Australian Government Faces Controversy Over Unusable Face Masks in COVID Contracts

The Australian government is under scrutiny after it was discovered that nearly 46 million face masks purchased as part of COVID contracts worth $100 million were deemed unusable. The contracts were awarded to Australian Business Mobiles NSW (ABM), a retailer whose expertise was primarily in selling household goods. ABM, in turn, sub-contracted the supply of the personal protective equipment (PPE) to two companies registered in Cyprus, which made around $40 million on the deals.

A whistleblower raised concerns about the arrangement in July 2020, prompting questions about tax arrangements as well. Five out of the seven manufacturers that supplied masks to ABM were deemed non-compliant with quality regulations, rendering the majority of the masks unusable. The government has not taken steps to recover the money or replace the masks, but is exploring potential avenues to do so.

The Neumann brothers, who owned the Cyprus-registered companies involved in the PPE supply, are also linked to controversial PPE contracts in the UK. The deals in the UK were similarly troublesome, with the Department of Health and Social Care rejecting an entire consignment of surgical gowns under one contract. The UK government is now seeking to recover the funds paid for those contracts.

The ABM case raises serious questions about the Australian government's due diligence processes and the prices agreed upon for PPE procurement during the early stages of the pandemic. The contracts were awarded under an exemption to normal competitive procurement rules, allowing for expedited sourcing of PPE to protect public health.

The Australian National Audit Office reviewed PPE procurement in 2020 and deemed it generally value for money. However, the current controversy highlights the need for stricter due diligence measures when entering into significant contracts for essential medical supplies.

The government's inquiry into Australia's COVID-19 response will examine the procurement of PPE. The Australian Taxation Office has not confirmed whether it is investigating the whistleblower's concerns, emphasizing the seriousness with which it treats whistleblower tip-offs.