Federal Government Awards Billions in No-Bid COVID PPE Contracts, Often to Politically Connected Companies

In June 2020, NPR analysis revealed that the federal government had awarded over 250 COVID-19 related contracts worth more than $1 million each without full competitive bidding, totaling billions of dollars in federal spending. Many contracts went to companies with no experience in medical equipment, some with direct political connections to the Trump administration. The contracts included widespread price gouging (markups of 50-1,300%), defective equipment, and outright fraud, exposing how public health emergencies become profit opportunities for politically connected contractors while regulatory oversight collapses.

No-Bid Contract Epidemic: Billions Without Competition

NPR’s investigation identified systematic bypassing of competitive procurement processes:

Scale of Non-Competitive Contracting:

• 250+ contracts worth over $1 million awarded without full competitive bidding
• Billions of dollars in federal spending through emergency procurement waivers
• Contracts awarded within days or weeks, bypassing normal vetting processes
• Emergency authorities invoked to justify avoiding standard oversight

Justification: Federal agencies claimed emergency conditions required rapid procurement, but:

• Many contracts went to companies with no relevant experience or equipment
• Political connections appeared more important than capability or expertise
• No evidence rapid procurement improved supply or reduced shortages
• Competitive bidding could have occurred within reasonable emergency timeframes

Notable Examples: Political Connections and Inexperience

Several high-profile contracts exemplified the pattern of political favoritism and contractor incompetence:

Federal Government Experts LLC: $34.5 Million for Nothing

The Contract:

• Awarded $34.5 million no-bid contract for medical supplies
• Company had no prior experience selling medical equipment
• No website, minimal business history, newly formed LLC
• Contract later canceled after company failed to deliver supplies

Outcome:

• Company never delivered contracted PPE
• Federal government eventually recovered funds after cancellation
• No criminal charges filed despite apparent fraud

Zach Fuentes LLC: Former Trump Deputy Chief of Staff

The Connection:

• Zach Fuentes served as President Trump’s deputy chief of staff
• Left White House, formed LLC, immediately won $3 million federal contract
• Contract for respirator masks to the Navajo Nation

The Problems:

• No prior experience in medical equipment or supply chain
• Contract awarded based on political connections, not expertise
• Represented clear conflict of interest and potential corruption
• Congressional investigators flagged as “suspicious”

Fillakit LLC: $10.2 Million for Non-Existent Medical Equipment

The Contract:

• $10.2 million contract for COVID test collection kits
• Company was a novelty marketing firm specializing in “make your own whiskey” kits
• No medical equipment experience or regulatory approvals
• Contract awarded through emergency procedures

The Outcome:

• Failed to deliver functional medical supplies
• Products delivered were defective or inappropriate for medical use
• Contract eventually terminated, partial recovery of funds

Price Gouging: 50-1,300% Markups

The Department of Justice’s COVID-19 Hoarding and Price-Gouging Task Force documented extreme price inflation:

Documented Markups:

• Masks sold at 50-1,300% above normal market prices
• N95 respirators: Normal price ~$1, gouged price $10-15+
• Surgical masks: Normal price ~$0.10, gouged price $1-2+
• Hand sanitizer: Normal price ~$3, gouged price $30-60+

Prosecution Examples:

New Jersey Cases: The U.S. Attorney’s Office for the District of New Jersey charged 18 defendants in one year with:

• Price gouging on masks, sanitizer, and PPE
• Hoarding essential supplies to create artificial scarcity
• Fraudulent schemes claiming to have supplies for sale
• False advertising and wire fraud related to COVID products

Southern and Eastern Districts of New York: High-profile cases involved companies charging between 50-1,300% markups on masks, with some prosecutions under Defense Production Act authorities.

Task Force Scope: Attorney General William Barr created the Hoarding and Price-Gouging Task Force pursuant to President Trump’s Executive Order under the Defense Production Act, demonstrating the scale of profiteering requiring federal intervention.

