$200M in City Purchased COVID Gear Auctioned For Just $500,000
HomeHome > News > $200M in City Purchased COVID Gear Auctioned For Just $500,000

$200M in City Purchased COVID Gear Auctioned For Just $500,000

Oct 09, 2023

A bridge ventilator was displayed when former Mayor Bill de Blasio announced a breakthrough in the fight against COVID-19, with a city-convened effort to produce the devices, April 21, 2020.

Ed Reed/Mayoral Photography Office

Over the last few weeks, 18-wheelers pulled up again and again to the City of New York's huge supply warehouse in Queens to pick up dozens of unopened cartons containing what, during the depths of the pandemic, City Hall proclaimed would be lifesaving miracle devices known as "bridge vents."

As the COVID pandemic overtook New York City in April 2020, then-Mayor Bill de Blasio commissioned 3,000 of the breathing devices as back-ups for the ventilators that kept sick patients alive, helping fund their manufacture even though they had never been tested in a New York City hospital setting.

"This is a story about doing the impossible," de Blasio said at the time. "We’d never made a ventilator before — and so we made thousands. We learned it would take a year — and so we did it in a month. Our City is taking our future into our own hands. That's how we’ll beat this crisis and prepare for the next."

Taxpayers paid $12 million for the devices. The city Economic Development Corporation awarded Spiro Wave LLC, the group that built the devices, $100,000 in "seed money" and secured the rights to buy 70% of whatever was produced going forward.

De Blasio's pandemic medical miracle has turned into a bargain-basement giveaway under current Mayor Eric Adams — with the bridge vents unloaded, unused, in an auction that ended Jan. 24, described in sale records as "non-functioning medical equipment sold as scrap metal."

A junk dealer from Long Island picked up the entire $12 million, 500,000-pound kit and kaboodle — for only $24,600. It took the dealer 28 truckloads to cart the stuff away, auction records state.

That's just over $8 per device, way less than a penny back for every taxpayer dollar spent.

And that's just the beginning.

An investigation by THE CITY has determined that since last summer, the Department of Citywide Administrative Services (DCAS) has systematically tried to auction off millions of dollars worth of COVID-related personal protective equipment (PPE) and medical supplies — gowns, face shields, hand sanitizer, KN95 masks, N95 masks — that the department decided are no longer needed. Many of these supplies remain in their original packaging and are brand-new.

THE CITY was able to connect specific auctions to 20 COVID-related medical supply contracts and confirmed the sales with a source familiar with the agency's auction efforts who spoke to THE CITY on the condition of anonymity. About 9.5 million items purchased by the city government from $224 million in COVID-related contracts at the pandemic's 2020 peak have been auctioned so far, garnering about $500,000.

That comes to 5 cents per item. Many other COVID items have remained unsold after going up for auction, with no bidders biting.

In one round last summer, only two of 24 auctions yielded sales. Even then, bidders paid $194,000 for goods originally bought for $980,000, according to internal DCAS emails.

A spokesperson for DCAS, Nick Benson, defended the agency's actions at a time of crisis, calling the early days of the pandemic "a dark and difficult time for all New Yorkers" and noting the global shortages of critical supplies.

"Thankfully, New Yorkers and our heroic frontline medical workers came together to avert some of the worst-case scenarios," Benson said. The spending rush at the start of the pandemic was meant to create a 90-day supply of medical supplies, he said.

Some of the surplus has already been given away, he said, to Ukraine, Indonesia, Ghana, Haiti, South Africa or nonprofit organizations. Auctioning off surplus, he said, "is required by the city charter."

DCAS officials appeared to be aware that the situation didn't look good, especially as COVID cases again rose last year.

A top DCAS official fretted in July 2022 that if the public learned about the auctions, it would prompt an inquiry "about the city's over-buying during COVID," an internal email reveals. "In direct consultation" with Mayor Eric Adams’ office, DCAS had "crafted talking points to address why the city is auctioning off PPE while Covid cases continue to persist."

