The San Juan Daily Star
Fiscal board questions LUMA over lack of competitive bid for poles contract
By The Star Staff
The Financial Oversight and Management Board recently questioned LUMA Energy for not conducting a competitive bid for a $26.5 million contract to obtain 5,000 galvanized street poles to replace those damaged by Hurricane Fiona.
The oversight approved with observations the contract between LUMA Energy Servco, as agent to the Puerto Rico Electric Power Authority, and Texas-based Transamerican Power Products Inc. for the galvanized poles. LUMA Energy Servco is part of LUMA Energy.
“Our review is solely limited to compliance of the Proposed Contract with Section 204(b)(2) of PROMESA [the Puerto Rico Oversight, Management and Economic Stability Act], which seeks to ensure that proposed contracts promote market competition and are not inconsistent with approved Fiscal Plans,” the federally appointed board said. “For the avoidance of doubt, the review performed by the [oversight board] does not cover a legal review of the contractual documentation or the contracting process.”
In addition, the oversight board did not engage in any due diligence or background check with respect to the contracting parties or whether the contracting parties comply with the requirements under the applicable contract, according to a letter sent to LUMA Energy Servco Vice President of Procurement and Contracts Mariano Mier Romeu on Nov. 18.
According to the proposed contract, LUMA will execute individual purchase orders for the required materials. The proposed contract has a one-year term from its date of execution.
They will be paid for with public funds but LUMA said it will seek federal reimbursement of the contract amount.
“It appears that LUMA is conducting a noncompetitive procurement, relying on the emergency/exigency exception for competitive procurement,” the oversight board noted. “LUMA provided a justification memorandum indicating that Hurricanes Fiona and Ian have caused strain to the supply chain and logistics networks.”
The board said further that LUMA should prepare and maintain a comprehensive justification memorandum in the procurement file, which must, at a minimum: identify the circumstances that justify a noncompetitive procurement; provide a brief description of the product or service being procured, including the expected amount; and explain why the noncompetitive procurement is necessary.
The memo should explain the nature of the public exigency/emergency, including specific conditions and circumstances that clearly illustrate why a procurement other than through noncompetitive proposals would cause unacceptable delay in addressing the public exigency/emergency; state how long the noncompetitively procured proposed contract will be in place and identify the impact of the unavailability of a noncompetitively procured contract for that amount of time; describe the steps taken to determine that full and open competition could not have been used; discuss cost reasonableness and the methods used to justify cost reasonableness; and describe any known conflicts of interest and any efforts that were made to identify possible conflicts of interest.
LUMA must also describe why no other contract type was suitable other than time and materials, or T&M, at this point, and describe how LUMA will maintain oversight over the contractor to ensure the contractor is using efficient methods and effective cost controls, among other requirements, the oversight board said.