Estimated read time: 16-17 minutes
This archived news story is available only for your personal, non-commercial use. Information in the story may be outdated or superseded by additional information. Reading or replaying the story in its archived form does not constitute a republication of the story.
SALT LAKE CITY — Even though Utah emergency preparedness officials identified a pandemic as a high-risk threat, the COVID-19 pandemic caught Utah leaders off guard.
That lack of preparedness trickled downstream, causing communication and leadership issues while state officials scrambled to dole out millions of dollars in no-bid contracts, in some cases lacking due diligence and adequate documentation to track the chain of command.
That’s according to a vast, 33-page audit that Utah State Auditor John Dougall released Wednesday after months of tight-lipped work reviewing the over $108 million the state of Utah has spent on COVID-19 pandemic response emergency purchases.
The audit doesn’t pinpoint any single individual as the culprit, but rather a lack of process and preparedness that compounded issues around purchases like the controversial $800,000 hydroxychloroquine buy earlier this spring, and questionable expensive contracts for the TestUtah initiative and the Healthy Together app.
The audit report lists several findings, including that Utah’s pandemic preparation “was not reasonably sufficient” and should have foreseen possible supply chain disruptions, and that an “unclear chain of command hindered” early response to the pandemic.
“From our high-level review, we conclude that the state did not adequately anticipate or prepare for this type of statewide, national and global pandemic,” auditors wrote in the report.
Dougall, in an interview with KSL Wednesday, credited state officials for “trying to do the best they could under difficult circumstances.” But he said auditors concluded that the overarching problem began “upstream” with preparedness. Had state officials been better procedurally prepared for a pandemic, Dougall said the state would have began with a “better perspective outside of the heat of battle.”
While the state’s Division of Emergency Preparedness and Department of Health mobilized their emergency response in accordance to protocols, “it appears that planning and preparation efforts for this type of emergency were insufficient,” auditors wrote. “It also appears that, once the pandemic began, coordination and cooperation among various entities lacked cohesiveness.”
When the personal protective equipment shortage and supply chain splintered at a national and global level, Utah was no exception. By early March, state officials determined local health care systems only had one to two days of PPE supplies on hand. That’s even though a 2007 report from the Governor’s Task Force for Pandemic Influenza Preparedness recommended state officials work with local health care systems to stockpile PPE. In absence of those stockpiles, the state was forced to “compete for PPE on a global scale,” the report states.
“This resulted in higher costs,” auditors wrote. “We are particularly concerned that some in emergency planning positions expressed surprise about the significant disruption in the supply chain. Given the nature of a pandemic, supply chain disruptions are a significant risk that should be anticipated and mitigated, where appropriate.”
“This indicates that DEM (Division of Emergency Management) did not adequately contemplate or prepare for major threats from a pandemic,” auditors wrote, comparing that to the state’s much more expansive preparedness for an emergency related to an earthquake, which includes community outreach and an annual statewide earthquake drill, the Great Utah Shake Out.
“These measures are considered reasonable since Utah is a seismically active region. However, we believe that DEM and UDOH should have promoted awareness and preparedness for a pandemic, given that pandemic is included as a significant hazard by both agencies,” auditors wrote, noting that while Utah has had few significant earthquakes over the past 15 years, “the nation has faced legitimate threats of pandemic multiple times during the same period. However, the state has not consistently placed reasonable emphasis on pandemic education and preparedness.”
Auditors suggested state level training events would have helped better prepare for a pandemic, with regular brainstorming and training events. Even though the state’s Emergency Operations Plan includes a pandemic as one of the common or high-risk hazards, the Division of Emergency Management “identifies only ‘stress on the health care system’ as an associated threat of a pandemic,” rather than also economic threats, which are considered for an earthquake, auditors wrote.
"We are particularly concerned that some in emergency planning positions expressed surprise about the significant disruption in the supply chain... This indicates that DEM (Division of Emergency Management) did not adequately contemplate or prepare for major threats from a pandemic."
–State COVID-19 audit
In a written response to the audit, Justin Harding, Herbert’s chief of staff, wrote: “We appreciate the review and the opportunity to learn and grow,” but also noted that some “aspects of the limited review seem to assume that state agencies have unlimited resources to plan for and respond to emergencies.”
