Waste, negligence and cronyism: Inside Britain's pandemic spending

Patrons under a temporary canopy in the street outside a bar in the West End of London, on Tuesday, Dec. 15, 2020. On Wednesday, Prime Minister Boris Johnson stuck by his pledge to lift some important coronavirus restrictions for a few precious days between Dec. 23 and 27 — a decision that attests to his deep-seated desire not to be seen as the Ebenezer Scrooge of Downing Street, as well as to the atavistic appeal of the Christmas holiday in this otherwise secular country. (Andrew Testa/The New York Times)

LONDON — When the pandemic exploded in March, British officials embarked on a desperate scramble to procure the personal protective equipment, ventilators, coronavirus tests and other supplies critical to containing the surge. In the months following those fevered days, the government handed out thousands of contracts to fight the virus, some of them in a secretive “VIP lane” to a select few companies with connections to the governing Conservative Party.

To shine a light on one of the greatest spending sprees in Britain’s postwar era, The New York Times analyzed a large segment of it, the roughly 1,200 central government contracts that have been made public, together worth nearly $22 billion. Of that, about $11 billion went to companies either run by friends and associates of politicians in the Conservative Party, or with no prior experience or a history of controversy. Meanwhile, smaller firms without political clout got nowhere.

“The government had license to act fast because it was a pandemic, but we didn’t give them permission to act fast and loose with public money,” said Meg Hillier, a lawmaker with the opposition Labour Party and chairwoman of the powerful Public Accounts Committee. “We’re talking billions of pounds, and it’s quite right that we ask questions about how that money was spent.”

The procurement system was cobbled together during a meeting of anxious bureaucrats in late March, and a wealthy former investment banker and Conservative Party grandee, Lord Paul Deighton, was later tapped to act as the government’s czar for personal protective equipment.

Eight months on, Deighton has helped the government award billions of dollars in contracts –– including hundreds of millions to several companies where he has financial interests or personal connections.

The contracts that have been made public are only a part of the total. Citing the urgency of the pandemic, the government cast aside the usual transparency rules and awarded contracts worth billions of dollars without competitive bidding. To date, just over half of all of the contracts awarded in the first seven months remain concealed from the public, according to the National Audit Office, a watchdog agency.

The Times investigation was based on contracts compiled by Tussell, a research firm that tracks public spending. It also relies on other public records, and interviews with dozens of government officials, lawmakers, business owners, doctors and nurses.

All of the companies named in this article have denied wrongdoing, and there is no evidence to suggest that government officials were engaged in illegal conduct. But there is ample evidence of cronyism, waste and poor due diligence. Some of it has been documented by the British media, but the scale of the problem is wider than previously known.

In the government’s rush to hand out contracts, officials ignored or missed many red flags. Dozens of companies that won a total of $3.6 billion in contracts had poor credit, and several had declared assets of just $2 or $3 each. Others had histories of fraud, human rights abuses, tax evasion or other serious controversies. A few were set up on the spur of the moment or had no relevant experience — and still won contracts.

The Department of Health and Social Care, which led the government’s pandemic procurement, said in a statement that “proper due diligence” was carried out for all contracts.

“We take these checks extremely seriously,” a spokesperson for the department said in an emailed statement.

The government was undoubtedly in crisis in March, with Prime Minister Boris Johnson putting the country on a “war footing.” Many companies, such as the fashion brand Burberry, did create new production lines and successfully produce critical supplies.

Nevertheless, the crisis gave way to a system that was neither fair nor equitable, critics say. Suppliers who answered the government’s call say the publicly advertised procurement system run by Deighton was at best slow and at worst unresponsive.

Junior staffers reviewed thousands of proposals and passed on a chosen few to their bosses, who often had only a day to sign off on contracts, according to a government official involved in the process. Some businesses said they were left waiting months as their proposals went unanswered. Others said it was difficult to keep up with what the government wanted, with safety specifications sometimes changing after deliveries had already been made.

Normally, companies would bid on individual contracts with requirements published in advance. But given the government’s frenzied need for supplies, most companies simply submitted broad proposals through a government website. Government officials then decided yes or no, or in some cases approached companies themselves.

A government spokesperson said that the huge global demand for PPE had created “a highly competitive market” and that it used “the quickest and most accessible routes” to buy protective gear.

In choosing speed over due diligence, however, ministers squandered millions on “unsuitable” items, including some that did not meet safety standards, according to the National Audit Office. The government said that only a tiny portion of the supplies, 0.5%, had been found unfit for their intended uses.

Ministers could have avoided the panicked spending spree, critics said, had they not ignored their own pandemic preparedness plan and sold off stocks of PPE from rainy-day reserves in the first three months of the year.

“If they had stocked according to that plan, then they would have bought themselves more time,” said Dolin Bhagawati, a neurosurgeon and a leader of the Doctors’ Association UK, which is suing the government for failing to investigate the effects of the personal protective equipment, or PPE, shortages.

March was a month of madness for Matt Hancock, Britain’s health secretary. Doctors and nurses were in open revolt, telling the government they felt like “cannon fodder” for being forced to work without proper protective gear. Officials were struggling to process thousands of offers that responded to the government’s call to arms to British suppliers.

In the pressurized atmosphere of early April, with lawmakers loudly demanding protective gear for their constituents, Hancock secretly authorized the VIP lane for favored companies, which proved to be 10 times more likely to win contracts than those outside that group, according to the National Audit Office.

The government did not carry out systematic company checks, including for potential conflicts of interest, until it had already spent nearly $2 billion, auditors found. Officials did not always document who recommended a company or why it was awarded a contract.

