Covid Procurement Highlights Need For Reform

The original version of this article was first published in Construction Law by Nick Barrett

Much, if not all, of 2021 will be spent dealing with the fall out of the Covid-19 pandemic, and hopefully learning from the way the UK mobilised its central government procurement systems to combat it. There is much to learn.

There are hopes that leaving the European Union might mean a more welcoming attitude to the sort of fundamental reform that has long been recognised as essential for more efficient, money saving procurement of all services and products by the public sector. There have been successes. Developing and manufacturing a vaccine in such a short space of time might go down in history as one of the great medical success stories. The construction industry earned well deserved plaudits for making the Nightingale Hospitals available in a timely fashion. But was the way the UK responded to the pandemic a procurement success story?

Most crucial medical supplies like personal protective equipment (PPE) for national health service staff were obtained. But there were some headline grabbing embarrassments for the government along the way. A raft of previously unknown ‘brokers’ popped up promising to deliver supplies that nobody suspected even existed. Sometimes they didn’t, at least not while meeting the required specification. Some of these people or organisations were able to simply ‘flip’ the contracts, creaming off large profits.

Some contracts were awarded retrospectively as normal standards of transparency and procurement process were steamrollered in the understandable rush to combat Covid, which quickly caught the eye of the National Audit Office.

An almost unique part of the UK’s Covid related procurement during 2020 was abandoning the usual practice of subjecting the award of contracts to suppliers with known connections to gatekeepers like Ministers and MPs to greater scrutiny than usual. This abandonment of open competition was achieved through the creation of a high priority channel for some major awards that companies could breeze through if recommended by these gatekeepers, which included health service officials. Entry to this channel reportedly improved chances of being awarded a contract by a factor of ten.

We will probably never know for sure what part of the £15 Billion or so that has been spent on PPE so far could have been saved. On transparency the UK has fallen well behind international standards in its Covid related procurement. Some countries publish all emergency contracts within 24 hours. UK procurement rules demand publication after 30 days; but many were unpublished after three months, or longer.

Other countries have already investigated their procurement during the first year of the pandemic, pointing out where things could be improved. The UK government has yet to undertake such detailed scrutiny of its performance, so the opportunity for learning and improving is so far being passed up, at unknown cost to the public purse.

The pandemic has highlighted weakness in the UK public sector procurement system, in particular its uncoordinated and fragmented nature, which have been appreciated for years. The need may be for appointing someone with an overarching power to reform public sector procurement, to ensure readiness for another pandemic, which we are assured will arrive one day, as well as to generate efficiencies that might leave us in a better position to both respond to and pay for it.

FAREWELL TO THE “SMASH AND GRAB”

FAREWELL TO THE “SMASH AND GRAB”

For those participants in the Construction Industry who have been living in a cave for the last 20 years, it may come as a surprise that legislation which took effect in 1998 and 2011 introduced a new payment regime with concepts such as “withholding notices” and “payless notices”.

The regime imposed stringent obligations on paying parties to issue within short periods of time after receipt of invoices a notification setting out any sum which was not to be paid and specifying the reasons why.

Many employers and main contractors have continued to be caught out by this payment regime with main contractors and subcontractors taking advantage of any default by the paying party to issue adjudication notices requiring payment due to the absence of the requisite notifications. The Technology and Construction Court have reviewed this previously and come to the conclusion that failure to issue the correct notice is in effect strict liability to make payment.

His Honour Judge Peter Coulson in the recent case of Grove Developments has taken a different stance. He is unable to support the opinion of previous colleagues and has given binding authority that the absence of a payment notice is not fatal and a paying party will be entitled to commence a counter-adjudication seeking a “true value” of the invoice or account in question.

This is not a time for complacency and employers and main contractors must continue to comply with the payment regime.

However, in the event of default this case does allow a paying party to at least issue a counter-adjudication to nullify the effect of the inevitable decision of any first adjudicator being asked to order payment for failure to comply.

To discuss this or any other construction law issues please contact Blake Turner at info@blaketurner.com or on 020 7952 6214.

Read More