PPE procurement: the government responds to legal action

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The government has hit back against Jolyon Maugham’s pre-action protocol letters issued in June against Health Secretary Matt Hancock concerning multi-million pound contracts for personal protective equipment (PPE) awarded to Pest Fix Ltd of Littlehampton and Clandeboye Agencies Ltd, a chocolate wholesaler in Antrim.

Maugham challenged their lawfulness on the grounds that there was no evidence that either company had experience in supplying PPE and that the “extreme urgency” which dictated single-bidder contracts was of the department of health’s own making through a lack of forward planning.

The latest documents are on the Good Law Project’s website HERE.

The government’s case for extreme emergency is somewhat weakened by the admission that none of the two million isolation suits, of which half have been delivered so far by Pest Fix, has been supplied into the NHS, but instead are currently being stored in DHSC’s central logistics facility in Daventry pending tests before they can be released for use.

It seems odd that millions of isolation suits were purchased at the height of the pandemic with rapidly escalating prices, only to be put into stock and left unused.

The Pest Fix and Clandeboye orders were just two of at least 60 contracts awarded by the department of health and social care for PPE during the crisis without a competitive tendering process.  They are all listed at the bottom of this article from data shown on the EU’s TED website. The total value of these contracts was just shy of £1bn.

Pest Fix has instructed counsel to defend the action and claims the company has supplied a “broad range of products” to more than 15 NHS Trusts over the last 11 years, although it’s not clear this was PPE. It’s notable that even the government’s response doesn’t claim Pest Fix Ltd ever supplied PPE and their own website describing products for sale had the words “… including PPE” hastily added sometime after 15 June this year.

Pest Fix Ltd says Daniel and Matthew England run the company. Companies House records show the brothers formed another company, Radiant Holdings Ltd on 30 April and another, Dragon Investments on 11 May. A Mr Terry Burrows was appointed as a director of Crisp Websites, trading as Pest Fix Ltd, on 13 May. This was within a month of winning the PPE contract. Both new businesses are described as carrying out the activities of a holding company. It is not clear what the purpose of these two new legal entities is.

It has also emerged that their contract was not for £108m – this was apparently an administrative error using an earlier draft  – and the final order was actually for £32m although a number of additional contracts for the supply of other PPE items have subsequently been concluded with Pest Fix Ltd, details of which are to be published soon.

Payment terms on the Pest Fix contract included a 75 per cent deposit and then further staged payments afterwards. This presumably means at some point £24m was transferred to the bank account of a small company in Littlehampton – Crisp Websites Ltd trading as Pest Fix Ltd – whose last accounts in November 2019 showed assets of £18,000.

The government’s defence is that the “surging demand” for PPE in March and April disrupted traditional supply lines, prices were rocketing, some countries were banning the export of PPE while others were offering to pay substantial sums of cash upfront to overseas producers in order to secure immediate commitments. Raw materials were running short and customers were being outbid – gazumped – even on existing contracts.

In the circumstances and perhaps understandably, the government decided to adopt a different approach and look for new sources. The ‘coronavirus support from business’ scheme was launched on 27 March 2020 and encouraged companies supplying a range of products and services, including PPE, to register on an online portal. The scheme was widely advertised at the time, the government claims.

Pest Fix Ltd, Clandeboye Agencies and others, were part of the 24,000 offers of support from some 16,000 potential suppliers that came in as a result of this “enhanced engagement”. Around 600 orders ranging in value from under £1m to over £100m were placed with 200 different suppliers and amounted to some £5.5bn in total. This was all for PPE apparently.

It is not clear if these were just the single-bidder contracts or all orders including those placed under competitive tendering rules.

What is interesting is that while the DHSC continued liaising with established large-scale PPE suppliers, apparently “the nature of the changed market conditions required the development of alternative sources of supply and it was appropriate not to impose unnecessary hurdles in the way of securing that objectives.”

So, a whole new set of “buying teams” were set up using some 500 staff seconded from other departments. They “prioritised” these offers on the basis of how urgently the particular product was needed, the quantity on offer, value for money, certainty of supply and lead times. The government says where appropriate, further financial checks were conducted prior to contracts being concluded.

And oddly, it was the cabinet office which “performed an appropriate process of due diligence before passing Pest Fix’s offer to the closing team to undertake commercial negotiations”.

It seems fair to say that the civil servants handling these very large contracts were not doing so through the normal channels and processes and in many cases they were sourcing from small untried companies inexperienced in supplying PPE.  

There is no suggestion of wrongdoing, necessarily. What this story seems to expose is the chaos and panic at the highest levels of government brought about mainly due to lack of forward planning.

This can surely be the only reason why Germany, with the second-highest number of contracts for PPE garments in Europe on the TED website and not all single-bidder, spent less than €20m in total on them, while Britain was reaching close to £1bn. Spain used single-bidder contracts just twice, spending under €915,000 in total.

The government’s response is intended to cover both the Pest Fix and Clandeboye Agencies pre-action letters but Clandeboye’s contract is not actually mentioned for some reason. Jolyon Maugham has confirmed he intends to proceed with his legal action.

A full list of single-bidder contracts compiled from the EU’s figures is given below:

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