Another email urged moving ahead quickly with the auctions because the landlord of the New Jersey warehouse where much of the equipment was stored was raising the rent — and because much of the stockpile would soon be past its expiration date.

Much of this big sell-off is occurring because de Blasio waived the usual good government oversight of city contracts at the start of the pandemic. Former city Comptroller Scott Stringer, whose job was to make sure that the city gets what it's paying for, was sidelined.

Earlier this month, his successor, Comptroller Brad Lander, issued a report noting that despite the pandemic, city agencies still had the responsibility to vet the credibility of vendors to see if they would deliver what they promised and if the prices offered were reasonable.

Lander found that both of those efforts were spotty at best, and the City of New York wound up paying upfront for millions of dollars’ worth of defective goods or supplies that were never delivered.

The comptroller zeroed in on Digital Gadgets, an electronics firm run by Charlie Tebele, a major donor to de Blasio, who appointed Tebele to EDC's board after the city ramped down its COVID purchases. Digital Gadgets was prepaid $9.1 million for ventilators that it failed to deliver, so the city applied that payment to surgical masks the company did supply. But Digital's initial delivery of N95 masks were of "poor quality or not FDA-certified," and were sold to the city for $4 a piece — well above the average per-mask price of $3.10, Lander found.

In many cases, in fact, the city paid absurdly inflated prices. A company called Fastenal sold the city 50,000 face shields at $6.70 per shield when the average price at the start of the pandemic was $3.67, the comptroller found. That means taxpayers paid $335,000 for items that on average should have cost $183,500.

On Valentine's Day, DCAS put up for auction a lot containing 701,100 face shields, with an opening bid of $1,000. That's less than one penny per shield.

THE CITY asked DCAS and Mayor Adams’ office how much the taxpayers got back for all the goods they actually have been able to sell at auction. DCAS and City Hall refused to say, demanding that THE CITY request the data under New York's Freedom of Information Law two weeks after THE CITY first asked for it.

Officials at EDC — which arranged the purchase of the bridge vents, provided the vendor with startup funding, and bought the rights to obtain thousands more — refused to answer THE CITY's questions about what happened. De Blasio also did not weigh in, declining to respond to THE CITY's call seeking comment.

EDC President & CEO Andrew Kimball, who was not at the agency when the purchase was arranged, would not say how many bridge vents were purchased, whether any were used in city hospitals, what effect if any they had on patients, and what happened to the $100,000 in seed money and the purchase of rights.

In 39 auctions where THE CITY was able to obtain records from the private auction service, almost all the goods were offered with starting bids that provided huge discounts, in most cases for pennies on the dollar.

A case in point is Duggal Visual Solutions, an image-production firm based in the Brooklyn Navy Yard. When COVID-19 struck, Duggal transformed into a factory to produce protective equipment for front-line medical workers.

In April and May 2020, DCAS awarded Duggal two contracts for COVID-related medical supplies, prompting a visit from de Blasio, who proclaimed "This is like a wartime factory." All told, Duggal was paid $2.9 million.

Company CEO Mike Duggal said he planned to make 500,000 medical aprons for the City of New York — thin plastic sheets that cover the front but not the back of wearers. Over the last few months, DCAS put up for auction 226,000 of these aprons with an opening bid of $500 for the whole lot. It's not clear if they got any bidders, and DCAS declined to reveal how much money, if any, this auctioned item generated.

Duggal also said it also manufactured 2.6 million face masks in a joint venture with Bednark Studio of Brooklyn. In January DCAS offered much of that up (2.38 million masks) at two separate auctions. No bidders emerged, so last week DCAS tried again, lowering the opening bid of one lot of 1.4 million shields from $4,205 to $4,000, and hiking the starting bid of the second lot of 924,000 shields from $1,000 to $2,900.

Those auctions close Feb. 28. As of Monday they attracted zero bidders.

