(CALMATTERS) – A medical equipment supplier that was once raided by the FBI. A business executive fined for making false or misleading statements in financial reports. A corporation fined for Medicaid fraud. At least two companies that had existed less than a week.
These are among the hundreds of vendors the state of California has contracted with, or nearly gone into business with, as government officials rushed to prepare for the coronavirus pandemic.
While normal bidding and vetting procedures have been suspended during the state of emergency, California has entered into roughly $3 billion worth of no-bid contracts for masks, ventilators, call-center workers and other supplies and services to respond to the health crisis,the state’s procurement database shows. Some of the vendors are established companies the state has been doing business with for a long time, but others are newcomers that launched amid a chaotic quest for medical supplies. The nationwide scramble kicked off in March when President Donald Trump told governors that states were on their own to secure equipment necessary to manage the pandemic.
Some of the contracts topped out at a half-billion dollars. And in a few instances, readily available public records and some Googling should have raised potential red flags.
“Unfortunately, there was a big rush” for equipment around the world, said Francesco Decarolis, an economist at Bocconi University in Milan, Italy, and former Stanford University assistant professor with expertise in U.S. procurement policy.
“There was fear of not doing things in time, and under emergency situations normal procedures are bypassed, and it’s very hard to ensure that things run smoothly. This is a wakeup call.”
Gov. Gavin Newsom said the state hasn’t lost a penny — though a series of deals that collapsed or stalled have delayed California’s effort to obtain a huge volume of N95 masks. In one case, the state yanked its money back after bankers raised suspicions about a $456.9 million wire transfer to a company called Blue Flame, an intended down payment for 100 million N95 masks, as first reported by CalMatters. The payment and swift reversal were detailed in records obtained from the state Treasurer’s Office.
A subsequent deal to buy N95 masks from a company called BYD was delayed because federal health officials did not initially certify the masks. After the company missed two deadlines to earn certification, the state extended the contract again last week. The federal occupational safety agency certified the masks Monday, Newsom announced, adding that the company would begin shipping the first of 150 million N95s to California later this week. BYD already refunded half of its initial $495 million payment after blowing an earlier certification deadline.
Asked last week about delays with the BYD transaction, Newsom said: “Under the contract, we pay for what we get. We don’t pay for things we don’t get.”
Newsom’s staff declined to answer a question from CalMatters about whether the governor was personally involved in approving any pandemic contracts.