Author Archives: Mariana Teran

Who did FEMA contract with?

In March 2020, for the first time in this nation’s history, all 50 states declared a major disaster due to the novel coronavirus (“Covid-19”).  In response to the declaration, the Federal Emergency Management Agency (“FEMA”) began procuring domestic vendors to fulfill contracts for personal protective equipment (“PPE”) and testing supplies.

Months later, FEMA is under review for granting Covid-19 emergency contracts to businesses that were unable to meet their contractual obligations.  Typically, FEMA engages in a competitive bidding process prior to choosing a vendor to fulfill a contract, as outlined in 2 CFR § 200.320.  Abandoning its own protocol, FEMA awarded contracts to new vendors to manufacture PPE without evaluating the vendors or their capabilities.  FEMA awarded approximately 1.8 billion dollars in contracts without engaging in a competitive bidding process. Now vendors have defaulted on contacts claiming they are unable to meet delivery deadlines or production quantities.  Without the necessary PPE, hospitals and governmental officials are at increased risk of contracting Covid-19.  The 2020 PPE shortage demonstrates the necessity of the competitive bidding process to prevent fraud and waste of taxpayer funds.

Some of the contract awardees had only come into existence a few days before they accepted contracts.  Several vendors had no history of manufacturing PPE or any other type of medical equipment.  These vendors attempted to act as intermediates between FEMA and foreign manufacturers, accepting contacts and then assigning their contractual rights.  Without proper evaluation of vendors, the possibility of ethical violations arises.  One vendor, founded by a former White House aide, was awarded a three million dollar contract for masks.  The company had no experience manufacturing masks and delivered several defective masks.

The competitive bidding process is not new to FEMA or the federal government. There are multiple methods used for the proposal bidding process but the suggested method is a sealed bid. Bids are publicly solicited and a firm fixed price contract is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the solicitation, offers the lowest in price.  When a sealed bid process is not used, then a competitive proposal process is sought. The competitive proposal process is normally conducted with more than one source submitting an offer, and either a fixed price or cost-reimbursement type contract is awarded. Contracts must be awarded to the responsible firm whose proposal is most advantageous to the program, with price and other factors considered.

FEMA does have discretion to allow for noncompetitive procurements under certain circumstances, including when FEMA determines that immediate actions required to address a public exigency or emergency and cannot be delayed by use of a competitive solicitation.  Even under its discretion, FEMA should take administrative steps to protect federal funds from fraud, waste, and abuse.

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SCOTUS To Decide On Latest Religious Exemption For Employers

On January 17, 2020, the U.S. Supreme Court granted the writ of certiorari to hear two cases involving employers’ obligation to provide health insurance coverage for contraceptives. Employers are currently required to provide employees with health insurance including women’s preventive care under the Affordable Care Act (“ACA”). In 2011, the U.S. Department of Health and Human Services (“DHHS’) announced a rule to allow employers to use religious beliefs as an exception to providing female employees with insurance that includes women’s preventive care.  Later, in 2017, DHHS announced an interim rule which expanded upon its original exemption to include employers who had not only religious conflicts but also moral or ethical objections. 

The Supreme Court consolidated two cases relating to the DHHS’ rule.  The first case began before the new rule went into effect, when the Attorney General of Pennsylvania filed for a preliminary injunction to stop the rules enforcement. The District Court for the Eastern District of Pennsylvania entered a nationwide injunction against the rule’s enforcement;  the Third Circuit Court upheld the District Court’s decision. The second case involves a right of intervener filed by the Little Sisters of the Poor, a mission based organization led by catholic nuns  who intervened to object to the national injunction on the DHS’ rule.

 In support of the DHHS rule, religious organization and employers contend that under the Religious Freedom Restoration Act (“RFRA”) they are entitled to exercise their religious belief.  Since the use of contraception is not supported by those religious beliefs, religious organizations claim an exemption from the ACA requirement.  However, Pennsylvania argued that the DHHS did not follow the rule making requirements under the Administrative Procedures Act, and the rule goes beyond the legislative intent of the ACA.  Further, RFRA does not create an exception for the ACA requirement because the ACA’s requirement does not put a substantial burden on religious exercise.  Finally, Pennsylvania argues that the interim rule would create irreparable harm to state citizens by limiting access to affordable health care.

