WILMINGTON, Del. – The coronavirus offered DuPont, the chemical giant based here, a golden opportunity.
In January, the company assembled a crisis team to find out how to speed up global production of personal protective equipment, including coveralls made from its patented Tyvek material, which normally sell for about $ 5 a piece at hospitals. In early March, as the disease began to spread to the United States, the DuPont plant in Richmond, Virginia, was in the process of launching Tyvek.
It usually takes up to three months to ship the material to Vietnam, where it is sewn into body suits and retrieve it. When the federal government offered to pay for charter flights to reduce the round trip from 750,000 items to 10 days, DuPont agreed.
DuPont then sold 60% of the protective gear to Uncle Sam while retaining 40% for his other customers. The company declined to say how much the Department of Health and Human Services paid 450,000 suits, but a spokesperson said they were selling up to $ 15 each, three times the amount they bought before the virus pandemic.
“We actually helped supply the raw materials from Richmond, Virginia, and we airlifted those products to Vietnam, all so that DuPont could sell us,” their products, said a senior federal official involved in the coronavirus effort.
President Donald Trump and the HHS department, which announced the deal earlier this week, described the deal as one of many successes in the expedited delivery of essential medical equipment to the United States.
But for some government officials familiar with the end of the coronavirus supply chain, this was yet another example of Trump’s industry-serving task force as the White House attempted to corner the medical supply market.
For weeks, Trump has resisted pressure to use all the power of his office to temporarily transform the private sector into a branch of the federal government in the event of a national emergency. But he and his lieutenants instead used the crisis to make federal assets and personnel incidental to the industry, according to NBC interviews with dozens of public and private sources involved in various aspects of the coronavirus response.
In doing so, the vice president’s coronavirus task force – primarily through a supply chain unit led by Admiral John Polowczyk and strongly influenced by White House adviser Jared Kushner – favored some of the largest corporations in the country and ignored small producers of goods and services with a long history of meeting emergency needs, according to officials from several federal agencies and people familiar with contracting.
They also operated almost entirely in the dark, revealing few details of their agreements with large companies; created a new convoluted emergency response system; and sowed confusion and mistrust in the states and among those in need of medical supplies.
There is virtually no responsibility for their decisions on how and where to allocate emergency supplies, a void that has sparked strong criticism from Democratic congressional officials who are asking for answers.
The story of the supply chain group, a power center within the largest task force led by Vice President Mike Pence, is a story of chaos, secrecy and nonsense, officials said. . Governors, local officials and veterans of federal emergency response say it has made the national fight against the pandemic far more difficult.
But the view is very different from the inside. Pence called on Kushner and his innovation team to help federal agencies scale up and speed up the acquisition and distribution of equipment, according to a senior administration official who spoke to NBC under anonymity to provide an overview of the group’s mandate and operations.
Rather than creating new layers of bureaucracy, supply chain task force and data analysis members view their work as a key tool in removing barriers. Currently, Kushner’s group is focused on setting up a solid COVID-19 test plan so that the American company can be reopened, as well as deploying a production schedule of 110,000 fans. between April 13 and the end of June, according to the senior official of the administration knowing his operations well.
Perhaps they get better at getting results than telling their story, the source said.
To reconstruct this story, NBC News interviewed state, local and health system officials who detailed specific cases of federal interference in the delivery of vital goods – from California to Michigan to New Jersey – as well as senior and middle managers. officials and representatives of companies who have benefited from the actions of the working group.
With so many ad hoc groups purchasing goods and services for the crisis – the White House Coronavirus task force, one of its seven subsidiary task forces, or other government agencies – it’s impossible to say if taxpayers get the best deals possible or are gouged.
Just as DuPont wouldn’t say how much Tyvek suits cost American taxpayers, a Federal Express spokesperson laughed when asked what the government pays for each of the 40 flights the carrier chartered for the department Health and Social Services and FEMA. But a senior government official involved in the response effort said that such charter flights could cost up to $ 1 million each, while comparable Department of Defense planes could be borrowed by federal agencies for about 10,000 dollars an hour. A round trip from the East Coast to Vietnam on a commercial flight takes approximately 41 hours of flight time.
