California to get $247M refund as masks face delivery delay - Michael Towner, Iconic Legacy

​California will be refunded $247 million it paid to a Chinese company under a major deal for protective masks after the company failed to meet a deadline for federal certification of the masks, Gov. Gavin Newsom’s administration said.

Newsom announced the contract last month to fanfare, saying California had inked a nearly $1 billion deal for 200 million protective masks per month amid the coronavirus pandemic. Most were set to be tight-fitting N-95 respirator masks, while the rest would be looser-fitting surgical masks. Millions of the surgical masks already arrived, but the company missed an April 30 deadline outlined in the contract for certification of the N95 masks by the National Institute for Occupational Safety and Health.

The respirator masks were set to start arriving this month, with tens of millions planned for shipment in May. The governor's office provided no details on what caused the certification delay.

The $247 million is half of an up-front payment the state made for the contract in April in an unusual move of making a payment before goods were delivered. The state could have clawed back all of its up-front payment under the original agreement, but an amendment signed Wednesday gives the company another month to meet the certification. If the masks are not certified by May 31, California can get the rest of the payment back in early June.

The state paid $3.30 per N95 and 55 cents per surgical mask under the contract. The state made a separate $104.7 million payment last week for the delivery of the surgical masks.

While the state initially sought 100 million surgical masks through the deal, it now plans to buy even more, according to the amendment, though it did not include a specific number. The state and BYD must set an updated delivery schedule for the surgical masks by Friday.

A new payment and delivery schedule for the N95 masks must be set by May 22. Under the federal certification process, the final validation step would take place in Utah, Newsom said previously. It wasn't clear where the delay in the federal certification process occurred or whether the masks had yet arrived in the United States. While the masks will be made in China, the contract requires the company to comply with various U.S. and California environmental and labor laws.

​This isn't the first time California wired money that was then returned for masks. In March, California wired nearly half a billion dollars to Blue Flame Medical LLC for 100 million masks, but canceled the deal and got its money back later that day, CalMatters reported on Wednesday.

Separately, the state was refunded $8.7 million less than two weeks after wiring the amount to a company with a Florida address, Hichens Harrison Capital Partners, according to documents from the treasurer's office. The company, which has a subsidiary in Brazil and business with China, currently advertises an "exclusive line of ventilators" on its website.

In an April 13 email to California officials, Peter Leite, the president of Hichens Harrison Capital Partners, wrote the order was canceled and the money would be returned. Leite referred questions about the canceled transaction to the state on Wednesday. Spokesman for the governor's office and the Office of Emergency Services didn't immediately answer questions about the transaction.

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