Amid the emergency due to the recent atmospheric event and the vulnerability of the Electric Power Authority (PREPA), a report by the Office of the Inspector General (OIG) of the Department of Homeland Security (DSN) revealed that the public corporation overpaid for contracts with Whitefish Energy and Cobra Acquisitions in 2017, even though they did not meet federal requirements.
Both contracts – which were signed to repair the electrical system after Hurricane Maria at a cost of $ 2 billion – they did not comply with federal cost principles and the amounts had to be reasonable with the awards for recovery.
According to the report, irregularities were identified in the supervision of contracts by PREPA and the Federal Agency for the Emergency Management (FEMA). In this situation, the public corporation may not be entitled to a full refund through FEMA's Public Assistance Program (AP).
EL VOCERO contacted spokespersons for PREPA's press, Edith Seda and Jorge Luis Burgos to obtain a response, but as of press time, no reply was received.
Costs were not reasonable
Although the OIG certified that the corporation Publicly met federal requirements to contract Whitefish services, the report noted that PREPA failed to determine that the costs were reasonable. Compliance with the provisions comes after the contract was amended to correct deficiencies.
The report further explained that PREPA incurred higher fees than those originally submitted by Whitefish. "This happened because the Authority did not evaluate the reasonableness of the new higher rates. As a result, part of the costs of the contract with Whitefish may not be eligible for reimbursement through the AP. PREPA is at risk of not being fully reimbursed for the costs of the contract, "he maintains.
The $ 300 million contract awarded to Whitefish was canceled after it emerged that the company only had two employees, not it had the necessary equipment to carry out the works and that the normal auction process was not followed.
Regarding the contract with Cobra Acquisitions -which exceeded $ 1.2 billion-, the audit The federal government charged that the supervision the corporation performed did not meet the eligibility requirements of the FEMA AP program, which requires them to supervise the agreed works.
“The Public Assistance program requires PREPA to provide a high degree of supervision of time and material contracts. However, PREPA did not sufficiently supervise the contract with Cobra. This occurred because Puerto Rico did not monitor PREPA's activities to ensure that they complied with the program's guidelines, "said the OIG.
As a result of poor supervision, some of the costs detailed in the contract were also not reasonable and, therefore, they may not be eligible for grant funding, the report added.
The contract with Cobra – which came after the Whitefish deal was canceled – resulted in the arrest of Ahsha Tribble, former FEMA Deputy Regional Administrator; Donald Keith Ellison, former Cobra Acquisition President and Jovanda R. Patterson, former FEMA Deputy Chief of Staff, for fraud in recovery funds for the electrical system.
FEMA also failed to comply
Federal investigation It also points out irregularities on the part of FEMA for reimbursements made to PREPA for some expenses incurred under the contract with Cobra. As they point out, the federal agency disbursed $ 852 million to defray these expenses without first confirming if PREPA had adequately supervised the contract.
“FEMA reimbursed the money… without first confirming if PREPA provided a high degree of supervision with compliance said agreement. FEMA did not determine whether the contract with Cobra was reasonable and eligible to receive the AP reimbursement, "said the OIG.
Likewise, the report denounced that FEMA also failed to comply with its own guidelines for failing to verify whether PREPA sought compliance with Charge with the agreed dates, the materials established in the contract and the reasonableness of these. They further state that the payments made are ineligible to the AP.
"Time proved us right"
The President of the Union of Workers in the Electricity and Irrigation Industry (Utier) , Ángel Figueroa Jaramillo, sentenced that the federal investigation shows that the union organization – which has been warning about irregularities in both contracts since 2017 – has spoken with the truth.
“The arrests that occurred due to fraud were not the only irregularities in relation to these cases. We also never understood how a company that had no available guards was able to bill over $ 1.2 billion for working a year and a half. That is equivalent to six years of PREPA's total payroll, "said Figueroa.
The union leader considers that the investigation may lead to more in-depth investigations that could jeopardize the executions of the last two executive directors of the corporation and disclose other irregularities with other contracts signed with other companies.
Privatization gains strength
For his part, Senator William Villafañe, president of the Special Commission on Energy Affairs of the Senate said that the shortcomings in the management of contracts prevails the need to ensure the good management of federal funds.
"The contract with the Luma consortium for the concession of the electrical system is supposed to largely ensure the correct handling of federal programs. One of the components of the consortium is a company specifically dedicated to the management of programs similar to the one in question, "said the senator.