House Panel Asks Agencies To Explain COVID-19 Contracts

By Daniel Wilson
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Law360 (July 16, 2020, 10:38 PM EDT) -- A House COVID-19 response oversight panel urged several agencies to explain the reasoning behind certain contracts for personal protective equipment and medical supplies, questioning why they had been awarded to firms connected to the Trump administration or lacking in federal experience.

Several contractors chosen to help address the coronavirus pandemic appear to be unqualified and selected only due to political connections to the administration, while others lacked federal contracting experience and haven't been able to meet their contractual requirements, Democrats on the House Select Subcommittee on the Coronavirus Crisis, led by Chairman Jim Clyburn, D-S.C., said in a letter released by the subcommittee Wednesday.

The committee is also concerned about reports that the White House had pushed for contracts to be awarded to certain companies without using a competitive process, according to the letter, sent to the U.S. departments of Defense, Health and Human Services, Homeland Security and Veterans Affairs.

"The Select Subcommittee is concerned that these contracting practices may have wasted taxpayer dollars and exacerbated shortages of critical supplies, contributing to the spread of the coronavirus and the death of Americans," Clyburn said.

Among the examples mentioned of work awarded to unqualified companies with White House ties was a $3 million respirator mask supply deal awarded by HHS subagency the Indian Health Service to Zach Fuentes LLC, according to the letter.

The company is owned by a former deputy chief of staff to President Donald Trump and was created just 11 days before it was awarded the contract, and the masks supplied under the deal were proven "unsuitable for use in a medical or surgical environment," the letter states. But rather than agree to take the masks back, the company wants full payment, Clyburn said.

Also, the VA had awarded more than 20 contracts for PPE and other supplies to AvMEDICAL LLC, often noncompetitively, beginning roughly a month after its CEO Troy Mizell donated to Trump's reelection campaign and the Republican National Committee, despite Mizell having previously been in charge of another company the VA's Office of Inspector General said in 2015 had misrepresented itself to win VA contracts, Clyburn said.

And in an example of the White House trying to get deals awarded noncompetitively, it has been reported that the administration pushed for a subsidiary of AirBoss of America Corp. to win a $96 million Federal Emergency Management Agency sole-source deal for respirators and filters, according to the letter. A federal procurement database specifically states the deal was "ordered by the White House," Clyburn said.

Then there are the more than 445 companies with little or no prior federal contracting experience that had been awarded pandemic response deals, some of which couldn't meet requirements, according to the lawmakers.

In one example, FEMA noncompetitively awarded a $55 million contract for N95 masks to Panthera Worldwide LLC, which had only one previous federal contract, no history of producing medical equipment, and was charging $5.50 per mask, well above manufacturer list prices, Clyburn said. The company went into bankruptcy, with the deal canceled and the company's owners sued for fraud, the letter states.

The subcommittee urged the agencies to provide documents related to their procurement policies for PPE, medical equipment, and testing supplies, and contract files related to the contracts used as examples in the letter, as well as projections for how many supplies they will need to respond to COVID-19 and how they plan to procure them. The lawmakers want these projections updated every two weeks.

Clyburn also sent separate letters to each of the contractors listed in the letter to the agencies, asking for related documents.

"This contract award and your company's performance raise serious questions as to why your company received this contract, how your company's performance will impact the federal government's response to the coronavirus crisis and ongoing shortages in critical supplies, and what steps the federal government should take now to address these issues," he said in each letter.

AirBoss said in a statement provided to Law360 on Thursday that the questioned FEMA contract was for the supply of a commercially available product, sold at a discount to its regular list price, and that it was "proud of our long-standing and significant work with U.S. government agencies over many years and under many U.S. presidential administrations."

"The FEMA contract about which the subcommittee is inquiring, we can assure is not the result of 'political connections,'" it said. "Our proven track record and ongoing delivery in our existing U.S. government contracts, including the FEMA contract, are on track and successful. [We] have for decades supplied personal protective equipment and related products to governments, militaries and healthcare providers around the world."

Representatives for the four agencies and for other contractors named in the letter did not immediately respond to requests for comment late Thursday.

--Editing by Daniel King.

For a reprint of this article, please contact reprints@law360.com.

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