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Calif. Veteran-Owned Small Biz Losing State Contract to Chinese Conglomerate

They executed flawlessly on the contract, and were rewarded with termination by the CDPH

By Katy Grimes, October 5, 2022 5:51 pm

California Gov. Gavin Newsom and elected lawmakers frequently tout the state’s contracting with minority-owned, veteran-owned small businesses. California’s dominance in many economic areas is based, in part, on the significant role small businesses play in the state’s $3.1 trillion economy.

But on Friday, a Disabled Veteran Business Enterprise owned California small business is getting the boot by the California Department of Public Health, only to be replaced by a Chinese Conglomerate.

What’s going on with the state doing business with China? Remember when in April 2020 Gov. Newsom approved spending $1.4 Billion on masks from BYD, a Chinese company? BYD was an electric bus manufacturer with no history of making personal protective equipment, but was awarded a no-bid contract by the Newsom administration.

The Globe interviewed John Deterding, Disabled Veteran Business Enterprise (DVBE) owner and CEO of Maclean Health, about this disreputable turn of events.

Ironically, just last week, Gov. Newsom signed Assembly Bill 2019 by Assemblywoman Cottie Petrie-Norris (D-Irvine) which codifies a state goal of 25% of all contracts issued by state agencies be with small, micro and disabled veteran business enterprises (DVBE) for state procurements and related proposes. AB 2019 finds that small businesses and DVBEs not only contribute significantly to the tax base of the State of California, but also account for approximately 7 million employees, or 49 percent of all employment in the state. AB 2019 requires all state department directors to establish a minimum goal of 25% procurement participation for small businesses, DVBEs and microbusinesses combined.

Given the overwhelming support by the business community, this bill cleared the Legislaturewithout a single “no” vote.

The Governor signed this measure and touted its importance in a press release titled “New Support for Small Businesses and Entrepreneurs Coming to California.” Does the left hand even know what the right hand is doing in California politics? Maclean Health is a Sacramento-based, certified Small Business and DVBE that specializes in providing healthcare products to state and federal government entities.

During the pandemic, Maclean Health was a critically important partner of the California Department of Public Health (CDPH) by providing N-95 masks since 2020 and Covid-19 test kits to ensure the safety of Californians, Deterding told the Globe.

DVBE business Maclean Health, the California small business which has provided the State of California 30,000,000 Covid-19 test kits when the state most needed them, and were difficult to acquire because of supply chain restrictions, will unilaterally have its contract terminated this Friday, and turned over to a Chinese-owned company.

Deterding, owner/CEO of Maclean, is a California native, and Navy veteran. Mr. Deterding says despite his 100% performance record providing the state the Covid test kits, as well as other critical healthcare products, at a fair market price and often below market prices, he received notice in August that his deliveries of test kits and contract were suspended, and would be awarded instead, in a no-bid contract to iHealth, a Chinese-owned company.

He explained that once Covid hit, and the supply chain across the globe was compromised, the state was having difficulty acquiring Covid test kits.

Deterding said by January 2022, the height of the Covid variant Omicron strain, it became  particularly challenging to procure Covid-19 tests for the government due to a global shortage. But Maclean was able to provide the 3.3 million Covid test kits the state needed, at the best market rate of $6.80 per, saving the state tens of millions of dollars. Deterding said at that time, other suppliers could not provide the State a reasonable price because the market price soared to over $10 per test. Maclean was then awarded a contract through March 2023.

“We had a 100% performance rating,” Deterding said. “We never had any issues.”

Deterding said once the market was again saturated with test kits, Maclean Health and the state renegotiated the price and he was again awarded a contract for having the lowest price in the country.

During August pricing discussions with the California Department of Public Health, he was told a “competitor” was willing to price the test kits below Maclean’s lowest price, but was never informed of the award process or selection criteria. Deterding said he was told at that time that “the competitor has ties to the administration.”

By September Maclean Health received a termination letter.

