Crony Capitalism

The $300 Million Contract Awarded to the Interior Secretary's Friend's Company Is Exempt from Government Audits

Oh, okay.


Jose A. Iglesias/TNS/Newscom

The federal government has awarded a tiny Montana company a $300 million no-bid contract to repair Puerto Rico's hurricane-wrecked electrical grid. The company, Whitefish Energy, has close ties to Interior Secretary Ryan Zinke. A copy of that contract leaked last night, and it seems to prohibit the federal government from auditing Whitefish's work and to shield other details of the company's efforts from being disclosed via open records laws.

"In no event," the contract says, will the Puerto Rico Electric Power Authority, the Federal Emergency Management Agency, the Comptroller General of the United States, "or any of their authorized representatives have the right to audit or review the cost and profit elements" of the deal.

The contract was posted online by Ken Klippenstein, a contributor to The Daily Beast, the first publication to report on the connections between the company and the secretary of the interior.

The leaked document seems to confirm concerns—voiced by lawmakers, pundits, and reform groups—that the Whitefish contract is a lucrative special deal for a friend of a top administration official, and that it places politics ahead of what's in the best interest of Puerto Ricans, many of whom are still without electricity.

Andy Techmanski, owner of Whitefish Energy, is a neighbor and friend of Secretary Zinke, according to multiple news reports. The two men have publicly disclosed their acquaintance. The company has only a handful of employees and is relying almost entirely on subcontractors to do the actual work of restoring power in Peurto Rico.

Members of Congress have called for an investigation into the Whitefish contract. Yesterday members of the House Committee on Energy and Commerce sent a letter to Techmanski seeking copies of all contracts and subcontracts signed by Whitefish as part of its work in Puerto Rico. Meanwhile, members of the House Natural Resources Committee wrote to the Puerto Rico Electric Power Authority (PREPA) requesting more information about how and why Whitefish was selected for this work.

Separately, Sens. Maria Cantwell (D-Wash.) and Ron Wyden (D-Ore.) have requested a Government Accountability Office review of the "use of public money to reimburse work completed by Whitefish Energy," according to Reuters.

Prior to landing the contract for repair work in Puerto Rico, Whitefish's largest project had been a $1.3 million deal to rebuild less than 5 miles of electrical lines in Arizona, The Washington Post reported this week. By comparison, there are more than 2,400 miles of transmission lines and 30,000 of distribution electrical lines in Puerto Rico.

The Trump administration and the company itself have offered only the barest of explanations for how a small electrical firm from Montana managed to land a lucrative contract for work in the Caribbean. Both have claimed that the company has experience working in mountain ranges and on rugged terrain and have denied that cronyism played a role in awarding the contract.

"There was no federal involvement," Chris Chiames, a spokesman for Whitefish Energy, told BuzzFeed this week. "There was never any special favors asked, nor would there have been."

The Federal Emergency Management Agency (FEMA), which is no stranger to fiscal malfeasance, said Friday that it had "significant concerns" about the Whitefish contract. According to The Hill, FEMA denied having signed off on the contract and said details of the contract suggesting as much were inaccurate.

Whether Whitefish gets the job done is supposed to be shrouded in secrecy. The copy of the contract posted by Klippenstein includes a provision prohibiting the government from auditing its work. Another part of the contract says the Puerto Rican government "waives any claim against [Whitefish Energy] related to delayed completion of work."

Until the Trump administration can offer a better explanation for the decision to award a multi-million no-bid contract to a company with close ties to a top administration official, this whole thing smells really bad. The administration sure looks like it's been swallowed by the very swamp it promised to drain.

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  1. Members of Congress have called for an investigation into the Whitefish contract.

    *People* sign contracts. Start squeezing ’em.

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  2. Damn, i need to make some more ambitious friends.

  3. Looks like I need to find a better neighborhood.

    1. It’s Montana. Your next door neighbor might be twenty miles away.

  4. Kudos to the libertarian Trump administration for doing what it can to lower barriers to entry in the disaster reconstruction industry.

    1. Puerto Ricans were complaining that the US gov (Trump) was not doing enough.

      The Administration signed a contract to do something in a shithole where violence against workers is a risk and now Trump is somehow at fault.

      There must be a trend here….

      1. Ah, someone who doesn’t know the difference between “do something” and “do anything”.

  5. Whitefish is backed by … Comtrafo Transformers, based in Brazil.

    “Well, that clinches it — they know Spanish.”

    *** aide whispers in ear ***

    “That is, they appreciate Latin Americans.”

    1. “Well, that clinches it — they know Spanish.”

      Or perhaps Portuguese..

      1. THAT”S THE JOKE!!

  6. How’s that swamp drainy thing working out for you?

    1. Not many swamps in Montana. Just saying.

      1. Because Whitefish drained them all, dude.

  7. did it ever occur to anyone that the company may have received the contract because it is good at its job, and Zinke is friends with successful people?

    1. Lot’s of thing occur to me…

    2. This cannot be spoken about because TRUMP!

      1. You’re dying on this fucking hill?

  8. Another example of journalists writing about things they don’t understand. It’s pretty clear from these excepts that this is what is known as a Labor Hours/Level of Effort contract. That means that the contractor gets paid a set rate per hour of work. The rate is flat regardless of what the contractor’s cost of actually hiring the employees/subcontractors is. The point of an audit is to make sure you’re getting charged the right price. You’ll see that clause lets the government audit records that are relevant. That means they can audit time sheets, for instance, to make sure the hours claimed were actually worked. But the records of what the contractor is paying its employees are completely irrelevant to whether the right price is getting paid. An audit like that would have only one purpose: to claim after the work is done that the contractor made more profit than some politician wanted regardless of the pricing structure of the contract.

