11. Although smallpox was eradicated worldwide in the 1970s, the UK, like some other countries, continued to hold a contingency stockpile of the vaccine. Following the attack on the World Trade Centre on September 11 2001, the Department reviewed its ability to deal with terrorist attacks, including biological terrorism. With the advice of a sub-group of independent experts convened by the Joint Committee on Vaccination and Immunisation, the Department and the Ministry of Defence decided on 18 December 2001 to purchase up-to-date stocks of smallpox vaccine as a means of strengthening the country's defence against possible biological terrorist attacks.[17] For the purchase of a first tranche of smallpox vaccine, the Department used confidential procurement procedures, allowed under European Union rules on the grounds of national security. The procurement was not advertised and the Department held confidential discussions with five potential suppliers, selected from a list of twelve, with known production capabilities in the UK and Europe.[18]

12. A contract was awarded to PowderJect Pharmaceuticals PLC in April 2002.[19] The National Audit Office found no evidence of impropriety in the conduct of this procurement exercise, but the fact that the Chief Executive of PowderJect had made political donations coinciding with the evaluation and award of the contract prompted concerns over propriety amongst some suppliers, in Parliament and in the media. The Department did not have a system to identify donations made by companies participating in the bidding. Instead, the donations became public only late in the process as a consequence of Stock Exchange disclosure rules, once officials had completed their assessment and recommended the choice of PowderJect to Ministers. The Department told us that, had it known about the donations earlier, it might have involved Ministers less in the decision-making process and thought more carefully about the relationship with the supplier.[20]

13. Suppliers consulted by the National Audit Office raised further concerns that the Department's procurement process for that first tranche of smallpox vaccine had not been transparent. They claimed that the Department had not clearly specified that it was interested only in the 'Lister' strain of the vaccine, and had not revealed the procurement criteria and timelines to be applied. They also claimed that companies had been expecting a second stage to the procurement process, at which point bidders would have received full specifications against which to bid and that, although companies had been expected to consider licensing issues and clinical trials, they had not been informed of the Department's decision to accept an unlicensed product. The Department believed that these views were unjustified, and had not been shared by all the bidders. In discussions with the bidders, issues of procurement criteria, timescales, scope of the contract and strain of the vaccine had all been covered in detail, and the Department had followed a standard script to ensure that all the companies were provided with exactly the same information. However, the Department recognised that, as a result of the unusual nature of this procurement, there might have been a mismatch between the information provided and its interpretation by the companies concerned.[21]

14. The Department had wished to move quickly because of the need to prepare the country adequately against any terrorist threat. The Department had held early discussions with individual companies for supply of vaccine, but it had not been an open market and at that stage the Department had little knowledge of what vaccine was available and how quickly companies would have been able to prepare it. The Department recognised that, if companies had to start from scratch, it would have taken them from 18 to 24 months to develop vaccine. Nonetheless, the Department had made clear in discussions that they had wanted to buy supplies of vaccine as soon as possible.[22]

15. Expert advice sought from a specially formed sub-group of the Joint Committee on Vaccination and Immunisation had been that two alternative strains of vaccine—the Lister strain and New York City Board of Health (NYCBH) strain—showed no real difference in efficacy. However, the expert sub-group recommended that, since the authorities in the United States had stocks of the NYCBH vaccine, the United Kingdom should opt for a different strain so that both could fall back on the other vaccine should either prove to have problems.[23] When the Department had invited companies to tender, they had not specified the Lister strain to the exclusion of other options because they did not know what was available, and would have risked being unable to source any supply of vaccine. However, the Department had made clear in discussion with the companies that the Lister strain was the preferred option if this could be obtained. Of the five companies invited to bid, three had the capacity to produce the Lister strain using the new manufacturing process required and, of these, PowderJect had been able to supply vaccine the fastest.[24]

15. In October 2002 the Department advertised a follow-up procurement exercise in the Official Journal of the European Community. Having augmented emergency stocks of vaccine, timescales for the next stage had been less urgent. The Department also wished to be as transparent as possible, and this route allowed them to follow as closely as possible normal procurement rules without compromising national security. This contract was won by Aventis, on the grounds that in the Department's judgement it best matched the required standards for safety, efficacy, availability, price and the degree of experience of the company.[25]

16. All vaccines routinely used in this country are required to have a valid Marketing Authorisation, or licence, but there was no licensed smallpox vaccine available from any supplier at the time. Normally, before a vaccine can be licensed, the manufacturer carries out trials with people who might have the disease, but in the case of smallpox such trials were not possible because the disease has been eradicated. The vaccine was given to some healthcare workers who volunteered, but while this might test the immunity the vaccine appeared to give and whether it was safe, it could not show how the vaccine would respond to the disease itself.[26]

17. The Department explained that, in the first-round procurement for smallpox vaccine, they had known there were no licensed products but had made clear that they were willing to accept an unlicensed vaccine in the short term. Because the vaccine was unlicensed, the Department provided PowderJect with an indemnity against liabilities arising from possible side effects. The Department estimated the potential liability to be £30 million, but no payments have needed to be made so far. In the second-round procurement the Department asked for a vaccine that was licensable, recognising that achieving a product licence would take time. Work to establish the conditions under which a smallpox vaccine might be licensed is ongoing between the United Kingdom licensing authority and European and American licensing authorities.[27]

18   ibid, para 3.14 (case study E) Back

19   Qq 12, 18-19, 21, 126; C&AG's Report, para 3.24 Back

20   Qq 22-23, 86-89, 120-126; C&AG's Report, para 3.25 Back

21   Qq 7, 10-11, 26-27, 38-40; C&AG's Report, paras 3.19-3.21 Back

22   Qq 12, 57-58 Back

23   Qq 13-15; C&AG's Report, para 3.9 (case study C) Back

24   Qq 9, 12, 28-29; C&AG's Report, para 3.17 (case study F) Back

25   Qq 16-17, 24, 32-33, 59-60; C&AG's Report, para 3.15 Back

26   Qq 33, 109-111; C&AG's Report, para 3.22 Back

27   Qq 32, 61, 109 Back