One company in the VIP lane was an investment firm, Ayanda Capital, where Andrew Mills served as a senior board adviser while also working for a government body, the Board of Trade. While it is not clear what role Mills played, Ayanda Capital was awarded nearly $340 million to supply personal protective equipment. It eventually delivered 50 million masks worth more than $200 million that could not be used for their original purpose, because the ear loop fastenings did not match the government’s new requirements.

A spokesperson for Ayanda denied that the masks were unusable and said they met all government requirements when the order was placed.

Many companies and business people, often better qualified to produce protective gear but lacking political connections, had no access to the VIP lane. Multibrands International, a British manufacturer that had been producing PPE for China since December, was among them. Its owner, Rizwana Hussain, spent months trying to reach government officials through public channels.

Hussain had offered to supply the government starting in March, her emails show. She was still at it in early May when news broke that 400,000 protective gowns that the government ordered from Turkey had proved to be unusable. “I was so upset thinking, ‘Why are we listening to these disastrous happenings when we’re here and are offering our help?’” Hussain said.

She said that although her company could produce large quantities of protective gear at its factories in China and India, she never heard back from the government.

Government officials said that the high-priority lane was set up to efficiently prioritize credible offers of PPE for the National Health Service, and that all proposals, whatever channel they went through, were assessed by the same standards.

But they have not released the names of the nearly 500 companies that made the VIP list, fueling questions of cronyism.

“Some people seem to be doing very well out of this crisis and that goes against a very basic principle of fairness,” said Rachel Reeves, a Labour party lawmaker and shadow minister for the Cabinet Office.

Deighton was a central figure in the procurement program, if one with potential conflicts of interest.

He is remembered by his former colleagues at the London Olympics committee as an analytical thinker and a “counselor” of sorts, who was always calm and thoughtful. He is popular inside Westminster, too, where he once served as a junior Treasury minister in a Conservative government, is close to the prime minister’s office and recommended the successor to controversial Dominic Cummings, who recently resigned as chief of staff.

Deighton, who was once a Goldman Sachs executive, remains involved in business and has financial or personal connections to at least seven companies that were awarded lucrative government contracts totaling nearly $300 million, the Times has learned.

There is no evidence to suggest that the companies won contracts because of their connection to Deighton, and he was not directly involved in awarding vaccine, contact tracing or consulting contracts. He properly declared his business interests in a public register for the House of Lords but did not respond to questions about them.

Still, conflict of interest questions remain, given his access to government ministers overseeing the spending spree and his involvement in high-level meetings and strategy discussions.

Two of the contracts linked to Deighton were PPE-related. One, for $78 million, was awarded to Honeywell Safety Products, a subsidiary of Honeywell International, a company he holds shares in.

Deighton is also a shareholder of AstraZeneca, the British pharmaceutical company that is developing a vaccine with Oxford University, and was awarded $205 million for test services.

He also holds shares in consulting firm Accenture, which was awarded a $5.6 million contract to help develop England’s ill-fated contact tracing app and detect fraud in procurement. Another company he has a stake in, UBS, won $770,000.

Neither Deighton nor the companies would divulge the size of his share holdings.

A $406,000 contract was awarded to a consulting firm, Chanzo, to help set up and run the PPE procurement system, including providing a chief of staff for Deighton.

Chanzo’s founder and chief executive, Jean Tomlin, is a longtime business associate of Deighton, and worked with him on the Olympic committee. Tomlin is also a fellow director at Hakluyt, a corporate intelligence firm founded by former British intelligence officers, which Deighton chairs.

Lady Alison Deighton, his wife, is a former director of N.M. Rothschild, which won a $770,000 contract for consulting services. Another consulting contract of the same value went to Moelis & Co., an investment bank where one senior adviser and Labour peer, Lord Charles Allen, was also on the Olympic committee board with Deighton.

A colleague in a situation similar to Deighton’s has been forced to relinquish his shareholdings. Lord Theodore Agnew, a Cabinet Office minister responsible for supporting COVID-19 procurement, put shares worth about $120,000 in an artificial intelligence company, Faculty Science, into a blind trust following criticism. The company, which has close ties to the Conservative Party and Cummings’ campaign to leave the European Union, was awarded $5.5 million for COVID-related data analysis services.

Faculty Science said it was “pleased” the National Audit Office had found no conflicts of interest in the awarding of its contracts, nor any evidence of Agnew’s involvement.

The government said that it has rules and processes to guard against conflicts of interest.

Officials insisted that Deighton had no role in approving contracts, despite his appointment as the czar overseeing both the purchase and manufacture of protective gear.

In the end, his team awarded contracts to fewer than 1% of suppliers who went through ordinary government channels, an auditor’s report found. Hussain’s company, Multibrands International, was not among the recipients.

“Before this case we were extremely naive,” she said. “We thought if we rang the government, said we’re a local British business with the facilities to help, that would be enough.”

“Now we know not being part of the government inner circle held us back,” Hussain said.

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Notes: PestFix said it had repurposed its business during the pandemic to supply medical PPE and said the government changed its specifications after it had supplied the face masks. PPE Medpro said that it was awarded contracts based on the considerable experience and expertise of its staff. Uniserve Group said that its director had no connections to the Conservative government. Deloitte said that its U.K. arm does not give cash contributions to political parties. Ocean Footprint said it had previously sold masks to the boatbuilding industry. Serco said that it “took significant steps to reform itself” after the 2013 fraud scandal. Randox Laboratories did not respond to questions and Owen Paterson declined to comment. All other companies mentioned in the article either declined to comment or did not respond to questions.

©2019 New York Times News Service