Special pathways outside of the normal procurement process were set up at the height of the pandemic to help “VIPs” win lucrative government contracts for personal protective equipment (PPE), according to the Good Law Project (GLP).
The not-for-profit organisation has today revealed leaked documents, which it has argued show that the Cabinet Office was “directly feeding its contacts into the procurement process, outside the normal public channel”.
GLP also said the leaked information exposed a “startling opportunity for price gouging by favoured suppliers”, with questions only being asked if prices offered were more than 25% above the average paid to other suppliers.
Commenting on the documents, Labour’s Rachel Reeves said: “These disturbing new findings confirm suspicions that this Tory government put the profits of its friends and donors above the interests of the frontline workers.
“Not only were some of these “VIPs” paid over the odds – in one case for unusable PPE – they were awarded these contracts at the height of the crisis when our NHS workers needed urgent, high-quality PPE.”
The Shadow Chancellor of the Duchy of Lancaster added: “Labour has previously called for an investigation from the National Audit Office into this government’s strange procurement decisions – it is vital this new evidence is included.”
Also commenting on the findings, GLP director Jolyon Maugham said: “The leaked documents reveal that Cabinet Office contacts and others were helping ‘VIPs’ sell personal protective equipment to government outside normal procurement channels.
“The information that government would buy at 25% above the price paid to ‘regular’ suppliers was a licence to make enormous margins – 35-45% – on contracts sometimes worth hundreds of millions of pounds.”
One of the documents released by GLP this morning stated on pricing for the equipment contracts: “Cost per unit ex VAT without shipping costs to be provided ad comparison made to average unit prices.
“If greater than 25% variation, explanation why price achieved is reasonable to be provided, explain why prepayment is necessary, action to reduce it taken.”
Jolyon Maugham QC added: “Although government has tried to cover up the per unit prices it paid to connected suppliers, we know that Ayanda enjoyed staggering margins above the prices paid to others.
“So there are certainly questions to be asked about whether other politically connected ‘VIPs’ benefitted from lucrative inside information about pricing.”
The GLP has argued that suspicions were aroused over government procurement processes after what it describes as “enormous contracts” were awarded to new entities, long-dormant companies or those of “dubious financial standing”.
The organisation highlighted several examples including PPE Medpro, which won two NHS contracts worth £200m just seven weeks after it was set up by the former business associate of Conservative peer Baroness Mone.
PPE Medpro told LabourList that the company “did not operate a VIP path and is not businesses friendly with the government in order to win PPE projects and at boosted prices”.
The organisation added: “We should be celebrated in what we achieved in an emergency crisis were materials and component prices went through the roof. The award of such contracts was entirely proper and lawful and was based on merit.”
The Law Project pointed out that staffing agency SG Recruitment UK Limited won two PPE contracts worth over £50m despite auditors raising concerns about its solvency, and that Tory Peer Lord Chadlington sits on its parent company’s board.
GLP also explained that P14 Medical Limited, which it says is controlled by the former Tory councillor Steve Dechan, was awarded three contracts worth over £276m despite having negative £485,000 in net assets.
Asked for comment, P14 said that all of the contracts awarded to the company “have been delivered on time and to the highest standards” and added that the organisation has been “supplying the NHS for over a decade”.
It also told LabourList: “P14 has long standing relationships with manufacturers across the globe, this has enabled us to deliver a high volume of products in a short period of time; including supplying the Nightingale Hospital based at the ExCeL centre with specialist PPE within days of the request.”
Labour has repeatedly criticised PPE outsourcing in the pandemic. The party recently accused Downing Street of “damaging public confidence” after it emerged that contracts worth £81m were awarded to a firm owned by a major Tory donor.
The party also called for the government to abandon its reliance on outsourcing in the national coronavirus test and trace system last month, arguing that Conservative ministers have been “rewarding private-sector failings”.
Official figures showed earlier in October that the largely privatised test and trace reached only 68.6% of contacts, while tracing undertaken by local public health protection teams managed a 97.1% contact rate over the same period.
But the government has insisted on continued use of private companies, despite poor performance and errors such as one in which over 15,000 Covid cases were not passed onto contact tracers and public health teams earlier this month.
Labour analysis of this one “computing issue”, as the Prime Minister described it, meant that as many as 48,000 people – who had come into close contact with someone who had the virus – were not informed and told to self-isolate.
The government voted down a Labour opposition day debate motion that called on the government to drop private firms such as Serco from the highly-criticised tracing system and instead expand the role of public health teams.
GLP is currently involved in several judicial review cases against the Department for Health and Social Care, including some relating to PPE contracts handed to a pest control company, a confectionery wholesaler and a family fund.
The organisation highlighted that in the family fund case, involving Ayanda Capital, the legal action has revealed that £150m had been spent by the government on face masks that the NHS was subsequently unable to use.
The Good Law Project is a not-for-profit membership organisation with the stated aim of using strategic litigation as a way to “challenge abuses of power, exploitation, inequality, and injustice”.
The Cabinet Office has been contacted for comment.