Monday 7 December 2020
Why did a month-old company land a couple of big-money contracts for PPE? And what does it reveal about the British government’s response to the pandemic?
Basia Cummings: The pandemic is costing this country billions – actually, hundreds of billions, with billions more to come – at a time when the economy is, to put it mildly, not doing very well…
So there are moments in this crisis when it has felt quite strange that there has been a fierce debate, in the news and among politicians, about millions of pounds. Those millions being the money that the government has spent frantically trying to get hold of personal protective equipment – PPE – the masks and gowns and visors that help keep people safe from the virus.
To be clear, the government has spent billions on PPE as well. But the stories which have made the headlines have been smaller – like the one about a middleman in a deal who picked up about £21 million.
Partly, I think it’s just human nature. We focus on individuals. We hate the thought of somebody getting rich when so many of us are having such a hard time.
I also think it’s partly something that comes from the damage of how political debate is done these days. It’s not enough to say that our political opponents are useless or incompetent. The only way to really cut through is to call them corrupt. Just look what Donald Trump did to Hillary Clinton – and has tried to do to Joe Biden.
[Clip of Donald Trump]
Basia: But on the other hand, of course, if it is true that some people have set about profiting from this crisis – and if it is true that people in government, or connected to government, have helped them – then that’s a proper story. One we should really care about.
It’s hard to cut through the chaos of those early days of the pandemic and figure out what was really going on. But that’s what we’re going to do in this Slow Newscast.
I’m Basia Cummings, and this week we’re going to try to understand the lines between corruption, cronyism and just garden-variety incompetence.
I’m going to be joined by my colleague, the great Chris Cook, who’s spent weeks digging into PPE contracts. But don’t feel sorry for him, because he loves it. And what he’s come back with is a really interesting story – one that helps us figure out what might really have been going on behind the scenes.
Let’s start here. There’s one thing we don’t need to argue about: on PPE contracts, corners were cut. The normal rules that the government has to follow when it’s spending money went out of the window.
Usually, it has to be completely clear that there are no conflicts of interest between civil servants who are buying this stuff and the people that they’re buying it from. Normally, they have to show that they’ve got the best value for money.
None of that happened this year, after coronavirus hit. And, in itself, that’s okay. The government’s allowed to suspend the rules in an emergency, which coronavirus undoubtedly is.
But there’s a question that the government just can’t get rid of, which is this: did people in government cut corners to help this country get its hands on desperately needed stocks of protective equipment for staff in hospitals and care homes? Or did they cut corners to help their friends?
So let’s go back to April, that terrible month when things were chaos. Governments were accusing each other, hospitals were running out of crucial supplies, and thousands of people were dying. The panic was palpable.
Basia: Last month, in a Think-In in our newsroom – which is what we call our version of an editorial conference – we heard from a man called Jakob, chief executive of Falck, a large European healthcare provider. The picture on their side of the fence was just as stark:
Jakob Riis: It was… hectic is one word. And it was a period of time where we tried to figure out what is going to be the biggest obstacle to maintaining the critical health infrastructure.
And that market, within literally days, started heating up. Sort of civilised in the beginning, but then it just got worse and worse. So every time we’d close the contract, we might realise that some government had basically just taken over the shipment and said that we wouldn’t receive it. So, as I said, decisions had to be made within hours and some of the prices on simple, simple issues like masks and so on went to… astronomical numbers.
It was a situation where I think there was nothing that was even close to normal. And some of the biggest shipments of personal protective equipment in Denmark actually came in by one of the big fashion and clothing retail companies that’s Danish and operates around China.
It was connections. And nothing was normal at that point in time.
Basia: Nothing was normal. Nothing is normal. But after the first wave of chaos, help started to come from unexpected places.
[Clip of Robert Jenrick]
Basia: China sent huge shipments to Europe and America; manufacturers began totally rebuilding their production lines to produce more PPE; and, after the first wave, the government finally had a moment that it could begin to look ahead.
And the question of what they did next is crucial if we’re trying to understand how well they behaved in this pandemic.
So I want to come to Jolyon Maugham, a barrister and the founder of the Good Law Project, a group that fights the government in the courts. Jolyon began looking into some of the big government contracts allocated during the pandemic:
Jolyon Maugham: Good Law Project got involved in this back in late June, I think. And we didn’t really understand what we were doing then. And we brought three cases then. It wouldn’t be true to say that we picked them out at random, but nor did we have any ability to tell a good one from a bad one.
And each of those cases is absolutely remarkable. So, the least offensive of the three is the purchase of £108 million of gowns from an Irish confectioner called Clandeboye. That’s the least remarkable. And in relation to that case – although we haven’t yet had any real disclosure from government – we know that confectionery wholesaler was rated “red” by government for financial sustainability.
