Gov’t terminates MSA contract

The CNMI administration terminated yesterday its $8 million sole-source contract with the startup interisland airline Marianas Southern Airways, citing a lack of funding, but MSA hopes that the CNMI government can come up with a solution other than termination for the sake of the CNMI community.

The Department of Finance announced on Feb. 21 that it would be terminating the $8 million sole-source contract that the previous Torres administration had with MSA, technically called Marianas Pacific Express LLC.

Following the announcement, MSA president Keith Stewart said he has met with CNMI legislators and representatives of the administration to possibly maintain the contract or to work something out in order to maintain the contract because it would ultimately affect the CNMI community.

In addition, Stewart clarified that there were no under-the-table deals between MSA and the previous administration. As far as he is concerned, MSA was approached to submit a proposal during the time when interisland service was suspended back in 2021, and they were chosen and given a contract.

“We were told that several airlines were approached when one airline had stopped providing service. So the emergency solution was to start up [another] commuter airline. I had no idea and we had nothing to do with that. As for the contract, [it] was approved by the attorney general, there were no ‘backdoor deals,’ it was all legal. We were approached, we submitted a proposal, and we were given a contract,” he said.

Stewart also touched on rumors about a possible suspension of flights on MSA’s part but he said there were no such announcements and he does not want to speculate.

“We’re not going to speculate about what will happen. We’ll wait until we know more,” Stewart said.

Meanwhile, a statement from the office of Gov. Arnold I. Palacios said he said he fully recognizes the seriousness of any decision to end this contract, but there is just no money to support this $8-million sole-source deal.

“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 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 startup costs. The source of funding was federal money awarded to the Commonwealth through the American Rescue Plan Act. 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 stated.

Palacios also questioned the fairness of the contract. “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.”

In a separate statement attributed to Sen. Paul Manglona (Ind-Rota), he reportedly stated that, although it is unfortunate that the CNMI has found itself in this position, the lack of a funding source to pay for the contract necessitated its cancellation.

“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. 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 said.