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Puerto Rico moves to cancel contract with Whitefish Energy to repair electric grid

The Washington Post logoThe Washington Post 10/30/2017 Steven Mufson, Arelis R. Hernández, Aaron C. Davis
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Puerto Rico’s electric company moved Sunday to cancel a $300 million contract with a small Montana firm for repairs to the territory’s hurricane-ravaged electrical grid, saying controversy surrounding the agreement was distracting from the effort to restore power.

The contract with Whitefish Energy — a firm that had just two employees the day the storm hit — had drawn blistering criticism from members of Congress for days. And on Friday the Federal Emergency Management Agency, which has a large role in determining government reimbursements, said it had “significant concerns” about how the contract was secured.

Thirty-nine days after Hurricane Maria hit the territory, Gov. Ricardo Rosselló said that he is requesting assistance from Florida and New York under “mutual aid” arrangements that utilities traditionally activate during emergencies. The territory had not previously done so and had not responded to offers of assistance.

About 80 percent of people on the commonwealth’s main island still have no electricity.

“As a result of the information that has been revealed and the need to protect the public interest, as governor I am asking the power authority to cancel the Whitefish contract immediately,” Rosselló said in a news conference at La Fortaleza, the governor’s mansion. He did not cite specific information beyond what has been reported in media coverage.

Whitefish chief executive Andrew Techmanski has extensive experience in the electric transmission business, but Whitefish has received only small contracts, records show. Whitefish’s contract in Puerto Rico, the largest yet issued in the troubled relief effort, was not competitively bid.

Local residents wait in line during a water distribution in Bayamon following damages caused by Hurricane Maria in Las Piedras, Puerto Rico, October 1, 2017. The aftermath of Hurricane Maria

Slideshow by photo services

Whitefish has said it has experience in mountainous terrain and that its business model calls for scaling up quickly.

In a statement, Whitefish said that it was “very disappointed” and that the utility’s decision “will only delay what the people of Puerto Rico want and deserve — to have the power restored quickly.” It said that it would “finish any work that PREPA” — the Puerto Rico Electric Power Authority — “wants us to complete and stand by our commitments.”

The company defended its performance, saying it had brought 350 workers, 2,500 tons of equipment and five helicopters to the island. It said repairs on a major transmission line, including work in remote, inaccessible areas, would soon bring electricity to large portions of San Juan, Puerto Rico’s capital.

“The original decision by PREPA to have Whitefish Energy come to the Puerto Rico only sped up the repairs, and if it were not for that action, crews would just now be getting to the island to begin the process of rebuilding the system and restoring power,” Whitefish’s statement said.

Whitefish Energy is based in Whitefish, Mont., the home town of Interior Secretary Ryan Zinke. Techmanski and Zinke know one another, The Washington Post reported last week, and at least four times Zinke’s wife, Lolita, has “liked” family and profile pictures uploaded by Techmanski’s wife, Amanda, on Facebook. One of the Zinkes’ sons had a summer job with Whitefish.

Zinke’s office has said he had no role in Whitefish securing the Puerto Rico contract. Andrew Techmanski also has said Zinke was not involved.

Rosselló said Sunday that he had spoken to Gov. Andrew M. Cuomo (D-N.Y.) and Gov. Rick Scott (R-Fla.) and that their involvement through mutual aid was expected to boost the number of repair brigades to 1,000 by Nov. 8, up from about 400 now.

Ricardo Ramos, executive director of PREPA, said Whitefish would be paid to complete ongoing work on two transmission lines, which he said could take as long as 30 days. Of the contract, he said, “the best thing that can happen is its cancellation.”

“There’s a perception risk, a reputation risk and a delay risk in continuing the contract,” he said.

The decision was a stark reversal for Ramos. On Friday, he offered an extensive defense of the contract, saying in an hour-long interview with The Post that PREPA had winnowed down a list of seven suitors for electricity repair before Hurricane Maria made landfall. He said the utility company had crafted the contract with Whitefish so the Montana firm would be paid for each transmission line fix only after it was completed and tested.

