Fiscal Board Approves New Gov’t Procurement Rules
GSA Regulation Seeks to Curb Troubling Emergency Purchases
SAN JUAN — Puerto Rico’s Financial Oversight and Management Board (FOMB) approved last week the regulation for the implementation of the commonwealth government’s newly centralized and uniform procurement system, enacted last year under a revamped General Services Administration (GSA), which is scheduled to go into effect next month.
“This is not just one more regulation. This is a tool that will allow us to generate significant fiscal savings and greater efficiency,” Karla Mercado Rivera, GSA administrator and the commonwealth’s chief procurement officer, said during a Nov. 18 press conference, in which she said the regulation was being filed at the Puerto Rico State Department and would go into effect 30 days afterward. “We want to restore the trust of the citizens in their government.”
She said private-sector groups such as the Puerto Rico Manufacturers Association (PRMA), the Puerto Rico United Retailers Center (CUD by its Spanish initials), and the Puerto Rico chapter of the Associated General Contractors of America, among others, participated in the process of drawing up the 14-chapter regulation.
Mercado, who was confirmed last year to head the agency for a 10-year term, as established in Act 73 of July 19, 2019, said the regulation provides “clear instructions to guarantee that there will be no room for subjectivity and doubts” and “guarantee sound and transparent competition” in bidding and contracting processes at all commonwealth agencies and certain public corporations. The new GSA will audit and monitor these transactions, she said.
The commonwealth stands to save about $126.4 million in “total rightsizing procurement savings,” according to the commonwealth fiscal plan certified by the oversight board for fiscal year 2021. Nonetheless, Mercado said the long-term savings could amount to “billions of dollars.”
“The fluctuation of prices [in goods and services is] due to reactive buying. It is not the same to have a stipulated price beforehand than to buy in a fluctuating market,” she said. “Making this uniform and increasing volume in the centralized categories will achieve savings.”
FOMB Executive Director Natalie Jaresko said the new regulation “should prevent the irregularities and inefficiencies that have plagued Puerto Rico’s procurement system for too long,” noting the oversight board’s amendments to the rules.
“The lack of proper rules and procedures in the way the government awards contracts… has opened the door to multiple irregularities or, at a minimum, has left suspicions or perceptions of conflict of interest and corruption,” she said, stressing that the aim is obtaining the “best products and services at the lowest possible price.”
A critical deficiency that the new regulation addresses is the propensity of government agencies to make exceptional or emergency purchases, which sidestep the bidding process, Jaresko said, noting that the new rules would restrict this practice, which often leads to irregularities.
She said the case in point is the aborted hiring of two local firms, 313 LLC and Apex General Contractors, as intermediaries to purchase nearly $40 million in Covid-19 test kits from overseas companies in March, which the board investigated. The contracts were cancelled only after a local bank halted a transfer of commonwealth funds to an Australian company upon identifying an irregularity in the transaction.
“No one can say who ordered the tests, no one can say who approved those orders; the evidence and controls are all lost in a maze of text messages and other communications that don’t amount to a single file or a single record that we could consider an orderly process,” Jaresko said. “What became obvious when reviewing everything sent to us… [is] there was no formal process for procurement during an emergency or exceptional situation. It was done in an ad hoc fashion.”
The new regulation also requires a re-bid process to take place when no offers and proposals are received in the process of procuring ordinary contracts for goods and services. Bids must be submitted in an open-book format, requiring suppliers to list all costs, including markups and hidden charges.
Agencies must publish all purchase orders, in addition to all contracts, following the same procedure, which Jaresko said GSA will do on its website.
GSA officials must certify more flexible informal bids involving goods and services under $100,000 to ensure no attempt has been made to reduce the value of a purchase so that it falls under the established threshold to avoid a formal bidding process.
Moreover, government entities are required to submit their purchase request to the GSA at least 60 days before the date that the good or service is needed.
“The last-minute purchasing, when we have no choice, we run out of fuel or we run out of pencils, is not the best way to make effective efficient purchases. Proper planning is critical,” Jaresko stressed.