California ‘vetting’ masks it’s buying in deal with company barred from some transit bids

Gov. Gavin Newsom brushed off concerns Monday about the Chinese manufacturer his administration is paying nearly $1 billion to make masks to protect health care workers from COVID-19, saying the state’s contract requires that the masks meet federal standards.

The Newsom administration is working with the federal government and several private health care companies to assess whether the masks meet quality standards, said Mark Ghilarducci, director of the governor’s Office of Emergency Services. They are being manufactured by BYD, a Chinese multinational company with a subsidiary based in California.

The state has teams “on site” at the two overseas facilities where the masks are being manufactured to ensure quality control, said Ghilarducci, whose office is facilitating the contract.

“There’s been a lot of very intensive, very cross-coordinated efforts to ensure these materials will come in in the timeframe and get the certifications that are required,” Ghilarducci said during a Monday news conference. “If they don’t, we have provisions to address that accordingly.”

Ghilarducci and Newsom did not answer questions Monday about whether they were aware of concerns raised by experts and Congressional lawmakers about BYD before they negotiated the contract. News outlet Vice reported Saturday about issues raised by American government officials about electric vehicles manufactured by BYD, as well as allegations that the company has used forced labor.

In past statements, BYD has denied wrongdoing and maintained that has not participated in forced labor. Last year, President Donald Trump signed a law barring state-controlled companies, such as businesses like BYD that are headquartered in China, from bidding for some government transit contracts.

In response, BYD charged that the federal government was influenced by “a special interest misinformation campaign to squash competition in the electric bus sector.”

Ghilarducci said the problems Vice reported about BYD’s electric vehicles are a “separate” issue from the mask purchase.

California spent $500 million so far

The Newsom administration has not yet released its contract with BYD publicly, despite requests from reporters and a top lawmaker.

Although normally the government doesn’t pay companies for goods until it receives them, the state has already paid about half of the total cost for the masks and other protective equipment, said H.D. Palmer, a spokesman for the state’s Department of Finance.

The state made the payment to Global Healthcare Product Solutions, LLC, a subsidiary of BYD, said Jennifer Hanson, a spokeswoman for the California Controller’s Office.

State Treasurer Fiona Ma said her office vetted the request to send the money before wiring the $495 million payment Friday morning.

Emails Ma provided to The Sacramento Bee show that the Office of Emergency Services told her office that OES, FEMA and large medical companies had vetted the company. BYD has contracts with large public transit agencies, including LA Metro, according to the email.

Sen. Holly Mitchell, D-Los Angeles, who leads the Legislature’s joint budget committee, wrote Newsom a letter Thursday giving him permission to make the payment but also raising concerns about the contract.

“Under normal circumstances, the Legislature would have had more time to deliberate an expenditure of this magnitude and would have been allowed to thoroughly vet the details of the contract,” she wrote.

She acknowledged that the Newsom administration needed to act quickly while the Legislature is on recess because of the pandemic, but asked that his office provide lawmakers “the full details of the contract.” She specifically requested the required quality standards, the price per mask and the production and delivery timelines in the contract.

‘Extensive vetting’

Mitchell’s office declined an interview request from The Bee and did not answer questions about whether the Newsom administration has provided Mitchell the information she requested.

Newsom said last week that he had already signed the agreements for the masks. Ghilarducci said Monday that his office had not yet provided the contracts to reporters because the state was “still in the final negotiation phases,” but that his office will release the contract publicly in the future.

The contract is unusual in both its size and its timeline. It calls for BYD to send California 200 million masks per month, Newsom says. About 150 million of those will be N95 masks, which are thought to be most effective in preventing transmission of the coronavirus that causes COVID-19, while the remaining 50 million will be surgical masks.

The $990 million the state has agreed to pay for the masks makes up a significant chunk of the $7 billion the state expects to spend on coronavirus response, according to a letter Finance Director Keely Bosler sent lawmakers Friday.

The Department of Finance expects much of that will be reimbursed by the federal government, according to the letter.

California and private medical companies did “extensive vetting” of BYD before Newsom signed the contract, Ghilarducci said.

“We have a contract that I’ll put up against any other,” Newsom said.

It covers a two and a half month period with an option for month-to-month extensions, said Brian Ferguson, spokesman for the state’s Office of Emergency Services.

The first shipment of masks is due to arrive before the end of April, Ferguson said.

This story was updated at 3:45 p.m. on April 14, 2020 to reflect the intent of the 2019 law that barred China-based companies such as BYD from bidding on certain federal transit contracts.

This story was originally published April 13, 2020 at 6:14 PM.