    1. This.

    2. Yep.

      The only time government really gets to audit their books is if it’s not a fixed price. If you knew just how shitty the government is to their contractors (relative to the commercial world) you’d know exactly why those lines are in there.

      In the words of Darth Vader:

    3. Another good reason for an audit prohibition is to prevent leaks or FOIA disclosures from letting competitors see the company’s cost and margin data.

    4. And really, that per diem is pretty typical for a disaster area where amenities will be lacking or non-existent, and what there is suffering from short supply.

    5. This is right. The complained of language is an attempt to protect your client from gov’t overreach. The gov’t can see what it needs to see to ensure there was no fraud without being able to see your costs, which is competitive information. I do a lot of gov’t procurement work and I try and limit this exposure. Otherwise your competitors will use public records requests to obtain your client’s pricing information in addition to the political risk if some bureaucrat sees you made, gasp, margin. It also could hurt future procurement.

      Almost every state has a requirement that access to your books and records be provided. Companies want to limit this to what is legally required and no more.

    6. and the no-bid clause? That ensures that the fees in the contract are competitive?

  9. As a Puerto Rican ex-pat, I say git a rope! Then again… what harm could he possibly do compared to the idiots my peeps elected to ruin the island?

  10. See the value of competition! Every single corrupt government official wanted that contract for themselves, and when they didn’t get it, they narced out the government official that did.

    1. The lefties rarely have issue with ripping off taxpayers unless they don’t get the contract to do so.

  11. There is no evidence the White House knew about this contract. Who and what agency signed the contract?
    At a guess it’s going to take more than $300 million to restore power in Puerto Rico. As I understand it, the island’s power station was wrecked too. Not only do all the transmission lines have to be restored, all the lines from the street to homes, businesses have to be restored too. The power company owns the power lines from the street to where the power lines enter a building.
    I suspect the $300 million bid from Whitfish was a low ball to win the contract. Subsequent contracts for millions more to follow.

  12. This kind of thing is the inevitability of the government doing things and being involved in matters it should not be.

  13. Every other source I look at mentions the 2 full time employees. No mention of how many subcontractors were “employed” at the time the contract was signed. The contract is between PREPA and Whitefish so there is lots of ambiguity about this whole Federal Government element. PREPA is not a part of the Federal Government. It is notoriously corrupt, inept, inefficient, and mostly useless however. Otherwise PR wouldn’t be in this problem to begin with at all. How does DHS get tied into this issue? Because a lot of money was just handed to PR for disaster relief. Ditto Department of the Interior. Because of the ongoing bailout of PR caused by incredible levels of corruption and incompetence, PR can not invoke the mutual assistance element of getting other Power Utilities employees to help. They simply can not pay for the simple room and boarding elements of that agreement. So to everyone griping about this deal… yeah it sucks… but it was the PR government supported by the PR people who drove PR into this massive issue.

  14. The $332.41 for accomodations per day can be explained because Puerto Rico is a shithole and these guys are being put up in the only hotels worth staying at, in San Juan.

    Not that government contracts cannot be wasteful and usually are but this company is being hired to fix all the electrical power were the power is out which makes life working all day miserable.

    Furthermore, these guys have to have guards so they don’t get robbed as Puerto Rico is a shithole.

    If these guys are fixing power outages how are restaurants supposed to be open without power? These workers need to eat somehow and Puerto Rico is a shithole.

    My main point is that Puerto Rico is a shithole and you have to pay people big money to endure the hardships. Just like sending workers to war zones and other shitty and dangerous places.

    1. Say, what do you think of Puerto Rico?

  15. Congressional oversight is suddenly in vogue!

  16. Trump is draining the swamp. His team has just exposed the Russiagate dossier as an invention of the DNC and the Clintons; the Uranium One Deal as the real Russian collusion; the mind-numbing corruption of the Clintons exchanging our national security for cash; the complicity of the FBI (Comey, Mueller, Rosenstein, McCabe) in using our intelligence services for partisan politics, especially in completely ignoring their corruption charges against Russian agents before the uranium deal; and the unmasking of private American citizens based on the lies of a foreign spy from Britain, who was illegally paid by the Clintons and the DNC. Puerto Rico is a swamp now, so Trump will probably drain that one too.

  17. So, if FEMA didn’t sign off on the contract and obligate government money, who did? As a federal employee project manager, I’m curious – which agency, other than FEMA, would be contracting with a firm to repair infrastructure following a natural disaster?

    1. It’s a grant to PREPA. FEMA doesn’t do most reconstruction work itself, it gives money for state and local groups to do it.

  18. I’m disappointed that Reason would publish an article like this without answering a fundamental question.

    How does Zinke/DOI influence the award of a contract by PREPA? What’s the connection?

    1. Very much this. The who/what/when/why/how is totally absent from everyone reporting this!
      1.) Who issued the bid? (FEMA, PR, PR Power) 2.) When did it get accepted? 3.) What work has already been completed? 4.) Is there any reason this work has been sub-par so far?

      So far all we have is, “Someone got a big contract, someone that we never heard of, and they are friends with a big wig in federal government”. You can say that all day about “beltway bandits”, why do we ONLY care about this one?

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  20. Who wrote the RFP, and who accepted Whitefish’s bid?

    1. Lightnin’ wrote the bid on instructions from The Kingfish.

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