Carthy leads Public Accounts Committee engagement on HSE procurement – Matt Carthy TD
The Dáil’s Public Accounts Committee last week engaged with senior HSE representatives regarding deficiencies in procurement practices, particularly during the Covid pandemic. In his interaction local Sinn Féin TD Matt Carthy focused his questions on the procurement of defective ventilators for which an internal HSE report had raised concerns in advance of the purchase.
Deputy Carthy had the role of lead questioner for the Public Accounts hearing which largely focused on pandemic related procurement of defective equipment, rising waiting lists, and the recent resignations from the Sláintecare Implementation Advisory Council.
A transcript of Deputy Carthy’s engagement with the HSE officials follows:
Deputy Matt Carthy:
“I want to be associated with this committee’s thanks to the staff of the HSE for their work on our behalf throughout the Covid emergency. I am going to deal with the issue of procurement but, before I do, I acknowledge that every member of this committee and every member of the public recognises that Covid presented unique challenges. Normal expectations did not apply but that did not mitigate the need for basic due diligence to be in place.
“This committee has asked on a number of occasions when the review of the 2019 procurement will take place and I ask that question again of Mr. Reid.”
Mr. Paul Reid:
“I thank Deputy Carthy for his comments, which we will relay to the staff and acknowledge in the context of procurement in general. We had been progressing the 2019 review in the early stages of 2020. Subsequently, major elements of our resources moved from procurement to Covid. Many resources were redeployed to support our front-line activities against Covid. Our assessment during 2020 was that we would do the assessment on the basis of the figures for 2020. We have done that assessment and it has been provided in the full report. We do not have the detail for 2019. We have made the pragmatic judgment that the best data available to be most efficient were for 2020. That detail has been provided to the committee.”
Matt Carthy: “Do I take it from that reply that a review of 2019 procurement will not be carried out?”
Paul Reid: “I will let one of my colleagues comment on that but, from my perspective that is the case. We want to focus on the detailed findings of the thorough and diligent assessment of 2020. That informs us better in terms of the big, key challenges we have in procurement. I acknowledge those challenges. There are legacy challenges that we are going to address through a range of initiatives. Our response will be based on the full detail of our assessment for 2020.”
Matt Carthy: “Does Mr. Reid understand that 2019 is a good base year because it was a year that did not involve the Covid emergency? That review would, therefore, be important to be able to assess the real lie of the land.”
Paul Reid: “I will make the point that we have always done reviews of our procurement process in any given year. We will continue to do so. The detailed assessment of 2020 that was done was intended to get a better and deeper insight across all services and divisions within the HSE. The assessment has given us those details. In terms of baseline activity, we have extracted great Covid-related detail. We can look at our baseline activity for 2020. I will ask my colleague, Mr. Mulvany, the chief financial officer, to make a brief comment on that matter.”
Stephen Mulvany: “The 2019 exercise we started would have been the first time we had done such extensive sampling of the entire procurement process across the HSE above the figure of €25,000. As the CEO has indicated, we could not finish that because of Covid. We did it for 2020. We acknowledge the point made by the Deputy in terms of Covid versus non-Covid. In the analysis for 2020, we have separated out Covid versus non-Covid and have provided those figures, so we would not disagree with the Comptroller and Auditor General’s assessment that the overall figure of 10% is unlikely to be representative overall. We have already started the work and planning around the 2021 exercise. Our sense is that we need to focus on that.
“To be clear, going back to 2019 would not be practical but we are also very clear and upfront. We have lost ground due to Covid. We have fewer contracts under management and spend under cover now because of Covid and Brexit before it because we diverted our procurement staff as we then did. We see little value in going back to 2019 because we know we have lost ground since then. The focus is on what we are doing now, which is planning the 2021 exercise, which we will seek to do in more detail. As the Comptroller and Auditor General pointed out, we covered €25,000 and above, which is the norm in the public sector. We will go below €25,000 in what we are doing for 2021. It does not make sense to us to divert the limited resources we have to look at 2019. The aim is to move forward, do 2021 next and build on what we have done so far.”
Matt Carthy: “To be clear, we will never have a review of the procurement processes in the last full year pre-Covid. I know an €82 million computerised procurement system is being built. Do we have a timeframe for when this will be implemented across the entire HSE?”
Stephen Mulvany: “The integrated financial management system, IFMS, project covers financial management and procurement. As the Deputy noted, it is an €82 million capital approval. The briefing we provided indicates that the current plan is to have 80% of the public healthcare system, including the larger voluntaries, covered by quarter one of 2025. We can deal with more questions later but that is the intent.”