Deterding’s elected state representative, Assemblyman Ken Cooley (D-Sacramento), wrote an eloquent, thoughtful and thorough letter to Dr. Mark Ghaly, Secretary of California Health and Human Services Agency about the Maclean Health DVBE termination. Cooley addressed the termination, acknowledging that although “the state has the power to terminate such contracts, it does not make it right.”

“And it’s the type of conduct that will make people of enterprise and talent, deservedly wary of partnering with California,” Cooley said.

Cooley called the termination “heavy-handed” and “seemingly inexplicable,” especially since Maclean held the state Covid-19 test kit contract, shipping and delivering 30 million Covid test kits to the state with a 100% performance record.

Cooley continues:

“Based on Maclean’s exceptional performance and competitive pricing during that critical period, the Department made the decision to expand its relationship with Maclean and contract for a twelve-month agreement to provide the state up to 100,000,000 test kits between April 2022 and March 2023. Despite the fact that this contract was let under emergency authority that waives many Government Code contracting requirements, the Department chose to award the test kit contract to a California certified small business and DVBE thus recognizing the State’s preference and policy goals in the California Government Code when contracting.”

“That this is a very important California public value and I am very concerned that this move may be a precursor to CDPH ‘walking back’ that very, very right decision.”

Cooley notes that Maclean agreed to deliver between 5 million and 15 million test kits per month, “a herculean obligation that they agreed to at some possible risk to themselves…” Maclean made a personal financial guarantee for their contract performance.

They executed flawlessly on the contract, and were rewarded with termination by the CDPH, and no explanation why.

A source in the Capitol said the CDPH will claim the contract termination with Maclean was only about cost/price. Maclean offered the best price in the country for the test kits, so the price issue is suspect.

Maclean Health has since had to engage a law firm and invoked the contract’s Dispute Resolution Process, but haven’t heard much of anything from the CDPH. As Deterding says in a letter to Dr. Tomas Aragon, Director of the CDPH, the termination of the contract is dubious “and a contravention of public policy, and not in the best interest of the people of California.”

He also says that concerns around the cancellation of the contract “are further aggravated by the fact that, unless there is quick intervention” by the CDPH, “the CDPH now intends to purchase test kits from a large, Chinese-owned company.”

Why would the CDPH break a contract with a Disabled Veteran Business enterprise, native to California, which had performed flawlessly for the state, and award a no-bid contract to a company from China?

At issue is that the Governor’s administration keeps awarding contracts under his 2.5 years of emergency Covid powers (900 days+), which bypass the state bidding process, state code, and any semblance of transparency.

However, when the CDPH awarded the contract to Maclean Health, they did award it to a DVBE, bringing it right back into government code. So the termination of the Maclean contract is particularly egregious, as Assemblyman Cooley notes.

The Globe contacted four employees at the CDPH involved in the Maclean contract. We asked why the CDPH would cancel a contract with a California-owned DVBE contractor and award it to a company in China, especially on the heels of the governor just signing the bill codifying a state goal of 25% of all contracts issued by state agencies be with small, micro and disabled veteran business enterprises for state procurements and related proposes?

We have not heard back from the CDPH.

Gov. Newsom may tout his support for Disabled Veteran Business Enterprises, but his Administration is about to trample a successful small business, and reliable supplier of critical Covid test kits, when the Governor needed them the most.

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13 thoughts on “Calif. Veteran-Owned Small Biz Losing State Contract to Chinese Conglomerate

  1. We wouldn’t even have known about this latest China-deal-making chapter if Katy Grimes hadn’t dug into the particulars of it. The increasing brazenness of the state players in favoring China — CA Dept of Public Health in this case, Newsom elsewhere — is puzzling and bizarre. It seems they are not even trying to hide it anymore. Where are they going with all of this? They must realize that it won’t end well for them, and rather soon, too, if certain people are indeed elected to certain state offices that will get to the bottom of it all. This no-bid contract nonsense that comes from the so-called State of Emergency and so often ominously favors China is another reason why these ridiculous emergency powers must end. Will they ever end?

