A newly released review of the state’s early response to COVID-19 found that Utah leaders were unprepared for a global pandemic and that in the scramble to adapt, they spent millions of dollars in no-bid contracts with little documentation of due diligence.

“From our high-level review, we conclude that the State did not adequately anticipate or prepare for this type of statewide, national, and global pandemic,” stated the review released Wednesday by the Office of the State Auditor.

Lack of a clear hierarchy and communication missteps also mired the state’s pandemic response, at times, and there was a flurry of spending on testing and technology that happened through verbal negotiations and approvals with a minimal paper trail, the audit found.

In the case of a controversial hydroxychloroquine purchase, state auditors couldn’t even determine who OK’d spending $800,000 on the malaria drug.

“Without written documentation of authorization (or explicit verbal authorization), it is impossible to determine exactly how this occurred,” the auditors wrote. “We are concerned that this purchase occurred without anyone’s explicit authorization.”

Auditors concluded, though, that the amount paid for the hydroxychloroquine and the desire to stockpile it were reasonable — even though a number of health experts warned against using an unproven treatment on coronavirus patients and discouraged the state from buying the drug.

The public-private TestUtah initiative also came under scrutiny in the audit, after months of questions about the accuracy of the coronavirus tests used in the project. The report didn’t evaluate the quality of the tests but did look at their cost — finding that Utah paid nearly double per test what established testing services were charging.

The audit also mentions that officials within the Governor’s Office of Management and Budget (GOMB) directed many of the COVID-19 contracts, including TestUtah, to companies associated with Silicon Slopes, a nonprofit that advocates for Utah’s tech industry. And it notes that Republican Gov. Gary Herbert and Lt. Gov. Spencer Cox, who is running to succeed Herbert, have a “relatively close” relationship with Silicon Slopes and its member companies.

“This causes particular concerns when contracts are steered to those companies, especially at the approval of the Governor,” the review states.

Justin Harding, chief of staff in the governor’s office, said in a written response included with the audit that those relationships “did not influence the award of contracts.”

“The review of which contract should be awarded to which entities was performed by staff members who exercised independent judgment in making recommendations about contract awards,” he continued.

The governor’s office argued later on that awarding contracts to known vendors was an “intentional decision that likely saved the State a large sum of money.”

“Some states paid tens or hundreds of millions of dollars for supplies they never received because of fraudulent practices or simple inability to deliver on the part of unknown vendors,” Harding wrote. “Utah, on the other hand, received every good it purchased.”

At the beginning of the pandemic, state officials circumvented typical procurement processes designed to promote competition and fairness. Utah law allows for these shortcuts in emergencies, when officials might not have the time for standard bidding, but it still directs agencies to seek out as much competition as possible through phone and internet quotes and by inviting other businesses to make a pitch.

There’s little record of any of these efforts inside GOMB, auditors said.

“If written documentation exists of a competitive analysis, the Governor’s Office was unable to provide it to us for this review,” the report stated. “While we recognize that decisions had to be made quickly, we are concerned that the lack of documented competitive analysis for these contracts, many of which were entered into over a 2- to 3-week period, indicates that a reasonable analysis may not have taken place.”

(Rick Egan | Tribune file) TestUtah Covid-19 testing at the 800 North location in Orem, Tuesday, June 9, 2020.
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The Alliance for a Better Utah, a progressive good-government nonprofit, said the audit highlights “a number of serious flaws” in the state’s management of COVID-19.

“This audit validates the concerns many have had that well-connected businesses obtained lucrative contracts to assist with Utah’s COVID response and then fell short,” Chase Thomas, the alliance’s executive director, said in a prepared statement. “The audit also raises a number of questions about the role of the Governor’s Office of Management and Budget, and why they have been behind the wheel of so many public health decisions without properly consulting public health experts.”

Democratic gubernatorial nominee Chris Peterson, who’s running against Cox, said Utahns have the right to expect better from their government.

“The administration’s missteps are costing our state dearly in terms of lost lives, shattered health, failing businesses, and wasted taxpayer funds,” he said in a statement. “It is time for Utah to shift away from cronyism and one-party government.”

In a response to the audit, the governor’s office said the state would work with the Legislature to implement “appropriate recommendations” from the review.

“The State of Utah never shies away from the opportunity to improve operations, even in the midst of a global pandemic,” the office said in a statement. “From the beginning of the COVID-19 crisis, we have been clear that we are constantly trying to improve our coordination and processes in order to best serve the people of Utah. State employees have truly risen to the occasion and have continued to render great service as we fight this pandemic.”

Preparing for a pandemic

While the audit focused largely on the state’s response to COVID-19, it also criticized state officials' preparation for the pandemic as inadequate — despite the fact that this type of emergency has consistently been identified as a “significant threat to Utah.”

As recently as 2019, the Utah Department of Health identified pandemics as the “top priority hazard” for the state from 2019 through 2024, the audit notes.

Still, the state has historically placed a “significantly higher priority on earthquake preparedness,” including contemplating economic and supply chain disruptions as a result of that disaster. In preparing for a pandemic, on the other hand, the Division of Emergency Management identified only “stress on the health care system” as a potential byproduct.

“As Utahns have learned firsthand, global supply chain shortages, acute and chronic economic implications, and significant impacts on governmental services, such as education, are all repercussions of this pandemic,” the review states. And it argues the Division of Emergency Management could have identified those and other risks and placed “more emphasis on strategic planning” to mitigate them.

In 2007, a task force urged state officials to stockpile personal protective equipment in preparation for a pandemic. But the audit found the state hadn’t done enough to acquire these supplies.

