Thursday, November 23, 2017

Puerto Rico’s fiscal board rolls out contract-review process

By on November 6, 2017

SAN JUAN — The seven-member panel in charge of overseeing Puerto Rico’s finances rolled out on Monday its new policy to review all contracts in excess of $10 million and to which the commonwealth government seeks to be a counterparty.

“This policy applies to all contracts in which the commonwealth or any covered instrumentality is a counterparty, including those with the federal government, state governments, private parties and nonprofit organizations,” reads the document uploaded Monday to the financial control board’s website.

The new rules apply to contracts executed before the approval of the policy, “to ensure they do not adversely affect the territorial government’s compliance with the fiscal plan,” the board says. About 1,600 contracts have been awarded by the commonwealth since Hurricane Irma, according to government officials.

In a footnote, the board warns it can “adopt other methods, such as random sampling of contracts below the $10 million threshold, to assure that they ‘promote market competition’ and ‘are not inconsistent with the approved fiscal plan.'”

Puerto Rico fiscal Board to review gov’t contracts of over $10 million

The entity established by the federal Promesa law had announced its intent to implement a contract-reviewing process during its 10th public meeting, held Oct. 31, amid concerns over a $300 million contract between the island’s power utility and Montana-based Whitefish Energy Holdings. José Carrión, chairman of the fiscal board, said the decision to implement the policy wasn’t in response to the Whitefish deal, but rather something the panel had always intended to do.

If the board determines so, contracts will have to be the result of a “competitive and transparent procurement and tender process” and be consistent with federal regulations to ensure receipt of federal funds or reimbursements.

Contracts covered by the policy, moreover, must be “consistent” with the applicable fiscal plan that was in place at the time they were awarded, or future revised plans, as the board deems appropriate.

The process calls for the commonwealth government to submit to the board via email any contract or series of these, including amendments, that in the aggregate exceed the $10 million threshold.

The submission must include, as applicable, existing procurement policies, the request for proposal (RFP) issued and related documents, evaluation criteria, scoring records, internal cost estimates, any correspondence with the bidder, risk assessments on counterparties and the names of those who take part in the evaluation process, among other components.

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In addition, there must be also a certification of compliance with conflicts of interest regulations, laws or policies; an estimate of the impact the contract would have on the fiscal plan; and the drafted contract with pricing information.

Once the board receives all this information from the commonwealth, it will notify within seven business days one of the following: “no observations”; “observations, but feedback is not required”; “observations, feedback required”; “requires further review”‘; or “noncompliant.”

If feedback or further review are required, responses or additional documents must be delivered within five business days by the contracting party. For its part, the board will provide a revised response within the five business days that follow.

If a “noncompliant” notice is issued, it is because the contract fails to comply with the policy and “significant changes or potential RFP re-issuance may be required,” the document says.

Compliance with Promesa

Christian Sobrino, the government’s representative to the board, warned during the Oct. 31 meeting that no third parties—particularly the fiscal board—shall intervene in contracts between the commonwealth and the federal government. He further noted that Promesa prevents the board from taking actions that interfere with federal programs.

Yet, the board argues the policy “is mindful” of what Promesa states, particularly in Section 204(d)(2). The latter establishes that the board may not exercise its powers to prevent local government actions aimed at implementing federal programs.

The policy “does not intend to impede the implementation of any federal programs, particularly those related to disaster response and recovery. To the contrary, the [board] established this policy in large part to support the implementation of federal programs, including, for example, to ensure that contracts are consistent with the requirements of federal programs,” the document reads.

U.S. government to defend Promesa’s constitutionality

During the board’s meeting, Sobrino insisted there are transactions carried out by the commonwealth government that, although contracts, don’t affect market competition.

“The government of Puerto Rico generates over 100,000 transactions or contracts a year. That’s a large volume. We have to close that revision sample to make sure they have the capacity to carry them out,” he said.



FOMB CONTRACT POLICY (Text)

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