  2. What’s a Covid-19 test kit???

    $top perpetuating the $scamdemic…

    But it DOES raise a troubling question about CA state lawmakers being on the take to the Communist Chinese and their “Belt and Road” initiatives and CA lawmakers continued association with Chinese spies (Swallwell’s Fang Fang, Feinstein’s chauffeur, and Pelosi’s questionable investment practices, not to be outdone by Governor Frat Boy’s BYD Chinese $scamdemic deal and associated kickbacks)

    California is for sale to the Communist Chinese, who covet our farmland, and are paying off CA legislators and the water board to drain the reservoirs and bankrupt CA farmers, so the CCP,can buy the land at the bankruptcy sales….

    Prove me wrong…

    1. They are also trying to burn land owners out with the “wild fires”. Cal Fire caught hundreds of arsonists in the last year. Now I see logging trucks running up and down our highway carrying trees that are burned on the outside only. What is that all about???

  3. Katy noted that a source in the Capitol said the CDPH will claim the contract termination with Maclean was only about cost/price but Maclean offered the best price in the country for the test kits, so the price issue is suspect? Hmmm, maybe Gov. Newsom and his Democrat minions at the CDPH are getting financial incentives (aka payoffs) from that Chinese conglomerate and/or the CCP?

  4. China is BUYING CA

    remember when Jerry Brown kept going over to “sister city” — he was part of the sale of CA which is carried on with Newscum

  5. The CCP/PLA have been collecting DNA samples ever since they released the Wuhan Virus to the world. They tried to obtain samples from the US military early in the pandemic, ostensibly to create their own virus vaccine, but were denied. Selling test kits and having the kits analyzed in China labs provides all of the DNA samples they need to inoculate their people, while making future biological weapons effective against their main adversary – the USA. Newsom is a traitor and so are his Democrat minions.

  6. Thank you Katy for bringing this story to the general public. I look forward to hearing the response from CDPH, but I will not be holding my breath.

    This is another prime example that Newsom is duplicitous in his concern for veterans and small business owners!

    Now, for those who still vote for these same democrats, stop voting for the same old nonsense then vote for change. Dahle and a republican legislator could set this state on the right track. His first act would be to rescind the emergency powers act! We need to put our small businesses and veterans before an international contract! Remember actions speak louder than words!

    We have an opportunity as Californians for change. Let’s make the change and vote out Newsom et. al. out of office!

  7. Katy Grimes, you did a Great Job in uncovering the Basic Criminality hidden “behind closed doors” in our hopelessly-corrupt Cal-Gov administration run by “Gavin”, who loves millions of burnt-to-death forest animals, billions of dollars of burnt-up forest trees, his Purposeful Destruction of well over a million acres of farms, ranches, orchards, & vineyards in our greatly-“Gavin”-harmed Great Central Valley food creators whose great hard-working Ag world feeds CA, and, much of the world, “Gavin’s” search for huge piles of murdered babies, and, “Gavin’s” desire to have “medical” actors cut off little girls’ breasts, amidst their Trans-based efforts to destroy their lives, (as we’ve seen by those “trans” girls who’ve Awakened from this Vile, Stalin/Hitler-style, God-Hating Depravity on many fronts), . . . And, So Many More “media-hidden” crimes~!!! Now, what about stopping your blocking of me from your FB page, generated by “Phil’s” temporary anger at my upset-ness at Hugh Hewitt’s overt failures~?~! It’s long past time to call out the CAGOP for it’s “Love of Losing The Cultural Wars”~!! My request would be Step One in that issue~! Best Regards.

  8. Newsom and his fellow progs don’t give a rip about entrepreneurs, small businesses, or veterans. They’ve never served, they’ve never had to make a payroll, they’ve never worked a day in their lives, and they disdain those who have. Remember the inspiring words of our erstwhile leader, Barak Obamanation: “If you’ve got a business, you didn’t build that. Somebody else made that happen.”

    1. Thanks for the reminder, Leonard.
      I guess Obama could only speak of what he knows as I am more convinced , his ascendency to POTUS was because SOMEBODY else made that happen!

    2. Obama was explaining why corporations and the rich should pay higher taxes–they build their wealth on a foundation of public projects, laws and grants. Some of that wealth should be repaid to the taxpayers through taxes.

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