11 December 2020

National Medical Stockpile

The ANAO Planning and Governance of COVID-19 Procurements to Increase the National Medical Stockpile report comments 

1. Since its emergence in late 2019, coronavirus disease 2019 (COVID-19) has become a global pandemic that is impacting on human health and national economies. From February 2020 the Australian Government commenced the introduction of a range of policies and measures in response to the emergence of COVID-19 that included: travel restrictions and international border control and quarantine arrangements; delivery of substantial economic stimulus, including financial support for affected individuals, businesses and communities; and support for essential services and procurement of critical medical supplies. 

2. The National Medical Stockpile (NMS) is a reserve of pharmaceuticals, vaccines, antidotes and personal protective equipment (PPE) for use during the national response to a public health emergency that could arise from natural causes or terrorist activities. It is meant to supplement state and territory supplies in a health emergency. Between 3 March and 1 May 2020 $3.23 billion in funding was provided to the Australian Government Department of Health (Health) to procure medical supplies, namely PPE and medical equipment, for the NMS. Procurement activity peaked in April 2020, with the last contract for NMS supplies prior to 31 August 2020 entered into on 14 August 2020. 

3. The Department of Industry, Science, Energy and Resources (DISER) began assisting Health with the COVID-19 NMS procurements on 2 March 2020. On 18 March 2020 the Acting Secretary of Health decided, under paragraph 2.6 of the Commonwealth Procurement Rules (CPRs), that the CPRs would not apply to the COVID-19 NMS procurements. Paragraph 2.6 allows the accountable authority to decide this in a range of circumstances, including to protect human health. 

Rationale for undertaking the audit 

4. The COVID-19 pandemic and the pace and scale of the Australian Government’s response impacts on the risk environment faced by the Australian public sector. This audit is one of five performance audits conducted under phase one of the ANAO’s multi-year strategy that will focus on the effective, efficient, economical and ethical delivery of the Australian Government’s response to the COVID-19 pandemic. 

5. A challenging procurement environment, as well as the decision to not apply the CPRs, created additional risks to the proper use of public resources and achievement of procurement outcomes for the COVID-19 NMS procurements. The Australian Parliament and public require assurance that the procurement requirement has been met through the planning and governance arrangements that Health and DISER established in conducting the procurements. 

Audit objective and criteria 

6. The audit examined whether the COVID-19 NMS procurement requirement was met through effective planning and governance arrangements. 

7. To form a conclusion against the audit objective, the following high level criteria were adopted: Was pre-pandemic procurement planning for the NMS effective? As part of the Australian Government’s COVID-19 response, was the planning and governance of the NMS procurements effective? Was the COVID-19 NMS procurement requirement for PPE and medical equipment met?  


8. The COVID-19 NMS procurement requirement for PPE and medical equipment was met or exceeded. Elements of Health’s procurement planning for the NMS could be improved. 

9. Health’s pre-pandemic procurement planning for the NMS was partially effective. Procurement planning was partially risk-based. Agreement with states and territories about stockpiling responsibilities was not documented and stockpile information was not adequately shared. There were no protocols for emergency procurements. 

10. Health’s and DISER’s NMS procurement planning and governance arrangements in response to the COVID-19 pandemic were effective. Both entities had elements of a plan for meeting the requirement, established fit for purpose governance arrangements and considered risks. 

11. The COVID-19 NMS procurement requirement was not clearly specified for PPE, swabs and COVID-19 tests. Procured quantities for the NMS were approximately aligned with overall national health system demand estimates for all items where demand modelling was undertaken, suggesting the procurement requirement was met or exceeded. 

Supporting findings 

Pre-pandemic procurement planning for the National Medical Stockpile 

12. Health’s procurement planning for the NMS was partially risk-based. A strategic plan for the NMS did not consider procurement in detail, but did establish an overarching framework for key risks to be considered in management decisions, including procurement decisions. A Replenishment Plan set out procurement priorities that were focused on chemical, biological, radiological or nuclear (CBRN) threats and an influenza pandemic and did not address other potential health threats. Procurement planning documents did not provide a risk-based rationale for the quantity of PPE to be procured and held within the NMS and Health did not consider potential risks to PPE supply chain security during an emergency. 

13. NMS procurement planning was not adequately coordinated with the states and territories in light of the objective to ‘supplement’ and work ‘in concert’ with state and territory stockpiles. Health does not have a documented agreement with the states and territories about stockpiling and there was a lack of regular and systematic information sharing about stockpiles with the states and territories. 

14. Strategic planning for the NMS did not adequately prepare for emergency procurements. High level plans for responding to a disease occurrence do not provide specific guidance on conducting emergency NMS procurements and, despite the NMS’s core function as an emergency mechanism, Health had not developed specific protocols for conducting these procurements or for coordinating the multi-jurisdictional procurement response. 

Planning and governance of COVID-19 National Medical Stockpile procurements 

15. Health’s planning for the COVID-19 NMS procurements was fit for purpose. It did not develop a strategic or operational procurement plan but elements of a plan — such as definition of objectives, timeframes and procurement method — were incorporated in documentation. DISER’s operational planning for the procurement activities was also fit for purpose. It did not develop an overarching operational plan for its involvement but taskforces developed, used and shared process maps, templates and checklists to guide procurement activities. 

16. Health’s and DISER’s internal and cross-departmental governance arrangements for the COVID-19 NMS procurements were fit for purpose. Respective roles between Health and DISER were not documented but were broadly understood. Both departments used a flexible taskforce approach to manage the procurements, involved procurement advisory services and actively engaged executive management in decision-making. There was a process for managing conflicts of interest in both departments, however, a requirement for specific conflict of interest declarations for the NMS procurements was introduced late and incompletely adhered to. 

17. Health and DISER assessed and treated risks to the proper use and management of public resources in the COVID-19 NMS procurements and to procurement outcomes. Health did not conduct an overarching assessment of risk in relation to COVID-19 NMS procurement activity and risk treatments for individual procurements were not well documented. Both departments considered procurement risks in a number of their implementation activities. 

18. When conducting the COVID-19 NMS procurements, Health applied the CPRs appropriately. Health officials informed the delegate of the use of paragraph 10.3(b) of the CPRs when seeking approval to commit funds through limited tender and sought the approval of the Acting Secretary of Health to invoke paragraph 2.6 to not apply the CPRs to the procurements. No alternative procurement framework for the COVID-19 NMS procurements was specified by the Acting Secretary. The Acting Secretary revoked the application of paragraph 2.6 when it was no longer necessary. 

Meeting the COVID-19 National Medical Stockpile procurement requirement 

19. In formulating the NMS procurement requirement, demand estimates and supply chain issues were considered by Health and DISER. However, due to the dynamic situation and late and partial information about existing national stocks of PPE, only the ventilator procurement requirement was specified clearly. In the absence of a specified procurement requirement, Health and DISER officials understood the requirement was to procure as much PPE as possible, as quickly as possible. 

20. The NMS procurement requirement for invasive ventilators was exceeded. In the absence of a specific procurement target for PPE and swabs, the ANAO compared procurements of PPE and swabs to national health system demand estimates and found that the NMS procurement requirement for PPE and swabs was met, or exceeded once procurements by other actors including the states and territories are taken into account. The ANAO was unable to determine if the procurement requirement for COVID-19 tests was met due to no specified requirement or comparable demand estimates.