This is not the first time the Supreme Court has listened to an argument regarding the religious exception to the ACA. In 2014, the court decided in Burwell v. Hobby Lobby Stores by a 5-4 decision that under RFRA, DHS could expand religious exceptions to for-profit companies since those rights were already extended to non-profit companies. In her dissent, Justice Ginsburg, disagreed with the majority’s view because for-profit companies are not allowed to declare a religion.  Additionally, judicial precedent states that a religious belief cannot “impinge on the rights of third parties”.

In the writ for certiorari in Little Sisters of the Poor Home for the Aged v. Burwell, the petitioners asked the Court to answer whether the federal government lawfully exempted religious objectors from the regulatory requirement to provide health plans that include contraceptive coverage.  Meanwhile, in Trump v. Pennsylvania, the State of Pennsylvania proposed the following questions to the Court: First, whether the agencies had statutory authority under the ACA and the RFRA, to expand the conscience exemption to the contraceptive-coverage mandate; and second, whether the agencies’ decision to forgo notice and opportunity for public comment before issuing the interim final rules rendered the final rules—which were issued after notice and comment—invalid under the Administrative Procedure Act, 5 U.S.C. 551 et seq., 701 et seq; and third, whether the court of appeals erred in affirming a nationwide preliminary injunction barring implementation of the final rules.

The Supreme Court is poised to deliver its opinion on this high-profile issue before the end of the current session. The court’s decision might finally clarify the obligations employers have to provide women’s preventative healthcare to female employees and if there are exceptions to that obligation under RFRA, the ACA or the U.S. Constitution. 

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States Take Regulatory Measures to Protect Youth from E-Cigarettes

Over the past decade, electric cigarettes or commonly referred to as e-cigarettes have become a blossoming market as technology has upgraded traditional cigarettes.  The e-cigarette industry has urged that vaping is a “safer” method of smoking. In August 2019, e-cigarettes claimed its first victim.  Earlier this year, the Center for Disease Control reported the hospitalization of a young man in Illinois for a respiratory related illness that was attributed to vaping. Eventually the young man succumbed to his illness.  Since the first incident, the CDC has attributed an additional thirty three respiratory-related deaths to routine vaping habits.

Why is vaping so popular? As technology evolves, so does the method people used to inhale tobacco.  Whether the delivery is a pipe, a cigar, a cigarette, or—today’s method—e-cigarettes, tobacco is tobacco is tobacco.  Regardless of the tobacco product, the use of tobacco increases health risk of the user. The popularity of vaping grew when companies released flavored vaping oils and tobacco products, which attracts a new, younger market.

If you offer a child a lollipop, they will gladly accept it, so comes as no surprise that teenagers and young adults are attracted to e-cigarettes, especially with flavors like strawberries or cotton candy.  States have tried to address this issue by passing statutes to restrict the minimum age requirement to purchase e-cigarettes to 18 or 21.  This hasn’t stopped teenagers and young adults from purchasing e-cigarettes.  The United States Surgeon General reported in 2018 that e-cigarette use increased among high schoolers by 78%.  So, what can the legislature do to discourage the sale of e-cigarettes to young people?

States are considering passing statutes prohibiting the sale of flavored e-cigarettes and other e-cigarette regulations.  In the meantime, state executive offices have taken the lead on dealing with this issue.  Montana Governor Steve Bullock directed the Montana Department of Health and Human Services to issue a temporary ban on flavored e-cigarettes until the state can determine what type of action to proceed with.  Montana is not alone; Michigan has also banned the sale of flavored e-cigarettes.

Other states have taken this battle into the courthouse.  The state of New York has filed suit against twenty-two online flavored e-cigarette vendors accusing them of creating a “public nuisance” by selling targeted flavors to youths under the state age limit.

State regulation has not gone unnoticed by the e-cigarette industry.  One of the largest e-cigarette retailers, JUUL, has announced it will suspend the sales of flavored e-cigarettes.  This isn’t the only change at JUUL. In September, the retailer replaced its CEO, Kevin Burns, with K.C. Crosthwaite, the CGO for Altria, a traditional tobacco company.  JUUL also announced it will suspend all television, print, and digital advertisements.  The e-cigarette industry is feeling the financial effects of the various bans.  Altria reported a 19% loss in stock prices over since the beginning of 2019.

Even with all the government regulation and voluntary removal of products, consumers can still purchase unflavored tobacco and mint e-cigarettes.  Whether the sale of these products will be enough to keep the industry afloat is undetermined.  What is certain is that a wave of change is rushing towards the e-cigarette industry which could drown the entire industry.  Compliance with government regulation and consumer claims could cause serious damage to the e-cigarette industry.

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