdenbeath (Neale Hanvey) raised very important points about the onshoring of critical manufacturing capability. Project Defend in the Department for International Trade has done a lot of work in that area. Some of the testing specifics I will need to take away and raise with my ministerial colleagues.

I would like to address some of the points raised by the hon. Member for Jarrow, who discussed the recent High Court judgment in relation to the public contract awarded by the Cabinet Office to Public First. I looked back in my role, to better understand the context in which that was contracted, because I received some early questions, when I was first in my ministerial role, that I personally wanted to investigate as well, and I think it might be helpful if I set out a little more of the context.

Back in March, there was no vaccine, no test and trace, and very little knowledge of how best to manage this novel disease. Strong messaging of the kind that could alter behaviours was, at the outset of the pandemic, one of the few tools that we had in our arsenal in the battle against transmission. It followed that the Government Communication Service needed rapidly to assess which messages would have the greatest impact. We needed to turn campaigns around in lightning-quick time, and teams had to be surged to deal with the unprecedented demand for effective comms material. In dealing with such an unforeseen set of circumstances, few officials knew which messages would be sufficiently hard hitting to influence and, most importantly, to change public behaviour.

It was in that context that rapid decisions were made on comms contracts, including the one that was challenged in court. That was for Public First, a research and policy company. It was taken on, alongside BritainThinks, as one of two companies in the market deemed to have the scale, expertise and experience to provide focus-group testing in March. They were both rapidly diverted from existing work to take a snapshot of public reaction. That allowed us in government to test things such as the contain strategy, the early “Stop The Spread” campaign and the “Stay Home” message, which was deemed by the hon. Member for Hornsey and Wood Green in earlier comments to be a waste of money.

A legal challenge was brought against that contract, on three grounds: urgent procurement without competition; the proportionality of its award for six months; and inclusion of non-urgent work. We did not use money, as was suggested by other hon. Members, to cover up, but actually to find out what had happened, so that we could respond to that legal challenge. The judgment found in favour of the Government on two grounds: first, we were entitled to rely on the emergency procurement regulations because of extreme urgency; and, secondly, the terms of the contract, including length, were proportionate in the circumstances. The court ruled that the Government were entitled to award the contract on grounds of extreme urgency, in response to an unprecedented global pandemic. It recognised the very complex circumstances that we were operating in. It also recognised that a failure to provide effective comms would have put public health at risk.

On the one remaining ground of “apparent bias”, the judgment makes it clear that the decision to award the contract was not due to any personal or professional connections, although consideration should have been given to other research agencies, and the process followed should have been more adequately demonstrated when it came to the objective criteria used to select the supplier. The judgment none the less makes it clear that there was no suggestion of actual bias.

We have done a lot of work to address some of the procedural issues that were raised by this case and which I have mentioned, because I had my own concerns about it. Our implementation of the Boardman recommendations, which I have already discussed, has addressed several areas raised in the judgment. I agree with the hon. Member for Jarrow about winding down the use of regulation 32 in comms, and I have done a lot of work in this area.

Ms Fovargue, I apologise for the length at which I have responded to some of the issues raised. These are important issues and ones that I personally want to ensure that the Government are addressing proactively. I am very keen that we also provide greater context for some of the criticisms and challenges brought. It is absolutely fair that the public would have questions on this, and I want to try to address some of those. I am very grateful for the valuable points raised by hon. Members in the course of this debate, but I want to assure people that the Government are taking decisive action to improve transparency around procurement, alongside a full inquiry into the covid pandemic next year.

Tonia Antoniazzi Portrait Tonia Antoniazzi
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I thank all my colleagues for their contributions and the Minister for her response. The sheer number of examples of deals that have been raised go some way to explaining the depth—