Basia: For Jolyon, that panic back in April was causing some really bad decisions. Partly, of course, because of the panic. And partly because… well, there was just a lack of understanding.
Jolyon: What we ended up with was this extraordinary free-for-all of people with no experience in the market being given contracts, sometimes for many hundreds of millions of pounds, to supply product that they didn’t understand and that government purchasing from them did not understand either. And there’s compelling evidence of over-payment, of substantial over-payment, by government. And faulty supplies.
Basia: And this is where my colleague Chris Cook comes in. He investigated one big contract in particular.
It is a remarkable story that takes us from China to the Isle of Man to London. It taps into all of these problems that both Jakob and Jolyon have mentioned. And it leaves us with some really big questions.
Chris Cook: So we’ve been looking at one contract in particular, really, to sort of help understand how we got to where we’ve got to.
So the contracts we’ve looked at are contracts between the Department of Health and a company called PPE Medpro, which is, as the name suggests a PPE company. If you look on its website, it says it’s the go-to company for quality and safety-conscious buyers wanting to react to rapid market demand. And their product range, they say, is specifically developed to address the urgent need for high quality low-cost personal protection products.
And it won two really big contracts. On 12 June, it won a masks contract for £81 million. And a second, even bigger, contract on 25 June for gowns for £122 million. So that’s about £200 million of contracts that it won.
And that second contract, the gowns contract, is a really huge contract. So that’s about 20 million gowns in total. To put that in context, since the end of February, the NHS supply chain has delivered about 10 million gowns in total. So PPE Medpro is being asked to supply basically more than twice what the NHS has used in gowns during the pandemic.
And these contracts are being delivered in June, right? So these are late contracts.
If you look in the government’s own documentation, [PPE Medpro is] listed as a large supplier, which it definitionally is. But, actually, if you start at the top, things look a bit different. So, you know, we rang the number on the website.
Chris on phone: Can I ask where you are physically? Is this an answering service?
PPE Medpro employee: You’re through to reception for PPE Medpro. Can I take a name, please?
Chris: Sure, my name is Chris. I was just wondering whether this is an answering service or whether you’re actually in the building.
PPE Medpro employee: Okay. If I can take your surname, Chris.
Chris: Sure, it’s Cook.
PPE Medpro employee: Thank you. And if I can take the name of your company you’re calling from.
Chris: Sure. It’s Tortoise. I was actually just wondering if you were an answering service or whether you were actually in the reception at Great Portland Street.
PPE Medpro employee: I’m in the reception for PPE Med…
PPE Medpro employee: Medpro, yes. How can I help you?
Chris: I was actually just trying to work out whether you were an answering service or whether there was someone in the building.
PPE Medpro employee: Okay. And can I help you in any other way?
Chris: No, that’s fine, that’s fine. Thanks ever so much.
Chris, back in the Tortoise studio: You get through to what I was pretty sure was basically one of those remote secretarial services; you know, an answering service. So that’s quite odd, right?
If you look on their website and their corporate information, they also list two addresses. So one of them is on High Holborn, so by Chancery Lane tube station, quite a posh address. That’s actually just their accountants.
The other is a sales office and that’s actually an address above a stationery shop. And, actually, when I went there physically, I couldn’t see any trace of it on the ground.
So here’s the thing, right? So this company, which got £200 million of contracts in June, was actually founded on 12 May. It had two directors at the start, both residents of the Isle of Man. And it doesn’t really have any kind of permanent office in the UK.
Basia: I want to pause here and step back: this is a company being awarded a huge contract to provide gowns in June, to provide double what we’ve actually ended up using during this pandemic year. And the critical detail here is that PPE Medpro, this supposedly specialist PPE supply company, was only a month old.
To put this into context: around the time Boris Johnson was announcing plans to phase out of Lockdown One, these guys were getting together to create this new company – PPE Medpro – and, almost immediately, they won over £200 million of contracts.
Chris: So when we wrote to them, their lawyers told us that the people behind this company had 40 years’ of experience in this kind of procurement. And, actually, they told us that they had been asked to set up this company as a vehicle for this specific purpose by the government.
Now, that’s quite striking. I’ve asked why the government might want a company to do this, and I haven’t got a reply.
They also don’t say in the letter who’s actually behind the company. If you look through the paperwork, you can see that one of the two founding directors is a man called Anthony Page, so I emailed him and he wrote back, and he had that High Holborn address in his email signature. But actually, if you look at the underlying data hidden in the email, you can see that he was on the Isle of Man when he sent it to me.
