Heat oil in a medium, heavy saucepan over medium-high heat. Add ham to pan; cook until brown, about 5 minutes. Stir in peppers and onions; cook, stirring occasionally, scraping up brown bits from bottom, until vegetables are soft and translucent, 10 minutes. Add sazón, garlic, cilantro and oregano. Cook until fragrant, about 30 seconds.
Add rice to pan. Cook, stirring frequently, until coated in oil and toasted, about
1 minute. Stir in pigeon peas, tomato sauce, olives and 1½ cups water; using a wooden spoon, stir once and bring rice mixture to a boil. Cook, uncovered, until water is evaporated, about 10 minutes. Gently stir rice from bottom up.
Lower heat to medium low and cook, covered, until rice is tender, about 15 minutes. Remove saucepan from heat. Gently fluff rice with fork. Cover pan and let stand 5 minutes.
The crust of rice that forms on the bottom of the pot is a delicacy referred to in Puerto Rico as pegao. Once the rice is served, the pegao is scraped out and distributed as a treat. To achieve the perfect crust – caramelized and crunchy, but not burnt –once the water has evaporated, scrape the bottom of pan with the wooden spoon, making sure to dislodge any stuck bits [Step 2]. This will prevent the rice from burning. Then, allow the rice to cook over medium-low heat, and refrain from shaking the pot or lifting the lid. This will ensure an even distribution of heat on the bottom of the pot, which, in turn, allows the perfect pegao to form.