Harding noted state agencies “do not operate with unlimited budgets, personnel, or time” and that limits the state’s ability to prepare for and respond to emergencies.
Lt. Gov. Spencer Cox, who head’s the state’s coronavirus task force, did not respond to the audit. His gubernatorial campaign directed a response to Cox’s office, which then directed his response to a combined Unified Command statement issued by Herbert’s spokeswoman, Anna Lenhardt.
Lenhardt said Utah “never shies away from the opportunity to improve operations, even in the midst of a global pandemic.”
“From the beginning of the COVID-19 crisis, we have been clear that we are constantly trying to improve our coordination and processes in order to best serve the people of Utah,” Lenhardt said. “State employees have truly risen to the occasion and have continued to render great service as we fight this pandemic. We look forward to working with the Legislature to implement appropriate recommendations contained in the audit.”
Unclear command chain
Auditors also detailed how it appears various state agencies and officials “were not always working in coordination with each other.” While agencies activated their emergency response protocols in January and Herbert announced the formation of the Utah COVID-19 Community Task Force on March 2, it wasn’t until March 26 that the governor activated the state’s Unified Command structure, nearly three weeks after he issued the COVID-19 emergency declaration and one week after the state had already launched efforts to procure millions of dollars in personal protective equipment.
At that time, the Governor’s Office of Management and Budget was already deep into efforts to expand testing services, create a COVID-19 dashboard, and a mobile app. Auditors wrote that command structure should have been activated when the emergency was declared, and that all state agencies involved in the pandemic response should have been incorporated into the command structure, including both the task force and the management and budget office’s procurement efforts.
“Despite being designated as the primary agency to respond to a pandemic, UDOH reports they had little involvement in the decisions to purchase the dashboard and the other services procured by GOMB,” auditors wrote. “As a result, there was a lack of effective collaboration between UDOH and GOMB during the initial pandemic response.”
Harding agreed with auditor’s findings related to an unclear chain of command.
“We agree that better communication could have improved the state’s early response to the pandemic,” Harding said in his response. “With the benefit of hindsight, we also agree that the Unified Command should have been activated earlier.”
Early on in the pandemic’s response, legislative leaders were also exploring a public, private partnership to increase testing and treatment — a partnership that eventually led to the now infamous (and refunded) $800,000 purchase of hydroxychloroquine and TestUtah. Auditors determined that effort was not coordinated with the task force, and there was a lack of understanding among officials about the state’s role to fund the initiative.
KSL in May reported how the effort, which began as a pitch for a coalition of Utah’s Silicon Slopes tech companies to crowdsource funding for the TestUtah initiative, went from “we pay” to Utah pays, resulting in multimillion-dollar, no-bid, taxpayer-paid contracts for those companies.
Auditors wrote the effort to raise funds was “marginally successful,” and during late March, “this effort turned from a solely private fundraising effort into a state-funded public-private partnership.”
Auditors noted that the Governor’s Office of Management and Budget initiated certain purchases and no-bid contracts that garnered extensive media coverage out of concern for a lack of competitive bidding, like the hydroxychloroquine and the TestUtah initiative. Those contracts were “steered” to certain vendors associated with Silicon Slopes, which “heightens risk,” auditors wrote.
“We also note that the governor and lieutenant governor had a relatively close relationship with (Silicon Slopes) and various of its member companies,” auditors included in a footnote of the report. “This causes particular concerns when contracts are steered to those companies, especially at the approval of the governor.”
In awarding the contracts, management and budget office said it gave preference to Utah-based, Silicon Slopes companies “that had already begun mobilization to address the emergency on their own,” and represented “that it was not reasonable to expect private companies to perform these particular contracts without compensation,” auditors wrote.
“While we recognize the need of a local presence for testing and the benefit of prioritizing the availability of in-state supplies, this may not be a reasonable assumption for the development of certain technical solutions (dashboard, app, website, surveys, etc.),” auditors wrote.
While the report says it is “also reasonable to expect to compensate vendors for large-scale efforts, we are concerned that various high-level state officials involved” in the Silicon Slopes discussions “failed to understand the evolving nature of these public-private arrangements, believing that certain goods or services were being donated when they were really being procured under contract.”
Auditors also noted the Governor’s Office of Management and Budget lacked documentation and “reasonable due diligence” when determining vendors and prices. Often, auditors wrote, “the approvals were verbal and not documented.”