Matt Carthy: “Does Mr. Mulvany expect it to be within that budget of €82 million?”
Stephen Mulvany: “We do. We have spent about 20% of that budget so we are at about €15 million or €16 million of the €82 million. At this point, I am not flagging any threat to that overall budget.”
Matt Carthy: “In the 2020 procurement review, the HSE reported 91% procurement compliance but of course that encompassed the emergency procurement measures that were allowable as a result of the pandemic. What proportion of that 91% fell under emergency measures?”
Stephen Mulvany: “If we look at the sample exercise, and it is probably wrong to call it a sample because it was a huge exercise that covered €1.9 billion, we can see that within that, €1.3 billion involved Covid. If we ignore that, we can see €635 million involved non-Covid – what we call core. Of that, 82% was compliant. In other words, it was either competitive or it was compliant without the requirement to be competitive. Therefore, 18% was non-compliant.”
Matt Carthy: “We are told that the Minister for Public Expenditure and Reform raised concerns that some €1.25 billion that was spent by the HSE and had not been competitively procured could expose the State to legal action because it fell short of what was required under domestic and EU law. Do we have any sense of how many legal challenges are ongoing with regard to our procurement process?”
Stephen Mulvany: “That reference came from a meeting of the public sector interim procurement board, of which the HSE’s head of procurement is a member. It came about as a result of us presenting the information, a summary of which I have given the Deputy there. As far as I am aware, although Mr. Swords can tell me more, one company is taking legal action against the HSE and there are a number in respect of which we are involved in or considering legal action concerning a variety of items, some of which have already been referenced in the opening statements. Only one company that I am aware of has taken legal action against the HSE.”
Matt Carthy: “I will go back to Mr. Reid. There is a distinction then – we can hear this in the CFO’s responses – between being non-compliant and being non-competitive, and that presents a number of particular challenges. When you are in a process that is non-competitive, I think there is a need for additional diligence, even when we are in the midst of an emergency. We know that the HSE paid €81 million for 2,200 ventilators. We are told 1,735 of those were never delivered and none of them was ever used. Has the HSE managed to recoup any of that €81 million that we paid?”
Paul Reid: “I will make a broad comment first on procurement more widely and the issues around compliant versus non-compliant and competitive versus non-competitive. We acknowledge we have significant work to do on our procurement processes overall, and there has been a very significant commitment by the executive team on our board to set out a range of actions, which we have covered in the report to the Committee of Public Accounts so I will not list them off, but I want to acknowledge that upfront. It is something we are giving a lot of attention to and something the board is very focused on.
“Specifically regarding the ventilators and recovery of cost, I will give a little context from my perspective first. I know the Deputy has covered this in his opening comments, but it is just to put into context what we were seeking, the volume we were seeking and the context in which we had to commit that spend. We all know that at the start of this we were dealing with harrowing images from across the world that we were all seeing on our screens. From an ICU perspective we do not benchmark strongly at all by international comparisons with our ICU facility. We know about the early forecasts, and I have covered in the opening statement the early predictions that if certain public health actions were not taken, there would be up to 40,000 deaths, potentially. We knew that was the context we were entering into. Specifically regarding ventilators, what was happening at that time was—–”
Matt Carthy: “With due respect, I asked Mr. Reid whether or not any of that €81 million has been recouped. We accept the context.”
Paul Reid: “Okay. I appreciate that. Specifically regarding the €81 million spend, we can give the Deputy the full breakdown. The CFO will give it to him. A significant part of that has been recouped so far. We have covered the outstanding sum of about €42 million in the AFS. Since then it has decreased to just about €35 million. We are expecting imminently recovery of another €11 million; we expect to get that very shortly. That is the current status of that. Some other costs expended had been recouped as part of PPE supplies instead, but I will get the CFO to give the Deputy a full breakdown of where that stands right now. We are not letting up on some of this spend.”
Stephen Mulvany: “As the Deputy said, to the non-traditional suppliers we paid out €81 million. As was said in the opening statements, by the time of the report in the AFS there was €42 million of that for which we had not got value. That means there was €39 million for which we had at that stage got value. We had got either ICU machines, refunds or conversions to other materials such as PPE, so €42 million was the piece we were working on at that point, which was back in May. Today the figure is just under €35 million, so we have got value for some of the difference. As the CEO said, there is a further €11 million or €12 million which is imminently going to arrive in terms of value. The piece of the €81 million for which we have not got value, to answer the Deputy’s question, very shortly will be €23 million, and we are pursuing all avenues to get that.”
