£19bn of UK Covid-related contracts awarded without seeking rival bids

The UK government is under pressure to reinstate competitive tendering procedures after awarding at least £19bn of Covid-related contracts to companies without seeking rival bids.

An analysis of contract data for the Financial Times by Spend Network, a consultancy that analyses global contracting, shows that Whitehall continued to award billions of pounds worth of contracts without any competitive process despite the National Audit Office warning in November of the risk that it would “undermine public trust”. 

The public spending watchdog had expressed concern over the direct award of £10.5bn coronavirus-related contracts without competition as well as a string of transparency and conflict of interest concerns on a total £17.5bn of contracts awarded in the four months to July 31 last year.

Ian Makgill, founder of Spend Network, which analysed the data for the 12 months to March 18, when the government invoked emergency procedures, described the lack of competition as “concerning”.

The true figure for contracts awarded without competition could be higher given that the government has 30 days to publish contracts, Makgill added. 

“Although the number of direct awards slowed towards the end of last year we haven’t seen those fall as rapidly as you would expect,” he said. “It made sense at the start of the pandemic to declare an emergency and suspend normal bid procedures, but it is less clear a year later.”

Competition in public services contracts is considered essential to get good value for taxpayers and to ward against cronyism. There has already been stiff criticism of the procurement process during the pandemic after billions of pounds worth of contracts were handed to individuals with ties to the Conservative party. 

The Good Law Project, a not-for-profit organisation, which has accused the government of “pork barrel” politics, is taking legal action against it over several Covid-19 related contracts.

The Cabinet Office said: “Procurement rules allow for direct awards in times of emergency and all contracts are published online, in line with transparency requirements.”

However, Pedro Telles, associate professor in procurement law at Copenhagen Business School, said the “vast majority” of contracts awarded in the past year were probably illegal given the restrictive nature of the 2015 Public Contract regulations, which allow contracts to be awarded without any competition only when it is of strict necessity, or an extreme emergency due to “unforeseeable” events.

Given evidence of the spread of coronavirus from China, Taiwan and Italy early last year, it was not clear that the pandemic in Britain was unforeseeable, Telles added.

In cases such as awards to design ventilators from scratch, the contracts would never have been supplied in time to help with the first wave “effectively meaning they could have been tendered with pro-competitive tools instead”, Telles said. 

The government’s use of a “VIP list” of suppliers, compiled through recommendations by MPs and senior officials, was also illegal as they “introduce discrimination unnecessarily to serve the urgent need [or needs]”, Telles added. 

November’s NAO report said suppliers on the VIP list were 10 times more likely to receive contracts than other bidders. 

One procurement lawyer close to the government said it was a “grey area” as to whether the use of direct awards was justified under the law but if you passed that hurdle there was “nothing in the law that prevented you from awarding it to your mates”.

Another added that if the prime minister wanted Britain to be “open for business”, he needed to act quickly to reassure international investors that its procurement practices were fair.

Peter Smith, a procurement expert and author of Bad Buying, said there was “no excuse now for avoiding proper and open competition across almost everything the government buys”. 

Of the £19bn Covid-19 contracts awarded without competitive tendering in the 12 months to March 18, £17.6bn was awarded by central government, mostly by the Department for Health and Social Care, and just over £1.2bn by the NHS.