Audit Report on the Department of Citywide Administrative Services’ Oversight of CareFusion 211, Inc. to Provide COVID-19 Ventilators

Introduction

The mission of the Department of Citywide Administrative Services (DCAS) is to provide value-added and effective shared services to support the operations of New York City (City) government. In furtherance of this mission, DCAS has established a centralized purchasing process through which it procures more than $1 billion in supplies and equipment each year on behalf of City agencies. The goal of this centralized purchasing is to ensure that products and services are obtained at the lowest net costs and meet the highest standards.

As part of the City’s efforts to combat the threat of COVID-19, and with the approval of the Mayor’s Office of Contract Services (MOCS), on April 22, 2020, DCAS entered into a contract pursuant to an expedited emergency procedure with CareFusion 211, Inc. (CareFusion), a medical instruments and equipment manufacturing company, to provide the City with 2,000 ventilators and associated parts (collectively referred to herein as ventilators), by August 31, 2020. According to the terms of the contract, the 2,000 ventilators were to be delivered to the City on the following three dates: 500 ventilators by June 30, 2020; 750 ventilators by July 31, 2020; and 750 ventilators by August 31, 2020.

The total cost of the contract with CareFusion was $61,824,800. In accordance with the terms of the contract, DCAS agreed to make a prepayment of $15,456,200 (25 percent of the contract amount) that was to be applied to the delivery of the first 500 ventilators.

On October 27, 2020, DCAS notified CareFusion of its intent to terminate the contract for cause,  citing CareFusion’s failure to deliver the total number of ventilators by the final date agreed upon in the contract (August 31, 2020).

Audit Findings and Conclusions

DCAS complied with the expedited emergency procurement requirements established by the Mayor’s Emergency Executive Order (EEO) 101, MOCS’ guidance, and DCAS’ internal COVID-19 procurement procedures in its award of the COVID-19 emergency contract to CareFusion for the provision of ventilators. However, DCAS did not provide evidence that it adequately oversaw CareFusion’s delivery of the ventilators as required by its contract. AC CareFusion missed the first two delivery dates entirely and 122 of the 522 ventilators that CareFusion ultimately supplied were delivered after the August 31, 2020 deadline for final delivery of all the contracted ventilators. Notably, the contract provided for a highly unusual prepayment of 25 percent of the purchase price prior to the delivery, which eliminated a significant motivation for the vendor to make prompt delivery.AC To date, CareFusion has not delivered 1,478 of the 2,000 ventilators due under the contract. In addition, DCAS did not take adequate steps to obtain evidence that the ventilators delivered were in proper working order.

Failure to properly monitor the timeliness and quality of vendor performance increases the risk that deficiencies will not be promptly identified, which can prevent the City from getting the goods and services for which it is paying. Further, when the goods in question are critical lifesaving equipment, failure to monitor the timeliness of the vendor’s performance increases the risk to public health and safety due to the City not having the equipment when needed.

Audit Recommendations

To address the issues raised by this audit, we make the following three recommendations:

• DCAS should ensure that it has systems in place, and that it effectively uses those systems, to enable it to monitor the vendor’s performance, as well as the receipt, timeliness, and quality of the vendor’s delivery of goods and services in connection with all of its contracts at the time performance of those contracts commences.
• DCAS should ensure that it acquires, reviews, and retains evidence of the delivery of goods and services that fully conform to contract terms to support payments made.

Agency Response

In its response, DCAS appears to generally agree with the audit’s three recommendations and contends that the agency’s current practices are consistent with those recommendations. DCAS, however, does not indicate when its current practices were implemented. As reflected in the findings of this audit, we did not find them to be in place in connection with DCAS’ oversight of its contract with CareFusion.

DCAS also strongly objects to the audit’s findings and contends overall that the audit report is “unbalanced and inaccurate.” However, in doing so, DCAS repeatedly misstates audit findings and argues at length against positions that the audit does not take. After carefully reviewing DCAS’ arguments, we found them to be without merit. DCAS fails to provide credible evidence challenging the deficiencies identified in this audit; namely, (1) that DCAS did not provide evidence that it adequately oversaw CareFusion’s delivery of ventilators as required by its contract; and (2) that DCAS did not take adequate steps to obtain evidence that the ventilators delivered were in proper working order. Consequently, we find no basis to change any of the report’s findings or conclusions.