Reprinted with permission from ProPublica.
A former White House aide won a $3 million federal contract to supply respirator masks to Navajo Nation hospitals in New Mexico and Arizona 11 days after he created a company to sell personal protective equipment in response to the coronavirus pandemic.
Zach Fuentes, President Donald Trump's former deputy chief of staff, secured the deal with the Indian Health Service with limited competitive bidding and no prior federal contracting experience.
The IHS told ProPublica it has found that 247,000 of the masks delivered by Fuentes' company — at a cost of roughly $800,000 — may be unsuitable for medical use. An additional 130,400, worth about $422,000, are not the type specified in the procurement data, the agency said.
What's more, the masks Fuentes agreed to provide — Chinese-made KN95s — have come under intense scrutiny from U.S. regulators amid concerns that they offered inadequate protection.
“The IHS Navajo Area Office will determine if these masks will be returned," the agency said in a statement. The agency said it is verifying Fuentes' company's April 8 statement to IHS that all the masks were certified by the Food and Drug Administration, and an FDA spokesperson said the agency cannot verify if the products were certified without the name of the manufacturer.
Hospitals in the Navajo Nation, which spans Utah, New Mexico and Arizona, have been desperate for protective supplies as the numbers of coronavirus infections and deaths have grown quickly. As of Friday, the Navajo Nation reported 4,434 COVID-19 cases and 147 deaths, a crisis that has prompted outcries from members of Congress and demands for increased funding.
Fuentes initiated email contact with officials at IHS, a division of the Department of Health and Human Services, the agency said. After the contact, the agency informally solicited prices from a handful of face mask providers and chose Fuentes of the six companies that responded because his firm offered the best price and terms, IHS said. Fuentes also benefited from government procurement rules favoring veteran- and minority-owned businesses, the procurement data shows.
Fuentes said political connections to the Trump White House played no role in his company's selection. “Nobody referred me from the White House. It was nothing like that," he said. “Emphatically no."
The White House did not respond to a question about Fuentes' contract.
IHS told ProPublica that Fuentes' company reported that the masks were made in China, but the agency did not specify the manufacturer. Federal contracting records show without explanation that Fuentes refunded $250,000 to the IHS this month, and he said in an interview last week that he gave back money when he procured masks at a slightly reduced cost.
“We went back to IHS and said, 'We were able to get this cheaper,'" Fuentes said. “We will never gouge our customers."
Fuentes referred questions about the mask manufacturer and FDA certifications to his consultant, Sia N. Ashok, a business school classmate. In a phone interview, Ashok declined to name the manufacturer because it could violate the company's contract, she said.
Ashok said the company lived up to the terms of its contract with IHS and has all the FDA certifications it needs in place.
“If the customer or IHS or anyone has any issues with anything, we would be more than happy to replace," she said.
Fuentes' contract price of $3.24 per mask is more expensive than the pre-pandemic rate of about $1 per mask, but far less than what some government entities have paid at the height of the crisis. Mask costs can vary widely depending on availability, demand, quality and exact specifications.
Fuentes is a retired Coast Guard officer and protege of former White House chief of staff John Kelly. He formerly served as Kelly's military aide while he was secretary of the Department of Homeland Security, and Fuentes followed Kelly to the White House. In December 2018, as Kelly prepared to leave, The New York Times reported that Fuentes had told associates he planned to “hide out" in a vague role at the White House until he qualified for a Coast Guard early retirement program. Fuentes retired in January from the Coast Guard after 15 years of service. He said his retirement was for medical reasons.
He jumped into the federal contracting world in April at a time of great opportunity — and high risk. The coronavirus pandemic loosened many federal procurement rules as agencies scrambled to respond to a national emergency. But as supplies of personal protective equipment ran out and many countries restricted exports, delivering on contracts became more difficult, and agencies have wrestled with incomplete orders, cancellations and possible counterfeit goods.
N95 masks were so scarce that the FDA in April allowed the use of some Chinese masks that had not been certified by U.S. regulators. But in recent weeks, the FDA narrowed its guidance after tests indicated that some of the products were not as effective as they should be, and it tightened restrictions on the use of Chinese masks by hospital and medical personnel.
Fuentes formed Zach Fuentes LLC as the emergency regulations were evolving.
In April, the FDA authorized the use of masks made by close to 90 manufacturers in China.
But the masks made by some of those manufacturers did not pass CDC tests because they did not filter out enough fine particles. In some cases, the masks failed utterly.
This month, the FDA rescinded its authorization for the vast majority of the Chinese manufacturers, published a much smaller list of respirators made by 14 approved manufacturers and tightened the standards for evaluating Chinese masks.
Eleven federal agencies, including IHS, have reported buying either KN95 masks, or N95 masks made outside the United States, according to contract data. Of those, Fuentes' contract with IHS is the second-largest that mentions KN95 masks specifically. The largest contract was struck by FEMA, for $3.9 million, on May 4.
Overall, IHS has spent $85.4 million to respond to COVID-19 as of May 22, signing 318 contracts with 211 vendors, according to federal procurement records. The masks provided by Fuentes went to five IHS medical facilities and to a government warehouse.
Fuentes' new company has also received a much smaller contract from the Bureau of Prisons to provide 10,000 N95 masks for $1.31 each, according to a BOP statement to ProPublica and procurement documents.
One IHS hospital slated to receive masks from Fuentes is the Gallup Indian Medical Center in New Mexico. A doctor there, who declined to be named because he was not authorized to speak publicly, said the facility initially had a shortage of protective equipment. Conditions have improved thanks to federal purchases and donations, he said, though staffers still have to reuse masks up to five times each, he said.
“IHS facilities have sufficient quantities of N95 respirators at this time," an agency spokesman said.
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