Covid a cash cow worth $10bn in business deals

The Morrison government’s pandemic extravaganza has seen Australian companies fill their boots with lucrative contracts.

Scott Morrison meets CSL staff working on the COVID vaccine while he toured the company's facility in Melbourne in March. Picture: Andrew Henshaw

COVID-19 has been a revenue bonanza for companies that helped to save lives, propped up government services or clipped tickets along Josh Frydenberg’s emergency ramp to recovery.

From big pharma and budding medtechs, to providers of surge workforces, IT support, customer services, coronavirus testing and a reserve army of bureaucratic brain power, corporate Australia has won in excess of $10bn in pandemic-related contracts.

By last August, the Department of Health had committed to more than $3bn in contracts to replenish the National Medical Stockpile, including face masks, hand sanitiser, test kits, gowns, gloves and ventilators.

According to the Australian National Audit Office, Aspen Medical secured more than $1bn in procurements for the stockpile.

The Canberra-based crisis medical provider has turned pandemic into profit, winning $1.3bn in COVID-related contracts, while its global workforce has grown from fewer than 700 to around 3500.

In the year to June, Aspen’s revenue multiplied by more than seven times on the previous year to $563m. From a loss of $6m in the 2019 financial year, it posted an after-tax profit of $105m and paid $23m in dividends.

Aspen founder and executive chairman Glenn Keys declined to be interviewed and did not respond to written questions submitted by The Australian.

Aspen provided a surge workforce at Sydney’s Newmarch House aged-care facility and performed screening and testing offshore for stranded Ruby Princess crew members a year ago.

It also managed the first round of hotel quarantine in Sydney, as well as quarantine for cruise ships in Japan and San Francisco.

According to Deloitte Access Economics, “government consumer spending” across all levels grew at the fastest rate seen in 45 years during 2020.

“Much of this is due to the cost of fighting the pandemic, with almost $20bn earmarked for vaccines, testing, telehealth and additional hospital funding,” Deloitte said in its quarterly business outlook released on Monday.

“But with Australia’s relative success against the virus, health spending will add less to government consumption in 2021.”

The Morrison government’s $7bn-plus COVID-19 vaccination program, dogged by rollout delays and facing a target-free strategy reset, is a mystery box of spending, wrapped in layers of “commercial in confidence” provisions and opaque strategy advice that experts say cannot be justified.

“Obviously in a fast-moving global pandemic there is a trade-off between value for money and speed of delivery,” said Stephen Duckett, health and aged-care program director at the Grattan Institute. “Yet for vaccines we’ve known since August they were coming so the issue of speed should not be an excuse. We should be getting value for money and delivery and the government should be held accountable for it.”

According to Austender disclosures, Multigate Medical Products received $638m in stockpile procurements. The Sydney company tripled its profit to $25m in the year to last June.

Other major medical procurements were awarded to CW Management ($319m), Detmold ($252m), ResMed ($76m) and Medcon ($74m).

Andrew Forrest. Picture: AAP

First Sourcing and Logistics, a wholly owned subsidiary of Andrew Forrest’s Minderoo Foundation, procured laboratory equipment and test kits from Beijing Genomics Institute as well as PPE from other suppliers. The philanthropic foundation was reimbursed $189m by the Health Department.

Protective clothing and equipment were supplied by TAR Concepts ($48m), Plus Medical ($41m) and Cole Workwear ($37m).

All up, the ANAO reported 34 companies received at least $1m in stockpile supply contracts.

Last March, the Health Department’s acting secretary determined the Commonwealth Procurement Rules would not apply for that program, an exemption that is available to protect human health.

Canberra has $4bn in advance purchase agreements for just under 145 million doses of three leading vaccines, developed by Pfizer, AstraZeneca and Novavax, and 25 million doses from the COVAX facility, a global initiative whereby rich nations help poorer ones secure vaccines.

As The Australian revealed in November, when the initial $1.5bn deal with Pfizer and Novavax was announced, taxpayers are paying $350m more than indicative global prices at prevailing exchange rates.