Yet, in the interview, Ramos acknowledged that the island’s utility company did not require any substantial assurance that Whitefish would complete the work it had promised. PREPA did not require any performance bond, he said. By contrast, when the U.S. Army Corps of Engineers signed a $240 million contract this month for similar work with Flour, an engineering firm based in Texas, it required the company to produce a $150 million performance bond within five days.

In addition, Ramos said PREPA did little to scrutinize Whitefish’s work history beyond reviewing material the company itself provided.

Techmanski’s wife, Amanda, is listed as one of two managers for Whitefish Energy Holdings LLC. She is a registered nurse, records show, and last month she touted on Facebook a new job she was starting as a nurse practitioner.

With Amanda Techmanski as a manager, Whitefish was listed as an “economically disadvantaged woman-owned small business” on a federal Energy Department contract it won in July for a small transmission line repair in Arizona. The company’s registered address also goes back to the couple’s remote Montana home.

A prior business venture in the last decade ended poorly for Andrew Techmanski, records in Britain show. In 2009, he resigned from a business he had helped form three years earlier to string electric lines. The company folded less than two years later, and some debts remained outstanding last year, according to records.

A day after it signed the deal for highly technical work in Puerto Rico, including using helicopters to land repair crews on transmission towers, Whitefish failed a safety audit to obtain a basic license to truck supplies on U.S. roadways. As of Sunday, the Federal Motor Carrier Safety Administration still listed Whitefish’s trucking license as revoked.

In tweets Sunday morning, Rosselló called for additional measures to scrutinize contracting by the territory’s power authority more carefully. He said there should be a “special outside coordinator” to monitor PREPA’s purchases so we “can have more clarity in this process.”

The controversy over the Whitefish contract has raised the question of who is in charge of finances and recovery in the bankrupt U.S. territory. Both the commonwealth and PREPA are bankrupt, and a federal judge is overseeing the restructuring of more than $70 billion in debt.

A financial control board created by Congress to resolve the long-running debt crisis is planning to ask the court this week for clear authority to examine contracts as small as $10 million — an authority its members believe they already possess. Just last week, the oversight board said it would install its own emergency manager at PREPA to review contracts and monitor the day-to-day operations of the utility.

The governor is opposing the appointment and said Sunday that he would name his own administrator for PREPA’s purchases. Rosselló, who, like many Puerto Ricans, has complained that the federal government plays a colonial role in the territory, has been battling the influence of the oversight board.

However, Congress sees the board’s role as crucial. “Transparent accountability at PREPA is necessary for an effective and sustained recovery in Puerto Rico,” Parish Braden, spokesman for the House Natural Resources Committee, said in an email.

The House committee is planning a hearing on the Whitefish contract. The Senate Homeland Security and Governmental Affairs Committee is hold a hearing on hurricane response Tuesday.

Whitefish’s pay scales — as high as $462 an hour for a foreman under the contract — appear to be higher than those charged by some other firms. The rate was $319.04 an hour for a lineman. Those rates include Whitefish’s costs, administrative expenses and profits.

While the conditions in Puerto Rico are difficult and the work is dangerous, there are companies and agencies seeking to do the work for substantially less, according to people familiar with figures from four companies from the mainland.

The Corps of Engineers is doing essentially the same work as Whitefish in Puerto Rico and has been offering to pay firms as much as $195.04 an hour for a journeyman lineman and $230.32 an hour for a general foreman, according to a document provided to The Post.

The average rate Florida paid for linemen who helped restore electric power after Hurricane Irma was $165 per hour, according to a person who works closely with the energy industry and who spoke on the condition of anonymity to preserve his business relationships.

The Whitefish contract contained a clause that said that the pay rates and other terms of the agreement could not be audited or reviewed by FEMA, the commonwealth, the comptroller general or PREPA. The contract also required PREPA to confirm that FEMA had reviewed and approved the agreement to ensure that money spent would “qualify for funding from FEMA.”

FEMA said Friday that it had not approved the Whitefish agreement. “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,” the agency said in a statement.

In a news conference Sunday, PREPA chief Ramos said he learned of the contract clauses from the media.

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