April 9, 2003 – The Property and Procurement Department is underutilized and underfunded and has in many instances operated outside of rules in issuing government contracts, a Senate committee was told on Wednesday.
Sen. Shawn-Michael Malone, chair of the Government Operations Committee, said he called the meeting to examine the government's system of awarding contracts in light of several questionable cases recently which have wound up in litigation. "In the last few months, the government has been in court over the contracts," he said, "and we can't afford to operate in this manner."
Arnold van Beverhoudt, Caribbean field office supervisor for the U.S. Department of the Interior's Office of Inspector General, outlined flaws within Property and Procurement cited in his office's September 2002 audit report on "Professional Service Contracts of the Government of the V.I."
Marc Biggs, P&P commissioner, responded to the audit report recommendations on Wednesday, as did Attorney General Iver Stridiron. Contracts awarded by Biggs' department must be approved by the Department of Justice, which Stridiron heads.
The audit was undertaken to determine whether:
– The V.I. government awarded professional service contracts in accordance with procurement requirements of the V.I. Code.
– Contractor performance was monitored.
– Contractors were paid in accordance with contract provisions.
The government struck out on all three counts, according to the audit findings. The report states that during Fiscal Years 2000 and 2001, the government issued 388 professional services contracts totaling approximately $100 million with gross disregard for the contracting process.
The auditors found both the awarding and the administering of the contracts inadequate to protect the government's interests. And as a result, the report states, government agencies "regularly violated the procurement process."
Van Beverhoudt said on Wednesday that his office reviewed a sampling of 70 contracts totaling $24.3 million. From these, it found several basic concerns, he said.
Four years of payments without a contract
The most glaring lapses cited in the report concern a vendor operating without a contract who was paid in excess of $1 million by the Public Works Department and 11 other government agencies between 1998 and 2002, ostensibly to provide computer services.
The auditors found that the vendor did not have a valid V.I. business license until June 2001. Audit reports issued by the Office of Inspector General do not identify individuals cited by name; when senators asked, van Beverhoudt said he thought the vendor was named Thomas, but he didn't have a first name.
Last fall, when the audit report was released, Public Works Commissioner Wayne Callwood questioned a monthly fee of $4,950 to provide services including the purchase of computer hardware and software and maintenance of the computer network and telephone systems, with the total payment over the four years coming to $375,173.
Callwood said then that when he became commissioner in the spring of 2001, the vendor was already employed, and he was surprised to learn the person had no contract. He also said Public Works had experienced "major problems" with the quality of the vendor's services.
On Wednesday, van Beverhoudt said the vendor did not have contracts with any of the 12 agencies involved. Of the more than $1 million paid to the vendor, he said, $266,000 represented federal funds.
Biggs said that contracts for less than $5,000 do not have to go through the bidding process. Because of this, he said, his department can get left "out of the loop."
Over the course of three years, the vendor received repeated payments of less than $5,000. Stridiron termed it a "worst-case scenario," when the payments of $4,950 could "slip under the radar."
Other areas of concern
The other areas of concern cited by Van Beverhoudt were that Property and Procurement:
– Awarded contracts non-competitively; without evidence that funding was available to pay contract costs.
– Allowed contractors to begin work before contracts were awarded or fully executed.
– Awarded contracts to firms not licensed to do business in the Virgin Islands.
– Failed to monitor contract performance.
– Allowed retirees to receive both retirement annuities and contract payments in violation of V.I. law. (The law at the time limited such double payments to 75 days; recent legislation changed the period to three years.)
Language in the V.I. Code came under question. Van Beverhoudt said he frequently hears that professional service contracts don't have to go through the bidding process. "I believe this is incorrect," he said.
V.I. Code subsection 239(a), which cites cases where actions can be exempt from procurement procedures, states that bids "should be procured by competitive negotiation wherever practicable." In other words, van Beverhoudt said, "some form of competition is required for professional service contracts."
Stridiron disagreed. "There are instances where competitive bidding isn't practicable," he said, citing a complicated tax case as an example.
Van Beverhoudt acknowledged the problem but said his office needs a letter of justification in such cases. "No contract can be approved without a letter of justification," he said. But he also said there have been cases where such letters were "misplaced." There is a checklist initialing that the letter was received, but "we couldn't locate the letter," he said.
Stridiron defended P&P's process. "If we don't do it by the book, sometimes to the chagrin of government agencies, we get a contract kicked right back to us," he said. However, he admitted, "We're all human and sometimes a letter just isn't there."
Budget cuts hurt ability to bring in revenue
Responding to questions from Sen. Emmett Hansen II, Biggs said P&P currently is owed about $769,000 in outstanding rent payments. Hansen expressed concern that, like other revenue-generating agencies, P&P is under-utilized and cut back to the point where it cannot fulfill its mandate.
Biggs said P&P could be a revenue-generating agency if he had the personnel to do the work. Five employees are needed in each district to establish an adequate contracting office, he said, and $460,000 to $500,000 would be required to hire them. Instead, his staff has been cut by 155 employees, and he doesn't have the necessary inspectors.
"We don't have the people to collect the rent," he said. Upon further questioning, he said a supplemental budget request he made last year was approved, but no funds have been received.
Sen. Louis Hill asked Biggs about his department's control over the purchasing of government vehicles. He asked why "every government employee must drive an SUV." Malone assured Hill that his committee will be looking into the vehicle-purchase process.
Biggs agreed with the recommendations made in van Beverhoudt's audit report and submitted a plan for implementing them. Biggs said he sent a memo to all department heads outlining procedures to follow in submitting a letter of justification — and the guaranteed result if those procedures are not followed. He sent out another memo spelling out procurement requirements that departments must adhere to in order for their contracts to be approved by him.
Van Beverhoudt expressed approval of Biggs' actions. Based on the directives.
Biggs said, "We consider six of the report's recommendations to be resolved."
Ira Mills, director of the Office of Management and Budget, and Finance Commissioner Bernice Turnbull had been invited to testify at the hearing but did not appear. Mills sent a letter saying he could not attend, but Malone said his presence was essential to provide budget i
nformation that the committee needed.
Committee members present were Sens. Lorraine Berry, Douglas Canton, Carlton Dowe, Hansen, Hill, Malone and Celestino A. White Sr. Sens. Roosevelt David and Adlah "Foncie" Donastorg, who are non members, also were present.

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