Puerto Rico is still in the midst of a crisis. Though many Americans’ attention has moved onwards, 75 percent of the island remains without power. The amount of time it has taken to restore power to Puerto Rican residents’ homes is staggering. At 1.25 billion customer hours of service lost, Hurricane Maria has now caused the biggest blackout in American history. Many journalists have demanded answers for this delay, and some of the blame has fallen upon one company, Whitefish Energy, from the hometown of Interior Secretary Ryan Zinke. The small company somehow landed a massive $300 million contract to take the leading role in restoring power to the island. A closer look suggests that this could be, unfortunately, another case of taxpayer dollars being wasted by a government enterprise seeking to reward friends.
Many have pointed to Whitefish’s size to attempt to highlight the unlikely nature of the small company receiving the contract. Whitefish had a full-time staff of two employees at the time the contract was issued, though the company’s business model is to rely mainly on subcontractors for the work it does. Whitefish operates under an annual profit of $1 million, and the largest previous federal contract Whitefish had received was a $1.3 million contract to “replace and upgrade” portions of a 4.8 mile transmission line. As the Washington Post reports, Puerto Rico has 2,400 miles of transmission lines, and 30,000 miles of distribution lines.
Were this a case of a small company defying the odds to outmuscle larger and less efficient opponents, then the Whitefish contract could be considered a laudable, yet rare, attempt by the government to seek out value for taxpayer dollars. Unfortunately, there are several red flags that cast doubt on whether this is the case.
The company is owned by Andy Techmanski, a man who happens to know Zinke by virtue of growing up in the same Montana town of 6,000 people. The government-owned Puerto Rico Electric Power Authority (PREPA) awarded Whitefish the contract without a competitive bidding process. It also implied it had FEMA’s approval, when in fact FEMA denies having provided any such authorization. There was also no bidding process for the contract — Techmanski claims that he and PREPA “called each other.”
The contract itself contains many provisions that appear suspicious as well. The largest contract yet to be released for disaster relief, it contains some startling calculations. Included in the contract are over $40,000 in helicopter ride costs, almost $80 per day, per person, on food costs, and $332 per day, per person on accommodations. Under the terms of the contract, the hourly pay per subcontracted lineman is about $320, while the hourly pay for a subcontracted supervisor is $462 — for context, if a subcontracted supervisor worked 40 hour weeks for a year, he would make almost a million dollars at that rate! Shockingly, the contract also required the government to waive its right to audit the costs and expenditures for work in Puerto Rico.
PREPA already did not have the best reputation for transparency and fiscal responsibility. A policy director at a Puerto Rico-based think tank claimed that the island’s residents are tired of PREPA because “they do business behind closed doors and it ends up costing a lot of money.” PREPA also filed for bankruptcy in July after falling $9 billion in debt.
Cronies rewarding their corporate friends is an unsavory practice that wastes taxpayer dollars and harms competition. Government contracts should be rewarded on the basis of value and cost to taxpayers, not proximity to those in power. Favoritism allows inefficient businesses to draw market share away from competitors that offer a better product or service.
Americans concerned with where their money goes should keep watch as the investigation behind the Whitefish contract unfolds. After all, if a deal flops like a fish, there might be something fishy about it.