You see, he’s an employee, along with the other original director, of something called the Knox House Trust, which is an Isle of Man-based company. And it’s one that’s associated with Doug Barrowman, who is a rather grand businessman.
Now, when we wrote to PPE Medpro, we didn’t ask them about donations to the Tory party, but they did spontaneously tell me that neither the month-old company nor its officers had ever given any money to the party.
The thing is, there is a pretty obvious link between this group of people and the Conservative party. Doug Barrowman is newly married, as of literally the past fortnight. He’s married to Michelle Mone, better known as Baroness Mone.
[Clip of Baroness Mone]
Basia: That’s one of Michelle’s Instagram Stories sharing her wedding videos and pictures. Michelle is a lingerie magnate and a Conservative peer.
So what did the government get for its money?
Chris: So I’ve got paperwork showing that the government made dozens of separate payments to PPE Medpro. And, to be clear, those are payments that only went out as the stuff actually turned up. What that shows is that, yes, we can prove that they delivered the consignments.
The thing is, the gowns obviously weren’t made here, they weren’t made in that office in High Holborn, they weren’t made above a stationery shop on Great Portland Street. They come from two factories in China.
I asked one of the factories, which was responsible for supplying 13 million of the gowns, how much it would have cost to buy those gowns back in June.
And the sales person told me it cost no more than $2.42 each for their normal gowns, even if you weren’t placing a mammoth order. $2.42.
They have a posher gown, which comes in at $3.10 per gown. And, again, that’s before any sort of bulk discounts. So the most expensive gown they’re offering, they told me, was about $3.10.
The price being paid by the British taxpayer is between about $4.10 and $4.90, across those 13 million gowns. So that’s quite a big gap.
Now it’s possible that PPE Medpro is paying for other stuff as well. So there’s maybe some testing and accreditation we don’t know about. There would probably be a bit of transport costs, they won’t tell us. But the thing is, it’s not transport back to the UK. This contract is actually a contract to deliver the goods within China to another company, called Uniserve, which was going to ship it back to Britain.
So the gap between the factory price and what we paid is quite large. We don’t know what the other costs it had to cover were, but they seem… it’s still very, very large.
Now, PPE Medpro say they were charging, on average, 50 to 80 per cent less than similar suppliers. I’m not sure that’s quite how I would put it. They are actually slightly cheaper per gown than the amount that was being paid at the beginning of June by the British government. But, for Chinese-made PPE in particular, it’s certainly not on the cheaper end.
I should also point out, by the way, that the amount that Britain was paying per gown on average in June was about four times what had been being paid the previous year. So there were very large markups going on as the world raced to buy PPE.
Basia: And you might be thinking: okay, so the government got their shipment. This company delivered. Why does this matter?
It is a thought that’s crossed my mind too, and Jolyon explains it really well:
Jolyon: Very little of it really makes any sense. I mean, perhaps the most striking feature of all is that these gowns were bought at a moment in which we had already purchased around 70 million gowns. We then buy these further gowns from PPE Medpro, but we already have 70 million, as it were, metaphorically on the plane. Why do we need more?
You need to remember that, in the entirety of the pandemic to date, we’ve only consumed something like 11 or 12 million gowns. We have 70 million already. Why are we buying far more at what looks like a massive over-price from a company connected to a Tory peer that’s made substantial donations – or these group companies have made substantial donations – to the Conservative party. Has no experience. Has no financial track record. It couldn’t pass any sustainability checks.
I mean, the whole thing is just absolutely mind-blowing.
Basia: The government has undoubtedly had issues with buying stuff in this crisis – the scale of the contracts, who gets them, and how, and what they deliver, and the quality of it.
So what the story of PPE Medpro, this month-old company, demonstrates is just how people took advantage of this.
But this was a problem years in the making. It doesn’t start and end with the pandemic.
Chris: Five years ago, people in government who worried about this stuff were worrying about whether they should set up basically a British front office in China. Other countries do this.
Because we buy huge amounts of stuff even in a normal year. And we wanted to be able to – we should have been able to – buy directly and cut out a lot of the middlemen.
We didn’t do that. So lacking that capacity during the crisis, we ended up turning to people without track records. Just anyone who knew someone in China. I think we haven’t heard any issues with PPE Medpro’s kit, but the issues with the paperwork show up some of the problems and how other people‘s kit might have slipped through unnoticed.
So the fact that stuff is being bought without ideal paperwork may explain why we’ve heard these stories from clinicians about opening boxes and finding masks and gowns that clearly don’t meet the requirements. So, in some cases, we’ve heard of boxes being full of dirty kit. And other cases that clearly not quite what was asked for…
Chris: The other thing that’s really strange about the PPE Medpro decision, though, is that this is just an enormously large shipment. It’s just actually not clear why we bought so much. We’ve bought enough for two years, a full on pandemic, and paid for it all – and I don’t know why.
