Nick Markham, a senior official in the new hospital team at the Department of Health and Social Care (DHSC), helped to ensure that a £137,460 contract was offered to his close associate, management consultant, Nigel Crainey, to be his “expert adviser”.
This was despite civil servants having raised concerns that the contract was not needed and did not represent value for money. The civil servants also raised issues with the appointment of Crainey, who Markham had worked with previously on London Continental Railways, because they claimed that it had not been done through a formal process.
HR has a responsibility to determine whether contracts pose a conflict of interest, according to Simon Jones, HR consultant at Ariadne Associates.
Speaking to HR magazine, he said: "Although most employers don't have to operate to the same high ethical standards that the public sector is expected to, they still have responsibilities in this area. If there were suggestions that money had changed hands between cronies then this is likely to fall foul of the Bribery Act.”
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Jones suggested that HR should create a code of conduct for appointing contracts.
He continued: “Employers would be advised to have a clear code of conduct where employees are required to declare any potential conflicts of interest, with possible disciplinary consequences for anyone failing to do so.
“This is likely to mean making sure that such employees are not involved in decisions on such contracts. From an HR perspective, there should also be clear whistleblowing procedures which means that other employees can raise concerns without fear of retribution."
A freedom of information request to DHSC revealed a document in which a panel of officials, who were examining the contract, questioned the reputational risk that could come with the work being offered to Crainey, as well as the lack of mitigation against conflict of interest that could potentially have arisen as a result.
When a senior official in the DHSC’s new hospital team was asked the reason for the contract, they replied: “Because we have been told to”.
Shadow health secretary Wes Streeting told the Guardian that the contract represented the “waste, cronyism and corruption of this Conservative government”.
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Jonathan Maude, labour and employment partner at law firm Vedder Price, explained that employers are not bound by legal obligations to prevent cronyism.
He told HR magazine: “There is no strict legal obligation to prevent cronyism when hiring employees or external consultants. The risk associated with cronyism is the negative public perception created. Allegations of cronyism can easily damage a company’s reputation.
“Unless fraud is a genuine risk, there are no legal obligations on companies to prevent cronyism. Instead, they are guided by corporate governance best practice and their own moral compass.”
Maude added that the risk of conflicts of interest arising was higher when hiring consultants than employees.
He continued: “The rules for engaging a consultant and hiring an employee are different. Employers don’t have the same obligation to check for conflicts when hiring a consultant as they do when employing a member of staff. As a result, the risk of a conflict of interest arising is greater.
“That said, if an employer is not seen to be conducting a competitive selection process, it risks leaving itself open to potential conflicts of interest as well as other damaging allegations.”
