In a highly critical report published today the Commons’ Public
Accounts Committee says that “woefully inadequate
record-keeping”, failing to meet even basic requirements to
publicly report ministers’ meetings with external parties or deal
with potential conflicts of interest, “despite clear concerns
about Randox’s political connections” means it is “impossible to
have confidence” that the £777 million of contracts – many
without competition – “were awarded properly”.
The Committee says that “even allowing for the exceptional
circumstances at the start of the pandemic, basic civil service
practices to document contract decision making were not followed
and DHSC “failed in its duties to be transparent about meetings
that its ministers had with Randox” leaving “the role of DHSC
ministers in approving the contract confused and unclear”.
Following the initial £132 million contract – awarded
with no competition and without any performance measures – Randox
struggled to deliver the expected level of testing capacity: yet
the Government still awarded Randox a contract extension worth
£328 million seven months later, again without competition.
Randox then saw a hundred-fold increase in its profit in the year
to June 2021 – but the Government did not consider supplier
profit margins or the potential for excess profits in its
decision-making on the contracts.
, Chair of the Public Accounts Committee,
said: “The NAO has been careful to stress that it
has not seen any evidence that the Government’s contracts with
Randox were awarded improperly. But then, in the case of the
hundreds of millions of pounds of contracts awarded to Randox
there was precious little evidence to see. Much of the business
was won without any competing tenders from companies who may have
had better capacity to deliver, perhaps without the upfront
capital.
“Add to that the failure to include any performance measures in
the first contract, or any protection against excess profits, and
this looks less like just the rushed policy and contract-making
that we’ve seen across so much of the Government’s response to
the pandemic. We repeatedly hear the reference to to the
crisis we were facing as a nation. But acting fast doesn’t mean
acting fast and loose. There is truth in the adage about
‘opportunities in a crisis’ but I don’t think this is what was in
mind.”
PAC report conclusions and
recommendations:
-
Woefully inadequate record-keeping by the Department
makes it impossible to have confidence that all its contracts
with Randox were awarded properly. The Department
was not able to provide documentation showing details of
contractual negotiations or price benchmarking leading up to
the award of its first £132 million contract for testing
services with Randox in March 2020. The much larger £328
million contract extension was awarded seven months later, in
October 2020, but the Department was still unable to provide
key contract documentation on negotiations and benchmarking
undertaken at the time. The Department also did not record any
detailed due diligence on Randox in relation to either of these
contracts. The large gaps in the document trail mean that it is
impossible to say the contracts were awarded properly in the
way that we would expect to be able to, even allowing for the
exceptional circumstances and accelerated processes in place at
the time.
Recommendation: The Department should write to us
within two months, setting out details of when and how its
commercial refresh will bring record-keeping up to standard and
ensure that this is the case under all circumstances.
-
The Department failed to meet basic requirements to
report publicly ministers’ meetings with external
parties. The Ministerial Code requires all
departments to report meetings that ministers have had with
external parties and any hospitality received, in the interests
of transparency and accountability. The Department properly
declared only four of the eight meetings on testing that
involved its ministers and Randox. In addition, it kept minutes
of only two of these meetings. Details of some of these
meetings emerged only because documents relating to Randox’s
contracts were requested by MPs through the ‘Humble Address’
process and published in February 2022. The Department also did
not declare hospitality that the then Secretary of State had
received from Randox’s managing director on a ministerial visit
to Northern Ireland in 2019 and Mr Hancock has since told us
that his ministerial private office considered it was a
political event and therefore did not need to be
declared.1 The Department’s disclosures and
record-keeping have been well below the standards we would
expect under any circumstances. In emergency situations it is
even more important to ensure that information is correctly
documented.
Recommendation: In its Treasury Minute response, the
Department should set out how it intends to strengthen its
transparency processes and ensure that it enforces requirements
and takes action where they are not followed.
