SALT LAKE CITY — Utah state officials have spent over $108 million — and counting — to respond to the coronavirus pandemic, unconstrained by usual competitive bidding requirements that had been suspended amid the emergency.
Painting a picture of desperation, splintering global supply chains and fears of the unknown, state officials walked through a transaction log of the purchases on Tuesday in a briefing for reporters, lauding efforts to ensure Utah had the medical supplies it needed to maximize testing and keep hospitals stocked.
Of the $108 million Utah has spent so far (much of which state officials expect to be reimbursed with federal dollars), $74 million was for bulk personal protective equipment, including masks, gloves, gowns and other protective gear.
“We definitely have stories where supply chains dried up, and they still are very shattered,” Utah Public Safety Commissioner Jess Anderson said. “We’ve had ... to dig under every nook and cranny and look under every rock and everything we can to find a good, solid supply chain. It has not been easy. It has been a herculean effort, across the entire world — literally a global effort.”
That’s all while state officials have had to navigate an at times predatory market ripe for price gouging and fraud, Anderson said.
“Early on, indicators were that for every one good supply chain there were 20 (that were) fraudulent,” Anderson said. “And so with that, we knew we had to be very careful so we took great precautions.”
Chris Hughes, director of the state’s Division of Purchasing and General Services, described how somewhat of a black market for personal protective equipment began taking shape, as “nefarious” sellers tried to shop fraudulent product to state officials.
“I’ve received over 1,000 responses to our requests for PPE, but not all of them were legitimate,” Hughes said. “A few of them have asked me to meet them in alleyways to deliver the PPE, others asked me to fly out to different states to be able to meet them, and we just didn’t feel comfortable with any of those.”
But at times, state officials had only minutes to pull the trigger on crucial shipments, Anderson said, as states literally bid against each other.
One purchase in particular came after state officials discovered in early April they were not just days but hours away from running out of the swabs needed for COVID-19 test kits, Anderson said.
State officials then began scrambling, “scouring the world” for swabs, Anderson said. They thought they found a pallet of swabs sitting in China, ready to go. They were about to charter a flight to pick them up.
“We were ready to pull that off, and in the last minute found out the pallet of swabs had gone to someone else, essentially a higher bidder,” Anderson said. “That was what we faced. States were outbidding each other, these wars of trying to get product.”
Then, Anderson said Sen. Mitt Romney’s office contacted them with information about a shipment of 100,000 swabs sitting in Chicago — but for $15 a swab, a high price compared to what is usually $1.25 a swab.
It was a “hard decision,” Anderson said, but state officials ultimately agreed to pay $1.5 million for the swabs. The truck shipment was escorted by troopers through Wyoming and across Utah’s state line, all the way to customs in Salt Lake City.
“It was a critical time,” he said. “We had to keep testing going. ... If we would have delayed at all, we would have run out of swabs.”
Now, Utah is positioned as one of the top states for testing in the U.S. But those swabs came with a high price tag — one that state officials haven’t seen “before or since,” Anderson said.
“And so to me, yeah, it brings us a lot of concern. It raises alarm,” Anderson said, adding that law enforcement agencies are interested in “looking into that case, so we’ll be working with them on this particular issue.”
But Anderson said that purchase was one that came “in a great time of need” and helped Utah a long way down the road for increasing testing capacity.
Overall, Anderson credited state purchasing officials for processing hundreds of purchases while avoiding fraud or price gouging. Out of 300 purchases, Anderson said only 10 have been canceled and are being reviewed after either the product never showed or state officials found a better price elsewhere.
“Ten of those cases is not bad, however. I’m proud to say we haven’t had a single one that I’m aware of that did not come through we didn’t catch,” Anderson said.
Hughes said his department is reviewing that list of purchases and will eventually ask the Utah Attorney General’s Office to review all the purchases to “ensure there was no price gouging going on.”
Our hope is we haven’t wasted any taxpayer dollars, federal or state. At the end of this thing, however, if there’s a chance of that, more than anything I want to be prepared ... and have a little bit too much than not enough.
