While Gov. Gavin Newsom says the light at the end of the pandemic tunnel is growing brighter, California remains under a state of emergency.
That means his administration wields the power to award contracts without the normal competitive bidding process in response to COVID-19. And the money continues to flow to a major Newsom contributor: UnitedHealth. The state awarded over $221 million in no-bid contracts this year alone for UnitedHealth subsidiary OptumServe to help with vaccine delivery, according to recently released contract documents. Another no-bid agreement from last year — this one for testing — was extended by $61 million, according to the documents.
A CapRadio investigation in February found the state had already awarded UnitedHealth nearly half-a-billion dollars worth of pandemic response contracts — some no-bid, and some awarded through a fast-tracked bidding process.
The company has contributed hundreds of thousands of dollars to Newsom’s reelection campaign and ballot measure committee since 2018. That includes $131,000 in December 2020, sandwiched between the state awarding various no-bid deals worth hundreds of millions of dollars.
Neither Newsom’s office nor UnitedHealth responded to a request for comment. Both denied wrongdoing in response to CapRadio’s previous reporting into the overlap of no-bid contracts and major contributors.
“The Governor’s Administration made the decision to enter into all contracts related to the COVID-19 response based on the best interests of the state and protecting health and welfare of all our residents,” Erin Mellon, spokesperson for the governor, wrote last month in an emailed statement to CapRadio. “The state had to work quickly to get the necessary equipment in place to save lives.”
But government ethics experts say the overlap of no-bid contracts with major campaign contributors is cause for concern — even if there’s no evidence of illegal wrongdoing.
Bob Stern, former general counsel to the California Fair Political Practices Commission and principal co-author of the state’s Political Reform Act, previously told CapRadio that it could strain public trust.
“I really think that the governor has a tin ear in terms of receiving huge campaign contributions and providing sole-source contracts for corporations that were giving him these contributions,” he said.
Competitive bidding is designed to secure the most cost-effective deal for the state and avoid favoritism. However, it can be time-consuming. During states of emergency, the governor can skip this process to quickly deliver goods and services.
Early in the pandemic, for example, the Newsom administration inked a no-bid $990 million deal with BYD for hundreds of millions of N95 and surgical masks. The governor said the state had to move quickly to secure the protective equipment.
“We've been competing against other states, against other nations, against our own federal government for PPE — coveralls, masks, shields, N95 masks — and we're not waiting around any longer,’’ he said during an interview on The Rachel Maddow Show when he announced the deal.
The company’s president donated $20,000 to Newsom a few months ahead of the massive deal.
Typical states of emergency may last a few weeks or a few months. The COVID-19 pandemic, however, has stretched the current state of emergency past the one-year mark — and Newsom wants to extend his emergency spending authority into 2022.
The nonpartisan Legislative Analyst’s Office raised concerns about this proposal, arguing “there would be no reasonable checks and balances on the Governor’s COVID-19 spending authority.”
While the state has created a website listing state contracts awarded during the pandemic, government ethics experts told CapRadio the administration should be more transparent about the overlap of no-bid contracts awarded to major donors to the governor.
Stern argues Newsom shouldn’t accept campaign contributions from a company within a year of awarding them a no-bid contract.
In February, the state awarded a $45 million no-bid contract for UnitedHealth subsidiary OptumServe to deliver vaccinations, which included converting some testing locations into immunization sites. The contract runs through April.
In March, the state awarded a $176 million no-bid contract for a UnitedHealth subsidiary to deliver vaccines under the direction of Blue Shield of California, the company responsible for California’s vaccine distribution. Blue Shield, another major Newsom contributor, received a $15 million no-bid contract to handle distribution. The contract runs through August.
Krista Canellakis, Deputy Secretary for General Services with the state Government Operations Agency, wrote in an email that these are “the first of many contracts” the state will enter into for vaccine delivery.
“The legislature has been notified the costs could ultimately be in the neighborhood of $1 billion,” she wrote.
Canellakis added that the state awarded no-bid contracts “because there is no time to do competitive bidding given the urgent need to bring up a network capable of delivering vaccinations” across the state.