It is also unclear which factors have the most weight in allocation decisions, which can be made on the basis of reliable data or through an opaque arbitration process in which senior politicians are involved. in the calls.
FEMA and DHS did not respond to NBC’s request for comment on criticism regarding the lack of transparency in the process, and FEMA did not respond to questions about the process for deciding where to allocate medical equipment, the cost of charter flights or the reason for placing the supply chain working group in a corridor between two buildings rented by the agency.
“Children” and the formula “40-40-20”
The two priorities that officials say have not been sacrificed by Trump or his supply chain task force, dubbed “the kids” at FEMA headquarters, are private profit and the House’s ability White to choose where the supplies go.
Team members include close friends and allies of Kushner, who is also the president’s son-in-law. Brad Smith, described as a “volunteer” because he is on loan as deputy administrator of the Centers for Medicare and Medicaid Services, is a Kushner’s friend who has been involved in his work.
Supply chain task force leaders have dismissed existing federal emergency management teams that had long-standing methods of getting help from the public and private sectors. Instead, they first contacted personal contacts, according to people familiar with their operations. As they have absorbed some of the old practices over time, with the help of career officials determined to align their actions with the protocol, it took time to find their own system.
“Jared and his friends decided they were going to do their job,” said the senior government official involved in the response effort. “It cost weeks. “
The senior administration official familiar with the work of the task force described a race to procure fans, test kits and protective equipment in the midst of a chaotic time when governors, mayors and systems hospitalists demanded more than they needed. The supply chain team had the ability to win bids and then distribute the goods directly, distribute them via the federal purchasing side, or simply assign contracts to the states, the person said.
But when it comes to determining needs, said the source, Kushner and his team took their time to demand that governors and mayors have an idea of how much equipment they already have at their disposal and what they can get – some governors are smarter and more resourceful than others, the source added.
In a ripple that impacted small businesses and communities across the country, the task force ended FEMA’s long-standing practice of using regional offices to locate, pay and acquire goods with small local suppliers in case of emergency, preferring instead to contract with heavy goods vehicles.
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In mid-March, a FEMA regional official originally contacted a potential supplier whose officials spoke with NBC News on condition of anonymity to avoid damaging future contract opportunities. by patients.
The supplier originally purchased $ 20,000 of equipment and told the regional office that production could increase to 10,000 face shields per day, using a supply chain entirely based in the United States, almost immediately. But word got back that under the new system, the regional office could not approve the purchase. The request is expected to go through the main federal procurement system, where it is still located.
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“It was a big investment on our part that was faced layer after layer, layer of resistance and difficulty,” said an official with the small supplier.
Working from a war room in the first floor hall between two towers of FEMA’s leased headquarters in southwest Washington, the task force received the keys to the world’s deepest treasure and allowed the Trump administration to calmly calm the scarce market for medical products in the United States and abroad. Its members were dispersed Tuesday after a group “partner” tested positive for the coronavirus.
Now their work is done with fewer eyes looking over their shoulders, just as two House committee chairs have requested documents related to the work of the supply chain task force.
Using what they call a “40-40-20” formula, the task force purchases whatever it can make available, and then allocates the goods, according to people familiar with the response effort. The first 20 percent is set aside for the federal government’s national strategic stock. The task force says where the next 40 percent is going, and the company selling the product must deliver the remaining 40 percent as it sees fit.
As part of “Project Airbridge”, a relatively new operation led by the Supply Chain Task Force, the federal government covers the cost of shipping PPE produced by large companies in exchange for the right to direct half of the goods, according to a FEMA spokesperson.
Airbridge started in late March when a member of one of the working groups contacted the FedEx government affairs team and asked, “Is this something you all know how to do?” according to the FedEx spokesperson. FedEx has delivered large amounts of cargo by air since legislation in the late 1970s deregulated the industry and now claims the largest all-cargo air fleet in the world.
In practice, the 40-40-20 agreement means that the federal task force can redirect a shipment already en route to a state, city or hospital that previously agreed to purchase it from the supplier.