Defective and Non-Existent Equipment

Beyond price gouging, many contracts resulted in defective or non-delivered supplies:

New York City Example: Comptroller audit found:

• 59 procurements totaling over $1 billion in initial value
• 11 vendor background checks lacked documentation
• 4 vendors either provided defective products or no products at all
• Inconsistent record-keeping put city at risk of additional gouging
• Billions in taxpayer funds spent with minimal accountability

Product Quality Issues:

• Counterfeit N95 masks that failed safety testing
• Ventilators that arrived broken or non-functional
• Sanitizer that failed to meet FDA concentration requirements
• Test kits that produced inaccurate results

Congressional Investigation: “Suspicious” Deals

Congressional oversight committees launched investigations into COVID contracting:

House Oversight Investigation (July 2020): Called contracts “suspicious” because companies:

• Lacked relevant experience in medical supplies
• Had political connections to Trump administration
• Received no-bid awards without competitive justification
• Failed to deliver contracted supplies or delivered defective equipment

Findings:

• Systematic bypassing of competitive procurement
• Political favoritism in contract awards
• Inadequate oversight of contractor performance
• Billions wasted on failed contracts and defective supplies

Limited Accountability: Despite investigations, few criminal prosecutions resulted, and most politically connected contractors faced no consequences beyond contract cancellations.

International Comparison: UK PPE Scandal

The U.S. PPE contracting failures paralleled similar scandals in the United Kingdom:

UK Scale:

• Over 135 contracts with systemic problems
• Lack of competition, opaque accounting, conflicts of interest
• £1 billion wasted on unusable PPE
• “VIP lane” for politically connected contractors

Transparency International UK Findings: Similar patterns of:

• Emergency procurement bypassing normal oversight
• Political connections determining contract awards
• Massive waste on defective or non-delivered equipment
• No accountability for contractors who failed to deliver

The “Kushner Task Force”: Shadow Procurement

Reporting revealed a parallel procurement operation run from the White House:

Jared Kushner’s Shadow Supply Chain:

• White House senior advisor Jared Kushner led unofficial procurement effort
• Bypassed FEMA and established agencies
• Recruited volunteers from private sector and consulting firms
• Operated outside normal government contracting rules

Problems:

• No clear authority or accountability structure
• Contracts awarded based on personal relationships
• Competition between Kushner operation and official agencies
• States bidding against federal government, driving up prices

Secrecy:

• Limited transparency about contracts and decision-making
• Conflicts of interest not disclosed or addressed
• Records incomplete, hindering oversight and accountability

Legitimate Need vs. Emergency Exploitation

The PPE shortage created genuine urgent need, but emergency conditions enabled corruption:

Real Crisis:

• Hospitals faced critical shortages of masks, gowns, ventilators
• Healthcare workers reused single-use PPE, risking infection
• States competed for limited supplies in chaotic marketplace
• Global supply chain disruptions created actual scarcity

Exploitation of Crisis:

• Contractors exploited urgent need to demand excessive prices
• Political connections valued over expertise and capability
• Emergency authorities bypassed accountability mechanisms
• Profiteering prioritized over public health

Defense Production Act: Underutilized

Despite invoking the Defense Production Act, the Trump administration rarely used its authorities:

Available Powers:

• Require manufacturers to prioritize government orders
• Set maximum prices to prevent gouging
• Commandeer supplies and control distribution
• Penalize hoarding and price manipulation

Limited Use:

• Administration threatened DPA use but rarely implemented
• Allowed private market chaos and price gouging to continue
• Protected corporate interests over public health needs
• DPA primarily used for prosecutions, not supply management

Alternative Approach: Aggressive DPA use could have:

• Prevented price gouging through maximum price orders
• Ensured supplies went to highest-need areas based on public health criteria
• Prevented political favoritism in contract awards
• Reduced waste and profiteering

The Toll: Healthcare Workers and Patients

PPE shortages and profiteering had direct human costs:

Healthcare Worker Deaths: Inadequate PPE contributed to:

• Over 3,600 healthcare worker deaths in 2020
• Thousands more infected and experiencing long-term health effects
• Moral injury and trauma from working without adequate protection
• Resignations and early retirements reducing healthcare workforce

Patient Impacts:

• Hospital outbreaks from inadequate infection control
• Delayed care due to PPE shortages limiting capacity
• Increased mortality from COVID transmission in healthcare settings
• Psychological toll on patients and families

State and Local Scramble: Bidding Wars

Federal procurement failures forced states and cities into chaotic competition:

State Bidding Wars:

