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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