Lawmakers asking why small Montana business landed $300M Puerto Rico power restoration contract

Officials are probing why the power authority didn't ask public power utilities.

ByABC News
October 27, 2017, 6:02 AM

— -- With more than 75 percent of Puerto Rico still without electricity in the wake of Hurricane Maria, lawmakers are calling for an investigation into why the island turned to a small, for-profit company instead of the mutual-aid network of public utilities usually called upon to coordinate power restoration after disasters.

Montana-based Whitefish Energy was awarded a $300 million Puerto Rico Electric Power Authority (PREPA) contract to repair downed transmission lines crisscrossing the mountains, the company confirmed to ABC News.

"Our rates are competitive and our work is top rate," spokesperson Chris Chiames told ABC News, adding that the company is uniquely qualified to tackle the situation in Puerto Rico due to the CEO's experience in "rugged and remote terrain."

But officials are questioning why PREPA chose to work with Whitefish instead of reaching out to the American Public Power Association, which normally matches states hit by disasters with nearby public power utilities who have offered up crews and equipment.

"To date, PREPA has not requested aid from the association," APPA confirmed. "The entire electric utility industry is standing by to send help as requested."

PREPA Executive Director Ricardo Ramos said Tuesday he ruled out APPA assistance because it would have required the agency, which is currently bankrupt, to handle logistics for crew lodging and food.

Other power restoration companies were ruled out because they required a large upfront deposit, which PREPA cannot afford to pay, he said.

Under the Whitefish contract, the agency paid only $3.7 million for initial "mobilization of personnel and equipment;" further advance payments are not required.

"Whitefish was the only company -- it was the first that could be mobilized to Puerto Rico. It did not ask us to be paid soon or a guarantee to pay," Ramos told reporters in Spanish. "For some reason, someone in the United States has to be upset, because they aren’t here, that I have hired Whitefish -- but that is their problem.”

Still, lawmakers are demanding answers.

“There is something very fishy about the Whitefish deal,” Democratic Rep. Luis Gutierrez, Ill., said in a statement to ABC News. “I have been here 25 years and this doesn’t pass the smell test.”

"Congress needs to understand why the Whitefish contract was awarded and whether other, more cost-effective options were available," Rep. Raul Grijalva, R-Ariz., said in another statement.

Complicating matters are concerns over the relationship between Whitefish founder Andy Techmanski and Interior Secretary Ryan Zinke.

Both parties have confirmed the families know one another -- in their small hometown, "everyone knows everyone" the Interior Department said.

But both insist that Zinke did not advocate on Whitefish's behalf.

The company says it called Puerto Rico before Maria hit to pitch its own services.

Whitefish "showed up at the right place at the right time and that's how they got the contract," Sen. Marco Rubio, R-Fla., told ABC News. "We want to see restoration pick up. Every day that they're without power is a day that economy isn't functioning and it's another day people are suffering. "

PHOTO: Whitefish Energy Holdings workers restore power lines damaged by Hurricane Maria in Barceloneta, Puerto Rico, Oct. 15, 2017.
Whitefish Energy Holdings workers restore power lines damaged by Hurricane Maria in Barceloneta, Puerto Rico, Oct. 15, 2017.

Hiring a company like Whitefish, which relies on subcontractors rather than a staff of trained personnel "didn't make a lot of sense," Sergio Marxuach, policy director at the nonpartisan Center for a New Economy, told ABC News. "This is one of the reasons people down here really hate PREPA -- they do business behind closed doors and it ends up costing a lot of money."

How Whitefish rates compare with public utility prices remains unclear.

The Federal Emergency Management Agency says it was not involved in the selection.

FEMA has "significant concerns" how PREPA procured the Whitefish contract and it "has not confirmed whether the contract prices are reasonable," the agency said in a statement.

FEMA said it has not reimbursed PREPA for any money spent on the Whitefish contract, and that it will verify that PREPA followed regulations "to ensure that federal money is well spent" before handing over any payment.

Directly contradicting a clause in the Whitefish contract that reads, "PREPA hereby represents and warrants that FEMA has reviewed and approved of this Contract, and confirms that this Contract is an acceptable form to qualify for funding from FEMA," FEMA insists the agency was not involved in PREPA's decision and that the clause is inaccurate.

FEMA issued the following statement:

The decision to award a contract to Whitefish Energy was made exclusively by the Puerto Rico Electric Power Authority (PREPA). FEMA was not involved in the selection. Questions regarding the awarding of the contract should be directed to PREPA.

Any language in any contract between PREPA and Whitefish that states FEMA approved that contract is inaccurate.

FEMA has not provided any reimbursement to Puerto Rico to date for the PREPA contract with Whitefish Energy. Regardless, FEMA will verify that the applicant (in this case PREPA) has, in fact, followed applicable regulations to ensure that federal money is properly spent.

Based on initial review and information from PREPA, FEMA has significant concerns with how PREPA procured this contract and has not confirmed whether the contract prices are reasonable. FEMA is presently engaged with PREPA and its legal counsel to obtain information about the contract and contracting process, including how the contract was procured and how PREPA determined the contract prices were reasonable.

It is important for all applicants for FEMA Public Assistance to understand and abide by Federal requirements for grantee procurement. Applicants who fail to abide by these requirements risk not being reimbursed by FEMA for their disaster costs.

FEMA continues to focus on the expedited restoration of essential services in support of the Governor’s recovery goals.

ABC News' Benjamin Siegel and Jennifer Metz contributed to this report.

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