Governor Arnold I. Palacios confirmed today the administration’s decision to terminate the government’s $8 million sole source contract with Marianas Pacific Express, LLC, dba Marianas Southern Airways (MSA).
“While I fully recognize the seriousness of any decision to end a contract, there is just no money to support this $8 million sole source deal,” Governor Palacios said. “Former Governor Torres overcommitted the Commonwealth and overpromised money we did not have then and do not have now.”
Under the terms of the MSA contract, the deal may be terminated if there is no money for it.
The sole source contract was executed in March 2022 in the amount of $8 million for interisland air and cargo passenger service between Saipan, Tinian, Rota, and Guam. On August 16, August 30, and twice on November 10, 2022 the Commonwealth government issued advance payments to MSA that totaled approximately $2.4 million, including $1.5 million for start-up costs. The source of funding was federal money awarded to the Commonwealth through the American Rescue Plan Act (ARPA).
“My administration is still assessing the extent of ARPA mismanagement, but what is crystal clear at this point is that these funds were misspent and overspent and ARPA accounts are now in deficit in the tens of millions of dollars,” Governor Palacios stated.
“Equally disturbing to the lack of funds to support this sole-source contract, I question the fairness and wisdom of issuing such a lucrative agreement to a new private venture when an existing competing vendor was already providing the same service and was not offered a similar opportunity,” he added.
“We want our Commonwealth to be a place where all businesses know they can operate and compete on a level playing field.”
On February 21, 2023, Acting Secretary of Finance Tracy Norita issued to Marianas Southern Airways the notice of termination of the contract, citing the nonavailability of funds. According to the contract terms, continued funding beyond fiscal year 2022 was contingent on availability of funding in future years. In the event of funding not becoming available, the Commonwealth may terminate the contract without any further liability.
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