As a consequence, officials had to compete for gloves, masks and face shields on a global scale when local health care officials were down to one or two days of personal protective equipment in March — a reality that “resulted in higher costs” for taxpayers.

Lack of pre-pandemic communication between government agencies also created delays during the early days of the COVID-19 crisis as certain officials pressed for information that wasn’t available or that the Utah Department of Health said it couldn’t provide because of privacy concerns, the audit concluded. Officials could’ve avoided those conflicts if they’d talked about data and metrics before the disease arrived in Utah, according to the auditors.

In its written response to the audit, the governor’s office pushed back on the assessment of several elements of its pandemic preparation, noting that the review seems to incorrectly “assume that state agencies have unlimited resources to plan for and respond to emergencies.”

Maintaining a stockpile of personal protective equipment, the office said, would have required an “ongoing multimillion-dollar investment” because those goods expire.

A plane filled with personal protective equipment is unloaded at the Delta Hanger Wednesday, April 15, 2020, at the Salt Lake International Airport. The first of several planes filled with personal protective equipment touched down in Utah, delivering masks and eye protection for health care workers throughout the state. "We are in a wartime environment. (AP Photo/Rick Bowmer)

The state spent about $25 million on masks in responding to the pandemic. But maintaining a stockpile, the state noted, “would require this level of expenditure at least every five years plus storage fees."

That means the costs associated with stockpiling personal protective equipment in responding to COVID-19 “were likely significantly less than the costs of stockpiling PPE for decades, considering the need to monitor and constantly rotate expiring PPE.”

Criticizing contracts

In March, Herbert granted GOMB the authority to oversee project management and the data systems that leaders would use to chart progress on the coronavirus and the economy. Within a few weeks, GOMB had cemented some of the largest contracts of the pandemic — and it did so without much input from Utah Department of Health (UDOH) officials, the review states.

“Despite being designated as the primary agency to respond to a pandemic, UDOH reports they had little involvement” in decisions to buy a $2 million data dashboard and contact tracing app or launch a public-private testing initiative.

“As a result," the report states, “there was a lack of effective collaboration between UDOH and GOMB during the initial pandemic response.”

In a couple of cases, the auditors determined that state agencies would’ve been capable of doing this work themselves for a fraction of the cost of contracting them out. But because of GOMB’s aggressive timeline for developing a mobile app or launching a data dashboard, the agency recruited tech companies to do the work instead, the report found.

And, though GOMB officials say they shopped around before signing the contracts, the auditors found few records corroborating these claims. In the case of TestUtah, they found no documentation at all that state leaders had contacted established testing facilities before signing the multimillion-dollar deal with the Silicon Slopes companies, which had no prior experience in disease testing.

TestUtah — a project to “crush the curve” by dramatically increasing the state’s capacity for testing — evolved out of discussions with a group of tech entrepreneurs who pitched the idea of a philanthropic effort. The vision was to funnel Utahns toward free testing and equip them with hydroxychloroquine, the anti-malaria drug that President Donald Trump touted as a possible treatment for COVID-19.

Even as state leaders rolled out the TestUtah initiative in a news conference, tech industry representatives were still saying that “no tech company is going to make any money off of this.”

In the end, the auditors found, the state paid much more per test than other testing services were charging.

As the initial vision for TestUtah expanded into a more sweeping, statewide initiative, it made sense that officials decided to compensate the involved companies, according to the report. But not all state officials seemed apprised of this transition from a volunteer to a paid effort, the auditors said.

“We are concerned that various high-level State officials involved with the [Silicon Slopes] discussions failed to understand the evolving nature of these public-private arrangements,” they wrote, “believing that certain goods or services were being donated when they were really being procured under contract.”

Moreover, there were no papers proving that GOMB completed a cost comparison or analyzed options before contracting with Nomi Health, a Utah tech company, for the testing initiative.

The initial, 60-day contracts with Nomi Health totaled $7.62 million, with the expectation that TestUtah would be churning out 3,000 COVID-19 tests each day. If that plan had borne out, the cost per test would’ve been $44, or much less than the going rate of roughly $125, according to the analysis.

There was far less testing activity than the contract had anticipated, however, and because the deal contained a flat rate, the state ended up paying $235 for each test.

(Kristin Murphy, Deseret News/pool) Gov. Gary Herbert speaks during the daily COVID-19 media briefing at the Capitol in Salt Lake City on Wednesday, April 22, 2020. A poster displaying how the Healthy Together app will use location tracking for COVID-19 contact tracing is on display in the foreground.

The report also examined the state’s spending on Healthy Together, a mobile application that was unveiled as a digital contact tracing tool. Auditors could find “no evidence to indicate the State performed any meaningful cost analysis” before entering the $6.35 million contract with the tech company Twenty and questioned the prudence of prioritizing a geolocation feature that drove up the app’s price.

Widespread adoption of location tracking was never likely in Utah, given the state’s “historical political climate and resistance to perceived government overreach,” auditors wrote. Sure enough, the state ultimately turned off the geolocation feature over public concerns.

Although the app has scarcely been used for contact tracing, the state continues to pay Twenty $300,000 a month for the digital tool, which officials say provides valuable public health information and prompts users to complete daily symptom checkers.

“We note that GOMB supported the use of the App for contact tracing while UDOH appeared more skeptical, favoring its traditional methods,” the audit stated. “Inadequate pre-planning and inadequate communication contributed to a rushed, high-priced purchase that has not met expected public adoption and utilization.”