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U.S. Buying Hospital Gowns From Untested Makers

Nov. 25, 2020

Several U.S. companies that won almost half a billion dollars in government contracts to make hospital gowns appear to have too few workers and not enough factory space to complete the job when the awards were made, according to a Bloomberg Law analysis.

Their selection calls into question how closely the Defense Department examined these untested company's abilities to fulfill the contracts. However, the Defense Department stands by its review.

Many of the contractors have scaled up their staffing and factory space since they got the awards in September.

Doctors and nurses are concerned about protecting themselves as the U.S. faces a winter surge in infections that could rival the worst days of a pandemic that already has killed 228,000 Americans. In the early months of Covid-19's spread, personal protective equipment (PPE) shortages abounded in places with high caseloads, prompting the government to seek ways to bolster its reserve supply of emergency medical supplies.

Lowest Bid

The contracts were awarded to the manufacturers that quoted the lowest price and attested they could meet the requirements for making the gowns, according to the DLA.

That procurement strategy didn’t take into account a company’s experience in federal contracting or in making medical operation gown, according to former Navy contracting officer Jeff Cuskey. Not considering past performance “interjects significant contract schedule and performance risk," he said.

Cuskey is now an independent consultant and expert witness on defense contracting and procurement and widely known in the field. He represented one company that bid unsuccessfully on a gown contract. He said the Defense Department can deploy other strategies that take into account more factors than price, but it didn't do so this time. The DLA's use of the lowest price criteria for selecting contractors “had inherent risks given the critical application"of these gowns for health-care workers, he said.

Wholesale costs for a U.S.-made reusable gowns typically range from $12 to $20 apiece, according to Brenna Schneider, chief executive officer of apparel manufacturer 99 Degrees Custom, who also unsuccessfully bid on the contract.

Made in U.S.

A consortium of six trade groups, led by the National Council of Textile Organizations, sent letters to the Defense Department raising concerns that some awardees may be using materials or labor from outside the U.S.

In response, the Defense Department said the manufacturers self-certified that they are producing the gowns domestically. The department also is requiring awardees to submit invoices for all materials to confirm compliance, it said in an attestation to the Congressional Research Service obtained by Bloomberg Law.

Four awardees also told Bloomberg Law their medical operation gowns were exclusively U.S.-made, including the supplies.

The Defense Department is “being extremely thorough on this, more than I’ve ever seen,” Jason Maddox, CEO of California-incorporated and Texas-based Maddox Defense, said in an interview.

Medical Operation Gown

Site Inspections

At least 12 awardees weren’t visited by inspectors until after their contracts were finalized, according to executives at those companies. The DOD attestation confirmed all of the facilities were visited after the awards were made. “Site visits are not normally conducted as part of the selection process,” McCaskill, the DLA spokesperson, said.

Feinberg and Maddox each confirmed separately to Bloomberg Law that Defense Department officials visited their company’s facilities before and after they got contracts.

Staffing, Financing

The only publicly available data on many of the contract awardees is from the commercial credit analytics firm Dun & Bradstreet, which is how the Defense Department got its financial information during the selection process, according to its report to the Congressional Research Service.

Dun & Bradstreet shows just four of the 15 primary contractors have 100 employees or more.

An awardee assigned to make 700,000 reusable gowns—the median number for the contracts—would need at least two work shifts of 83 workers each for five days a week for five months, Amos estimated. Schneider put that worker number at 71. To fulfill the median order for disposable gowns (6.25 million), the workers needed for each shift ranges from 164 to 194, they said.

Ramping Up

Twelve of the primary contractors added or changed their places of manufacturing after their contracts were awarded, according to contract amendments.

Some companies are getting creative adding capacity. Peter Berzin, chief executive officer of Franklin, Mass.-based Contollo Mass Manufacturing, a subcontractor for primary awardee Unifire Inc., said his company reopened a factory shuttered in 2015, used a die cutting machine that was still there, hired back some of the former workers, and received a $1.8 million grant from Massachusetts.

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