Home News Local news Report Finds VIPA Not Following Procurement Laws

Report Finds VIPA Not Following Procurement Laws


April 11, 2005 – A recently concluded federal audit of the V.I. Port Authority revealed the agency's procurement practices were not always in compliance with local and federal procurement regulations.
The audit report, which was released to the media Monday, was conducted by the U.S. Department of Interior Inspector General's Office. The report comes on the heels of another audit report issued by the V.I. Inspector General concerning the authority's use of federal funds for land acquisition in St. Croix to expand the Henry E. Rohlsen Airport. (See "VIPA Pays Nearly $400,000 Too Much for Yellow Cedar Property").
U.S. Inspector General Arnold van Beverhoudt stated in the report that because of VIPA's failure to adhere to the federal and local procurement requirements, the authority did not have adequate control over its procurement function.
The audit found that VIPA in some instances failed to use the competitive bidding process and did not properly document and maintain contract files for major capital improvement projects. VIPA also did not require contractors to submit all necessary documents, including evidence of liability insurance coverage and appropriate business licenses, thereby undermining the integrity of its procurement actions, the report further stated.
"Because the authority did not comply with established policies and did not have adequate control over its procurement activities, it could not ensure the efficient and effective use of funds," van Beverhoudt stated.
During fiscal years 2002 and 2003, the Port Authority awarded 24 construction and project management contracts for 11 capital projects totaling $85.3 million.
"We determined that the authority did not follow the competitive procurement requirements for seven contracts valued at $1.7 million and did not document the process for nine contracts valued at $46.4 million," van Beverhoudt stated.
The report said no documentation could be found regarding the selection of the construction contractor for the Henry Rohlsen Airport terminal building, nor for the selection of project management consultants for the marine port projects at Red Hook and Enighed Pond on St. John.
The Port Authority also did not plan adequately for the construction of the Rohlsen Airport terminal resulting in 17 contract change orders that totaled $8.4 million, putting the project 37 percent over budget and doubling the completion time.
VIPA also did not follow federal guidelines for approving the contract change orders, which utilized federal funds. According to the report, VIPA failed to include a clause allowing the Comptroller General of the United States to have access to the contractors' books, documents and records in the change order forms for federal grants projects. Failure to adhere to federal grant terms and conditions could jeopardize future grant awards.
By not utilizing the competitive bidding process and inadequately documenting contracts, the semi-autonomous agency could not verify whether it obtained fair and reasonable rates for goods and services offered under professional services contracts.
VIPA paid $1.9 million for six professional service contracts over a six-year period, and issued 2,158 purchase orders totaling $3.9 million during fiscal years 2002 and 2003.
In five instances the authority did not issue any contracts at all for services rendered, and in several instances it did not issue a contract until after the majority of work had been performed, and "significant" payments had already been made, the report stated.
Automated Solutions, a Georgia-based company, was awarded $957,000 for computer consulting services for fiscal year 2000 through 2004 without any formal contract in place.
VIPA failed to adhere to its own internal policy of getting two quotes for purchases $2,500 or less, and issuing contracts to vendors for purchases over $2,500.
The Port Authority also failed to deduct four percent gross receipt taxes from payments to contractors who performed services for the authority from 1997 to 2001. This deduction is required for payments to contractors exceeding $30,000. The code was amended to include this provision in September 1997.
"Authority officials said they were not aware of the new requirement until the authority received a Dec. 22, 2000 memorandum on the subject from the Bureau of Internal Revenue," van Beverhoudt said in his report. "The authority began deducting the gross receipt tax in February 2001. However, it did not deduct the tax from all applicable payments to contractors and service providers."
The audit identified nine instances totaling $846,653 where the gross receipt taxes were not deducted even after the Authority was notified.
Van Beverhoudt recommended among other things that the Port Authority employees revisit the agency's Procurement Policy and Procedures Manual, and the authority develop and implement a tracking system to ensure that all requirements are followed.
In response to the audit, VIPA Executive Director Darlan Brin said he took exception to certain findings and conclusions in the report, but acknowledged the fact that "there is a need for significant improvements." Brin said he would take steps to revise VIPA's procurement manual, as well as establish proper files and maintain proper records.
Click here to download the complete audit.

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