COVID-19 procurement and the risk of fraud
A couple of days ago I made reference to the Department for Health and Social Care annual report and its information about the losses on PPE. As it turns out the report contained more information related to public procurement warranting a comment. Once again buried deep in the report, the opinion of the Comptroller and Auditor General (p. 198-202) is scathing:
"The level of fraud risk has increased as a result of COVID-19 – related
procurement. A significant increase in new suppliers, a lack of timely checks on the quality of goods received and poor inventory management all contributed to this heightened risk. In these circumstances and given the lack of physical checks on the inventory held by the Department, *I have not been able to obtain assurance that there has not been a material level of losses due to fraud.*
(…)
7. In order to meet the demand for urgent procurement, the Department adapted its normal procurement and inventory management controls. This has contributed to a significant loss of value to the taxpayer and leaving the Department open to the risk of fraud. The Department has not yet fully evaluated the financial impact of these control adaptions or re-established effective controls in all areas.
(…)
15. The Department’s changes to its normal procurement processes in the context of an overheated global market for PPE meant it was exposed to a heightened risk of fraud in 2020-21. A significant increase in new suppliers, a lack of timely checks on the quality of goods received and poor inventory management all contributed to this heightened risk. In these circumstances and given the lack of physical checks on the inventory held by the Department, I have not been able to obtain assurance that there is not a material level of losses due to fraud."
This report is a timely reminder of why we have procurement rules and what they try to achieve, that is, simply avoiding really bad procurement.
Furthermore, even then, said rules only deal with the purchasing process and not with the actual contract management and delivery. In this particular case what we are seeing here are the downstream consequences of poorly designed procurement. Bad procurement decisions amplify the difficulties for contract management and that means opening the floodgates on risk.