–Utah Public Safety Commissioner Jess Anderson
Hughes, however, said it’s typically been “easy to identify who was price gouging and move away from them quickly.” For the most part, though, Hughes said the transactions Utah completed were done in “good faith.”
“The market in China where a lot of these products were coming from was very chaotic to the point where we’ve seen price increases of over 1,000% over the last few weeks on common PPE,” Hughes said. “Throw that in with price increases on freight, and some of these prices may be legitimate, it’s just at the moment (they) may have seemed high.”
Asked if the state’s controversial $800,000 purchase of 20,000 hydroxychloroquine and chloroquine medication packets (which has since been refunded) was being investigated for price gouging, Hughes said his office wasn’t reviewing that purchase, but the Utah Attorney General’s Office may be.
Dan Richards, owner of the pharmacy Meds in Motion that sold the drugs to the state, has defended the transaction, saying it was done in “good faith” and that accusations of price gouging are unfounded. Rather, Richards has said the state would have been given a more than 50% discount for the drugs.
Anderson defended that $800,000 purchase, applauding state officials for “trying to be proactive” and “working with the private sector to try and make something happen.” He noted the federal government had already stockpiled $53 million worth of doses, and state officials worried Utah wouldn’t be a state that would be prioritized for that national stockpile.
“It’s one of those situations where we never win,” Anderson said. “If it ends up it didn’t work, we were going to be criticized. If it ends up we acted too fast, we’re criticized. We understand that. Listen, our shoulders are broad. We can take that. We’re making decisions based on good knowledge we have at the time, and we just move forward.”
In addition to the roughly $74 million spent on personal protective equipment, Utah also spent millions on contracts with tech companies, including over $2 million for the Healthy Together app, a $2 million contract with Domo for information technology services for TestUtah.com, and an over $5 million in combined contracts with Nomi Health for the creation of TestUtah.com and drive-thru testing sites.
Those contracts have raised questions after executives from tech companies including Nomi Health had early on pitched their partnership as one that wouldn’t cost any taxpayer money, but instead would be crowdfunded. Mark Newman, CEO of Nomi Health, has told the Deseret News the effort transformed from a volunteer effort to a contract deal due to a rapid expansion of scope and scale brought on by a sheer volume of need.
Asked about how the contract with Nomi Health went from crowdfunding to a state contract, Kris Cox, executive director of the Utah Governor’s Office of Management and Budget, said she didn’t know about the crowdfunding concept, and ever since her office began handling the contract it was on the basis that it would be a paid contract.
Domo, however, originally agreed to provide a basic virtual dashboard of COVID-19 case count data at no cost. But after three days of establishing data requirements, the need and scope of the project evolved into a bigger project with more complicated data needs. As the state continued to request more additions to the dashboard, they amended the partnership into a paid contract, Cox said.
Overall, Anderson and Hughes said the purchases and contracts state officials have entered into have been money well spent.
“Our hope is we haven’t wasted any taxpayer dollars, federal or state,” Anderson said. “At the end of this thing, however, if there’s a chance of that, more than anything I want to be prepared ... and have a little bit too much than not enough.”
To increase transparency around the no-bid purchases, state officials have posted details about the transactions on the state’s purchasing website, at purchasing.utah.gov/covid-19.
A breakdown of some of Utah’s most significant COVID-19 expenditures, according to the state’s purchasing log:
- $74 million — bulk personal protective equipment
- $3.65 million — local health departments
- $1 million — intensive response for seniors
- $1 million — hospital contracts
- $1.8 million — ongoing surveys
- $2 million — Healthy Together app
- $2 million — online dashboard
- $1 million — TestUtah.com assessment tool
- $3 million — mobile testing sites
- $1.9 million — Unified Command facilities and response
- $3.2 million — business and community masks
- $11 million — small business bridge loans
Correction: In an earlier version, a quote by Chris Hughes, director of the state’s Division of Purchasing and General Services, incorrectly said the state received 100,000 responses to requests for PPE. Hughes said 1,000 responses were received.