Basia: And from a company that was only a month old at the time, had no track record, and has no office. Got it.
Chris: Exactly. I think, with PPE Medpro in particular, there are two big questions. The first is: why are we still doing this in late June?
The second is: why were we buying so much? Why was this order so gargantuan?
And, actually, the third thing is: why were we not prepared? Why were we in this position where, five years after [Department of Health] officials were talking about “maybe we need to be able to go direct to source, to these companies”, why are we still having to ring round anyone who knew anyone in China? Why were we so ill-prepared?
And I think that speaks to a bigger problem with the British state and about its inability to think beyond the next turn. People who think that there’s a conspiracy in any of what has happened with the pandemic should look at what’s happened with PPE, right? The NHS is very bad at buying hospital gowns and tongue depressors. It is not going to be able to mount a conspiracy to destroy your freedoms.
Basia: This is a story that leaves us with some big questions. Was this incompetence or a necessary risk? Should the government have been better prepared, and could they have been better prepared?
Jolyon says that elements of this are forgivable: the urgency, for example. But the lack of transparency and the inability, as Chris has shown, to get answers from the Department of Health for straightforward questions creates an air of suspicion. When you can’t get answers, and the government is unwilling to give them to you, it’s obvious that accusations of corruption arise.
If the context is clearly a mitigating factor, why hide the rest?
Jolyon: There is that sort of kernel of truth in government’s defence. But that kernel of truth doesn’t explain the forest of maize with which we are confronted. So you have massive, massive, massive over-purchasing. Five years – or more! – of supply purchase. So, by my calculations, we bought 36 years’ worth of supply of a product called an isolation suit.
We didn’t just buy far more than we needed to. We bought it without any sort of competitive price or quality process. And so we are going to learn – this I have absolutely no doubt – that a very significant proportion…. I would expect the majority of the PPE that we bought not to be fit for purchase.
The vast majority of contracts that we entered into, if we had perfect transparency, will be bad contracts for good reasons. But most of that stuff – with one proviso that I want to come back to – will be a function of incompetence rather than corruption.
But there will also be a class of case where there is corruption. There are lots and lots and lots of stories, some from really plausible sources, about contracts that were corrupt – i.e. those close to government ministers asking for kickbacks in order for contracts to be awarded. And some of those stories that I’ve heard are from sources that I regard as being absolutely impeccable.
If you have a sort of an iconoclastic attitude towards good governance, towards good process in government – i.e. just get it through the door, right, it doesn’t matter about anything else, we just need the PPE – you create an environment in which corruption can flourish because people are not enabled to ask questions about whether this is a transaction we really ought to be doing.
Basia: This is an open-ended story of course, even as we see light at the end of the tunnel with the arrival of a vaccine. And it’s open-ended because, as we try to mark those lines between corruption and cronyism and incompetence, you also begin to see that, actually, there are other parts of this pandemic that might also have provided cover for wrongdoing – other parts, other things, that perhaps are far worse than what went wrong with PPE.
It’s a point my colleague Ceri made in our recent ThinkIn, our editorial meeting, on this subject. He said: “It’s easier to point the finger at companies like PPE Medpro because they have a human face – kind of – a human front. It’s much harder to make sense of the bigger, systemic fraud that might also be happening.”
For example, on the Coronavirus Bounce Back Loans:
Ceri Thomas: It’s interesting, isn’t it, which of those processes we care about? Because I was looking at some figures that came out a week or two back from the British Business Bank. They’d looked at the Bounce Back loan scheme, which, as you will know, is the kind of smaller of the government loan schemes that lend to businesses in trouble. And by the end of October, the British Business Bank had found 27,000 fraud in applications for Bounce Back loans, with a value, if they’d gone through, of £1.1 billion.
And I suspect that those are likely to be a minority of the fraud in applications that were made; that much more than £1.1 billion pounds would have been sucked out of that scheme by who knows who?
We are obsessed with a bloke in Florida who gets £21 million. There’s been so little coverage of the £1.1 billion… of the huge leakage from the government loan schemes for business.
And, sorry, the reason that I’m going off on this is because I wonder how much of this is to do with a tendency these days to paint political opponents as inherently corrupt and malign. That’s a pattern you see around the world. Whilst we’re busily turning a blind eye to where the real money is leaking out of the system.
Basia: But that might be a story for another time. So, given that this is an open-ended story, I’m going to go old-school broadcaster on you now and end by saying: more, when we have it.