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Economic Development Legislation Supports Greater Local Purchases By Government

Eight new bills would protect Puerto Rico businesses from unfair external competition


October 24, 2002
Copyright © 2002 CARIBBEAN BUSINESS. All Rights Reserved.

House of Representatives Vice President Ferdinand Perez Roman submitted eight new bills to the Legislature last week aimed at increasing Puerto Rico government agencies’ purchases of local goods & services.

The eight bills would promote and strengthen local small and midsize businesses with government measures to protect them from unfair competition.

The House bills were based on information from a study prepared by local economic analysts Estudios Tecnicos Inc. The $48,000 study was commissioned by Perez Roman in conjunction with the Puerto Rico Manufacturers Association; the Puerto Rico Chamber of Commerce; the Puerto Rico Products Association; the Food Industry, Marketing & Distribution Association (MIDA by its Spanish acronym), and the Puerto Rico Retailers Association (Centro de Detallistas, in Spanish).

Published on Sept. 26, the study recommends that the government not focus exclusively on the creation of new jobs but also on the ability of local businesses to compete effectively with mainland U.S. and foreign corporations. According to the study, only $545 million of the $3.7 billion spent annually on Puerto Rico government goods & services is bought from local manufacturers.

Although procurement directors from 15 Puerto Rico government agencies acknowledged that the quality of goods & services purchased locally is the same as (80%) or better than (20%) those bought elsewhere, they said better pricing strategies, speedier deliveries, and additional services and guarantees are needed to make local companies more competitive. In turn, local businesses complained about government agencies’ tendency to pay late and about the amount of red tape in the procurement process.

Several U.S. states’ and foreign countries’ procurement regulations were analyzed based on their success in boosting government purchases from small and midsize businesses. In the U.S., the federal government has customarily allocated a share of its contracts to small businesses. The practice is in addition to a 5% incentive given to companies owned by women or by other minorities. Illinois and Iowa have established procurement targets for expenditures on local businesses, while Rhode Island and Florida have vendor information programs.

The procurement programs of foreign countries such as Peru, Colombia, and Venezuela have mostly implemented measures to substitute imports with local products, resulting in the creation of new businesses and jobs. Australia coordinates its government procurement through an electronic bank of products & service providers.

According to the House study, the local sectors that remain competitive and have the most potential are in health, information systems, manufacturing, pharmaceutical products, telecommunications, food products, small & midsize businesses, and retail business groups.

Short- and medium-term recommendations included intensifying the adoption of high technology by local companies, increasing the government’s promotional efforts to export local goods & services, and creating a website that provides accurate information about government purchases. In addition, a program whereby representatives from multinational or foreign companies mentor local companies could be established. Most important would be the creation of an entity to implement these recommendations.

Economic development bills submitted by House Vice President Ferdinand Perez Roman to the Legislature on Oct. 17, 2002

House Bill No. 2997 Establish the Puerto Rico General Services Administration as the agency responsible for implementing government’s local purchases.

House Bill No. 3082 Government agencies should buy goods & services from regional suppliers instead of concentrating their purchases in the San Juan metropolitan area.

House Bill No. 3088 Government agencies must submit a procurement report to the Legislature indicating the amount of their purchases and what percentage of the purchases came from local suppliers.

House Bill No. 3089 Amend Puerto Rico’s Procurement Law to guarantee the participation of local companies in government bidding processes.

House Bill No. 3234 Assign an Independent Monitor to oversee the Puerto Rico Prompt Payment Law and ensure that government agencies are complying with local purchasing requirements.

House Bill No. 3236 Create the position of Puerto Rico technology transformation general manager, to be named by the governor.

House Bill No. 3238 Establish a Puerto Rican Industry Investment Board to regulate the government’s expenditures on local products & services.

House Bill No. 3256 Create an index of local companies that are ready to export their goods & services and an Advisory Board that will encourage those companies’ advance.

Perez Roman had previously supported a House bill creating a local products’ promotional fund managed by the Puerto Rico Products Association; it became Law 157 of Aug. 10, 2002. On Oct. 10, he also submitted House Bill No. 3050 to create the Food Distribution Industry Competitive Law, which would establish a workgroup to strategize, promote, and benchmark the local sector.

This Caribbean Business article appears courtesy of Casiano Communications.
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