Tiny energy firm awarded $300m Puerto Rico electricity contract bars government from auditing agreement

The Federal Emergency Management Agency says it has “significant concerns” with the process that led to a small electric company in Montana gaining a major contract to rebuild Puerto Rico’s energy grid, just as news has emerged that the contract has a no-audit clause.

FEMA says that it was not involved in the decision to award the $300 million contract to between the Puerto Rico Electric Power Authority (PREPA) and Whitefish Energy, a small electric company with just two fulltime employees located in Interior Secretary Ryan Zinke’s hometown: Whitefish, Montana.

“Based on initial review and information from [Puerto Rico Electric Power Authority], FEMA has significant concerns with how PREPA procured this contract and has not confirmed whether the contract prices are reasonable,” FEMA wrote in a statement distancing the agency from the contracting process.

The contract, awarded in a no-bid process, includes a no-audit clause, which bars the federal government from reviewing the “cost and profit elements” of the agreement, according to a copy of the deal obtained by reporter Ken Klipperstein. That means that efforts to rebuild Puerto Rico’s electricity grid, which was devastated by the landfall of Hurricane Maria over a month ago, could be shrouded in secrecy.

The deal also contains a provision that prohibits the government from making “any claim against Contractor related to delayed completion of work," as well as $332.41 per day for worker accomodations each day (not including meals), according to Mr Klipperstein's copy of the contract.

The small energy company has been the subject of heavy criticism since the contract was awarded, with many wondering why a small company with just two full-time employees (it since hired more than 300 workers) found itself on the receiving end of a major contract with massive implications for an entire US territory.

Two House committees have launched investigations into the deal, backed by Congresspeople on both sides of the aisle, and the Department of Homeland Security is conducting a review of the deal.

“The size and terms of the contract, as well as the circumstances surrounding the contract’s formation, wise questions regarding PREPA’s standard contract awarding procedures,” Republican Representatives Bob Bishop and Bruce Westerman wrote in a statement.

Mr Bishop and Mr Westerman are both members of the House Natural Resources Committee.

This contract “raises every red flag in the book,” Senator Claire McCaskill, the top Democrat on the Senate Homeland Security and Government Affairs Committee, said.

The mayor of San Juan, Carmen Yulin Cruz — who has openly warred with President Donald Trump over his administration’s response to the crisis in Puerto Rico — has called for the deal to be voided, after a Twitter feud with the company in which they asked if she wanted them to stop working.

“We’ve got 44 linemen rebuilding power lines in your city & 40 more men just arrived. Do you want us to send them back or keep working?” Whitefish Energy tweeted at Ms Yulin Cruz this week.

Whitefish says that it welcomes an investigation, saying that the company “appreciates the efforts of the committees to gather information so that they have confidence in the overall process to support the people of Puerto Rico as well Whitefish Energy’s capabilities and commitment to deliver on the contract to help restore power and a sense of normalcy for the people of Puerto Rico.”

Whitefish Energy has been linked to the White House before. A main backer of the firm, HBC Investments, was a notable donor to Mr Trump’s 2016 campaign, forking over tens of thousands of dollars to the effort. And, Whitefish founder Andy Techmanski has noted that his family knows Mr Zinke.

The Interior Department has noted that in the town of Whitefish, a small resort town nestled in the Rocky Mountains, everybody knows everybody. Mr Zinke has denied involvement in the contracting process.

The White House has also said that it played no role in the selection of Whitefish Energy for the contract.