“I mentioned maybe two weeks ago that we were trying to get contracts with companies around the world to get these PPE. And when the shipments were supposed to arrive, we realized they were delayed or they were canceled and our goods went to the federal government, “said Governor Gretchen Whitmer, D-Mich., On Monday in an interview at NBC News.
“And I raised that, and people looked at me like I was serious? Is it correct? ” she said. “And since then, of course, other governors have said that, essentially the same exact thing that we are entering into these contracts, and then we find out that it goes to FEMA or to anyone. “
The equipment bidding wars have been a major source of friction between the federal and state governments, which could not hope to compete with the supply chain task force. The senior administration official familiar with the work of the supply chain working group said that the team continued to buy even though its members believed that the actual demand for goods would be less than the volume of requests that she received from all over the country.
An internal document provided to NBC News by a nurse from the Kaiser Permanente hospital system in the San Francisco Bay area describes the local version of the federal government’s logistical nightmare rushing at the last minute to bring medical supplies.
“We have been informed by Cardinal Health, our source of isolation gowns, that FEMA is intervening and sourcing from the United States from manufacturer Cardinal China,” said the Kaiser document. “We always receive a small replenishment as part of a protected allowance. However, there are very few sources of supply for isolation gowns. As a result, we must move on to mandatory urgent measures. “
For businesses working with the administration, the reductions are a necessary by-product of the requirement to give control over the allocation of 60% of their assets to the federal government. Their normal customers, even those who need it, are denied the supplies they expected.
Asked about this note, Kaiser Permanente spokesperson Marc Brown replied by e-mail that yes, some materials had “decreased” compared to levels prior to COVID-19.
“Meanwhile, we continue to hear from our various suppliers and distributors that future shipments may be reduced due to FEMA or other federal prioritization,” he wrote, asking questions of Cardinal Health. , a multi-billion dollar company based in Ohio that manufactures many drugs and surgical products.
NBC News has sent a copy of Kaiser’s memo to Cardinal Health. Spokesperson Lucy Bradlow said the wording of the document was not accurate, but declined to explain it further.
“It seems that, from the note you sent and what you describe, this is part of the Airbridge project, a collaboration between FEMA and industry that is accelerating the available inventory of essential supplies from abroad to American hospitals via military transport, “she then emailed, suggesting that NBC News contact FEMA itself.
At the same time, Trump and other White House officials say it is up to states, cities, and hospitals to find and acquire their own medical supplies, the task force is undermining these efforts by cutting deals with companies to re-route equipment away from lower level buyers. The priority list for administration can be determined based on data on the number of infections, hospitalizations and other information, which is generally the case for federal emergency procedures.
But Pence’s task force also has the power to “arbitrate,” the term used in the national emergency response protocol to resolve disputes over the destination of items in case of shortages, according to federal officials familiar with response effort. It is not clear whether Trump himself engages in the allocation of property through the arbitration process, but Kushner’s group is not involved, according to the senior administration official.
At a press briefing in the White House on March 20, the president appeared to be referring to the opaque system of selecting winners and losers.
“Stocks have been distributed in many states – first order, second order and daily,” he said.
Shanel Robinson, director of the board of directors for Somerset County, New Jersey, said in an interview this week that a load of personal protective equipment had been ripped from the county by the federal government while a place COVID-19 test was in preparation, which would be the first in the county.
The administration announced this week its decision to stop providing assistance to community test sites.
“We are on the 10 meter line for a site next week,” said Robinson, an Air Force veteran.
Congress wants to know
Defense Production Law, a law empowering the President to force companies to contribute to emergency response efforts, to take control of assets and to dictate prices, was invoked by the administration and agitated as a club to influence the actions of private companies. In one case, it was used to prevent 3M and other companies from exporting medical equipment abroad. The order cited the power of the Trump administration to determine which companies can transport which goods and when.
Controlling the flow of goods at a time of scarcity and need gives Trump tremendous leverage to reward his allies and punish enemies, including governors, mayors and business leaders. Much of the public reaction to it so far has come from governors, particularly Democrats, but there are signs that business leaders are also concerned.
