Mr. Seamus McCarthy:

Go raibh maith agat a Chathaoirligh. As I already introduced the HSE financial statement and the Appropriation Accounts, I will confine my remarks to the findings of the special report. The report before the committee examines from a value-for-money perspective the emergency procurement of ventilators by the Health Service Executive during the early months of the Covid-19 pandemic in 2020.

At this stage, the objective is to identify lessons which may enable our health management systems to achieve better value for money in the context of the next pandemic. The EU's public procurement framework provides for the normal tendering and competition rules to be set aside in situations of genuine urgency such as the Covid-19 emergency. However, good procurement practices can assist in achieving value for money even in emergency situations. These include speedy recognition of the key risks to achieve value for money and the capacity to identify strategies to mitigate those risks. For example, it is important to involve users and specialists in product specification and quantity required; to use established suppliers, forms of contract and contract terms, where possible; and to adhere to established procurement authorisations to ensure that managers with the appropriate knowledge and experience are involved in decision-making.

At the beginning of March 2020, the HSE identified that additional ventilators were urgently needed to deal with the expected surge in demand for critical care. HSE procurement commenced ordering and purchasing ventilators before a target number of devices required was determined. By late March 2020, clinical staff had estimated that an additional 326 ventilators would be needed. This was based on the maximum extent to which critical care capacity could be increased in response to an influx of Covid-19 patients, referred to as surge capacity planning. In the event, the HSE was able to procure 581 additional ventilators from its established suppliers at a cost of €20.5 million. These ventilators met the EU regulatory standards required for such devices.

Over a four-week period spanning March and April 2020, the HSE placed orders for a total of almost 3,500 ventilators at an agreed cost of €129 million. This was almost twice the number of devices which the HSE had been sanctioned to purchase and was over ten times the number of additional ventilators that could be clinically used. Unit prices for the devices were escalating rapidly as many health authorities were scrambling for supplies. Because the HSE had concerns about the capacity of its established suppliers to meet its planned purchasing, it ordered ventilators directly from three manufacturers in China who were identified with the assistance of IDA Ireland. The HSE also placed substantial orders with seven intermediary companies which had little or no experience in the supply of the devices and with which the HSE had not previously done business. The examination found no due diligence checks had been completed on four of the new suppliers while the extent of checks varied for the other six. The checks which were undertaken flagged significant financial and quality risks with using these suppliers but the HSE perceived that its need for ventilators outweighed the risks and made advance payments totalling €81 million to the new suppliers.

Subsequently the HSE cancelled many of the orders which had been placed and received refunds of €50.5 million. No benefit or value has been received by the HSE for expenditure totalling €30.5 million. At the time of reporting, the HSE was continuing to pursue refunds of €22.3 million and regarded €8.1 million as unrecoverable. The latter included payments for devices which were received but were deemed unsuitable for use due to quality issues and risks to patient safety.

It is important that established oversight and accountability arrangements continue to operate to the extent possible where a significant level of unplanned expenditure occurs in a short period. Although the HSE provided weekly reports to the Department of Health of expenditure incurred on its response to the Covid-19 pandemic, the reports did not include information on the advance payments which had been made. This was seriously misleading and negated the effectiveness of the Department's oversight of the level of expenditure being incurred.

Members will recall that the HSE undertook emergency procurement of substantial quantities of personal protective equipment, PPE, around the same time. I drew attention in the audit certificates for the 2020 and 2021 HSE annual financial statements to write-offs of stocks of PPE and hand gel totalling almost €483 million due to unsuitability of purchased items, obsolescence or price fluctuations.

In conclusion, I acknowledge that procurement in an emergency situation is challenging and is unlikely to result in optimum value-for-money outcomes. However, it is important to learn the lessons of experience and to improve processes where we can, so that better outcomes can be achieved in the use of public resources in similar future circumstances. Gabhaim buíochas leis an gCathaoirleach.