FOMB Approves New Rules That Regulate Government Purchases

Conceived in joint effort with the General Services Administration

Natalie Jaresko, the executive director of the FOMB.

The Financial Oversight and Management Board for Puerto Rico (FOMB) announced that it approved a set of rules that should substantially improve the Government of Puerto Rico’s practices in purchasing goods and services, and should prevent the irregularities and inefficiencies that have plagued Puerto Rico’s procurement system for too long.

The Uniform Regulation for Purchases and Bids of Goods, Works, and Nonprofessional Services of the General Services Administration, required by Act 73-2019 that centralized all purchases by government entities, was proposed by Puerto Rico’s General Services Administration (GSA) and revised by the Oversight Board to align with best practices and comply with the Certified Fiscal Plan

and the fiscal responsibility mandated under PROMESA.

The approved regulation establishes a single, robust, and sound procedure for all procurement, including exceptional purchases in emergencies or other situations during which the Government must act quickly. The regulation will promote market competition, transparency and accountability, and necessary controls in the acquisition of goods and services.

“This regulation is a big step forward for Puerto Rico,” said the Oversight Board’s Executive Director Natalie Jaresko. “The regulation will enable Puerto Rico to efficiently and effectively procure goods and services at the best possible prices. Competitive bidding for goods and services, transparent contracting, and sound controls are the guiding principle of well-functioning procurement process, and that’s what this new regulation enables.”

“Procurement is like the wiring behind the walls of any house: it is essential to the lives of every resident, but mostly noticed only when it isn’t working – and when it isn’t working, it’s dangerous. Puerto Rico’s faulty wiring has done tremendous harm. From procurement of emergency electricity grid services to inefficient supply purchases, contracting has been opaque and problematic, and the new regulation puts in place the rules, policies and procedures that should put an end to many of the shortcomings that resulted in faulty contracts,” Jaresko added.

Many of the significant deficiencies of the Government procurement process came to light during the Oversight Board’s review of the contracts to purchase COVID-19 test kits earlier this year, revealing a lack of uniform rules for purchases during a Government-declared emergency.

The Oversight Board’s review of the regulation proposed by GSA led to substantial changes, including:

• Minimization of what qualifies as exceptional procurement, allowing direct purchases of goods and services outside the normal procurement processes.

• Establishment of a defined process for exceptional procurement, including purchases during emergencies.

• Requirement that a re-bid process take place when no offers or proposals were received in the process of procuring ordinary contracts for goods and services.

• Bids in open-book format (also known as cost-plus contracts) to require suppliers to include all of their costs, mark ups, and services to assist in the transparency of decision making.

• Publication of all purchase orders, in addition to all contracts, following the same procedure.

“Centralizing procurement is an essential element of the government agency efficiency reform outlined in the Certified Fiscal Plan for Puerto Rico, to achieve greater purchasing power and transparency. Together with proper procurement rules and procedure, it should result in significant savings in government agencies’ budgets,” the FOMB affirmed in a press release.

The regulation adds robust controls and audits, and penalties for non-compliance. The regulation establishes that the review board is responsible for auditing all exceptional purchases quarterly and to make such audits public.

“The Puerto Rico Government now must ensure the regulation is implemented and applied rigorously, while establishing a flawless audit program to ensure that the controls are fully implemented and result in the required transparency and the expected savings,” the missive added.