California spends billions on no-bid contracts
LOS ANGELES — In a frantic effort to secure face masks and respond to the coronavirus crisis, California has committed to spend more than $3.7 billion on no-bid contracts, scores of them with businesses that have no track record with the state.
A Los Angeles Times data analysis found that nearly a third of those funds — about $1.2 billion — has been earmarked for suppliers of goods and services that do not appear in the state’s database of contracts prior to the COVID-19 outbreak.
Since Gov. Gavin Newsom’s emergency order on March 4, at least 80 were to first-time vendors, including a medical staffing firm that signed a $500 million deal and a company headed by the former attorney general of Alabama, who secured orders for more than $326 million for face masks and shields.
There have already been examples of questionable deals and alleged fraud across the country. The Times reported last month that California officials are paying more than 300% above list prices for masks. And a powerful California union that claimed to have discovered 39 million masks for health care workers fighting the novel coronavirus was duped in an elaborate scam uncovered by FBI investigators, authorities alleged.
Spending watchdogs acknowledge that state governments are under immense pressure to secure medical supplies during times of crisis.
But they caution that if officials don’t adhere to accepted purchasing protocols, such as dealing only with companies that have direct lines to manufacturers and proven track records in government contracts, they could result in bad deals.
“Pandemic times lead to pandemic decisions, which are not usually wellthought-out,” said Sergio Fernandez de Cordova, the chair of a media nonprofit in New York who is working with the consulting firm Raymond Associates LLC to secure better mask deals for government agencies.
The state’s initial pandemic response is estimated to cost at least $7 billion by the end of the year, and the Newsom administration has told lawmakers the state is counting on the federal government to pick up the bulk of those costs. But FEMA must first determine whether purchase prices were reasonable, according to a guidance drafted by the Office of Emergency Services.
Under California’s emergency order, state agencies can make purchases and sign contracts without the usual accountability measures required for multimillion-dollar deals, such as obtaining competitive bids or waiting for delivery before payment.
Jon Coupal, president of the Howard Jarvis Taxpayers Association, said the public is generally forgiving of “decisions made on the fly in an emergency,” but that transparency is paramount.
“When your house is on fire, taxpayers understand that you won’t price-check hoses — you have to act quickly,” he said. “But the state needs to come clean on what they bought and how it was negotiated.”
It’s unclear how much has been paid out so far.
Until Wednesday, one of California’s largest and least transparent transactions had been a nearly billion-dollar contract for protective masks from Chinese automaker BYD.
Government contracts are public under state law. But Newsom’s Office of Emergency Services had refused to make the BYD contract public or to disclose such relevant details as the price per mask, claiming that doing so “would introduce substantial and unnecessary risk to the state’s ability to secure necessary supplies.”