California Scheming: Billions Awarded by State in No-Bid ‘Auto-Renewed’ COVID Contracts

California Scheming: Billions Awarded by State in No-Bid ‘Auto-Renewed’ COVID Contracts
California Gov. Gavin Newsom speaks during a press conference in San Francisco, Calif., on Oct. 6, 2022. (Justin Sullivan/Getty Images)
John Haughey

California agencies approved more than 8,000 no-bid contracts with the onset of the COVID-19 pandemic in 2020, and many have since been “auto-renewed” with little or no oversight under the state’s public health emergency declaration, which has been in effect for nearly three years.

The no-bid contracts, awarded mostly by the California Department of Public Health (CDPH) and California Department of Technology, include more than 80 work orders of at least $25 million and total at least $12 billion, according to analyses by Kaiser Health News, the nonpartisan nonprofit CalMatters news services, and budget watchdogs such as the Howard Jarvis Taxpayers Association.

A 2022 bill adopted unanimously by both chambers of the California State Legislature in August, and signed into law by Gov. Gavin Newsom on Sept. 25, will require that state agencies “submit information regarding the terms and conditions of a proposed extension or renewal” of any contracts of $75 million or more awarded beginning Jan. 1, 2023.

Senate Bill 1271 will not retroactively apply to the no-bid contracts issued under the emergency declaration but is a long-overdue step in the right direction, said State Senate Minority Leader Scott Wilk (R-Santa Clarita).

“This is a victory for transparency and good governance,” Wilk said in an Aug. 22 statement following the adoption of SB 1271.

“This measure takes the ‘automatic’ out the state’s no-bid contract renewal process and adds essential oversight. I am very glad to see the legislature send a message to the governor that we want more checks and balances in the renewal process.”

SB 1271 was one of several bills proposed by Wilk in February 2022 as part of a “government accountability package” that included SCA-7, a resolution that would need to be approved by voters, and SB 947, an expansion of the California Whistleblower Protection Act to include employees of private entities awarded no-bid contracts.

SCA-7 would require all state agency no-bid contracts of $25 million or more up for renewal or extension be approved by the Joint Legislative Budget Committee at least 60 days before the contract’s end date.

“Right now, there are no laws on the books requiring public oversight hearings on renewals of no-bid state contracts of $25 million or more for any state agency,” Wilk said in comments accompanying SCA-7. “My bills would add that much needed component to the law.”

Wilk was traveling this week and unavailable for comment, but Press Secretary Jacqui Nguyen told The Epoch Times that SCA-7 and SB 947 have been “continued” for further discussion next year.

For California lawmakers, “next year” begins Dec. 5 when they become the first state legislators to convene their 2023 session.

Nguyen said whether the 2022 bills morph into “another bill down the road” or are reintroduced in 2023 as initially drafted is “not concrete,” noting that Wilk “wants to work” with fellow lawmakers to get more fiscal transparency measures encoded into state statute.

Although no-bid contracts, especially for technology services, have been a source of contention in California for years, the authority granted the governor under the state’s public health emergency allowed Newsom to unilaterally issue masking/vaccination mandates, temporary stay-at-home orders, and award no-bid emergency response contracts ignited widespread criticism, including from fellow Democrats in the deep blue state.

The angst was exacerbated late last year when a $1.7 billion no-bid annual contract awarded to PerkinElmer, Inc., a Massachusetts-based diagnostics company, was “auto-renewed” with little opportunity to question it.

PerkinElmer was awarded the annual contract in the spring of 2020 to operate a laboratory in Valencia, California, agreeing to return COVID-test results within 48 hours and process up to 100,000 tests each day.

In early 2021, whistleblowers at the Valencia lab reported tens of thousands of COVID-19 tests were contaminated by improper handling with results either inconclusive or incorrect, claiming unlicensed lab technicians were watching videos and sleeping while they were processing test samples.

Despite objections from the California Senate Republican Caucus, which noted at the time the lab had never met its promised testing capacity and turnaround timelines, the $1.7 billion annual contract was “auto-renewed” in October.

Attorney Laura Powell, of Californians for Good Governance, told The Epoch Times that while the PerkinElmer contract has drawn a lot of attention, there are thousands of other no-bid contracts state taxpayers are on the hook for but can find little information on.

“I tried to document how many (no-bid) contracts there are on a spreadsheet” and could not do so without filing public records requests, she said, claiming California routinely ignores such requests or “they drag their feet” in responding.

Powell in a Nov. 10 Twitter post drew attention to the CDPH issuing a $192 million contract for graphic design services related to COVID-19 public health messaging awarded to Sacramento-based PR firm Runyon Saltzman.

Runyon Saltzman has been awarded $328.7 million in contracts from California since 2020, including more than $254 million in no-bid contracts, she said.

The state has provided little detail about what, exactly, the $192 million contract entails. “Some have suggested the money’s actually going towards ad buys. Obviously they aren’t really spending that much on graphic design!” Powell wrote. “Still, 1) $192 million for propaganda is unconscionable, 2) they must be honest about how our money is spent, 3) no-bid contracts fuel corruption.”

Newsom announced in October that California’s COVID-19 state of emergency will end Feb. 28, 2023. But without more safeguards on no-bid contracts, critics such as Howard Jarvis Taxpayers Association President Jon Coupal, maintain that the governor and his successors are likely to sustain, if not increase, the practice.

“During the past two years, Gov. Gavin Newsom’s administration has paid billions of dollars in secretive no-bid contracts with little to no transparency,” Coupal said in a widely published April op-ed co-authored with Wilk. “Now Newsom is deploying his same secretive approach to a growing number of other public contracts. All Californians, irrespective of party affiliation, should be deeply concerned.”

“Transparency is non-partisan, or at least it should be,” Wilk added. “No-bid state contracts should never become the norm, and when they are deemed necessary, there must be strict accountability to prevent waste, fraud, and abuse. The public’s confidence in the contracting process must be restored.”

Taxpayers’ concerns and failing public confidence in the governor’s and state agencies’ procurement practices are drawing further scrutiny with the state facing potential budget deficits over the next five years.

California’s Legislative Analyst Office (LAO) estimates the state could face a $25 billion budget deficit in the next fiscal year and shortfalls between $8 billion to $17 billion in the following four years.

The estimate is part of the LAO’s 2023-24 Fiscal Outlook, released Nov. 16, which helps guide state lawmakers as they begin putting together budget proposals for the coming fiscal year.

LAO said the state’s revenue estimates represent “the weakest performance California has experienced since the Great Recession.”

John Haughey reports on public land use, natural resources, and energy policy for The Epoch Times. He has been a working journalist since 1978 with an extensive background in local government and state legislatures. He is a graduate of the University of Wyoming and a Navy veteran. He has reported for daily newspapers in California, Washington, Wyoming, New York, and Florida. You can reach John via email at [email protected]