KSL File

Utah’s no-bid COVID-19 buys spur some lawmakers to seek checks on spending power

By Katie McKellar, KSL | Posted - May 23, 2020 at 8:20 p.m.



SALT LAKE CITY — Frustrated by certain multimillion-dollar, no-bid purchases and contracts that state officials have executed as part of their response to the COVID-19 pandemic, a pair of lawmakers are drafting legislation to bring more transparency and checks to the state’s emergency procurement powers.

Rep. Andrew Stoddard, D-Sandy, and Rep. Suzanne Harrison, D-Draper, are preparing their own bills meant to bring more accountability and constraints to the state’s emergency purchasing powers, which allowed state officials to spend over $108 million on COVID-19 buys and contracts in less than three months, untethered by usual competitive bidding requirements.

“We want our government to be nimble and responsive. We also want accountability for how taxpayer dollars are being spent and transparency in the decision-making process,” Harrison said. “Taxpayers deserve wherever possible a competitive bidding process and knowing that we’re getting the best product and value, not just profiteering at taxpayer expense.”

Harrison said she plans to run a bill in the next general session to require the executive branch to keep written records and collect data regarding purchases and decisions made during states of emergency. She said it would also require the public and the Legislature to have access to the information in a timely and transparent manner.

“When we’re making decisions and purchases and signing contracts in an emergency situation, the public and taxpayers deserve transparency and accountability,” Harrison said. “That’s why I’m filing this legislation.”

Stoddard said he’s still working on drafting his bill, but he envisions it as legislation that would put “some limits” on purchasing during an emergency, depending on different types of emergencies and types of purchases needed. Stoddard said he seeks to possibly create some type of “modified RFP process,” one that allows for competitive bidding but is streamlined in an emergency.

Stoddard said his bill is currently slated for the 2021 general session, but he’s hoping to have it ready so it could possibly be considered in a special session if the opportunity arises.

Rep. Brad Daw, R-Orem, who is chairman of the Legislature’s Health and Human Services Interim Committee, is gearing up for interim hearings beginning in June to review the state’s entire response to COVID-19, including those purchases and contracts that have raised eyebrows.

Utah Auditor John Dougall is also auditing the state’s COVID-19 purchases.

“We’re going to cover everything COVID-19,” Daw said. “Clearly, we want to get this right. Emergencies tend to bring out the best and the worst of everybody, so (we want to) highlight want went right and learn from what went wrong.”

The purchase that has raised the most ire, and was later refunded amid outcry, was an $800,000 order of hydroxychloroquine from Utah pharmacy Meds in Motion, which spent about $1 million amassing a stockpile of the drug. The Governor’s Office of Management and Budget green-lighted the purchase as state health department bosses — despite pushback from Utah’s own state epidemiologist Dr. Angela Dunn — were poised to sign a separate standing order meant to facilitate the distribution of the drugs before the plan was scrapped.

Officials in the governor’s office, which conducted an internal review of the purchase, chalked the transaction up to “breakdowns in communication” between state agencies, but determined that “all acted in good faith.”

The group Alliance for a Better Utah, however, filed a price gouging complaint against Meds in Motion, accusing the pharmacy of charging too much for the 20,000 courses of the anti-malarial drugs, and pharmacists have questioned whether Meds in Motion had the proper license to compound and sell that many doses of the drugs. Dan Richards, owner of Meds in Motion, has defended the deal as fair, legal and in “good faith.”

“Even though the money was refunded, I think there are still so many questions as to why and who,” Stoddard said. “There are a lot of questions that haven’t been answered yet.”

State officials are also under contract for a total of up to $23.3 million for various COVID-19 contractual agreements, including consulting services, field testing and other contracts with tech companies that have developed apps, dashboards, mobile testing sites and surveys, according to a state summary of COVID-19 contractual agreements.

Of those contracts, some began as a pitch from tech company executives, including Nomi Health’s Mark Newman, to crowdfund the effort to increase COVID-19 testing for Utahns. Some later turned into multimillion-dollar, no bid contracts for his and other tech companies. Newman said the contracts with the state came about out of sheer volume of need, and state officials have said they did not expect Nomi to work for free.

Nomi Health is under contract with the state for up to $7.8 million for mobile testing sites through the end of May, plus up to $1.6 million for the TestUtah.com assessment tool. For the Healthy Together Mobile App, the company Twenty is under contract with the state for up to $6.3 million. The state has also executed a contract with Domo, an American Fork analytics company, for up to $2 million for IT services for TestUtah.com.

