California's $6.2M Baby2Baby diaper deal wasn't competitive despite governor's claims

Governor Gavin Newsom stood before cameras in May and announced that California would distribute free diapers to every new parent in the state through a partnership with Baby2Baby, a nonprofit organization. He described the arrangement as having "gone through a competitive bidding process." State records tell a different story. In California's official contract database, the $6.2 million Baby2Baby deal is listed plainly as "NON-COMPETITIVELY BID." The contradiction between what the governor said and what the documents show is not a matter of interpretation or terminology. It is a direct factual disagreement about how the state spent public money.

When CBS California Investigates requested the contract and supporting records on May 12, four days after the announcement, the state did not immediately comply. The agency took 24 days to confirm the records were even public. Then it delayed further. The final release came at 5:34 p.m. on July 17—66 days after the initial request, 70 days after the governor's announcement—arriving just hours after this investigation was first published. Buried in that delayed release was a document the state called a "Request for Information," which explicitly stated it was "Not a Solicitation" and that responses "cannot be accepted to form a binding contract." Fifteen organizations responded to this non-binding inquiry. Several told investigators they either never received interviews or felt they were not seriously considered. One of the nation's largest diaper bank networks said it responded and heard nothing back until learning from the governor's press conference that Baby2Baby had won.

The Baby2Baby contract did not follow California's standard path for no-bid deals. State law allows exemptions from competitive bidding in specific circumstances—emergencies, sole-source products—but those exemptions require justification submitted to the Department of General Services and must be publicly posted. Since 2018, California has posted 474 such exemptions. The diaper contract took no such route. Instead, an exemption was buried in the 893-page Budget Act of 2025 as a single provision that waived not only competitive bidding but also public advertising of the bid and review by the state's contracting watchdog. No bid required. No oversight. No entry in the public database. The exemption appeared in late June and became law three days later.

This contract was not alone. CBS California Investigates searched the full budget text and found more than two dozen matching exemption clauses across seven state departments, each one waiving both competitive bidding and Department of General Services review. Together, these exemptions cover more than $1 billion in appropriations: a $253 million opioid-response fund, grants supporting the 988 Suicide & Crisis Lifeline, a $12.9 million prison reentry program, and funds implementing Proposition 1, the governor's mental health measure that passed voters by just 0.4 percentage points in 2024. Two-thirds of these exemptions never expire. Because they are exempt from state contracting oversight, they do not appear in California's public database of no-bid contracts and remain largely invisible to public view.

The Baby2Baby arrangement was the nonprofit's third no-bid state contract, though the earlier ones were handled differently. In 2022, lawmakers wrote Baby2Baby's name directly into the budget for a $1 million car seat contract. In 2023, they did it again: $1.5 million for Los Angeles diaper distribution. Naming the vendor in the law provided transparency—lawmakers could see who was receiving money and voted on it. But even those transparent deals had a blind spot: neither appeared in the state's no-bid database. This time, there was no name in the law at all. The administration selected Baby2Baby through a process the governor called competitive. The records called it non-competitive.

The state's delay in releasing records meant that without the governor's public announcement—which prompted scrutiny of his ties to the organization—the non-competitive nature of the contract might never have been discovered. Baby2Baby's relationship to the state spans Newsom's tenure. He credits the nonprofit with bringing him the idea to eliminate the diaper sales tax. One of its co-CEOs sits on the board of the First Partner's California Partners Project. Yet when investigators examined Baby2Baby's public tax filings, government grants appeared only as a single $2.5 million line item with no indication of which governments paid. Federal law allows nonprofits to withhold the names of government contributors from public filings. Baby2Baby's contributor schedule is marked "RESTRICTED."

The free diaper program came at a cost to California's existing diaper banks. The governor's 2025 budget proposal eliminated their traditional funding and replaced it with the new statewide program. State officials told lawmakers that diaper banks would be able to bid for the contract. That never happened. In June, lawmakers amended the budget to remove the governor's program entirely and reallocated its $7.4 million to eleven named diaper banks and food banks, per the Legislative Analyst's Office recommendation. But after closed-door negotiations, lawmakers agreed to add an additional $7.4 million in the Budget Bill Jr. to fund the governor's program alongside the exemptions for bidding and oversight. This year, lawmakers more than doubled the diaper banks' funding to $16.5 million for the same eleven organizations. The diaper banks' allocation is now larger than the $12.5 million appropriated for the next phase of the Baby2Baby program itself. The difference: the diaper banks are named in the law, in plain sight.

The investigation found that Baby2Baby is a highly rated charity. Its most recent filing shows the co-CEOs earning under $70,000 a year. Every exemption described in this story is legal, approved by the Legislature. But the question extends far beyond diapers: Should the state be exempting more than a billion dollars in contracts from competitive bids and public oversight? And if the governor had not publicly called this one competitive, would anyone have ever checked?