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