California to get $247M refund as masks face delivery delay
Sacramento, Calif. – California will get a $247 million refund amid delayed delivery of protective masks it ordered under a deal with a Chinese manufacturer.
The N95 respirator masks, made in China by electric vehicle manufacturer BYD, failed to meet an April 30 certification deadline from the National Institute for Occupational Safety and Health, a spokesman for the Office of Emergency Services said Wednesday. The state disclosed the refund when it released its nearly $1 billion contract it signed in April for about 500 million masks over 2.5 months, a mix of N95 and surgical masks.
Tens of millions of masks were set to arrive in California this month.
The state paid the first half of the contract up front to Global Healthcare Product Solutions, a BYD subsidiary, nearly a month ago. That payment covered 300 million tight-fitting N95 masks at a cost of $3.30 each.
The governor’s office didn’t say what caused the certification delay. An amendment to the contract signed Wednesday gives the company until May 31 to meet certification. If it does not, it must return the other half of the state’s upfront payment.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
SACRAMENTO, Calif. – Millions of protective masks that were to arrive in California this week as part of the state’s nearly $1 billion deal with a Chinese company have been delayed, Gov. Gavin Newsom said Wednesday.
The governor said the N95 masks made by BYD, an electric vehicle manufacturer with a California manufacturing plant, were stalled in the federal certification process. He did not explain further, and his office did not respond to a request for more information.
Last month, Newsom announced the deal to great fanfare, calling it a “bold and big” effort in the state’s fight against the coronavirus. He said the deal would result in 500 million masks that were a mixture of traditional surgical masks and the more protective N95 models to the state over the next 2.5 months.
The state took the unusual step of paying about half the contract up front to cover about 300 million N95 masks at $3.30 per mask. The payment was made to Global Healthcare Product Solutions, a subsidiary of BYD.
The price per mask was first reported Wednesday by the Los Angeles Times and based on purchasing documents from the state treasurer’s office. The total contract also included looser-fitting surgical masks, though details on those were not part of the initial payment, said Brian Ferguson, a spokesman for the Office of Emergency Services.
Tens of millions of surgical masks have already arrived, but the N95 masks were delayed, Newsom said. Last week, the state paid an additional $104.7 million for those first shipments.
Newsom said last month that the state and federal governments had “teams on the ground” in China auditing and visiting BYD’s factories.
“We are looking to make sure we do not procure what is not authorized and ultimately is not validated,” he said.
The masks must be certified through the National Institute for Occupational Safety and Health, and were to be be tested and validated in Utah, he said.
Newsom has provided few details of the BYD deal, prompting criticism from some lawmakers. The Associated Press and other news agencies have sought the documents through public records requests and have been denied.
On Tuesday, the state’s Office of Emergency Services and Department of General Services denied the AP request.
“Given the unprecedented emergency conditions created by COVID-19 and the scarcity of equipment and supplies needed to protect lives, the State has a paramount interest in ensuring the safe procurement, transportation, storage, and distribution of necessary supplies,” Ryan Gronsky, senior counsel in the office of legal affairs at the Office of Emergency Services, wrote. “Publishing the agreement now – before performance under the contract is complete – would introduce substantial and unnecessary risk to the State’s ability to secure necessary supplies.”
Gronsky said the AP could refile a request for the document once the terms of the contract were completed.
On Wednesday, Newsom said the contract would be released “this week.” He blamed lawyers for holding up the disclosure and said he’s frustrated because “I want to share it with you.”
“We want to be as transparent as possible,” he said.
Newsom said he wants to share the contract so people can see what a great price the state paid.
The lack of information on the mask deal prompted criticism from state lawmakers, who said they would have had more time to vet the deal under normal circumstances. Documents from the treasurer’s office indicated Newsom’s administration hadn’t finished vetting BYD before Newsom publicly announced the contract or before his administration asked the state treasurer’s office to prepare $495 million in an initial wire transfer.
When the treasurer’s office asked for confirmation the vendor had been vetted on April 8, the day after Newsom announced the deal on MSNBC, Thomas Todd in the Department of Finance said “they’re vetting the vendor as we speak.”
The next day, an employee at the Office of Emergency Services told the treasury department that the state had worked with a “reliable” nonprofit organization to vet BYD and that the federal government and “large medical supply companies” also vetted the company.