The UK National Audit Office (NAO) has audited public procurement during the COVID-19 pandemic, covering the period up to July 31, 2020, in response to the concerns about the risks to the public money that could arise from greater use of direct awards to suppliers during the pandemic.

Audit Objectives:

The audit was designed to examine the following issues:

1.the need to procure goods, services and works quickly, the regulations that apply to this, as well as roles and responsibilities;

2. procurement during the pandemic;

3. management of procurement risks

1.         By July 31, 2020, over 8,600 contracts related to the government’s response to the pandemic had been awarded, with a value of GBP 18.0 billion.

2.         Most of these contracts (86%) were awarded by the Department of Health & Social Care.

3.         The Department of Health & Social Care, supported by the Government Commercial Function, mobilized staff from across government to support its procurement of personal protective equipment (PPE).

4.         PPE accounted for 80% of the number of contracts awarded, and 68% of the total value of contracts awarded.

5.         Government used a range of procurement routes to obtain goods and services during the pandemic.

6.         The widespread use of direct awards to procure goods, services and works may increase the chances that some procurement risks materialize if not correctly mitigated.

7.         In March 2020, the Cabinet Office issued technical guidance to support procurement by public bodies during the pandemic.

8.         Some Cabinet Office spending controls were not applied to PPE procurements, because separate assurance processes were put in place.

9.         The procurement processes established by the cross-government PPE team enabled PPE to be purchased quickly, but some procurements were carried out before all key controls were put in place.

10.       The cross-government PPE team established a high-priority lane to assess and process potential PPE leads from government officials, ministers’ offices, MPs and members of the House of Lords, senior NHS staff and other health professionals.

11.       Inadequate documentation was found in a number of cases on how the risks of procuring suppliers without competition had been mitigated.

12.       Some contracts were awarded retrospectively after some work had already been carried out.

13.       There was not always a clear audit trail to support key procurement decisions.

14.       Many of the contracts awarded over this period have not been published in a timely manner.

Efficient public procurement in times of complicated and unforeseen circumstances is possible if three elements are combined: transparency in awarding contracts, lawful action and providing feedback to suitable suppliers.

1.         Awarding bodies should publish basic information on contracts in a reasonable time, in line with the recommendation to publish within 90 days of award.

2.         The Cabinet Office should issue further guidance on specific procurement risks arising from greater use of emergency procurement regulation.

3.         Awarding bodies should provide clear documentation for establishing and using procedures that may result in unequal treatment of suppliers.

4.         When procuring directly from suppliers, awarding bodies need to provide clear documentation on how they have considered and managed potential conflicts of interest or bias in the procurement process.

5. The Cabinet Office should review whether requirements for disclosure and management of relevant interests are sufficient in cases where public office-holders hold cross-government responsibilities for awarding contracts or procurement

The UK National Audit Office (NAO) has conducted an audit of government procurement of defense equipment to assess whether the Ministry of Defense is providing the best value for money for the taxpayer in non-competitive procurement.

Audit Objectives:

This audit examines how the UK Ministry of Defense addresses the challenge of ensuring value for money in non-competitive procurement. Specifically, it considered the following:

1.         when the Ministry applies non-competitive procurement;

2.         how the Ministry seeks to secure value for money when using this approach;

3.         how independent regulation ensures value for money from non-competitive procurement.

Audit Criteria:

The UK National Audit Office (NAO) used four main criteria to assess how the UK Ministry of Defense delivers value for money in non-competitive procurement.

1.         Has effective tools and processes been put in place to protect value for money?

2.         Does the Ministry have sufficient numbers of skilled commercial staff to meet demands?

3.         Do the Ministry's contracting approaches provide incentives for suppliers to deliver, and decision-makers to push back against, business cases that do not offer value for money?

4.         Does the Ministry have sufficient data on its commercial activities to allow it to monitor whether it is achieving value for money?

1. The Ministry currently lacks good quality data on its portfolio of non-competitive contracts.

2.         The Ministry is committed to using competition wherever possible but it cannot show currently that it is doing so in a systematic way.

3.         Most suppliers now accept the need to work within the Single Source Contract Regulations (SSCR), but some are resisting them and their interpretation by the Ministry and Single Source Regulations Office (SSRO).

4.         The application of the Regulations (SSCR) has been hindered by staff shortages and lack of experience in dealing with single suppliers.

5.         The SSRO’s interpretation of its remit has created additional friction, in part because it is seeking changes to its powers.

6.Realization of potential savings identified from application of the Regulations (SSCR) will depend on good contract management.

7.         SSRO has recommended changes to the baseline contract profit rate and is seeking to improve how it measures the impact of its decisions on suppliers.

8.         The effectiveness of the Regulations could be undermined by gaps among key commercial and cost assurance staff.

1.         The Ministry should fully implement its plans to increase the capacity and capability of its commercial and cost analysis teams to ensure they are adequately resourced to handle the volume of contracts.

2.         The Ministry should be more consistent in requiring formal justification for non-competitive procurement, and be able to demonstrate it is applying credible pressure for competition.

3.         SSRO and the Ministry should work together to monitor the impact of procurement decisions on the defense industry.

4.         The Ministry and the SSRO should be clear on their respective roles, and how they will work together to ensure the Regulations are implemented effectively.

5.         The Ministry should ensure that the Regulations (SSCR) are applied as intended by the legislation.

Additionally

The most effective way to secure value for money in defense procurement is normally through competition. However, because such competition is frequently absent on the largest defense contracts, the Department introduced the Single Source Contract Regulations to balance a fair return for industry with the need for better value for money for the taxpayer. Four opportunities received the most attention:

1.         The ability to require full transparency of costs within suppliers’ prices provides greater assurance on value for money.

2.         The regime provides statutory backing for efforts to negotiate down prices.

3.         Transparency of costs incurred during the contract allows identification of “excess profits”.

4.         Building a knowledge base on costs informs future budgeting and contracting processes