Interstate agreement to develop a regional supply chain for personal protective equipment may violate Compact Clause without congressional consent

Previously, I expressed skepticism that interstate regional “pacts” or “agreements” to coordinate reopening the economy required congressional consent under the Compact Clause. Those agreements seemed like little more than information-sharing groups and conscious parallelism. Indeed, watching how states have behaved, they’ve continued to act primarily state-by-state, even as members of these “regional” groups.

But there’s a new proposal out of the northeast:

Amid the ongoing COVID-19 pandemic, Delaware Governor John Carney, New York Governor Andrew M. Cuomo, New Jersey Governor Phil Murphy, Connecticut Governor Ned Lamont, Pennsylvania Governor Tom Wolf, Rhode Island Governor Gina Raimondo and Massachusetts Governor Charlie Baker today announced a joint multi-state agreement to develop a regional supply chain for personal protective equipment, other medical equipment and testing.

While the states will continue to partner with the federal government during this global and national public health crisis, they will also work together to identify the entire region’s needs for these products, aggregate demand among the states, reduce costs and stabilize the supply chain. The states will also coordinate policies regarding the inventory of PPE each state’s health care infrastructure should have to be prepared for a possible second wave of COVID-19. The states will also coordinate policies on what supplies local governments should have on hand for their First Responders, and if any requirements regarding PPE for the non-for-profit and private sector are needed.

The states will then seek to identify suppliers within the country, region or state who can scale to meet the demand of the entire region over the next three months. The goal of this approach is to decrease the potential for disruptions in the supply chain for PPE and medical equipment, including sanitizer and ventilators, and testing, and promote regional economic development.

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Governor Cuomo said, “The COVID-19 pandemic created a mad scramble for medical equipment across the entire nation – there was competition among states, private entities and the federal government and we were driving up the prices of these critical resources. As a state and as a nation we can’t go through that again. We’re going to form a regional state purchasing consortium with our seven northeast partner states to increase our market power when we’re buying supplies and help us actually get the equipment at a better price.

The devil is in the details of an agreement like this, and, of course, press releases are perilously short on details. But this agreement starts to look like the kind of thing the Compact Clause cares about.

Start with some common definitions of a “compact,” “mutual declarations [that may be] reasonably treated as made upon mutual considerations,” or “reciprocity.” Here, it sounds like these states are agreeing to stop bidding individually for medical equipment and to start bidding collectively. They agree to divide the equipment based upon their internal criteria they share and pay based upon internal criteria they share.

It’s also expressly designed to leverage these states at the expense of other states, and even potentially at the expense of the federal government. That is, these governors (and I only quote Governor Andrew Cuomo, but you can read others) expressly want to increase the ability of this consortium to succeed at the expense of other states and the federal government.

Now, to be frank, my analysis may mean little—the Compact Clause has been construed exceedingly narrowly in the last two hundred years, and one is hard-pressed to find many cases where an interstate compact has been deemed to require congressional consent. And, of course, even if I’m right, Congress can always consent to the compact. But this strikes me as precisely the type of factionalism the Compact Clause is designed to prevent: if the problem is an ineffective federal coordination or excessive state squabbling, groups of states can’t team up to cure the problem for themselves at the expense of others.

Still, I wouldn’t be surprised to see some non-compacting states challenge the decisions of these compacting states. What appears to be an attempt to improve state relationships among some may well worsen those relationships among others.

Finally, one nice thing about this blog is an opportunity to throw out a possibility like this and open up for feedback. Are there purchasing power arrangements between states, like this one, that exist? Or, even better, that have faced litigation in the past? Professor James Coleman suggested that the Regional Greenhouse Gas Initiative, which includes bidding and auctions, is a possibility, and one that doesn’t have congressional consent. If anyone has others, feel free to post in the comments (which may take some time to appear).