Why were the government’s Covid contracts so badly mismanaged?

Sean O'Grady examines the mixture of panic and cronyism that led to tens of billions being wasted over the course of the pandemic

A box of face masks at the NHS’s National Procurement Warehouse at Canderside, Larkhall (PA)

As the National Audit Office (NAO) report into the award of Covid-19 contracts suggests, the reasons for the apparent waste of billions of pounds and ignoring the usual rules about probity and value for money were twofold: panic and cronyism. One is perhaps understandable; the other rather less so. And the £18bn of questionable contracts identified by the unimpeachable public sector auditors may not be the final sum total, given that consultants are still being employed and contracts remain open...

The panic arose because of the near total lack of protective equipment, ventilators and intensive care beds and associated kit. By March, the nature of Covid had become clear, with its potentially lethal consequences for older people and those with pre-existing conditions. With no therapeutic treatments, let alone a “cure” or vaccine, the possibility that the NHS would be overwhelmed became obvious. A lockdown was imposed and money was thrown almost indiscriminately at the problem. Hence the unlikely manufacturers engaged to make masks and ventilators, some of which were never delivered. Beyond the scope of this NAO study would be the £12bn expended on developing a mass test and trace system, and the billions more on Treasury job protection schemes that were open to fraud, exploitation and in any case poorly targeted, such as the “Eat Out to Help Out” scheme. That one may actually have been counterproductive in public health terms by encouraging people to congregate indoors.  

Ministers have acknowledged that errors may have been made because of the fast pace of developments, while it is also fair to add that in macroeconomic terms the injection of a huge public stimulus undoubtedly prevented a temporary recession turning into a prolonged slump – thus avoiding other negative health outcomes from a rise in poverty and lower living standards generally.  

Where the politics bites is the closeness of some suppliers to Conservative politicians, as members of the governing party and with emergency powers to award contracts with minimal preparation. The problem is the lack of transparency, or even knowledge about how hundreds of wasteful contracts were awarded. The lack of documentation means there is no easy audit trail to follow back, so that retrospective assessment of executive decisions by ministers and officials may prove impossible in some cases. This is the likely scandal that will eventually emerge from the official inquiry, when it eventually starts work. What is clear now is that it was probably beyond amateurish for the government to ask MPs to suggest firms in their constituencies tender for public money in areas where they possessed zero expertise. MPs are not purchasing managers.  

That said, the British public sector has long had a reputation for waste and lack of control, of which the pre-eminent symbol was the Anglo-French Concord supersonic aircraft, developed at vast cost and only ever flown by the two “home” carriers. The defence budget was notorious for binned projects and dead ends (and was to be a particular focus of attention by Dominic Cummings). Before Covid, there was the comparatively modest £50m plus blown on contracts for ferries and compensation for Eurotunnel in readiness for earlier hard Brexits that didn’t materialise (including a “start-up” with no ships). The previous record for colloidal waste on a single project was the abortive NHS IT system that ran to about £12bn before it was finally abandoned in 2012. More broadly the NAO estimated in 2018 that a total of £300bn of taxpayers’ money is committed to unfavourable private finance initiative (PFI) contracts. PFI was of course developed in the 1990s by the Major government to secure value for the public purse, and extended hugely under Tony Blair to harness the strengths of the private sector and keep debt off the public sector balance sheet. The collapse of Carillion in the middle of building the new Royal Liverpool Infirmary graphically revealed the flaws in the PFI concept – which is that the taxpayer always ends up shouldering the bill for failure – profits are privatised but losses nationalised.  

So waste is nothing so new. Even the Palace of Westminster itself, a World Heritage site and a magnificent emblem of democracy came in late and over budget. It was finished in 1870, 18 years late and at three times the original estimated cost, due to what we’d now call mission creep, poor confusion and lack of accountability. Sounds familiar.  

Hundreds of firms were fast-tracked for lucrative Covid-19 contracts after tips from ministers and MPs as £18bn was handed out under emergency rules, a damning report reveals today. The way procurement and transparency rules were ripped up in the scramble for equipment – with some deals secured by Conservative friends and donors – is sharply criticised by the spending watchdog. Its report confirms a secret “high-priority lane” for favoured firms, with 144 proposed by ministers’ private offices as MPs suggested “a possible manufacturer in their constituency”. Months later, the source of more than half of the 493 recommendations has not been identified – and just 55 per cent of the 1,644 contracts worth more than £25,000 awarded up to the end of July have been published. The NAO said it had found “no evidence of ministerial involvement in procurement decisions”, but criticised a lack of documentation on how conflicts of interest were managed. Meg Hillier, the chair of the Commons Public Accounts Committee, said the government failings uncovered were “likely to only be the tip of the iceberg”.

“It’s bad enough that it set up a ‘high-priority lane’ to fast-track companies with the right connections. But the failure to track how half the companies had ended up on it made it impossible to ensure proper safeguards were in place,” she said.