Eric Katz | October 30, 2017 | 0 Comments

Puerto Rico Terminates Controversial Contract to Restore Its Power

Carlos Giusti / AP

The Puerto Rican government is canceling a controversial contract that it established to restore power to the hurricane-ravaged island, amid concerns about the procurement process, unusual provisions within the agreement and exorbitant pricing.

The Puerto Rico Electric Power Authority announced it would end the $300 million agreement entered into with Whitefish Electric in the wake of Hurricane Maria, though it did not admit any impropriety. Two congressional committees announced probes last week into the contract, and the Homeland Security Department’s inspector general is investigating it. The Federal Emergency Management Agency said it had “significant concerns” with the contract, which was offered without a competitive bidding process, and threatened not to reimburse the Puerto Rican government for related costs.

The Puerto Rico Electric Power Authority is terminating the contract at the direction of Puerto Rican governor Ricardo Rosselló. Ricardo Ramos, the head of PREPA, said he was asked to appear before Congress to answer questions about the contract. Sen. Claire McCaskill, D-Mo., the ranking member of the Senate Homeland Security and Governmental Affairs Committee, said last week the contract “raises every red flag in the book.”

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The White House and FEMA have distanced themselves from the deal, saying it was reached outside any involvement from the federal government.

One provision that sparked controversy attempted to limit audits of the contract. “In no event shall PREPA, the Commonwealth of Puerto Rico, the FEMA administrator, the comptroller general of the United States, or any of their authorized representatives have the right to audit or review the cost and profit elements of the labor rates specified herein,” the agreement stated. PREPA also waived “any claims against” Whitefish for any delays in completing work.

Experts said those clauses were “highly irregular” and raised the possibility Whitefish would prolong its work to reach or extend the contract’s value.

Subcontractor linemen were set to bill the government at $3,000 per day under the arrangement. PREPA was also paying Whitefish at an hourly rate for equipment.

The contract initially came under scrutiny after reports surfaced that Whitefish is headquartered in the small town where Interior Department Secretary Ryan Zinke lives, and that Zinke’s son interned at the company. Interior has denied Zinke had any involvement with the contract, something White House Press Secretary Sarah Sanders said Zinke reiterated to Trump at a previously scheduled White House meeting on Friday.

"Any attempts by the dishonest media or political operatives to tie me to awarding or influencing any contract involving Whitefish are completely baseless," Zinke said in a statement Friday. "I welcome any and all investigations into these allegations, and encourage the Interior Department's inspector general to investigate this matter fully."

PREPA has already summoned the support of public utilities in New York and Florida, through the use of mutual aid agreements already in place. The Puerto Rican authority said on Twitter those services would help offset Whitefish withdrawal and the “delays of the Army Corps of Engineers,” which “has only seven brigades” on the island. PREPA is currently operating at just 30 percent capacity, according to the latest update.

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