THERE is no money for the previous administration’s $8 million sole-source deal with Marianas Southern Airways, Gov. Arnold I. Palacios stated on Thursday as he announced his decision to terminate the contract between the CNMI government and the airline company, Marianas Pacific Express.
The contract was signed by then-Gov. Ralph DLG Torres ahead of the interisland airline’s inaugural flight in August 2022.
He said the goal was to provide more interisland flights to the people of the CNMI that would “eliminate an overnight stay in Guam,” and reduce the “stress and costs for everyone who travels to the Marianas, most especially for our residents.”
In her notice of termination on Tuesday, acting Finance Secretary Tracy B. Norita told MSA’s president, Keith Stewart, that “it has been determined that there is no funding available for the contract, therefore the Commonwealth is terminating the contract pursuant to Section 7 of the Standard Terms and Conditions of the contract.”
In a statement on Thursday, Gov. Palacios said: “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.”
He said, “former Governor Torres overcommitted the Commonwealth and overpromised money we did not have then and do not have now.”
Palacios said 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 for interisland air and cargo passenger service between Saipan, Tinian, Rota, and Guam. On Aug. 16, Aug. 30, and twice on Nov. 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 administration said.
The funding source was the American Rescue Plan Act funds awarded to the CNMI government.
“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,” Palacios said.
“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. We want our Commonwealth to be a place where all businesses know they can operate and compete on a level playing field,” he added.
In a separate statement, Sen. Paul A. Manglona said the Senate Committee on Public Utilities, Transportation and Communications, which he chairs, met on Thursday to discuss the issue.
“We will work with the governor’s office to identify options, work on long-term and sustainable solutions that build transportation capacity for our islands,” he added.
He said his committee has been meeting with MSA, Star Marianas and the governor’s office regarding interisland transportation.
Saipan Marianas also provides an interisland flight service for Saipan, Tinian, Rota, and Guam.
“We understand that because of the overspending and mismanagement of federal funds that occurred with the last administration, there are insufficient funds to sustain the sole-source contract with Marianas Pacific Express,” Manglona said.
“It is unfortunate that we find ourselves in this situation, but the lack of a funding source to pay for the $8 million sole-source contract necessitated the cancellation of the contract,” he added.
