OPA finds conflict of interest, deficiencies in hotel quarantine procurement; $3M in questioned costs

Buses transport the quarantined travelers to Pacific Star hotel. (Photo by Allan Balbin)

The Guam Office of Public Accountability (OPA) has released an audit of the emergency procurement of Coronavirus (COVID-19) quarantine and isolation facilities. The audit
found the Office of the Governor did not comply with Guam Procurement Law when procuring these quarantine and isolation facilities.

Specifically, OPA identified four deficiencies related to:

(1) the Governor’s Office lacking procurement authority to procure quarantine and
isolation facilities;
(2) the Governor’s legal counsel had a conflict of interest with one of the awarded facilities;
(3) an incomplete procurement record; and
(4) the quarantine and isolation facility contracts did not conform to the requirements set
forth in the Governor’s Executive Order and Guam Procurement Law.

As a result of the audit’s findings, OPA questioned $3 million in costs for the procurement of quarantine and isolation facilities. In the subsequent two emergency procurements for quarantine and isolation facilities, and to their credit, the Government of Guam rectified the first two deficiencies by having the appropriate procuring agencies involved. However, the procurement record continued to be incomplete and the services extended beyond the 30-day emergency procurement limit.

Governor’s Office Lacked Procuring Authority

Pursuant to Title 10 of the Guam Code Annotated § 19403, the Governor has an “oversight” role over the public health emergency in the activation of the disaster response and recovery aspects.

The initiation of the emergency declaration directly appointed a primary “public health authority” (PHA) to respond to the emergency. As stated in the Governor’s Executive Order 2020-03, the designated PHA is the Director of the Department of Public Health and Social Services (DPHSS), with expressed authorization to exercise all powers set forth in the declaration. The Governor delegated her legal counsel to handle the initial emergency procurement for quarantine and isolation facilities, effectively bypassing the procuring authority already provided to the DPHSS Director under the PHA and Guam Procurement Law, and the authority of GSA’s Chief Procurement Officer (CPO), also under Guam Procurement Law.

OOG Legal Counsel Conflict of Interest

The audit also found a potential conflict of interest when the Governor’s legal counsel was placed in charge of the initial procurement for quarantine and isolation facilities. Through published local media articles, OPA confirmed the Governor’s legal counsel had an immediate family member with a financial interest with one of the awarded hotels. The mortgage for the hotel was held with a local bank, where the legal counsel held previous employment and an immediate family member is currently employed with and owns, which would be a conflict of interest as identified in 5 G.C.A. § 5628 (a). Upon discovery of an actual or potential conflict of interest, an employee shall promptly file a written statement of disqualification and shall withdraw from further participation in the transaction involved. The procurement record did not include any such written statement of disqualification.

Incomplete Procurement Record

The procurement record for the initial COVID-19 quarantine and isolation facilities was
incomplete as it lacked sufficient documentation to provide a complete history of the procurement in compliance with 5 G.C.A. § 5215. This included the request for quotations (i.e. solicitations local hotels) and the award of the procurement (i.e. selection of the local hotels). There is no clear indication in the procurement record with regards to who and how the decision to use these facilities was made. Without a proper procurement record, it voids the mandated transparency and accountability in the procurement process.

Contracts Were Not in Conformance with E.O. and Guam Procurement Law

The contracts for Hotels A through D were not in conformance with the E.O. and 5 G.C.A. § 5215. Specifically, 1) the contracted dates exceeded the 30-day limit for emergency procurement; 2) renewal terms disregarded E.O. terms; 3) total rooms procured conflicted with the Governor’s requested requirement; and 4) the CPO’s authorized signature was missing.

It was the understanding of the OOG’s Legal Counsel that they were acting on behalf of the
Governor, the E.O., and the Governor’s executive powers allowing them to fast track the
procurement process and forego the missing items identified in the initial procurement record.

However, by doing this, it undermined the integrity of the procurement process and led to non-compliance with Guam Procurement Law.

“The COVID-19 pandemic was an unprecedented public health emergency, and while there
appears to be misjudgments made, we must take the lessons learned in the experience and make necessary changes to improve future plans. While emergency procurement was acceptable for the initial procurement of the quarantine facilities to use, GovGuam was working on procuring quarantine facilities as far back as January 2020. After three months of emergency procurement, GovGuam had sufficient information regarding room utilization rates and the long-term requirement for quarantine and isolation facilities to prepare and issue an IFB, instead of the extended use of emergency procurement,” concluded Public Auditor Benjamin J.F. Cruz.

The Office of the Governor disagreed with OPA’s audit findings and recommendations. After
reviewing their response, OPA stated its audit findings and recommendations generally remained the same.

(OPA Release)