“If written documentation exists of a competitive analysis, the governor’s office was unable to provide it for us for this review,” auditors wrote. “While we recognize that decisions had to be made quickly, we are concerned that the lack of documented competitive analysis for these contracts, many of which were entered into over a two- to three-week period, indicates that a reasonable analysis may not have taken place.”
Overall, however, auditors concluded the contracts initiated by the governor’s office “appear reasonable” despite “various concerns.”
Harding agreed the agencies should provide documentation of reasonable due diligence. But he sought to dispel any notion that relationships Cox or Herbert have with any of the companies influenced the contracts.
“We want to be clear that any such relationships did not influence the award of contracts,” Harding wrote. “The review of which contract should be awarded to which entities was performed by staff members who exercised independent judgment in making recommendations about contract awards.”
He also noted “awarding contracts to known vendors was an intentional decision that likely saved the state a large amount of money.”
“Some states paid tens or hundreds of millions of dollars for supplies they never received because of fraudulent practices or simple inability to deliver on the part of unknown vendors,” Harding wrote. “Utah, on the other hand, received every good it purchased.”
Auditors also dived into the issues surrounding the $800,000 purchase of hydroxychloroquine that made headlines earlier this spring and sparked concern from some medical experts. The audit report concluded the purchase “lacked clear authorization,” with auditors finding “no evidence, verbal or otherwise,” that the Utah Department of Health authorized the purchase, and that state health officials told auditors they believed the medication would be purchased by private parties.
The request to purchase the medication under the Governor’s Office of Management and Budget’s emergency response budget “was verbal, as was the purchase directive, from GOMB to Purchasing to order and process the payment,” auditors wrote.
The purchase was later refunded after news reports about it, but still prompted concern about why state officials would greenlight a purchase of anti-malarial drugs, which had been touted by President Donald Trump but lacked consensus from medical experts on its effectiveness and safety to treat COVID-19.
“Without written documentation of authorization (or explicit verbal authorization), it is impossible to determine exactly how this occurred,” auditors wrote in the report. “We are concerned that this purchase occurred without anyone’s explicit authorization.”
However, despite concerns that the Utah pharmacy that sold 20,000 courses of the drugs to the state for $800,000 was price gouged, auditors concluded the price tag “appeared reasonable,” based on interviews with pharmacists and similar compounding pharmacies.
And while critics including the Alliance for a Better Utah expressed concerns that the stockpiling of the drugs was a “closed-door sweetheart deal” to “bankroll” pharmacist Dan Richard’s “speculative business decision at the risk of Utahns,” auditors concluded state officials did put “some effort” in to perform due diligence ahead of the purchase.
Having the medication on hand even if it was not used was likely a better decision than not having the medication when it might have been desperately needed.
–State COVID-19 audit
“We found that, given the heightened demand for the medications and shortages in the drug supplies during that period, as well as a lack of conclusive evidence of pricing as of a certain date, it was very difficult to determine the exact cost of the medications as of the order date,” auditors wrote. “However, based on available evidence, we concluded that the price charged for the medications was within a reasonable range.”
Auditors also deemed state officials’ desire to stockpile the drug and the purchase “reasonable given the concerns with the severity of the disease and belief of this medication’s possible benefits and limited side effects.”
“In other words, having the medication on hand even if it was not used was likely a better decision than not having the medication when it might have been desperately needed,” auditors wrote. “Further, it appears that the state made efforts to ensure the intended stockpile would not negatively impact the availability of the medication to existing users. “
However, auditors also noted “there was disagreement among multiple high-level state employees and medical professionals regarding whether to purchase that medication.”
KSL in May uncovered how Dr. Angela Dunn, Utah’s state epidemiologist, and Dr. Marc Babitz, deputy director of the Utah Department of Health, were at odds over the drugs, and how other Utah medical professionals protested the suggestion that state officials would endorse using hydroxychloroquine for COVID-19 treatment.
“The governor’s office could have given these dissenting voices greater consideration, possibly expanding the circle of input, before making the purchase,” auditors wrote.
Harding, in his response, said state leaders “agree that communication surrounding the purchase of this medication was insufficient and that better communication and planning could have avoided complications associated with this purchase.”
