HSE’s loss of over €370m on buying personal protective equipment

The Health Service Executive will report a “loss” of more than €370 million arising from the purchase of personal protective equipment (PPE) in the early weeks and months of the coronavirus pandemic.

The prevailing market price paid by the HSE for the equipment last year is now considered to be €310 million more than current value of the stock.Moreover, the HSE is to make provision of €64 million in its accounts for the year arising from the "anticipated obsolescence" of protective suits which it bought last year. It has written down the value of these suits on the basis that clinical demand indicates it is carrying up to 41 years' supply, a new report says.

The HSE said on Thursday the protective suits were purchased at a time when the more clinically appropriate gowns were not available.

“As the appropriate gowns became available their usage has reduced, requiring impairment.”

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A new audit report by consultants KPMG, which was commissioned by the HSE on foot of a request from Minister for Health Stephen Donnelly, says it spent €920 million on PPE last year compared to about €15 million in normal circumstances.

It says as of December 2020 PPE stock was valued at €557million but that an impairment of 67 per cent on the original cost of PPE in stock had been booked, leading to a revised value of €182million.

The report says at the start of the Covid-19 pandemic in early 2020 a hyper-competitive “sellers’ market” for PPE developed internationally as countries competed for stocks.

It says the HSE secured an unprecedented volume of PPE in the early part of 2020to protect healthcare staff. But on occasion it was forced to accept high prices, and in some cases, higher- than- ideal order volumes.

What about due diligence?

The report finds that in operating at pace, aspects of procurement activities deviated from traditional policy such as the extent of due diligence carried out with new vendors.

The auditors examined 40 purchase orders and found 21 were not approved in line with requirements. It says 11 of these related to purchases of more than €10 million which should have been approved by the HSE chief executive.

The report says that of 150 vendors from which PPE was procured during 2020, 115 were “newly onboarded vendors which had not previously been used by the HSE”.

Management in some cases were unable to complete full due diligence on all vendors before making advance payments in the far east. It says a "best efforts basis" was taken which included obtaining confirmations from Ulster Bank through its parent company that the vendors existed and verification that the bank details appeared legitimate.

Following a limited benchmarking exercise by the auditors the report says the HSE paid more than the NHS in the UK and Australian Health Service for comparable items of PPE with the exception of masks where the HSE paid about 2 per cent less per unit than its Australian counterparts.

It says the HSE on average paid 163 per cent more than the NHS for masks.