Vast sums spent, no one knows why: COVID reveals why UK transparency law must change
British governments love to outsource. But Freedom of Information doesn’t apply to private companies, so the rest of us have no idea what is happening in the COVID contract bonanza.
So why don't we know where taxpayers' money is going? | Public domain
13 July 2020
The British government has spent more than £5.5 billion of taxpayers’ money on personal protective equipment during the COVID-19 pandemic. Was it well spent? We have no way of knowing.
Not even a seventh of the government’s 600 PPE contracts have been published – meaning the public doesn’t know why a company was selected, what it is supposed to provide, who it is owned by, and whether it is solvent or suitably experienced.
In effect, the government is asking the public simply to trust its decisions, but this would be unwise. The government has chosen to skip competitive tendering for many of these contracts and instead to award them directly to preferred companies because of the “extreme urgency” of the pandemic. This is more than a little controversial, however. Direct contract awards are often linked to poor outcomes, low value for money and corruption.
A growing string of big-money controversies is hardly reassuring. The decision to give a £108 million contract to Pestfix, a pest-control company with assets of only £19,000, is now under judicial review. Questions swirl around Clandeboye Agencies Limited, a confectionery wholesaler that appears to have won another £108 million PPE contract. And why exactly was Ayanda Capital, a private equity firm registered in the tax haven of Mauritius, selected for a £252 million contract to provide face masks to the NHS?
Overall, public contracting in the UK is now worth an estimated £292 billion annually – one-third of the entire budget – and is one of the most strategically significant areas of government. What the coronavirus crisis shows is that we know too little about who the government pays to do what, and whether it works.
Not even a seventh of the government’s 600 PPE contracts have been published – meaning the public doesn’t know why a company was selected, what it is supposed to provide, who it is owned by, and whether it is solvent or suitably experienced.
In effect, the government is asking the public simply to trust its decisions, but this would be unwise. The government has chosen to skip competitive tendering for many of these contracts and instead to award them directly to preferred companies because of the “extreme urgency” of the pandemic. This is more than a little controversial, however. Direct contract awards are often linked to poor outcomes, low value for money and corruption.
A growing string of big-money controversies is hardly reassuring. The decision to give a £108 million contract to Pestfix, a pest-control company with assets of only £19,000, is now under judicial review. Questions swirl around Clandeboye Agencies Limited, a confectionery wholesaler that appears to have won another £108 million PPE contract. And why exactly was Ayanda Capital, a private equity firm registered in the tax haven of Mauritius, selected for a £252 million contract to provide face masks to the NHS?
Overall, public contracting in the UK is now worth an estimated £292 billion annually – one-third of the entire budget – and is one of the most strategically significant areas of government. What the coronavirus crisis shows is that we know too little about who the government pays to do what, and whether it works.
Most of the fundamentals – the who, what, where, when of contracting – are unknown to anyone outside government
This is because there are two problems with the transparency of government buying. One is that the government doesn’t follow its own rules on publishing tenders and contracts. The second is that transparency in public services – which the Freedom of Information Act should ensure – does not extend to public contracts given to private firms.
The Public Contracts Regulations 2015 require authorities to publish tender notices and contract award notices, and it is government policy to upload these on a central public portal called Contracts Finder. But Institute for Government research shows that less than 40% of tender notices and less than 30% of contract award notices were actually published between 2015 and 2018. This means that most of the fundamentals – the who, what, where, when of contracting – are unknown to anyone outside government.
power, parliamentary and independent committees have concluded that the act enhances democracy.
Yet it excludes private contractors from public scrutiny. Passed in 2000 (although active only in 2005), the act did not anticipate the boom in outsourcing that began under Labour and has accelerated under successive Tory governments.
As outsourcing grew steadily into one of the most strategically important – if controversial – functions of government, the utility of Freedom of Information (FOI) has shrunk in direct proportion. The logic for extending FOI to private contractors is clear: the law should apply to the public pound, however and wherever it is spent.
As things stand, for example, FOI will not help us understand much about the roll-out of COVID-19 testing because this has been outsourced to companies like Randox Laboratories. Randox has a £133 million contract to increase British testing capacity, which the Department of Health and Social Care awarded it without tender.
Incidentally, the company has another link with Conservative legislators beyond this contract: it pays the Tory MP and former Cabinet minister Owen Paterson £100,000 a year, at a rate of £500 per hour.
Randox is receiving a nine-figure sum of public money and there is a clear public interest in testing transparency, in spite of which there is no right of public access to relevant information that the company holds.
