Oversight board flags tech contract costs

By THE STAR STAFF

The Financial Oversight and Management Board (FOMB) has approved three Microsoft Caribbean, Inc. contracts and amendments while warning that government agencies need tighter budget controls to manage rising technology costs.

The most significant action involved the Puerto Rico Innovation and Technology Service (PRITS), whose cloud‑services contract with Microsoft has nearly tripled since its original approval in 2022. The latest amendment, its fifth, adds $3.5 million to cover unanticipated overage expenses for Fiscal Year 2026, bringing the total contract value to $28.9 million. PRITS attributed the increase to “critical technological projects, expansion of digital services, increase in data processing, implementation of new technological solutions, and operational needs,” according to the Oversight Board letter.

The FOMB noted, however, that PRITS has already amended the contract twice because of excess costs. It directed the agency to strengthen contract management and budget controls. PRITS certified that the additional costs will be paid with General and Special Revenue Funds allocated for Fiscal Year 2026.

The Department of Education (DE) also received an “approved with observations” determination for its first amendment to a major Microsoft licensing and cloud-services contract. The amendment adds $16.3 million for Fiscal Year 2027, doubling the contract’s value to $32.5 million. The original agreement, approved last year, covers software and cloud services for teachers, students, and administrative personnel through June 2028.

The DE justified the procurement as an exceptional purchase, citing Microsoft’s exclusive ownership of the necessary intellectual property. The agency certified that Fiscal Year 2027 costs will be paid entirely with General Funds. The Oversight Board reminded the department that any extensions must be submitted for review and that an updated Fund Availability Certification is due by July 15.

The third Microsoft contract reviewed last week involves the Courts Administration Office, known as OAT, which requested approval for a four-year, $13.7 million renewal of Microsoft licensing services. OAT said the contract did not go through a competitive procurement process because Microsoft is the sole manufacturer and owner of the services.

The agreement runs from July 1, 2026, through June 30, 2030. It includes $11.5 million for enterprise and cloud enrollment and $2.17 million for SQL Server and CIS Suite services. OAT certified that the first year will be funded through a mix of General and Special Revenue Funds already budgeted for Fiscal Year 2027. The Board said funds appear sufficient for the first year, but OAT must ensure future budgets include all contract costs and request another review if any changes occur.

Across all three agencies, the Oversight Board emphasized that its review is limited to compliance with Section 204(b)(2) of PROMESA and is not a legal or procurement audit. Even so, the Board warned that inaccuracies or misrepresentations could lead it to reassess the contracts and refer matters to the appropriate authorities.