Transparency International sheds light on public procurement during the pandemic

During the Covid-19 pandemic, the government’s use of Regulation 32(2)(c) of the Public Contracts Regulations 2015 (PCR) enabled it to make direct awards of contracts, for personal protective equipment (PPE), for example, without public notice or competition. Regulation 32(2)(c) only applies ‘insofar as is strictly necessary where, for reasons of extreme urgency brought about by events unforeseeable by the contracting authority […]’ the usual procurement rules cannot be complied with. In an application for judicial review of the direct award of a (non-PPE) contract, the Court of Appeal held in The Queen (On the application of the Good Law Project) v Minister for the Cabinet Office, Public First Limited [2022] EWCA Civ 21 that Covid-19 did engage Regulation 32(2)(c). Indeed, an EU Notice dated 1 April 2020 envisaged the use of such provisions during the pandemic. So, the suspension of the usual procurement safeguards was – legally at least – justified.

A total of £30.7bn of high-value Covid-19 contracts were awarded this way, lacking competition. The government was, however, bound to comply, in its awarding of the contracts during the pandemic, with the principles of equal treatment and transparency in Regulation 18 of the PCR (R(Good Law Project, Everydoctor) v The Secretary of State for Health and Social Care & Ors [2022] EWHC 46 (TCC) at [350]), as well as public law principles of lawful decision-making, such as lack of bias.

Transparency International’s report

Transparency International UK’s report ‘Behind the Masks – Corruption Red Flags in Covid-19 Public Procurement’, published on 9 September 2024, indicates that the relaxation of procurement processes under Regulation 32(2)(c) may well have led to breaches of those principles, namely corruption, in the direct awarding of contracts. Astonishingly, Transparency International identified three or more corruption ‘red flags’ in respect of Covid-19 contracts worth over £15.3bn, of the total £48.1bn of such contracts awarded, accounting for almost one in three pounds spent on Covid-19 contracts. The creation of a ‘High Priority Lane’ for referrals by MP’s, Ministers and senior officials created an obvious conflict of interest and indeed was ruled unlawful by the High Court in R(Good Law Project, Everydoctor) v The Secretary of State for Health and Social Care & Ors, although the court refused any relief on the basis that the contracts would likely have been awarded to the same suppliers anyway. Moreover, 28 contracts, worth £4.1bn, were awarded to suppliers with political connections. Substantial information about the procurement of PPE remains unpublished or redacted. There would appear to have been profiteering and uncommercial pricing. A vast amount of PPE was also said to be ‘unfit for purpose’.

Going forward

Even if the use of Regulation 32(2)(c) was legally justified, it appears that the situation was exploited for gain. This, in turn, calls into question the effectiveness of the legislation which, after all, expressly caters for situations of extreme urgency and should contain sufficient safeguards against corruption, even in such circumstances.

From 28 October 2028, Regulation 32(2)(c) is to be repealed and replaced with the provisions of the Procurement Act 2023 (PA), namely Paragraphs 13 and 14, Schedule 5. These allow a contracting authority to award a contract directly where the goods, services or works are strictly necessary for reasons of extreme and unavoidable urgency, meaning a competitive tendering procedure is not possible. Urgency is unavoidable if it is not attributable to any act or omission of, and could not have been foreseen by, the contracting authority. This test is materially the same as under the PCR. The PA requires contracting authorities to publish information about the awarding of a contract before it can enter into the contract with the supplier, but this obligation existed – and was ignored – under the PCR. A new power in the PA permits the government, by regulation, to define the goods and services that can be purchased by direct award ‘to protect life’ in an emergency, foreseen or not. Transparency International opines that these powers are insufficiently restricted.

The awarding of a Covid-19 contract was ruled unlawful because it failed to comply with the PCR. Yet, the effect of Transparency International’s report is that on the whole, the PCR failed to prevent a very significant waste of public funds. Further, it warns that the PA does not go far enough. Without further safeguards, in the event of another pandemic, public procurement could be exploited again.