State Sen. Scott Wilk speaks during the Valley Industry Association’s fourth annual State of the State luncheon at the Hyatt Regency Valencia in Valencia on Friday, 062521. Dan Watson/The Signal

Senate Republican Leader Scott Wilk, R-Santa Clarita, announced two measures to crack down on Governor Newsom’s practice of granting multi-million dollar contracts to vendors without going through a formal bidding process.

Wilk’s legislation is in response to the Newsom Administration awarding – and later auto-renewing – a no-bid state contract to the Valencia Branch Laboratory, where multiple whistleblowers exposed shocking health failures of the lab to CBS 13. This announcement comes the same week that the Newsom Administration announced a privately negotiated no-bid contract with Kaiser to expand its Medi-Cal coverage area.

“During the past two years, we have seen the unaccountable and frankly out-of-control Newsom Administration paying out billions of dollars in secretive no-bid contracts under the guise of curbing the impact of an ongoing global pandemic,” said Wilk. “Sub-par contracting decisions in critical areas such as COVID-19 test processing has led to massive waste, left the state vulnerable to fraud, and worse, has hamstrung our ability to effectively slow the spread of COVID-19.”

Senate Constitutional Amendment 7  will increase oversight by requiring no-bid contracts of $25 million or more entered on or after January 1, 2023, to be subject to the oversight hearing of the Joint Legislative Budget Committee prior to a renewal or extension of the contracts. This would ensure that no-bid contracts are not simply auto-renewed without the opportunity for public input.

Senate Bill 947  will ensure accountability by empowering employees of these no-bid contracts to report fraud, waste, abuse, and improper activity, free from fear of retaliation by granting them the whistleblower protections already afforded to formal employees of the state.

“The Newsom Administration’s practice of renewing no-bid contracts without reviewing their merits is not only a waste of taxpayer money, but also a way to skirt the spirit of California’s contracting process. Californians would not be aware of the Valencia lab fiasco had brave whistleblowers not risked their livelihoods to expose the glaring deficiencies. They should be offered the same protections as other state workers who call attention to grievous problems at a state agency.”

SCA 7 and SB 947 will next be referred to Senate policy committees for consideration. You can track their respective progress here and here.

Background: In 2020, PerkinElmer was awarded a $1.7 billion annual contract to operate the Valencia Branch Laboratory in Valencia to return COVID test results within 48 hours and process up to 100,000 tests each day. Instead of meeting these standards, the Valencia Lab gained notoriety last year when whistleblowers exposed shocking deficiencies at the lab to the CBS 13 Investigative Team. Whistleblowers reported tens of thousands of COVID-19 tests showing up as inconclusive, unlicensed lab technicians watching videos and sleeping while processing test samples, incorrect test results, and swapped and contaminated test samples.

Last October, the no-bid state contract for Valencia was quietly auto-renewed days before the contract expired, despite well-documented concerns from the Senate Republican Caucus and the reporting of multiple media outlets throughout the state. To this day, the lab continues to lag behind its promised testing capacity and test sample turnaround timeline. The California State Legislature recently approved $82 million for the troubled contract.

In addition to the Valencia Lab contract, examples of other notable no-bid contracts entered into by the state in recent years include:

-A deal to allow Kaiser Permanente to expand its Medi-Cal coverage and to skip a bidding process required for other commercial insurers to participate in Medi-Cal (February 2022).
-$176 million for a UnitedHealth subsidiary to deliver vaccines under the direction of Blue Shield of California, the company responsible for California’s vaccine distribution (March 2020).
-$72 million for Verily Life Sciences to expand COVID-19 testing (March 2020).
-$45 million for UnitedHealth subsidiary OptumServe to deliver vaccinations, which included converting some testing locations into immunization sites (February 2020).

The state entered into more than 8,000 no-bid contracts in 2020, with 80 of them totaling over $25 million. Those 80 contracts alone amount to over $11.9 billion combined in spending that the public has little oversight over.