Coronavirus Supply Chain Task Force on Tuesday received an urgent message from senior Homeland Security officials asking for a list of “industry contacts” to be supplied within the hour, according to familiar officials. demand.
In what Trump calls the “war on the coronavirus,” lost time can mean the loss of lives, money, and opportunities to secure medical equipment, and DHS has attached the time limit of one hour for the request. that he sent to FEMA lawyers.
But in the 60-minute run, DHS officials weren’t looking to move respirators, masks, or test kits to the front lines of the coronavirus effort. Instead, acting attorney general Chad Mizelle, one of the country’s top national security officials, wanted to prepare an appeal sheet so that he could allay the fears of big corporations said officials.
The presentation proposed by Mizelle to answer frequently asked questions about “some of the concerns related to CCA” in the industry comes as Congress, governors, state and local officials, hospital systems and the media pressure on the administration and some of the country’s largest companies to explain why the federal government is rerouting much-needed medical supplies at the last minute, why the price of products is skyrocketing and why Trump chose to not to use all of his authority in the public interest.
“We write with deep concern about the lack of clear coordination to procure and prioritize the personal protective equipment (PPE), ventilators, test kits and other critical medical resources necessary to meet the needs of the United States in the midst of the COVID-19 global pandemic, “Three chairmen of committees at Democratic House said on Wednesday in a letter to Trump. “More can be done to take advantage of the ability of industry and researchers to curb this pandemic.”
Senior government officials have said that most businesses working with the federal government do not partner because they are looking for a profit and that the government will not ask them to make a loss, adding that it would be a mistake. abuse the powers of defense production law.
This on-the-fly overhaul of U.S. emergency management has produced branded announcements by Trump on the speed and size of merchandise deliveries.
“Our large-scale air transport operation to provide protective equipment to doctors and nurses continues to expand with more than 24 flights already completed and 49 more flights now scheduled for the near future,” Trump said. ‘a briefing from the White House Coronavirus task force on Thursday. “So it was a great success in this equipment and these outfits are distributed. “
But the model, which critics of the federal government value self-confidence and favoritism over experience and expertise, can only be measured by itself, because it is unprecedented and because that he withdrew resources from the intervention apparatus set up by law.
Who gets the rough end of the deal?
Trump considers himself the perfect negotiator, but it is clear that he is reluctant to use his full authority to lean on the industry for a better set of conditions. Perhaps more important locally, just knowing how the system works would be an improvement.
Pence announced on Thursday that its task force was reversing its decision to stop providing federal support to community testing sites. He said it would be an option for states to take over, which he described as an attempt to give them more “flexibility” to choose locations and “style” them.
“We will continue to provide them with the personnel, supplies and other support they will need in the future,” he said.
For Robinson, Somerset County, N.J., official, it seemed that the response strategy was lacking in the area of strategic response.
“Having a long-term game plan, not just an immediate one, would serve us better,” she said.
Right now, what the public is getting from their money is a process that state and local authorities, as well as hospitals and front-line medical personnel, have been forced to devote to a precious time trying to understand. In some cases, they have wasted this time bidding against the federal government for supplies.
The only people who pretend to understand what’s going on are the politicians who work closely with Trump, Pence and Kushner – and representatives from some of the companies in the supply chain.
The White House and its task force have handled an untoldly difficult crisis to the best of their ability, the senior administration official said, adding that efforts to push lifesaving equipment into hot spots have been successful. that they consider the most important. metric.
No one has died in hospital yet because he was unable to obtain a ventilator, the source said.
But tests are still not widely available, Americans are still dying in hospitals and at home, and medical personnel are still struggling to find enough protective gear.
“Good crisis management requires a unified chain of command and responsibility. When you have multiple factions competing with an unclear division of labor between them, then this is a recipe for chaos, “said Jeremy Konyndyk, senior fellow at the Center for Global Development who led the Obama administration’s response to the Ebola epidemic in West Africa. “It’s only 101 levels of management. “
Jonathan Allen reported from Wilmington, Phil McCausland and Allan Smith reported from New York, and Cyrus Farivar reported from Oakland.