Matt Carthy: “That was a very long time to get that specific answer, and I am trying to be specific in my questions. Were any of the companies involved used by the HSE before or engaged with before? Is this the first—–”
Stephen Mulvany: “None of the companies in respect of which we had to pursue refunds was used by the HSE before but, separately, we had ordered 581 machines at a cost of €22 million from our regular suppliers. We had fully exhausted that before we went to the non-traditional suppliers.”
Matt Carthy: “There is an internal HSE document that identified risks with one particular vendor. In fact, of the nine parameters, three were deemed high-risk and there was a note in the document – this is prior to purchase – that there was a risk that expenditure of this magnitude would be wasted and that there were concerns about the quality of the machines. Did the HSE go to the effort of compiling a report on a potential vendor and then actually proceed with the sale despite those concerns being raised?”
Stephen Mulvany: “I do not have the specific detail of that case, but I will be clear.
“We are in the business of managing risks. When it came to procurement of ventilators, the biggest risk was that of not having sufficient ventilators. It is one thing to talk about what the criteria are today but back then, looking at what we potentially faced, we and every country in the world were seeking to secure ventilators. At times we had to order more in quantities—”
Matt Carthy: “Are any of the HSE guests aware of that case, involving Roqu? That internal document was widely reported. Is anybody aware of the specifics?”
John Swords: “That is subject to legal process. We are at risk if we disclose details of that. This is unfortunate. I cannot comment.”
Matt Carthy: “Okay. I move on to hand sanitisers. We know the case of Viropro. We know there were some basic red flags. The material safety data sheet the HSE requested and received did not match what was on the Department of Agriculture, Food and the Marine’s biological register. In another case, the vendor had not provided a number of the product on the register; rather, it gave an application number. In these instances, were companies being asked to provide documentation but nobody was checking the basis of the documentation that was provided?”
John Swords: “We checked the documentation and the product met the world health standards. The area we are talking about is where we had them in quarantine and were waiting for a PCS document or clearance from the Department of Agriculture, Food and the Marine. That was subject to discussions between the company and the Department. We await the outcome. In the interim period, we have quarantined those products. They will be in use and, bearing in mind the context we were working in, we took in the products to our national standards. The Department of Agriculture, Food and the Marine has a requirement there. The company did not have that so we placed them in quarantine. We await the outcome of those discussions.”
Matt Carthy: “The HSE had already purchased the—–”
John Swords: “We had.”
Matt Carthy: “I go back to the previous point where it was mentioned we could not get a response with regard to Roqu because of legal issues. No legal papers have been served yet. Is that correct?”
Stephen Mulvany: “We are not in a position to discuss specific suppliers because of the commercial arrangements we are trying to progress in the interests of protecting the State. We are not going to be able to—–”
Matt Carthy: “Is it commercial or legal?”
Stephen Mulvany: “The two are often connected but we would not want to indicate which end of the spectrum it will end up on. Where we can, we are seeking to resolve things amicably by negotiation with the suppliers, many of which were under pressure. However, we also have to be robust in the interests of the public purse. Beyond that, it would—–”
Matt Carthy: “To clarify what my question was, I outlined what the HSE document identified with regard to this vendor and asked whether the HSE was aware of the internal document outlining that there was a risk that an expenditure of this magnitude would be wasted but continued with the purchase nevertheless. I do not think that would interfere would legal or commercial complexities.”
Stephen Mulvany: “We will have to agree to disagree.”
Matt Carthy: “So the witnesses will not answer my question.”
Stephen Mulvany: “We are not in a position to discuss an individual suppler because we are trying to reduce any amount of money the HSE has not yet got value for. We believe that would put that in jeopardy. We are happy to give a full account in due course.”
Paul Reid: “It was said the committee fully understands the context but it is really important that this is set straight. I saw my procurement team working 24-7 for months on end. We took a risk-based approach. This was not a normal market or environment. I said to the Deputy and other Oireachtas Members at the time that there was no doubt we would get 70% of the decisions right and 30% of them we would do differently again or even get wrong. I said I would not stand for any of our teams not taking rapid action during that period on a risk-based approach. There is no doubt there are some things we would do differently again but we did not shirk from taking action on procurement to protect lives, the public and patients.”