July 7, 2021 | Policy Brief

The WHO’s Fraudulent Procurement of Chinese PPE Holds Important Lessons for U.S.

July 7, 2021 | Policy Brief

The WHO’s Fraudulent Procurement of Chinese PPE Holds Important Lessons for U.S.

The World Health Organization (WHO) violated its own procurement guidelines by improperly awarding contracts worth hundreds of millions of dollars to a Chinese state holding company, according to an external audit completed in mid-May 2021. The WHO’s reliance on outside consultants and Chinese personal protective equipment (PPE) manufacturers, with poor results, reinforces longstanding concerns regarding the WHO’s governance deficiencies, and serves as a cautionary tale to U.S. policymakers about the importance of bolstering domestic PPE production capacity.

India, acting in its capacity as the WHO’s current external auditor, recently uncovered that the organization awarded numerous multi-million dollar contracts to Chinese companies without a proper or transparent bidding process. Boston Consulting Group (BCG), which received contracts totaling $12 million, facilitated many of these Chinese PPE contracts. In its report, India noted that the bidding process for several of these contracts was “not in compliance with the WHO Procurement Manual provisions and violated the norms of public procurement.”

According to the audit, BCG was heavily involved in drafting a May 2020 Letter of Agreement between the WHO and China Meheco Group Co., Ltd., which served as a consolidator for the WHO’s PPE procurement. During this process, BCG provided lists of PPE suppliers to Meheco and conducted price negotiations on several occasions, working with suppliers, Meheco, and the WHO simultaneously. These dealings, the report outlines, constituted a “conflict of interest, compromising the integrity of the organization’s procurement process.”

The transactions also resulted in wide scale procurement failures. For example, the audit found serious errors in technical specifications and evaluation, quality control, documentation, and payment for the Chinese PPE. In one case, a $4.42 million order for isolation gowns in June 2020 foundered after Meheco determined that the products were of inferior quality, despite the WHO’s initial approval of them. In six of nine transactions examined, worth roughly $64 million, different technical standards were listed in the WHO-Meheco agreement, Meheco’s bid submitted on behalf of a Chinese manufacturer, and the WHO purchase order, casting further doubt on product quality.

The auditors also found no record of technical or financial evaluations of any of the examined transactions, in violation of the WHO’s guidelines. Quality inspections before Chinese products were shipped for delivery were conducted either by WHO staff or by a third party in only one of 26 purchases the auditor checked. In contracts worth $78 million, either Chinese firms changed the products they were supplying after winning the contract or Meheco itself modified the product or firm listed in the purchase order. These latest findings reinforce previous concerns about the WHO’s reliance on China, including a separate WHO Procurement Report showing that the WHO’s three largest non-UN suppliers, garnering over $205 million in contracts in 2020 alone, were all Chinese.

The WHO’s procurement of faulty Chinese PPE carries significant lessons for the United States, whose reliance on Chinese supply chains for face masks, air-purifying respirators, and other equipment led to widespread PPE shortages throughout the pandemic. In all, federal and state governments spent hundreds of millions of taxpayer dollars procuring counterfeit and often substandard Chinese PPE. In June 2021, for example, the U.S. Food and Drug Administration revoked emergency use authorization for Chinese-produced respirators after determining they did not “provide consistent and adequate respiratory protection to health care personnel exposed to COVID-19.” This incident and others like it reinforce the importance of shoring up critical industries against external threats.

Section 4153 of the Senate’s recently passed U.S. Innovation and Competition Act (USICA), known as the Endless Frontier Act, includes a requirement of long-term contracts for domestically manufactured PPE. However, similar domestic production measures were notably absent from two recently passed China bills in the House of Representatives: the National Science Foundation for the Future Act and the Department of Energy Science for the Future Act. Resolving these legislative discrepancies and bolstering the depleted Strategic National Stockpile should be essential as the COVID-19 delta variant threat looms.

Craig Singleton, a national security expert and former U.S. diplomat, is an adjunct China fellow at the Foundation for Defense of Democracies (FDD), where he contributes to FDD’s China Program, Center on Cyber and Technology Innovation (CCTI), and Center on Economic and Financial Power (CEFP). Gabriel Epstein is an intern for FDD. For more analysis from Craig, Gabriel, the China Program, CCTI, and CEFP, please subscribe HERE. Follow FDD on Twitter @FDD and @FDD_CCTI and @FDD_CEFP. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.


China COVID-19 International Organizations