July 29, 2021

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Board sues the government over contract documents

The Oversight Board sued the Wanda Vázquez Garced administration in Federal Court to request all information related to the contracts with Apex General Contractors, 313 LLC, and two other companies for the purchase of COVID-19 rapid testing kits, amid the emergency triggered by the coronavirus pandemic.

In a 33-page document citing El Nuevo Día’s investigation into the purchase of rapid testing kits by the Department of Health and the Emergency Management and Disaster Administration Bureau (NMEAD), the Board asked Judge Laura Taylor Swain, who presides over the island’s bankruptcy process cases, to establish that the government has violated PROMESA Section 204 and to demand the delivery of the requested documents as soon as possible.

According to the adversary procedure filed yesterday, the Board has exhausted all out-of-court avenues to obtain the contracts documents it seeks from the defendants.

The Board considers that although the government is operating under a state of emergency due to the pandemic and the entity authorized Executive Order 2020-24 – which allowed hiring without complying with the regular requirements of such agreement – the procedure adopted by the entity to evaluate the hiring by was not left without effect.

In addition to information on the Apex and 313 contracts, the Board also requested information from the Fiscal Agency & Financial Advisory Authority (FAFAA) on two other contracts. According to the federal entity, to address to the coronavirus emergency, the government also bought supplies from Puerto Rico Sales & Medical Services and Maitland 175.

The Board alleges that in the case of Puerto Rico Sales and Maitland, the information provided by the government only accentuated the Board´s concerns about the process followed to contract both entities.

FAFAA immediately indicated that the lawsuit represents an “unnecessary waste” of public funds by the Board, at a time when Puerto Rico is going through a pandemic that has caused a severe impact on the island’s economy.

Although the Board does not specify this in the lawsuit, the Puerto Rican government produced over 1,000 pages and 202 documents related to the negotiations of contracts for the COVID-19 rapid testing kits and other medical equipment or supplies during the state of emergency decreed by the governor, FAFAA argued.

FAFAA said that from day one that it has cooperated with the Board, producing documents, requesting information from the agencies involved, and offering the Board the opportunity to meet with officials to explain the situation and review documents. According to the agency, the Board refused to join this process and added that the Office of Management & Budget and the NMEAD also provided information to the Board.

This is not the first time that the Board and the government go to court. They have already gone to court over the appointment of a trustee or transformation officer at the Electric Power Authority (PREPA), after Hurricane María, and over the budget too.

The Board’s lawsuit comes just days after the U.S. Supreme Court ruled that appointments to the entity were made in accordance with the U.S. Constitution since they are local or territorial officials of Puerto Rico.

“The rules for how the Government spends money must be clear and transparent at all times,” said Board Executive Director Natalie Jaresko, in revealing the litigation that places the tax agency and the government on opposite sides again.

Since the Board approved, in March, a $787 million economic relief package and the use of $160 million from the emergency reserve to offset the effects of the pandemic, the fiscal entity told the governor that she should report on how she spent the funds approved. The entity also established that, despite the emergency, the government must present the contractual agreements it signs, including purchase orders.

Until last week, despite the economic disruption caused by the public health response, the government had only spent half of the funds allocated, according to the Board.

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