Health Secretary Matt Hancock is facing judicial review proceedings over the way deals to supply masks, gowns, and gloves were handed to small business PestFix and hedge fund Ayanda Capital in April last year.
Both were put into a High Priority Lane – dubbed a ‘VIP Lane’ – because they had been referred the PPE procurement team by someone within government.
The Good Law Project and EveryDoctor Ltd, which have brought legal proceedings, say the system was unlawful as companies with political connections were fast-tracked to deals while other firms had to wait in a queue.
Michael Bowsher QC, representing the Health Secretary, said “noise in the system” was identified as a problem for the procurement team, as suppliers and their political connections repeatedly requested updates on PPE deals in the works.
He said the establishment of a ‘VIP Team’, as well as a dedicated email inbox for MPs to ask questions, helped the PPE procurement team to “focus on their essential task”.
“The initial rationale…was that offers which had been referred by a senior referrer were going to be different because those referrers would want updates. That was going to create its own separate problem”, he said. “That needed to be addressed.”
In a message to colleagues which has been made public through the court process, Max Cairnduff, a senior procurement manager in the Cabinet Office, identified “unnecessary noise in the system” when justifying the VIP Lane.
“The ‘noise problem’…was inadvertent”, said Mr Bowsher. “It wasn’t that senior referrers wanted to create a problem, they thought they were helping.
“There were a lot of offers and it was a real problem of managing their well-meaning and much appreciated support.”
He added: “Maybe one could have come up with a better solution, but this was a problem and a problem that needed solving.”
PestFix, Ayanda, and Clandeboye – which was not in the VIP Lane – are the focus of the legal challenge, having received a total of seven contracts worth nearly £700 million.
It has been alleged that fast-tracking companies with connections to contracts was unlawful, amounting to a decision-making process which was “irrational”.
But Mr Bowsher argued: “What the high-priority lane was able to do was enable the process to be run in a way to enable other teams to have the noise taken out of their hair, and enable the much smaller team to be able to deal with it, all knowing what’s going on, and manage this noise problem.
“The ultimate aim was the smooth running of the PPE Cell.”
He accepted the procurement process in the first weeks of the pandemic “was not perfect”, and the due diligence on companies would be done differently today. But he argued it was justified in the “stressful” circumstances when Covid-19 first hit the UK, and PPE was in desperately short supply.
“It’s clear it is a perfectly reasonable and rational approach”, he said.
PestFix was referred into the VIP Lane because an ex-director of the company was an “old school friend” of the father-in-law of Steve Oldfield, the chief commercial officer at the DHSC.
Alan Bates, representing PestFix, said the company was unaware of any preferential treatment when it was given contracts to supply PPE.
“PestFix did not know anything about the so-called VIP lane until it read about it in the National Audit Office’s report and during these proceedings”, he said.
“It did not know it had been allocated to any such lane, let alone asking to be allocated to it.”
Mr Bates said the company responded to the Government’s request for help because it had experience in sourcing PPE and had contacts in China, with people there who could speak Chinese.
“It was that happy combination that made PestFix feel that it was well placed to help,” he added.
The court has seen an email suggesting that an agent for PestFix was “bribing” officials in China while trying to secure surgical gowns. Mr Bates said the airing of the allegation by the Good Law project was a “misuse of the court process”, adding: “The allegation that it paid bribes, its agents or anyone on its behalf paid bribes, is strongly denied.”
Mrs Justice O’Farrell is now expected to deliver her ruling at a later date.