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California grants another extension to BYD in delivering $1-billion order of N95 masks

Melody Gutierrez
BYD's office in downtown Los Angeles.  (Mel Melcon / Los Angeles Times)

Two months after Gov. Gavin Newsom announced a nearly $1-billion deal with Chinese automaker BYD to purchase respirators, California has yet to receive any of the much-needed N95 masks. And on Friday, state officials announced that they would give the company a second extension to deliver on its promise.

It's the latest complication in the deal with BYD, which has a U.S. subsidiary headquartered in Los Angeles County, to supply 300 million highly protective respirators during the COVID-19 pandemic. The electric car maker has struggled to have its N95 masks certified by the National Institute for Occupational Safety and Health. BYD first failed to meet a contractual deadline on April 30 for its N95 masks to be certified, forcing the company to refund half of California's $495-million down payment.

State officials amended the agreement to give BYD until May 31 for the N95 masks to be approved by federal regulators. The amendment allowed for the state to either extend that deadline or for BYD to return the remaining $247.5 million of California's down payment by Friday. State officials announced Friday that they will now give BYD until June 12 to have the masks certified. The new amendment notes that if the respirators are certified by the new timeline, the state plans to purchase 150 million masks, which would be delivered this month and next.

"Should the vendor fail to obtain NIOSH certification in the new timeline, any outstanding payments to the vendor will be refunded to the state," Brian Ferguson, a spokesman for the Governor's Office of Emergency Services, said in a statement.

On Friday, BYD declined to comment on the matter.

In April, California agreed to pay $990 million to BYD for 300 million N95 protective masks at a cost of $3.30 apiece. Although that price is higher than the masks would cost in non-pandemic times, the state entered into the contract during a worldwide shortage of the masks. The respirators filter 95% of particles, providing crucial protection to nurses and other essential workers.

While state lawmakers said they understood the state's desire to buy the critical supplies, the governor received bipartisan blowback for how his administration handled the deal.

Lawmakers said they learned about the $1-billion contract at the same time as the public, when Newsom went on MSNBC's "The Rachel Maddow Show" to announce the deal. Then, the contract itself was kept under wraps for a month. The governor’s office at first refused to disclose the document to lawmakers and journalists — even though government contracts are public under state law — citing concerns that the masks might be seized if the information was released.

In recent weeks, Newsom has downplayed the delays and said California taxpayers will not be out any money if BYD ultimately does not come through.

"We pay for what we get," Newsom said Friday. "We don't pay for things we don't get."

Newsom added that the state is working with other suppliers and will "have a backup."

In a statement last month to The Times, NIOSH said it notified BYD on May 4 that on-site visits to the company’s manufacturing and production facilities in China had resulted in a rating of “not acceptable.” The agency also said its “review of documentation provided to NIOSH for the design, manufacturing and quality inspection of the device was concerning.”

NIOSH declined to elaborate on the specific reasons for its denial, saying such information is confidential under federal rules, but added in a statement that the decision was “based on a number of factors.”

BYD submitted a total of four applications for N95 respirators, according to a letter from the regulatory agency. Three of the applications were denied and a fourth was withdrawn, a NIOSH official told The Times.

Federal regulators did not respond to a request for comment Friday on the status of BYD's mask certification.

While the state hasn't received N95 masks from BYD, the company has provided millions of surgical masks to California.

The state agreed to pay BYD $54.9 million to purchase 100 million surgical masks. So far, more than 90 million have been delivered to California, Newsom said. Over the next two months, BYD's contract with California also gives the state the option of buying an additional 250 million N95 respirators for $825 million and 112.5 million surgical masks for $61.8 million.