Teno thumbs down local preference bill

Posted on May 25 1999

A legislation seeking a sweeping overhaul of the bidding regulations on government contracts to favor local firms was disapproved by Gov. Pedro P. Tenorio because of the measure’s serious legal implications.

While the proposal drew praise from the governor for giving local businessmen the chance to participate in government contracts as way of retaining revenues within the CNMI, he was concerned about two key provisions that would violate existing laws.

In his message to the Legislature, Tenorio cited the provisions that requires a bidder to establish a local office, as well as the granting of authority to the governor and the attorney general to be the arbitrator of whether a contractor meets the required ownership percentage. The latter, he explained, “infringes on the powers of the judiciary.”

While the proposed amendment covers government contracts, the provisions appear similar to the Managaha law, which was earlier vetoed by the CNMI leader because of its adverse impact on foreign investments. It provides that locally-owned businesses stand a better chance of gaining concession rights on the tourist site so long as their offers fall within 20 percent of the highest bid.

Senate Bill 11-90 is step further to change bidding regulations since it covers not just construction projects but all government contracts, in what could be another hasty move that will shut the door for foreign investments in the Northern Marianas.

Senators have overwhelmingly passed a proposed legislation seeking to establish a local preference to bidders on CNMI agency contracts to protect locally-based companies against “competitive disadvantages” from off-island contractors especially at this time when millions of dollars in Capital Improvement Projects are underway.

Under the bill, local firms will be given priority to bid for infrastructure projects, public works as well as procurement of goods and services of the CNMI government.

They will only be required to come up with offers not more than 15 percent higher than the bid of any foreign firm or contractor deemed disqualified based on a set of criteria.

For instance, if a foreign company bids $5 million for a certain government project, a local bidder must not offer above $5.75 million to win the contract.

According to findings of the legislature, the existing law requiring that a company should be at least 75 percent owned by U.S. citizens before it can bid for any government contract is “without force and effect” and may be open to constitutional challenge.

The measure, proposed by Sen. Juan P. Morgen, also noted that the current bidding procedure for government contracts fails to consider whether the bidder is a local business paying its taxes to the commonwealth.

It said the public funds paid to local businesses benefit the NMI economy through tax and expenditures by resident workers of the company.

“Income remains in the economy and circulates with a multiplier effect instead of being remitted overseas. Local businesses also contribute to the community and support the government in ways that nonresident firms do not,” the bill pointed out.

By giving local preference on public contracts, the island government is also helping indigenous-owned businesses cope up with the costs of maintaining their operations here, it said.

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