Several of the contracts with tech companies have raised concerns for Harrison and Stoddard, who question the decision-making process for executing those contracts, and whether Utah is getting its money’s worth.

Harrison pointed to questions raised about TestUtah.com’s testing accuracy and why they aren’t participating in the same proficiency test other labs in the state have joined. Officials with MountainStar, the health care system that owns Timpanogos Regional Hospital in Orem where TestUtah.com tests are processed, say TestUtah.com’s tests have already been validated, and they’ve been willing to participate in proficiency testing — but they’ve taken issue with this proficiency test’s process.

Stoddard and Harrison also question the price and purpose of the Healthy Together Mobile App, saying contract tracing is best left up to public health professionals.

“It concerns me when people with no health care experience are given large contracts in a no-bid process without consulting experts in the field as to whether that’s the best product and use of taxpayer dollars,” Harrison said.

Of the more than $108 million state officials have spent on COVID-19 response, the bulk of the money, $74 million, has gone to the state’s stockpile of bulk personal protective equipment, including masks, gloves, gowns and other gear.

Chris Hughes, director of the state’s Division of Purchasing and General Services, described how state officials sought out those items in at-times desperate and frantic conditions. He said a type of black market for personal protective equipment began surfacing, as some “nefarious” sellers tried to shop fraudulent product to state officials. Others were well meaning, he said, but lacked the connections to give what they promised.

State purchasing officials had to sift through over 1,000 responses to the state’s requests for personal protective equipment, cross checking references and, in some cases, personal contacts with those businesses to verify reliability and whether they’d actually be able to deliver the product as supply chains fractured worldwide.

“We were investigating and reviewing everything that was coming in,” Hughes said. “We were trying to figure out whether or not they were a real person or they were just made up and trying to commit a scam.”

A summary of Utah’s emergency procurement process for personal protective equipment shows major suppliers that provided gear from China got a big chunk of the state’s business.

That includes $26.5 million plus freight to HB Group, a business out of Herriman that “has decades of experience in exporting from China,” according to the state summary. Another company, Future Stitch, which operates in California and China, got $18 million, plus freight, from the state.

Future Stitch was a company Utah officials trusted to supply personal protective equipment, since it has a factory in China that is able to store product until it needs to be delivered to the airport. “In addition, because of their local factory they have been able to use local connections to secure the best deals for the state of Utah,” according to the purchasing state summary.

Future Stitch was recommended by Josh James, CEO of Domo, according to that state document.

Personal contacts with those businesses, Hughes said, were helpful but not the only strategy for Utah officials to vet businesses. He said purchasing officials cross-checked references, conducted background checks, and researched the businesses’ history, like they would in a normal RFP process — but they were on a much more condensed timeline.

“It needed to be fast,” Hughes said.

For companies like HP Group and Future Stitch, Hughes said “they all had boots on the ground” to ensure the personal protective equipment would be available for Utah and not be sent to another state.

“Personal contacts helped us know the person on the other end of the phone or email was actually a real person with that name and somebody could point to them and say who they are,” Hughes said. But he noted those purchases didn’t just stem from those personal recommendations.

Rather, he said those companies surfaced out of a list of around “a couple hundred vendors” he had “very in-depth conversations” with as the state began its search for personal protective equipment.

But to Harrison, there’s a fine line for the state to use personal contacts to make purchasing decisions.

“I want to make sure in an emergency it’s not who you know, it’s what you have to offer and whether it’s a quality, competitive product for Utah taxpayers,” she said.

Amid calls for more transparency, Hughes’ department has posted details about the transactions on the state’s purchasing website, at purchasing.utah.gov/covid-19.

Hughes welcoms any additional scrutiny of the purchases, confident that no state officials “acted in bad faith.”

“It’s always good to review the emergency rules,” Hughes said. “Nothing in the procurement code prepared us for a global pandemic, a supply chain that was fractured, and a world wide demand of PPE from one country (China).”

Hughes also welcomes any ideas proposed by Stoddard and Harrison to add transparency and guardrails to the emergency procurement, but cautioned against anything that would add too heavy of a burden amid emergency conditions where speed and flexibility are key.

“I think we’ve learned a lot coming out of this, but I would hope we don’t limit ourselves too much,” Hughes said. “I’m happy for any review. ... For sure, I’ll look back at this and say, ‘OK, what can we learn from this and what can we do to move forward?’”

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