Influence Infects Pandemic Contracting

Issues
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A woman wears a mask, face shield and white jumpsuit while others in the background in similar attire clean
North Dakota National Guard airmen wear personal protective equipment as they sanitize a nursing home facility May 18, 2020 in Fargo, North Dakota. Photo by National Guard / Alamy Stock Photo.

With the COVID-19 death toll in the United States now exceeding 100,000, it is critical that our government works to provide medical supplies to treat patients, protective equipment for our front-line medical and essential workers, and testing materials to stop the spread of the virus.

But the federal government has given hundreds of millions of dollars in COVID-19 contracts to well-connected companies with little or no experience, raising questions about the Trump administration’s influence over the contract procurement process. 

The American public deserves to know that our elected officials have their best interests at heart – and not just those of political donors, allies, and influence-peddlers who find creative ways of getting the ear of White House officials beyond normal bidding procedures.

There is no question that this is a time of great need, and contractors are needed to provide items like life-saving Personal Protective Equipment (PPE) for front-line medical workers, cotton swabs to increase our testing capacity, and sanitation services to disinfect public spaces and stop the spread of the virus.

Given the scope of the pandemic, it is unsurprising that the government has sometimes turned to unconventional sources. Fashion companies are constructing masks, alcohol distillers are making hand sanitizer, and car manufacturers are producing life-saving ventilators. Abnormal times require innovative solutions, and there is nothing inherently wrong with companies deviating from their usual manufacturing focuses.

However, it has become clear that there is at least the appearance of favoritism in the contracting process, with companies that have ties to the Trump administration and those which have made political contributions seeming to have an advantage in receiving contracts. 

Hamilton Medical, a subsidiary of Hamilton Company, won a $551 million contract from the Department of Health and Human Services (HHS) to make ventilators, a significantly larger award than the company has ever received. Notably, in July of 2016, Hamilton Company made a $300,000 contribution to the pro-Trump super PAC Rebuilding America Now—during a period that then-vice presidential candidate Pence was encouraging donations to the group.

Ventilators are a necessity for saving the lives of COVID-19 patients. As confirmed cases skyrocketed at the beginning of April, medical experts across the country warned of an impending shortage of respiratory devices, and of the dire need to produce more.

But the contribution does raise questions about the White House’s influence on the contracting process, and whether lucrative contracts are more likely to be awarded to companies with a history of political donations or connections to the Administration, rather than those most qualified to produce them.

 As NBC News reported “[T]here's growing evidence that Trump and his aides are using his authority over both the contracting and allocation processes for political gain.”  In addition, The New York Times reported that Jared Kushner’s volunteer working group, tasked with sorting through more than a thousand potential contractors, were instructed to pay special attention to “VIP” leads from President Trump’s political allies.

A significant trend within the coronavirus related federal contracts has also been an uptick in so-called middlemen contractors – companies who themselves do not manufacture the products they supply to the government, but rather compile them from other sources, potentially at a profit.

For example, the Washington Post reported that Panthera Worldwide LLC, which was awarded a $55.5 million contract from HHS for N95 masks, has no experience in producing or procuring medical supplies. The contractor’s parent company – Panthera Enterprises – also filed for bankruptcy in 2019 and remains under significant debt, raising questions about its selection to produce the masks.

ProPublica profiled yet another middleman contractor, Federal Government Experts LLC, and its CEO Robert Stewart Jr.’s desperate search for N95 masks to fulfil the company’s $35.4 million deal with the Department of Veterans Affairs (VA). Federal Government Experts was ultimately unable to produce the masks – raising questions about how and why they were awarded the contract in the first place. 

Campaign Legal Center (CLC) found several other companies that appear to fit this pattern. VPL Medical, a California-based company with a limited public footprint and no clear experience in medical device procurement, was awarded a $6.4 million contract from the Department of Veterans Affairs  and a $15.4 million contract from HHS for masks.

Notably, VPL Medical formed as a corporation on March 24, less than a month before receiving the contracts. Red Tail Logistics has received several multi-million dollar contracts, including a $9.9 million deal through HHS for PPE. The company appears to have been founded in January 2019 and does not have a website or online presence. 

Given the White House’s role in the contracting process, one way for these middlemen contractors to win deals is to get the attention of the Trump administration, often through unconventional means.

 As reported by BuzzFeed News, Yaron Oren-Pines[EK1] , a Silicon Valley electrical engineer with no apparent experience in medical equipment procurement, was able to directly reach President Trump on Twitter. Three days later, he signed a contract with the State of New York for 1,450 ventilators – at the recommendation of the White House. Ultimately, this contract, too, was canceled by Governor Andrew Cuomo.

Even contractors with an established history of manufacturing large volumes of PPE have been forced to find ways to get the attention of top administration officials.

NBC reported last month that Mike Bowen, a senior official at the major Texas-based mask manufacturer Prestige Armitech, went on the “War Room” podcast – hosted by Steve Bannon, and popular with White House officials – to tout his company’s willingness to ramp up production. Bannon reportedly connected Bowen with a top Trump economic advisor, and a month later, Prestige Ameritech received a $9.5 million contract at the explicit request of the White House. 

The times we live in now are marked by tragedy and uncertainty. What shouldn’t be a question is that the government is working to serve the public interest.  Favoritism should not play a role in the federal contracting process – and companies should not be required to make political contributions or curry favor with the White House to secure contracts.

As made clear by the coronavirus pandemic, we must work to rebuild, not further erode, public trust in the government. One way to move in that direction is to ensure government contractors are chosen for their ability to meet public needs, not for their connections to political allies or their willingness to build up campaign coffers.

Sophia is a researcher for CLC's campaign finance & ethics teams.