FEMA probing $300 million no-bid contract for Puerto Rico

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The Federal Emergency Management Agency is investigating a controversial $300 million contract to rebuild Puerto Rico’s power grid, a no-bid award that has spotlighted the agency’s poor record of policing similar grants and drawn scrutiny from its watchdog.
Whitefish Energy Holdings LLC, a Montana-based company that had just two full-time employees prior to beginning its work in Puerto Rico, was selected last week by the Puerto Rico Electric Power Authority to lead the rebuilding of Puerto Rico’s hurricane-ravaged electrical grid with the expectation that the money would come from FEMA.
“FEMA has significant concerns with how PREPA procured this
contract and has not confirmed whether the contract prices are reasonable,” FEMA said in a statement, noting that it hasn’t reimbursed Puerto Rico yet for the contract and that it can withhold payments procurement procedures aren’t followed. Meanwhile, the office of inspector general of FEMA’s parent agency, the Department of Homeland Security, says it is investigating the contract.
“We plan to cooperate with any and all information requests,” Whitefish said. “We are very proud of the work we are doing to restore power to the people of Puerto Rico under very difficult circumstances, and we respectfully ask that others await the facts before jumping to misinformed conclusions.”
The inspector general’s office has repeatedly criticised FEMA for lax oversight of grants. The office frequently recommends that FEMA withhold or claw back payments that didn’t follow federal regulations, Bloomberg News.
In June, Inspector General John Roth sent a letter to the chairman of the Senate Committee on Homeland Security and Governmental Affairs, Ron Johnson of Wisconsin. That letter, which hasn’t previously been reported, warned of FEMA’s “continued failure to manage disaster relief funds adequately.”
Almost one-third of the grants reviewed by Roth’s office were improper, unauthorised or otherwise problematic, indicating “the potential for a much larger problem” with the $10 billion in such assistance that FEMA typically awards each year, Roth wrote.
Johnson’s office didn’t respond to requests for comment.
Whitefish is based in Whitefish, Montana, hometown of Interior Secretary Ryan Zinke. In an interview earlier this month, Andy Techmanski, Whitefish’s chief executive officer, said he knew Zinke but said the cabinet member had no role in the company or its work in Puerto Rico.
Among Whitefish’s investors is the Dallas-based HBC Investments LLC. Joseph Colonnetta, founding and general partner of HBC, is a backer of President Donald Trump.
FEMA oversees a vast web of disaster relief work: in September, there was $68 billion of ongoing FEMA grants spread across 653,000 projects, and multiple audits and reports by the inspector general show a pattern of problems in how these funds were being spent.
The June letter was the result of “a frustration in our lack of progress in getting FEMA or Congress to pay attention to this,” Roth said. The trigger, he said, was FEMA’s decision to give $2.1 billion in grant money to New Orleans, ostensibly to help it recover from hurricanes Katrina and Rita—more than a decade after the fact.
An audit by the inspector general concluded that FEMA shouldn’t have awarded the grants because it was for rebuilding streets and water lines that were degraded by years of neglect, not the hurricanes. FEMA, the inspector general concluded in July, should halt or “disallow” all funding for the work in
New Orleans.
FEMA, for its part, disagreed with the finding, arguing that extensive reviews showed the work would repair damage caused by the storms.