The audit also reviewed finances around the TestUtah initiative and the multimillion-dollar contracts with Nomi Health, the firm that spearheaded a private testing initiative, started up mobile testing sites, and contracted with a lab to deliver test results.
Auditors concluded that while the per-test costs were “reasonable” the “actual per-test costs were unreasonable.”
While the original 60-day contract with Nomi — costing $7.6 million — anticipated up to 3,000 tests per day, or about $44 per test, “the actual tests processed per day was substantially lower than projected, resulting in a cost per test of over $235.”
“This is significantly higher than other established testing services, which list their price at $125 or less per test,” auditors wrote.
The report says Utah Department of Health data showed the public demand for tests was much lower than anticipated, and during the 60-day contract period, the average number of tests per day statewide was about 3,200, with an average of about 540 daily tests at TestUtah sites.
“We express concern that the contract paid a flat rate for startup costs plus a flat rate per testing site,” auditors wrote. “The contract contained no provision for adjustment based on the number of tests performed. We note there did not appear to be an effective plan to rapidly ramp up testing demand once test availability expanded.”
Auditors noted that Nomi, according to contract terms, could have charged $8.9 million or $1.28 million more than the amount paid. After the 60-day contract period, the state extended the contract and testing rates increased. After the extension, the state procured a new contract at a lower cost, according to the report.
Ultimately, auditors concluded the efforts to increase testing capacity were “reasonable,” but “efforts to establish other options” were not documented.
“GOMB represented that they contracted with Nomi after reaching out, without success, to other testing facilities and labs to find more capacity for testing,” auditors wrote. “We have only received verbal representation of this. ... We have no records indicating who was contacted and what capacity existed.”
Healthy Together app
Auditors also reviewed the $6.3 million contract with Twenty for the Healthy Together app, initially intended to be tool to assist COVID-19 contact tracing with location tracking. Auditors found the purchase “prioritized location tracking functionality and development speed over alternative development options, resulting in a high price.”
“We found no evidence to indicate the state performed any meaningful cost analysis to determine whether the price was reasonable,” auditors wrote. “We also found it likely that part of Twenty’s price for development included the uncertainty of a broadly defined scope of work. This broad and changing scope likely contributed to delays in deliverables.”
Auditors recommended the Utah Department of Health consider “whether alternatives to the app would be more cost-effective” than continuing the current contract.
KSL in July reported how the state was still spending millions on the app without contact tracing features, even though a Utah-based firm offered the same service for free.
We found no evidence to indicate the state performed any meaningful cost analysis to determine whether the price was reasonable. We also found it likely that part of Twenty’s price for development included the uncertainty of a broadly defined scope of work. This broad and changing scope likely contributed to delays in deliverables.
–State COVID-19 audit
Harding, in his response to the TestUtah services, said state leaders are reviewing auditors’ suggestions “and will incorporate them in future planning efforts as appropriate.”
For the Healthy Together app, Harding said the app is an “important part” of the state’s COVID-19 response, with other features including symptom checking, test results and other information.
“Though changing course midstream in the use of this type of technology would likely create an unwanted redirection of resources and confusion among the user base, the UDOH and GOMB have considered, and will continue considering alternatives to the Healthy Together application,” Harding said.
Critics from the left-leaning advocacy group Alliance for a Better Utah, which has been vocally critical around issues like the hydroxychloroquine purchase, said Utah leaders must learn from the mistakes outlined in the audit and coalesce around “strong, unified and transparent leadership that will take charge and put people first.”
“Although politicians like to brag that Utah is the best managed state, this audit reveals a number of serious flaws in how Utah leaders have managed the COVID response,” Chase Thomas, executive director of Alliance for a Better Utah, said in a statement.
“This audit validates the concerns many have had that well-connected businesses obtained lucrative contracts to assist with Utah’s COVID response and then fell short. The audit also raises a number of questions about the role of the Governor’s Office of Management and Budget, and why they have been behind the wheel of so many public health decisions without properly consulting public health experts.”
Democratic gubernatorial candidate Chris Peterson said the “administration’s missteps are costing our state dearly in terms of lost lives, shattered health, failing businesses and wasted taxpayer funds.
“We have a right to expect better results,” Peterson said. “It is time for Utah to shift away from cronyism and one-party government.”
Contributing: Lisa Riley Roche