Huge fed­eral con­tracts for med­i­cal gowns went to small, in­ex­pe­ri­enced firms

The Charlotte Observer (Sunday) - - Business - BY DAVID GELLES AND RACHEL ABRAMS New York Times

The De­fense Depart­ment dis­trib­uted more than $1 bil­lion in fed­eral con­tracts last month to com­pa­nies for dis­pos­able med­i­cal gowns to pro­tect those on the front lines of the coro­n­avirus pan­demic.

More than 100 large and mid-size com­pa­nies, many with track records of suc­cess­fully com­plet­ing fed­eral pro­cure­ment con­tracts, bid for the work. But the ma­jor­ity of the awards ul­ti­mately went to a hand­ful of un­ex­pected and in­ex­pe­ri­enced com­pa­nies that now find them­selves on the hook to pro­duce hun­dreds of mil­lions of gowns in a mat­ter of months.

One deal, for $323 mil­lion, went to JL Kaya, whose only prior fed­eral con­tract­ing work was a $ 7,296 project to make gauze.

A batch of con­tracts worth $194 mil­lion went to Health Sup­ply US, a com­pany founded this year by a for­mer Trump ad­min­is­tra­tion of­fi­cial.

And an $88 mil­lion con­tract for gowns went to Mad­dox De­fense, which says it has done gov­ern­ment sub­con­tract­ing work but has never man­aged a ma­jor con­tract of its own.

Two of those com­pa­nies have been work­ing with a re­tired NFL player and, in one case, a for­mer arms dealer who was barred from gov­ern­ment con­tract­ing and was the in­spi­ra­tion for the film “War Dogs.”

The con­tracts for the dis­pos­able gowns were an­nounced last month by the De­fense Lo­gis­tics Agency, a Pen­tagon di­vi­sion that is work­ing on be­half of the Depart­ment of Health and Hu­man Ser­vices to re­plen­ish the gov­ern­ment’s stock­pile of pro­tec­tive gear and other emer­gency sup­plies. The con­tracts – awarded to a hand­ful of com­pa­nies, al­most all of them small busi­nesses – re­quire the com­pa­nies to de­liver as many as 260 mil­lion gowns by early next year.

The con­tracts went to the com­pa­nies that of­fered to pro­duce gowns at the low­est price. Jor­dan Gil­lis, the as­sis­tant sec­re­tary of de­fense for sus­tain­ment, said in a state­ment that in award­ing the con­tracts, the De­fense Depart­ment had con­sid­ered the “fi­nan­cial ca­pa­bil­ity, pro­duc­tion ca­pa­bil­ity, past per­for­mance and ver­i­fied ref­er­ences” of bid­ders.

Gil­lis said bid­ders had “pro­vided sourc­ing lo­ca­tions and pro­duc­tion fa­cil­ity in­for­ma­tion to demon­strate their abil­ity to com­ply with” the con­tract re­quire­ments. Since the con­tracts were awarded, he added, the De­fense Depart­ment has met with the com­pa­nies and “im­ple­mented ro­bust con­tract over­sight mea­sures,” in­clud­ing vis­it­ing pro­duc­tion fa­cil­i­ties.

But the ad­min­is­tra­tion’s se­lec­tion of in­ex­pe­ri­enced com­pa­nies for a cru­cial job has raised ques­tions across Washington.

At a Capi­tol Hill hear­ing last week, two sen­a­tors ex­pressed con­cerns that the con­tracts went to un­qual­i­fied com­pa­nies. In phone calls and let­ters, trade groups for ma­jor gar­ment man­u­fac­tur­ers have lodged com­plaints with the De­fense Lo­gis­tics Agency. And at least one com­pany filed a com­plaint about the gowns con­tracts with the Gov­ern­ment Ac­count­abil­ity Of­fice, which in­ves­ti­gates fed­eral spend­ing.

“These are large and ur­gent con­tracts,” said Charles Tiefer, a for­mer mem­ber of the fed­eral Com­mis­sion on War­time Con­tract­ing in Iraq and Afghanista­n and a pro­fes­sor at the Univer­sity of Bal­ti­more School of Law. “You would ex­pect them to be buy­ing from ma­jor con­trac­tors they had gone to be­fore, not from un­known con­trac­tors, not from un­known en­ti­ties.”

The fed­eral gov­ern­ment’s ef­fort to pro­cure per­sonal pro­tec­tive equip­ment dur­ing the pan­demic has been deeply trou­bled. This spring, a task force led by Pres­i­dent Don­ald Trump’s son-in-law and ad­viser, Jared Kush­ner, strug­gled to ob­tain masks as health care work­ers reused res­pi­ra­tors and nurses wore garbage bags when they ran out of gowns. Kush­ner’s team fa­vored leads about avail­able equip­ment that came from Trump’s po­lit­i­cal al­lies and per­sonal ac­quain­tances, the New York Times has re­ported.

Many states and hos­pi­tals were left to fend for them­selves. They have had to sort through a sea of scam­mers that have sent prices soar­ing. In one in­stance, New York state awarded an $86 mil­lion con­tract for ven­ti­la­tors to a man who had never sold one be­fore. The deal quickly un­rav­eled.

JL Kaya won the largest award for dis­pos­able med­i­cal gowns: up to 85 mil­lion in the next sev­eral months. The com­pany is run by Jose La­gardera, who on LinkedIn said his com­pany’s found­ing phi­los­o­phy was to “de­liver qual­ity, in­no­va­tion and ser­vice in all of our deal­ings with our cus­tomers, and sup­pli­ers.” While the com­pany has done fed­eral sub­con­tract­ing work be­fore, its only pre­vi­ous con­tract with the U.S. gov­ern­ment was in 2016, when it won a small deal to pro­vide sur­gi­cal gauze to the Army, ac­cord­ing to pub­lic records.

Since leav­ing foot­ball, Bird has pur­sued a va­ri­ety of ca­reers. He tried to win gov­ern­ment work to re­build the Puerto Ri­can elec­tri­cal grid af­ter Hur­ri­cane Maria in 2017 when he was chief ex­ec­u­tive of Fore­man Elec­tric, a ser­vices com­pany in Bird’s home­town, Odessa, Texas.

He later founded Karla Mae Cap­i­tal, whose web­site says it pro­vides com­pa­nies with fi­nanc­ing.

In re­cent months, Bird has turned his at­ten­tion to the ex­pand­ing mar­ket for per­sonal pro­tec­tive gear. He has been work­ing with Efraim Diveroli, the arms dealer por­trayed by Jonah Hill in “War Dogs,” who is co-owner of a com­pany called Medlink.


Jared Kush­ner, Pres­i­dent Don­ald Trump’s son-in-law and ad­viser, strug­gled to ob­tain masks as health care work­ers reused res­pi­ra­tors and nurses wore garbage bags when they ran out of gowns.

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