On Friday, the government announced it had ordered an extra 20 million doses of the Pfizer vaccine, after the technical group on immunisation recommended it for use in people aged under 50.

CSL is making 50 million doses locally of the AstraZeneca candidate, now preferred for those over 50, and has received federal assistance to retool its plants. But the value of that contract is a secret, buried in allied arrangements, including for the abandoned University of Queensland “molecular clamp” vaccine project.

The Australia-domiciled biotech has secured a $1bn contract to supply vaccines for a decade, when Seqirus’ cell-based influenza vaccine manufacturing facility in Melbourne comes online in 2026.

An AstraZeneca spokeswoman said the company “is still committed to providing the vaccine at no profit during the pandemic, and at no profit in perpetuity to low- and middle-income countries”.

The federal government has allocated $1.3bn for vaccine delivery, including workforce funding to states and territories, GPs, pharmacists and surge workforce. As well, it is providing $600m for vaccine logistics, administration, data and digital systems.

Aspen Medical founder Glenn Keys and Queensland Assistant Health Minister Nikki Boyd. Photo: David Alexander

Healthcare Australia, International SOS, Sonic Clinical Services and Aspen were the successful tenderers for vaccine administration. In February, a doctor employed by HCA was responsible for giving two elderly nursing home residents in Brisbane four times the recommended dose of the Pfizer vaccine.

Asked for details about the deals secured by aged-care vaccination providers HCA and Aspen, the federal Health Department said “the value of these contracts are commercial in confidence”.

When challenged, a Health official replied in an email: “The contractual arrangements with the suppliers of Vaccine Administration Services are structured on a unit basis rather than a lump sum basis as the services are demand driven.

“Unit pricing arrangements for each of the suppliers is commercial-in-confidence and on that basis cannot be disclosed.

“The department is committed to transparency and will disclose total amounts of expenditure when appropriate.”

On Christmas Eve, Health Minister Greg Hunt announced deals with four companies to distribute COVID-19 vaccines.

DHL and Linfox won contracts for distribution and logistics, transporting the vaccines and responsible for transport and management of vaccination supplies such as needles, syringes, and PPE.

Health Minister Greg Hunt watches Dale Austin receive her COVID vaccine shot as he visits the Bluff Rd Medical Centre in Sandringham. Picture: NCA NewsWire / David Crosling

While 2165 federal public servants were seconded last year to the 32,000-strong Services Australia for the initial processing of income support and other services, the agency also engaged private providers to cope with unprecedented demand.

According to the Australian Public Service Commission, between March and May last year, Services Australia processed more claims in a six-week period than it would usually process in a year, and in just over three months, 960,000 organisations and more than 3.5 million individuals received JobKeeper payments.

Stellar Asia Pacific was awarded a $55m contract for “surge services” in customer service, while Datacom Connect received $57m and Serco got $39m for temporary personnel services. Telstra provided $22m in telephony equipment to Services Australia.

Data#3 Limited provided $17.6m in software maintenance support, while NTT Australia supplied $4.7m in ICT support. Boston Consulting Group has a $4.5m labour hire contract to supply “computer services” to the federal government’s biggest agency.

Other large pandemic-related tenders included a $16m contract to Datacom Connect for surge capacity to support the Home Affairs Department.

Major consulting firms have sold their expertise to government during the pandemic, including for modelling, strategic advice and systems upgrades.

Consultant McKinsey Pacific Rim has a $1.6m contract for support services for the vaccine rollout, as well as $5m in COVID-related strategic advice for tourism, the medical stockpile and treatment strategies.

BCG has been engaged by Tourism Australia at a cost of $1.6m to provide economic modelling services to inform its understanding of the effects of the COVID-19 pandemic on the tourism sector globally and potential strategies.

The top-tier consultancy also won contracts to advise on workforce strategy, aviation, and the Department of Prime Minister & Cabinet and the National Covid Commission.

Ernst & Young provided $1.6m in audit services for the national stockpile, as well as another $1.5m for reviews of readiness of vaccination systems, risks to PPE supply, financial modelling and onshore manufacture of vaccines.