Huge discounts were also available for isolation gowns purchased in the first few weeks of the pandemic. Since last summer DCAS has been trying to sell off millions of these gowns — still packed in their original boxes — for a tiny fraction of what taxpayers paid for them. The gowns helped protect front-line hospital workers such as nurses as they confronted the wave of seriously ill COVID patients.

A Garment District firm, JBS Dresses, won two contracts and was paid $24.2 million. DCAS wouldn't say how many of these gowns were put to use, but last month the agency offered 162,000 of JBS’ "disposable gowns" with a starting bid of $58,746.

In some cases, the opening bid price has dropped as months passed.

A Pennsylvania limited liability corporation called LVLM Distribution got paid $5.6 million for "hospital isolation gowns/masks," and last month DCAS offered up a lot of 97,850 of their gowns for $1,000. DCAS got zero bids and put the same lot up again last week, dropping the opening price to $280.

That's a fraction of a penny per gown.

DCAS originally signed a $5.7 million contract to buy millions of isolation gowns from a men's fashion store based in Jersey City called Faded Royalty. Ultimately the firm was paid only $263,000 for whatever gowns they were able to deliver, and last fall DCAS began auctioning them off.

In the first auction, DCAS tried to sell about 176,000 Faded Royalty gowns for $64,000 — about $2.75 per gown. It's not clear what happened since DCAS officials wouldn't say, but at a second auction, DCAS’ new opening bid was $1,000 for 98,175 Faded Royalty gowns — about a penny per gown.

As of this week, they had received zero bidders and have since reduced the price to $400. Faded Royalty is now listed as "permanently closed."

When it came to unloading its COVID-related hand sanitizer purchases, DCAS was racing to beat the clock. In a July 2022 internal email, a top DCAS official noted, "Much of the hand sanitizer purchased is set to expire in 6 to 12 months. We would like to avoid having to destroy it."

Despite knowing of this pending expiration for months, DCAS last month tried to sell off 2,800 cases of hand sanitizer wipes for $56,000 that were about to expire. The sale began Jan. 12; the expiration date was Jan. 31. By Jan. 16, there were zero bidders.

Current DCAS Commissioner Dawn Pinnock was the number-two official at the department, with the title executive deputy commissioner for people, operations and risk management, when these purchases were made. She is now in charge of getting rid of them.

Pinnock declined to provide any response to THE CITY.

The push to sell off these items was triggered in part over the summer when Schenker Inc. — a firm DCAS hired to manage a warehouse in Keasbey, N.J. where some of the supplies are stored — began raising the monthly per-pallet storage cost significantly.

In mid-July, the Jersey warehouse still contained 13,500 pallets stacked with goods. Schenker was charging $16 per pallet but had notified DCAS of scheduled rate hikes that would push the cost to $20 per pallet by fall. The cost to taxpayers for this space had already risen dramatically: Schenker's original contract was for $739,830. As of last week taxpayers had shelled out $17.8 million for the warehouse, city records show.

In an internal email sent to agency colleagues in July, a top DCAS official noted the rising rent under the title "issues and concerns," and spelled out that "significant amounts of medical equipment, PPE and other Covid-related items" purchased at the outset of the pandemic "have been determined to be no longer necessary for medical or city agency needs."

The email states that "DCAS has been aggressive to ensure these items will not go to waste" but acknowledges difficulties selling this stuff. "Other governments are going through similar exercises so it's increasingly difficult to find buyers," the official noted.

The official recommended several options, starting with "more aggressive marketing of auctions," lowering starting bids, breaking lots into smaller purchases, and giving some of the stuff away "in parks, subway stations."

Finally the official suggests one other option: destroying whatever can't be auctioned.

Correction, February 23, 2023: The original headline on this article, written by an editor, has been changed to more accurately reflect what THE CITY knew at the time: COVID gear purchased as part of $224 million in city contracts was auctioned off for just $500,000.

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