There are debates on how FOI might apply to private organisations. Should the act apply only to the big boys, for example, or to the smaller fish in outsourced supply chains too? And how much public money should a private company receive before it becomes subject to the legislation?
Fixing British transparency is not rocket science, though. Introducing FOI to signatories, or “prime contractors”, of contracts with government worth more than £10 million would be a good start. These could then be reviewed by a select committee. Meanwhile, some pressure from Number 10 could surely compel public bodies to publish tender and contract award notices – as they are legally obliged to – on Contracts Finder.
Last year the Information Commissioner’s Office published ‘Outsourcing Oversight?’, the first substantial inquiry into FOI and outsourcing by a government body. In the shadow of Brexit, the report didn’t cut through. But the conversation on outsourcing and transparency, which has spanned the Grenfell fire, Carillion’s collapse, the Virgin Trains bailout and now the COVID-19 response, is far from finished.
Britain’s FOI legislation needs reform and strengthening. Earlier this year, openDemocracy began a two-year project examining how it is working – and not working. We will shortly be publishing our first major report, which looks at key trends and issues across government, at the enforcement of the act by the ICO and at areas for reform.
As the pandemic response shows, we simply don’t know enough about how the government spends public money to hold it to account.
Opaque contracts
Technically, the government doesn’t need to publish its PPE contracts because it has suspended its own procurement rules. But even during ‘normal’ times, central and local government and the NHS fail to follow basic transparency requirements.The Public Contracts Regulations 2015 require authorities to publish tender notices and contract award notices, and it is government policy to upload these on a central public portal called Contracts Finder. But Institute for Government research shows that less than 40% of tender notices and less than 30% of contract award notices were actually published between 2015 and 2018. This means that most of the fundamentals – the who, what, where, when of contracting – are unknown to anyone outside government.
Outsourcing loopholes
The Freedom of Information Act gives the public a right to directly request information held by government bodies. It offers ‘under the hood’ transparency in contrast to the ‘showroom’ of proactive publication. Although rarely popular with politicians inpower, parliamentary and independent committees have concluded that the act enhances democracy.
Yet it excludes private contractors from public scrutiny. Passed in 2000 (although active only in 2005), the act did not anticipate the boom in outsourcing that began under Labour and has accelerated under successive Tory governments.
As outsourcing grew steadily into one of the most strategically important – if controversial – functions of government, the utility of Freedom of Information (FOI) has shrunk in direct proportion. The logic for extending FOI to private contractors is clear: the law should apply to the public pound, however and wherever it is spent.
As things stand, for example, FOI will not help us understand much about the roll-out of COVID-19 testing because this has been outsourced to companies like Randox Laboratories. Randox has a £133 million contract to increase British testing capacity, which the Department of Health and Social Care awarded it without tender.
Incidentally, the company has another link with Conservative legislators beyond this contract: it pays the Tory MP and former Cabinet minister Owen Paterson £100,000 a year, at a rate of £500 per hour.
Randox is receiving a nine-figure sum of public money and there is a clear public interest in testing transparency, in spite of which there is no right of public access to relevant information that the company holds.
Moving forward
It’s not easy to find anyone who disagrees with the principle of extending FOI to contractors. Private companies, in public at least, appear willing to work under FOI. At the enquiry into the collapse of Carillion, the CBI suggested that companies are willing to accept additional transparency requirements inserted into contracts. So what exactly is the problem – is it perhaps government ministers who are enjoying protection from scrutiny?There are debates on how FOI might apply to private organisations. Should the act apply only to the big boys, for example, or to the smaller fish in outsourced supply chains too? And how much public money should a private company receive before it becomes subject to the legislation?
Fixing British transparency is not rocket science, though. Introducing FOI to signatories, or “prime contractors”, of contracts with government worth more than £10 million would be a good start. These could then be reviewed by a select committee. Meanwhile, some pressure from Number 10 could surely compel public bodies to publish tender and contract award notices – as they are legally obliged to – on Contracts Finder.
Last year the Information Commissioner’s Office published ‘Outsourcing Oversight?’, the first substantial inquiry into FOI and outsourcing by a government body. In the shadow of Brexit, the report didn’t cut through. But the conversation on outsourcing and transparency, which has spanned the Grenfell fire, Carillion’s collapse, the Virgin Trains bailout and now the COVID-19 response, is far from finished.
Britain’s FOI legislation needs reform and strengthening. Earlier this year, openDemocracy began a two-year project examining how it is working – and not working. We will shortly be publishing our first major report, which looks at key trends and issues across government, at the enforcement of the act by the ICO and at areas for reform.
As the pandemic response shows, we simply don’t know enough about how the government spends public money to hold it to account.
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