The Australian government knew an obscure online retailer had no experience importing PPE prior to handing it $100m and receiving 46m unusable masks at a critical point during the pandemic, documents show.
A Guardian Australia investigation last year revealed how a virtually unknown company, Australian Business Mobiles, received $100m in PPE contracts in early 2020 despite its prior business largely involving the sale of air fryers, robot vacuum cleaners, bedding and massage guns.
ABM was paid to provide 50m masks and 10m gowns at a critical period in the pandemic. It contracted two companies registered in Cyprus, a low-tax jurisdiction, to secure the PPE from Chinese manufacturers.
The Cyprus-registered companies made about $40m on the deals, according to contracts and other documents seen by Guardian Australia. The Australian Taxation Office is understood to have received documents from a whistleblower, raising questions about the arrangement.
Five of the seven manufacturers that supplied masks to ABM were deemed non-compliant with quality regulations, forcing the government to rule 46m of the 50m masks to be unusable because the various products were delivered to the national medical stockpile on mixed pallets.
Now, internal documents released to Guardian Australia via freedom of information laws show the health department was aware of ABM’s lack of experience in importing PPE early on in the procurement process.
In a briefing email dated 6 April, senior departmental officials were told ABM “does not ordinarily supply PPE”.
“Australian Business Mobiles does not ordinarily supply PPE, however, one of their directors and group chief financial officer has more than 5 years in medical device sales and distribution experience in senior executive positions for companies in Australia and is also experienced in navigating government procurement arrangements,” the email said.
The department was also concerned about ABM’s desire to include a “liability cap” that would limit the company’s exposure if something went wrong with the contracts or PPE.
The department said the inclusion of such a cap in the contract elevated the risk to the government to a rating of “medium”.
Despite the risk, the department noted ABM would still be required to “ensure the surgical masks are compliant with International standards for PPE”.
The documents show the department first emailed ABM on 21 March 2020, after a referral from the then health minister, Greg Hunt.
“Thank you for the recent telephone conversation. As discussed, Minister Hunt provided me details about possible masks and test kits you may have for the National Medical Stockpile,” the department said. “As discussed, all PPE must meet Australian Standards and the team would be able to provide this information to you.”
An unnamed ABM employee replied immediately, urging the department to commit to the deal that night.
“We need to move tonight if possible,” the ABM employee said.
The next day, ABM told the department: “Need order commitment today or can’t guarantee supply”.
An ABM employee, using an email signature reading “persistence beats resistance” then continued to press the department to agree to the deal.
“I really need an update on the contract and deposit please we need to action this today or we may lose the stock. Who can we escalate this to pls?” the ABM employee wrote on 23 March.
The department responded that it was doing due diligence and asked for “details of previous experience in supplying products of this sort”.
The documents show government officials were keenly aware of the potential of being saddled with faulty PPE products. In one email, the department told ABM the delay in committing to the deal was in part motivated by fears over importing non-compliant PPE.
“As you could appreciate the issue of potential non‐compliant product arriving from overseas had made us need to take a pause on mask offerings,” the department wrote.
The ABM employee responded:
“I understand this concern as we have gone through strong [quality assurance] and diligence per order ourselves. Our factories are busy and we need to move quickly now to lock in your order requirements so a contract if possible today is essential if possible.”
The department also asked ABM twice for information about its relevant history of PPE procurement. An ABM employee replied:
“Our experience in import and distribution over those years together with the established supply chain, allowed us to meet the immediate and urgent need of the Australian community in COVID‐19 readiness and management,” the employee said.
“We have been dealing with our existing network of trusted and proven suppliers and factories to source high grade medical and healthcare products. As a result we have brought to the market significant volume of Hand Sanitiser, Surgical Face Masks and COVID‐19 Test kits.”
ABM was approached for comment about the FoI documents.
A spokesperson for Ricky Neumann, an owner of the Cyprus-based companies, was also approached for comment. The spokesperson has previously said the companies had “always complied with our obligations and deny any wrongdoing”.
“All transactions have been properly and professionally documented regardless of their location, in full compliance with local jurisdictions,” the spokesperson said.
Guardian Australia does not suggest any of the parties to the deal have engaged in wrongdoing.
The ABM deals were struck at a time when governments around the world were desperately seeking to secure PPE stocks. Any company that had the means to source such PPE was able to charge high prices.
The federal government used a “human health” exemption to suspend normal competitive procurement rules to award ABM the contracts, as it did with many Covid deals. It conducted a more rapid process of due diligence on potential suppliers using taskforces of health and industry department officials.
ABM was referred to the department after an unsolicited approach was made to Hunt. A spokesperson for Hunt has previously said the minister’s office referred all offers of PPE or other assistance, including those put to him by Labor MPs, to the health department and then had no involvement in any further assessment or buying decisions.
The Australian National Audit Office reviewed PPE procurement in 2020 and found the contracts were generally value for money and departmental procurement planning and governance arrangements were effective.
The ATO declined to comment.
