Whose fault for PPE: privatisation or centralisation?
A recent report from the anti-privatisation group We Own It, 'Privatised and Unprepared: The NHS Supply Chain', claims that the privatisation of the procurement of personal protective equipment (PPE) hampered the National Health Service's response to the ongoing coronavirus pandemic. Former Labour leader Jeremy Corbyn has retweeted the report, as well as the left-wing thinktank New Economics Foundation and others.
On closer inspection, the report suggests that centralised procurement by the public sector failed the NHS far more than private contractors.
The report recognises that NHS Supply Chain, the publicly-owned management body in charge of procurement in England and Wales, outsources procurement to an oligopoly of private providers. (Though it awards five of the eleven contracts to British public sector bodies.) The contracts are often not transparent, and the providers routinely fail to meet adequate standards.
In an appendix, the report devotes ten pages to listing the failures of the private contractors. (However, few of the listed failings relate to the NHS, let alone PPE procurement contracts. They often involve other arms of the contractor, such as Deloitte's role in auditing major banks immediately before the financial crisis.)
The report then notes the severe shortages of PPE that the NHS faced during the pandemic. So the report concludes that we should bring procurement back into public hands.
What the report doesn't prove is that private contractors were responsible for PPE shortages during the pandemic. It does show that the Department of Health and Social Care (DHSC) has been.
A DHSC spokesperson said that the report "appears" to be based on "a number of fundamental misunderstandings". Perhaps it overestimated how much the NHS used private contractors to supply PPE during the pandemic, which it didn't assess. Requests for new suppliers were issued centrally by the DHSC, which contacted suppliers.
The report acknowledges that the DHSC took several decisions which hampered PPE procurement. For example, in the early days of the virus, it repeatedly focussed on reducing PPE demand rather than increasing supply, endangering the lives of doctors and nurses exposed to the virus:
The DHSC also missed emails inviting it to participate in the European Union's scheme for PPE procurement. Worse, the DHSC ordered local trusts to use centralised procurement, stopping them from sourcing PPE from local supply chains:
NHS Supply Chain usually delivers to 230 hospitals; it now delivers to 58,000 settings.
Overwhelmed, the DHSC turned down and replied late to private sector offers to produce PPE, relying on larger contracts that overpromised, such as the infamous Turkish plane. Last month, after over 8,000 offers of support, the government announced that it was working with just 159 British manufacturers to increase PPE supply.
The fatal decision to centralise procurement was not taken by private contractors: it was taken by the public sector. As the report shows, the DHSC failed to ramp up PPE procurement.
Given these public sector failings, and the lack of a proven link to private contractors, how does it follow that procurement should be placed into public control, as the report recommends?
Elsewhere, the report condemns profiteering from private companies. But the pursuit of profit encourages businesses to adapt to produce PPE, bringing prices down and eliminating shortages. Italy imposed a price on 50 cents on masks and ended up with shortages.
The report also criticises the culture of 'just-in-time production' in manufacturing. At the same time, it commends how so many businesses, factories, universities, schools and other organisations adapted to produce PPE, providing adjustable, dynamic supply chains. Why can't just-in-time production work for healthcare?
Indeed, the report falls into the trap of exaggerating the importance of preparing for pandemics. Preparation is only optimal up to a certain point. It's a waste of money to have 20,000 ventilators and millions of masks going spare all the time when the money is needed elsewhere - whether that's tackling homelessness, education, or just in the taxpayer's personal wallet. If we can adapt quickly to a pandemic and escalate supply when we need it - 'just-in-time', so to speak - that's better than squandering money where it isn't needed.
Did Public Health England - responsible for public health preparation - prepare? Not well enough. Did we adapt? Not well enough. Centralised procurement by the public sector stopped us doing so, not just on PPE but also testing.
Finally, almost risibly the report urges the government to 'try to predict future pandemics'. What? How are we meant to do that? Unlike what the report implies, even Exercise Cygnus didn't think about supply chain failures in PPE.
There are some critical points that the report raises. For instance, if outsourcing is to continue, it should certainly be less oligopolistic, more transparent, better value for money, and more accommodating for smaller firms and new competitors.
Additionally, as a recent report from NHS local trusts pleaded, hospitals should culture their newfound partnerships with local businesses and communities.
But We Own It's report sidelines these considerations in favour of an ideological conclusion that doesn't follow from its contents.
Bashing the private sector might be good fun, but the private sector has performed remarkably better than centralised public agencies throughout this crisis. The real debate from this pandemic should be centralised v decentralised, more than public v private.
Matteo Baccaglini is President of the Oxford Hayek Society.
The opinions expressed in this article are those of the author, and not necessarily of the Oxford Hayek Society.