• States competed against each other for limited supplies
• Prices escalated as states bid against each other
• FEMA and federal government sometimes outbid or seized state purchases
• No coordination or rational allocation based on need

Price Impacts:

• Competition drove prices to extreme levels
• Small and poor jurisdictions unable to compete with wealthy states
• Rural and underserved areas faced greatest shortages
• Market chaos enriched middlemen and profiteers

Hoarding: Some states resorted to:

• Secret purchases to avoid federal seizure
• Hidden stockpiles to prevent requisition
• Armed guards protecting supply deliveries
• Subterfuge to secure needed equipment

Prosecution vs. Prevention: Reactive Approach

DOJ’s price gouging prosecutions addressed symptoms, not systemic problems:

Prosecutions:

• Targeted individual sellers and small operators
• Charged price gouging, hoarding, and fraud
• Resulted in some fines and imprisonment

Limitations:

• Did not address systemic procurement failures
• Large contractors and politically connected firms largely escaped prosecution
• Focus on small operators while bigger corruption ignored
• Reactive rather than preventive approach

Unprosecuted:

• No major prosecutions of politically connected contractors
• Companies that failed to deliver faced contract cancellation but not criminal charges
• Price gouging by established corporations went unprosecuted
• Political favoritism in contract awards not treated as criminal corruption

Regulatory Capture: Agencies Serving Political Masters

Federal procurement agencies failed to protect public interest:

FEMA:

• Awarded contracts based on political direction
• Failed to properly vet contractors for capability
• Insufficient oversight of contractor performance
• Competed with states rather than coordinating supply

HHS:

• Secretary Alex Azar previously pharmaceutical industry executive (Eli Lilly)
• Agency priorities aligned with corporate interests
• Regulatory oversight weakened during emergency
• Conflicts of interest not addressed

Revolving Door: Many officials involved in COVID procurement:

• Came from industries benefiting from contracts
• Maintained relationships with contractors
• Planned to return to private sector after government service
• Faced conflicts of interest affecting procurement decisions

Long-Term Implications: Precedent for Future Emergencies

The COVID PPE contracting scandal established dangerous precedents:

Lessons for Contractors:

• Public health emergencies are profit opportunities
• Political connections more valuable than expertise
• Emergency procurement bypasses normal accountability
• Consequences minimal even for failure to deliver or fraud

Government Capabilities:

• Federal government unable to manage emergency procurement
• Political interference undermines professional procurement
• No effective mechanisms to prevent profiteering during crises
• Regulatory oversight collapses when most needed

Future Pandemics: Next public health emergency likely to see:

• Similar profiteering and price gouging
• Political favoritism in emergency contracts
• Waste of taxpayer funds on defective supplies
• Healthcare workers and patients bearing costs of corruption

Reform Failures: No Systemic Change

Despite investigations and prosecutions, no structural reforms addressed root problems:

Unreformed:

• Emergency procurement authorities still allow bypassing competition
• No requirements for conflict of interest screening
• Insufficient penalties for contractors who fail to deliver
• No enhanced oversight for future emergencies

Industry Lobbying: Contractor associations and industry groups:

• Opposed reforms to emergency procurement
• Claimed regulations would slow response to future crises
• Maintained political influence preventing accountability measures
• Ensured future emergencies will enable similar profiteering

The Cost of Corruption

Federal COVID PPE contracting failures cost:

Financial:

• Billions in taxpayer funds wasted on defective or non-delivered supplies
• Inflated prices paid due to lack of competition and price gouging
• Ongoing costs from inadequate stockpiles requiring future purchases

Human:

• Healthcare worker deaths from inadequate PPE
• Patient deaths from hospital outbreaks
• Long-term health effects on infected workers
• Psychological trauma and moral injury

Institutional:

• Public trust in government procurement destroyed
• Precedent that emergencies enable corruption
• Demonstration that political connections matter more than competence
• Confirmation that the wealthy and connected profit while ordinary people die

The COVID PPE contracting scandal exemplified how regulatory capture and political corruption function during emergencies: normal oversight evaporates, political connections determine who profits, and public health needs become secondary to enriching politically favored contractors. Thousands died from inadequate PPE while billions in taxpayer funds enriched companies with no medical expertise but strong political connections—a pattern that will repeat in future crises until structural reforms prioritize public health over private profit and political patronage.