Report completed on the National Emergency Supply Agency’s activities regarding the procurement of protective equipment
Last week saw a whirlwind of publicity around the National Emergency Supply Agency’s (NESA) protective equipment purchases and the related procurement processes. On Thursday 9 April, the Ministry of Economic Affairs and Employment asked the NESA to examine the equipment acquisitions that drew public attention. The NESA Board of Directors commissioned KPMG Oy Ab to conduct an external investigation into the procurement of protective equipment and has also investigated the matter internally. The report was submitted to the Ministry of Economic Affairs and Employment, and it will be published on the NESA website.
The coronavirus pandemic has pushed the demand for protective equipment to unprecedented levels. Practically every single country is making efforts to acquire as much as they can as quickly as possible. During the exceptional circumstances caused by the coronavirus, the NESA has accepted new procurement duties outside the organisation’s normal purview. Over the course of the past few weeks, the NESA has strived to exhaust every possible option to procure the requisite quantities of protective equipment, based on the support requests issued by the Ministry of Social Affairs and Health.
Results of the investigation
The requests for the procurement of protective equipment have involved exceptionally large quantities and tight schedules. The investigation shows that the NESA did not have the operational capabilities to conduct the equipment procurements in accordance with the support requests received from the ministries. In its efforts to fulfil the support requests, the acting management of the NESA substantially and repeatedly deviated from the Act on Public Procurement and Concession Contracts and the instructions specified in the organisation’s own rules of procedure and finance. The NESA Board was not aware of the publicised protective equipment purchases until their implementation.
The report also states that the suppliers of the protective equipment were not vetted to the necessary extent.
In addition to this swift external investigation, a more extensive examination of the events will also be commissioned.
Measures taken by the NESA to rectify the findings and deficiencies
The NESA has been quick to take measures to rectify the operational shortcomings revealed by the investigation. Its procurement organisation was bolstered even before the publicised purchases with experts from the Ministry of Economic Affairs and Employment, STUK and Hansel, and through internal transfers. The NESA has also leveraged third-party expertise as much as necessary under the extraordinary circumstances.
The NESA will be hiring a full-time internal audit manager from an external service provider to serve in its ranks until further notice. The internal audit manager will support the CEO in overseeing the operations and developing risk management procedures under the emergency conditions.
In its meeting on 11 April 2020, the NESA Board of Directors decided to relieve management team members Asko Harjula and Jyrki Hakola from their duties for the time being.
“During the coronavirus emergency, it is essential to be able to react to the changing situation swiftly and, where necessary, accept tasks that are normally outside the organisation’s purview. The NESA Board decided in its meeting on 14 April 2020 to confirm the specified procurement instructions for the coronavirus crisis. In these emergency conditions involving elevated risks, more attention than usual must be paid to the appropriate management of procurement risks,” says Chair of the Board of Directors Ilona Lundström.
“The emergency conditions place an exceptional amount of pressure on all social bodies. The NESA personnel have primarily handled their duties well and will be capable of carrying out the special tasks assigned to them, once the measures focusing on managing risks and bolstering expertise have been completed. We are currently doing everything we can to restore the Finnish public’s trust in the National Emergency Supply Agency and, under these difficult market conditions, acquire the protective items that are critically important for mitigating the epidemic and protecting the care staff,” says the NESA’s acting CEO Janne Känkänen.
Further measures concerning the publicised purchases
The public eye was drawn to the acquisitions completed based on the support requests of the Ministry of Social Affairs and Health. As was previously announced, the NESA has entered into agreements with LDN Legal Partners Ltd and The Look Medical Care Oü in order to procure protective equipment. The purchase prices were €4,980,000 for LDN Legal Partners Ltd, which has been paid in full, and €5,310,000 for The Look Medical Care Oü, of which €2,655,000 has currently been paid. The paid purchase price has been frozen. According to the report received by the NESA Board, the ones listed above are the only trade transactions with the parties in question.
Of the products procured from LDN Legal Partners Ltd, a portion equal to a third of the total value has been delivered. Based on the report received by the Board, there appears to have been a qualitative and quantitative discrepancy in the delivery that arrived in Helsinki on 7 April 2020. The NESA has taken measures to partially rescind the trade agreement and is now demanding a refund for the undelivered goods and a price reduction for the erroneous items. Furthermore, the NESA has requested the police to investigate the matter.
The report received by the Board indicates that the protective equipment delivered did not meet the specifications of the Ministry of Social Affairs and Health’s support request and the NESA’s order. The respirators that arrived in Finland did not comply with the standards applicable to protective equipment intended for hospital use. However, they are viable for care units and home services, which are currently using them.
The NESA has presented a notice of rescission to The Look Medical Care Oü with regard to the purchase and demanded the company to refund the paid portion of the purchase price. The justification is a foreseeable breach of contract based on suspected money laundering, freezing of the payment and the fact that the company has marketed corresponding products using a falsified product certificate. Protective equipment has not been delivered to Finland based on the agreement. The company has denied the validity of the grounds for rescission, and the matter remains contested. In addition to this, the company has since claimed that the aforementioned agreement with LDN Legal Partners Ltd was also made with The Look Medical Care Oü. The matter is also contested in this regard.
The Board of Directors of the NESA states that, in accordance with the Government Decree on the National Emergency Supply Agency (455/2008), decisions on procurements, sales transactions, investments and other financial commitments are made by the CEO, within the framework of the organisation’s budget and action plan. Therefore, it has been possible for the NESA’s acting management to lawfully conduct the purchases without the involvement of the NESA Board.
Acting CEO (operational activities)
Tel. +358 (0)50 396 4990
Chair of the NESA Board of Directors (Board activities)
Tel. +358 (0)29 504 7186
Tel. +358 (0)29 505 1017
Release published in Finnish on 14 April 2020 at 7:30 pm