A Department of Health audit has found the Care Quality Commission made ‘procedural errors’ in relation to a decision to award two contracts to the consultancy firm McKinsey & Co, with a total value of nearly £1.5m.

  • Government audit finds CQC made “procedural errors” awarding two contracts to McKinsey worth nearly £1.5m
  • Investigation commissioned in response to disclosure made to government by CQC employee
  • Audit does not uphold claims former chair David Prior engaged in “bullying” in relation to procurement, or that chief executive David Behan asked staff to delete email

The audit, commissioned by the DH in relation to allegations made by a CQC employee, found the regulator fell “short of the procurement requirements placed on a public body”.

However it dismissed allegations that the then CQC chair, David Prior, who was appointed a government minister last month, had engaged in “bullying or harassment” in relation to the procurement or that the CQC had entered into a “verbal contract” prior to the tenders.

It also did not uphold allegations that the CQC chief executive, David Behan, had asked his executive team to delete an email sent by him.

It found no evidence of inappropriate behaviour on the part of McKinsey and said no allegations had been made in relation to their conduct.

The audit was commissioned following a disclosure to the DH made by a CQC employee in April 2014 concerning events in February 2013.

In February 2013 the CQC was rapidly trying to overhaul its structures and approach to inspection in response to the Francis report, which found a failure of regulation had contributed to the care failures at Mid Staffordshire Foundation Trust.

As part of this overhaul, the CQC launched two tenders to review its organisational structures and develop a risk based intelligence approach.

The disclosure alleged the CQC breached procurement rules during the tenders, claiming attempts had been made to “bully and intimidate staff to select McKinsey”, and that the firm had been verbally awarded the contract in advance of the procurement and given preferential treatment.

Mr Behan and Mr Prior met exclusively with McKinsey in February 2013 in advance of the tenders being issued.

The audit was also passed a copy of an email, sent by Lucy Robbins, the then head of HR services, dated the day after a procurement panel met to make a decision about the organisational structures tender.

The email suggested Mr Prior had inappropriately tried to influence the panel’s deliberations.

It stated Jill Finney, the CQC’s then deputy chief executive, had asked panel members, upon the request of Mr Prior, if they “were clear as to what was being required of them”.

It continued: “It was clear from the body language and the tone of the conversation that David Prior was asking us potentially to choose McKinsey as the preferred supplier.”

Ms Finney told the audit team that Mr Prior had told her: “To go into the room and advise the panel that the answer had to be McKinsey.”

However Mr Prior told auditors he could not recollect the events associated with Ms Finney’s interruption of the panel.

The report says that because of the differing accounts, “we cannot come to a firm conclusion about what was said at this visit”.

While the panel scored McKinsey as the lowest of the three bidders, the procurement process was changed following this evaluation to include a second stage, where bidders were invited to present to a CQC panel with a changed composition.

McKinsey was progressed through to this stage, and following the presentations was awarded the contract, with its assessment score increasing by 93 per cent and the other bidder’s score decreasing by 29 per cent.

The auditors said it was unclear how the scores between the two panels should differ so markedly because of “inadequacies in the audit trail”. 

The report concluded there was no evidence that the changes to how the tender was evaluated “was motivated by improper financial gain, or any motive other than a belief that McKinsey would be the best choice at a time when urgent action was seen as important”.

However it said the decision to meet exclusively with McKinsey at the pre-tender stage resulted in at “least a perceived advantage over the other tenderers for both procurements”, and the decision to have a second panel represented “preferential treatment”.

It also said the interruption of the first panel was “inappropriate procurement practice”.

The disclosure to the DH also alleged the CQC executive team were told by Mr Behan to delete an email sent in February about McKinsey because the regulator had to be “seen to be following a procurement process”.

The audit said that Mr Behan “strongly refuted this allegation”. Of seven individuals interviewed by the auditors, one did not support the allegation, four could not remember such an incident, but two did support the allegation.

The report says that in light of this “conflict of evidence”, the allegation should not be upheld.

The report makes a number of recommendations to the CQC, including improving procurement training and a review of practices and procedures.

Following the report, Una O’Brien, the DH’s permanent secretary, sent a letter to Mr Behan.

In the letter she said that while the CQC had made “substantial progress in transforming itself” under his leadership, she was concerned by the audit’s findings, “as they indicated that on this occasion CQC fell short of the procurement requirements placed on a public body”.

In a statement on its website, the CQC said it accepted the report’s findings and recommendations.

Mr Behan said he regretted “that procedural errors were made in these important procurement exercises carried out as we sought to make quick and fundamental changes to the way we operated as a regulator”.

He said the CQC would use this report to “strengthen [our processes] further and to continue to improve”.

McKinsey declined to comment.