Maryland audit follows up on flaws in COVID-19 procurements, finds ‘lack of compliance’ and ‘ineffective monitoring’

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A review of emergency procurements for supplies in Maryland during the COVID-19 pandemic found “a lack of compliance” in general with state regulations and “ineffective monitoring” of payments, according to a report released Thursday by the Maryland Office of Legislative Audits.

The review found that 11 of 15 emergency procurements totaling $189.4 million were not in compliance with all state regulations.


“For example, there was no formal written contract for three of the procurements and the contracts for the other eight procurements did not include all of the critical provisions required by State procurement regulations,” wrote Gregory Hook, the legislative auditor, in a letter to lawmakers introducing the review.

Hook wrote that the agencies responsible for the procurements “frequently could not provide critical documentation to support the basis for the purchases, including written explanations for how the vendors were identified and selected.”


“We also concluded that 7 emergency procurements with payments at the time of our review totaling $133.7 million were not effectively monitored,” Hook wrote. “For example, for four emergency procurements, we noted payments totaling $25.5 million made for which the responsible agencies could not document that the services had been received and that the payments were in accordance with the contract.”

The review represents an expansion of an earlier one, after a request by state lawmakers.

The earlier review found that Gov. Larry Hogan’s administration failed to follow state procurement regulations when it bought 500,000 tests for COVID-19 from a South Korean company last year for, ultimately, about $12 million, after the first batch of tests later had to be replaced at an additional $2.5 million cost, because they had not been authorized by the U.S. Food and Drug Administration.

The report Thursday included a review of test results from the laboratories that used the second set of LabGenomics tests, which auditors were unable to obtain access to in time for their March 31 report. Auditors received an allegation to its fraud, waste and abuse hotline in September 2020 relating to concerns with the accuracy of test results received for samples collected at Towson University.

The review found that the majority of the LabGenomics tests were used to analyze patient samples and that certain individuals who received positive test results received negative results on subsequent tests. But, the review could not determine from available sources if the inconsistent results occurred due to deficiencies with the LabGenomics tests or other factors.

The report Thursday also included the results of a review of the emergency procurement and accountability of medical supplies from Blue Flame Medical.

Maryland received 27 Philips ventilators in May 2020 that were ordered from Blue Flame Medical and delivered to a warehouse in Sparrows Point.

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The Hogan administration ended up settling a multimillion-dollar contract dispute with the company, after the state tried to cancel the contract because the company was too slow in providing about $12.5 million worth of N95 masks and ventilators. The deal drew extra attention because the company’s founders were political consultants and fundraisers for Republicans and had never worked in medical supplies before the pandemic.

The auditor’s review found the masks and ventilators were not procured in accordance with state regulations.


“While the aforementioned purchase order included the quantity to be purchased and the related payment terms, it did not contain certain critical provisions required by State procurement regulations, such as dispute resolution, delays and extensions, conformance of specifications, and delivery and acceptance,” the report said.

In a response included in the review, the administration said the state was scrambling to find scarce resources, particularly in the beginning of the pandemic, with the core mission of preventing as many deaths and hospitalizations as possible.

The Maryland Department of General Services said “the entirety of the Maryland State government was being asked to rise to meet the challenges posed by a world-wide health crisis, the likes of which had not been witnessed in over a hundred years.”

“With supply chains completely gridlocked or collapsed, demand far exceeding the supply, and no contingency planning for these types of global events, the ‘as soon as practicable’ part of the regulation certainly provided the reasoning behind the strategies employed to acquire these critical supplies and services,” the department wrote.

The state health department said it has worked to improve contract management, including the creation of an Office of Contract Management and Procurement “to build on the procurement lessons that emerged in 2020.”