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  • Writer's pictureThe San Juan Daily Star

Study: Public contracting mechanisms in Puerto Rico are still rife with deficiencies

Issel Masses, executive director of Sembrando Sentido

By The Star Staff

The nonprofit organization Sembrando Sentido this week presented the “Evaluation of Public Procurement Processes in Puerto Rico,” a study that identified weaknesses in government contracting, exposing up to $3 billion to misuse and corruption and resulting in the deterioration of essential services.

According to the study, contracting mechanisms such as public-private partnerships (PPPs) and professional services lack transparency and robust competitive requirements. Those weaknesses are more profound in PPP processes, which provide a high level of discretion toward direct contracting without competition. In addition, the contracting structure with regard to PPPs makes it possible to offer multiple benefits to proponents of unsolicited proposals in multimillion-dollar transactions with a significant impact on services such as energy, transportation, infrastructure, etc.

The study also points to the misuse of previous states of emergencies to address foreseeable needs without rigorous planning or actual competition.

“It’s not a coincidence that the most scandalous corruption cases, such as Apex and Cobra, occurred during states of emergency because the standards of transparency and competition are easily bent. Five years after hurricanes Irma and Maria, the Government has yet to change its ways,” said Issel Masses, executive director of Sembrando Sentido, in a statement Monday.

“Weaknesses in planning resulting in unjustified emergency procurement continue to happen, such as in the recent emergency procurement scandals involving air ventilators in school establishments and repairs to a cemetery in the Municipality of Lares,” he said.

The evaluation report notes an “excessive number of laws and regulations that create confusion and inconsistencies in the bidding processes and contracting.” For example, there are more than 52 laws and 110 regulations related to public contracting in Puerto Rico, 79 of which are fundamental to the system but only one applies to all public entities. In addition, most laws and regulations are not up to date, creating loopholes that often result in more significant errors or the manipulation of due processes to avoid competition and integrity in contracting.

The evaluation also reveals that professional services, representing at least 9% of public spending, and waste management contracts, representing some 18.7% of the total required in municipal contracting, lack requirements to promote competition and a level playing field. Moreover, even those service types that do require bidding have around 29 exceptional circumstances that exempt the purchase from its due competitive process.

The evaluation notes that procurement reform in agencies should have specific proceedings to suspend or eliminate a contractor from the registry of bidders when in violation of the terms and conditions of contracts. The evaluation team also identified increased open and transparent opportunities and training in the private sector, promoted by the Puerto Rico General Services Administration (ASG). However, those improvements are far from sufficient, the evaluators said.

Both private sector surveys and interviews demonstrate a persisting distrust in the public procurement system, which is described as “bureaucratic.” Around 60% of contractors who completed a private sector survey (N=35) indicated that it has been difficult to learn about procurement opportunities. An estimated 71.4% of those surveyed reported past challenges with being paid after delivering the contracted goods or services. Almost half of those surveyed consider that to secure government contracts, it is necessary to have close relationships with public officials who make decisions, that it is required to participate in political events, or that they must offer private benefits to public servants.

In addition to the challenges identified before and during the bidding phases, Sembrando Sentido found that a permissive legal framework hampers contract management accountability. For example, although the Office of the Comptroller of Puerto Rico (OCPR) conducts municipal audits every two years, the new Municipal Code extends the minimum number of audits to once every five years.

“This represents a great risk to public integrity, especially considering the lack of transparency and preventive monitoring in public contracting,” Masses said.

Moreover, transparency is extremely weak, she said, with more than 56 government portals disclosing incomplete, unintegrated and poor-quality information on contracting.

“This decentralization of information, which generally does not include the disclosure of subcontracts or purchase orders, makes it almost impossible to know something as simple as how much is spent on public procurement,” Masses said.

According to the study, although the budget data of the Office of Management and Budget points to 20% of spending on contracts, the OCPR Registry of Contracts indicates that on average, $13.5 billion per fiscal year is committed to agreements and their amendments, equivalent to 50% of Puerto Rico’s annual budget.

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