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Local Uniform Company Wins Lawsuit Against Prepa

Prepa ignored cost preference and granted $2.8 million contract to company with no local manufacturing facility


June 10, 2004
Copyright © 2004 CARIBBEAN BUSINESS. All Rights Reserved.

In a decision that could help other local companies sell goods and services to the government, uniform company Pitirre Manufacturing Inc. won a lawsuit brought against the Puerto Rico Electric Power Authority (Prepa) for not granting it a $2.8 million contract that it should have won.

According to Pitirre Manufacturing President Ramon Rodriguez, six or seven companies bid for the contract to supply uniforms to Prepa’s workers, including his company and Olimac Mfg. Inc. The contract was awarded to Olimac Mfg., even though Pitirre Manufacturing had a 10% cost preference that would have put its bid at 9% under Olimac’s price.

"Incredibly, Prepa awarded the contract to Olimac, even though the company no longer has an apparel-manufacturing facility in Puerto Rico," said Rodriguez. "Even if my bid had been higher, the only way a company can work with subcontractors is by using already approved companies. So, we decided to challenge the results and take Prepa to court."

The Puerto Rico Appeals Court last week decided in favor of Pitirre Manufacturing. "The court ruled that Prepa had committed irregularities and ordered Prepa to cancel the uniform orders it had already placed with Olimac," said Rodriguez. "Even though it has cost me close to $7,000 to fight for this contract, I had to stand up for the rights of the few apparel companies left in Puerto Rico."

A source close to Prepa told CARIBBEAN BUSINESS that Executive Director Hector Rosario had been warned about irregularities in the bid process. "Rosario was personally informed that the decision by Prepa’s bid board went against the Puerto Rican Industry Investment Board Law of Jan. 8, 2004 [formerly the Government Purchases Preference Policy Board, which operated under the General Services Administration].

"Rosario claimed Prepa wasn’t bound by the new law and said its regulations precluded cost preferences for two local companies bidding on the same contract," continued the source. "According to the new law, however, this isn’t correct. The cost preference is valid at any time during a bid process and the new law does apply to Prepa. The agency’s board is upset with Rosario now for having caused them a legal problem."

A study commissioned in 2002 by the House of Representatives and a group of business organizations revealed that of the $5.2 billion in annual government purchases, only $450 million, or 9%, are from local manufacturers and distributors. The new investment law provides a 2% to 15% cost preference on the products of qualified companies looking to sell to the government through competitive procurement processes. This preference allows them to compete with larger companies that can offer their products at lower prices.

This Caribbean Business article appears courtesy of Casiano Communications.
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