-
The Department did not deal with potential conflicts of
interest, despite clear concerns about Randox’s political
connections. The Department did not show any
evidence of taking any care over potential conflicts of
interest when it awarded contracts to Randox. This was despite
officials being aware of Owen Paterson’s contacts with Rt Hon
, the then Secretary of
State for Health and Social Care, as a paid consultant for
Randox while he was still a sitting MP, and the hospitality Mr
Hancock received from Randox in 2019. For its first contract
with Randox, the Department failed to identify any conflicts of
interest, incorrectly stating at the time that consideration of
conflicts of interest was not applicable to that contract
award. The Department was not able to answer clearly how it
makes sure that those involved in procurement give due
consideration to potential conflicts of interest in their
decision making, even where interests are properly recorded or
declared. The Procurement Bill, published in May 2022, contains
new requirements on departments to record conflicts of
interests relating to contracts. We are also concerned about
the Department’s prioritisation of testing suppliers through
VIP and priority routes, including those referred by ministers,
MPs or Number 10. Suppliers that came through these routes were
awarded £6 billion out of the £7.9 billion total of testing
contracts awarded between May 2020 and March 2021.
Recommendation: Alongside its Treasury Minute
response, the Department should write to us to clarify the
information it had on declared private interests and how it used
this information to identify potential conflicts of interest in
its procurement decisions. In addition to the expected new
requirements to record conflicts of interest, government should
strengthen its approach to ensure that conflicts of interest are
not just documented, but also communicated and acted on by those
awarding contracts.
-
The award of the first Randox contract did not receive
adequate scrutiny from senior officials and the role of
ministers in signing it off was unclear. The
Department’s then Second Permanent Secretary had some
visibility of the first contract awarded to Randox, but he did
not approve it as we would normally expect. Instead, , the then Minister for
Technology, Innovation and Life Sciences, was asked by
departmental officials to provide his authorisation to proceed
with the contract. The Department says this was not formal
approval of the contract, but in the absence of any other
senior sign-off for the contract from either officials or
ministers, the contract was signed by a deputy director. Normal
processes for contract spend approvals involving the Cabinet
Office were also by-passed during the early months of the
pandemic, which meant that the Cabinet Office did not provide
its approval for Randox’s first contract for testing
services.
Recommendation: Government should provide additional
guidance to clarify the role of ministers in procurement
processes, including contract discussions and approvals.
-
The Department failed to hold Randox to account for its
performance against its first contract and awarded it another
£328 million extension without competition. The
Department did not set out any key performance indicators for
Randox in its first contract and only introduced performance
measures such as test turnaround times from July 2020 – a month
after that contract was originally expected to end. When
awarding the first contract, the Department saw Randox as a
market leader and one of the few providers able to expand
testing, but Randox still needed government support to fulfil
the contract. The Department says that it was not surprised at
Randox’s request for government help to secure necessary
testing equipment, but details of the expected support were not
clearly set out in the contract or considered when agreeing the
contract price. Despite the performance issues with the first
contract, which meant Randox took longer than expected to
increase its testing capacity, the Department still awarded a
£328 million extension to Randox without competition in October
2020 and appeared by then to have already become heavily
reliant on its services.
Recommendation: We expect clear and definitive
assurance from the Department that even where contracts are
awarded in exceptional circumstances, it will set performance
indicators and use these to hold providers to account.
-
The Department did not do enough work to determine
whether Randox was making excess profits from its contracts
with Randox. Randox’s published accounts do not
yet cover the entire period of the contracts we considered, but
they already show how Randox has substantially increased its
profits and expanded its business since the start of the
pandemic. Randox reported a profit of £177 million in the year
to 30 June 2021, more than a hundred times greater than its
£1.2 million profit for the 18 months to 30 June 2020. The
company’s net assets also increased ten-fold in one year, from
£17 million in June 2020 to £171 million in June 2021. However,
the Department did not conduct like-for-like benchmarking of
the price offered by Randox or consider supplier profit margins
before awarding Randox its first testing contract. The
Department told us that there was a more developed market of
suppliers offering testing services by the time it awarded
Randox’s contract extension in October 2020, but it again could
not provide any evidence of negotiations on price or
benchmarking conducted at the time. The Department was
therefore unable to offer a view on whether there had been
profiteering on testing contracts.
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. /ENDS
Full details of the inquiry including evidence received (under
“Publications) can be found here: https://committees.parliament.uk/work/6676/governments-contracts-with-randox-laboratories-ltd/
