PAC questions Covid lab contracts

by Seamus Ward

27 July 2022

Commons Public Accounts Committee chair Meg Hillier has accused the Department of Health and Social Care of ‘acting fast and loose’ when awarding contracts worth almost £777m for Covid testing services and goods.

Meg HillierIn a report, the PAC questioned the governance and transparency of contracts awarded to Randox Laboratories Limited and its strategic partner Qnostics Limited for polymerase chain reaction (PCR) testing and goods.

Poor record keeping meant it was impossible to be sure the contracts were awarded properly, the PAC said. And, even allowing for the exceptional circumstances at the beginning of the pandemic, basic civil service practices to document contract decision-making were not followed.

The Department was not transparent about meetings between ministers and the company, it said. It continued: 'The potential for conflicts of interest was obvious, but the Department neglected to explicitly consider conflicts of interest in its awarding of contracts to Randox.’

The PAC said the first contract was given to Randox for Covid testing services in March 2020 without competition. It did not receive the level of scrutiny the PAC would expect from the Department’s senior civil servants. And gaps in the audit trail made it impossible for the National Audit Office to provide positive assurance, though it reported that it had not seen evidence that the contracts were awarded improperly.

The report added that Randox had ‘struggled to deliver the expected level of testing capacity against its first contract, which did not set out any performance measures’. Yet the Department awarded Randox a contract extension worth £328m seven months later, again without competition. It insisted that the company had benefitted from capital investment included in the first contract, and saw a hundred-fold increase in profits in the year to June 2021. But the Department had not considered supplier profit margins, including a profit share, in its decision-making on the contracts.

Record keeping

The PAC called on the Department to improve record keeping, strengthen transparency, and clarify ministers’ role in procurement processes. Even where contracts are awarded in exceptional circumstances, performance indicators should be set and used to hold suppliers to account, and commercial guidance should ensure supplier profits are not excessive.

Committee chair Meg Hillier (pictured) said: ‘The NAO has been careful to stress that it has not seen any evidence that the government’s contracts with Randox were awarded improperly. But then, in the case of the hundreds of millions of pounds of contracts awarded to Randox, there was precious little evidence to see. Much of the business was won without any competing tenders from companies who may have had better capacity to deliver, perhaps without the upfront capital.

‘Add to that the failure to include any performance measures in the first contract, or any protection against excess profits, and this looks just like the rushed policy and contract-making that we’ve seen across so much of the government’s response to the pandemic. We repeatedly hear the reference to the crisis we were facing as a nation. But acting fast doesn’t mean acting fast and loose.’

However, Randox hit back at the report. A spokesperson said: ‘The PAC report is deeply flawed and wrong in assumptions it makes and the conclusions it draws about Randox.’

It is the UK’s largest diagnostic company, with four decades of experience, and over 2,000 professional staff at the start of the pandemic, the spokesperson said. The company processed more than 25 million samples, playing a crucial role in keeping the UK economy going during the lockdowns.

‘In supporting the UK’s urgent requirement for coronavirus testing, Randox reacted with speed, efficiency and flexibility in delivering value. The company developed and built, in record time, the UK’s largest Covid-19 laboratories and testing services. It provided the Department of Health and Social Care with a PCR testing capacity at the time of greatest need, rising from 300 tests per day to 120,000 per day by January 2021.

‘In adapting to rapidly changing DHSC and Department of Transport requirements, Randox delivered unique value to the government, the national economy and to individuals,’ they continued.

‘At no stage, either during its deliberations or in its preparation of this report, did the PAC make any contact whatsoever with Randox. Consequently, many elements of its report relating to Randox are false, based as they are, on wrong and unchecked assumptions about the company. For that reason, they and any publications arising from them are the subject of a legal complaint.

‘The issues the report raises around internal DHSC record keeping are clearly a matter for DHSC.’