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Of course, Whitefish gets a substantial markup after that...


The New York Times (yes, really!) ran an amazing follow-up piece on the dodgy grifter contractor Whitefish Energy, those two scalawags from Montana who somehow managed to get a $300 million contract to rebuild Puerto Rico's electrical grid following Hurricane Maria. It's a lovely takedown of the flummery Whitefish and the Puerto Rico Electric Power Authority (PREPA) have peddled to justify the insane rates Whitefish charged for its services.

At the end of October, Puerto Rico's government cancelled the contract after everyone pointed, laughed, and asked "What the hell IS that thing!?" Whitefish is still on the island, finishing up work on the sections of power lines it had started, and will be off Puerto Rico for good come November 30. But now they're trying to explain exactly why they're hiring linemen from Florida at normal contract rates but charging PREPA ridiculously high markups. Mostly, Whitefish seems to be operating on the same principle as people who charge triple the cost of a generator after a disaster -- you want electricity, you'll pay for it, suckers. And they insist it's completely justified, because "overhead." Let's see how Whitefish and PREPA 'splain away all that extra money!

  • The Top Dollar Dodge: Sure, Whitefish may be paying the workers it brought in from Florida fairly normal rates: $42 an hour plus overtime for regular linemen, $63 an hour for senior linemen, and that goes up to $100 an hour for linemen working double time -- depending on whether they're independent contractors, union members, etc. Somehow, once Whitefish bills PREPA, those workers are worth $319 an hour. But don't worry: Whitefish can explain!

    A spokesman for Whitefish, Chris Chiames, defended the costs, saying that “simply looking at the rate differential does not take into account Whitefish’s overhead costs,” which were built into the rate.

    “We have to pay a premium to entice the labor to come to Puerto Rico to work,” Mr. Chiames said. Many workers are paid overtime for all the time they work. Overtime pay varies by type of worker, union membership, mainland utility company and many other factors.

    OK, but if they have to pay a premium to entice the workers, why are the workers actually getting paid normal pay rates? Seems like the premium is going somewhere other than to the linemen? The Times notes that the rates Whitefish charges Puerto Rico are "far above the norm even for emergency work — and almost 17 times the average salary of their counterparts in Puerto Rico," according to energy industry experts.

    Plus, it seems to us that Whitefish has a lot more spokespersons now than it used to, and they don't come cheap.

  • But emergencies are expensive! Whitefish insists that the very special circumstances of getting lots of skilled subcontractors to the island justifies their high costs. That didn't wash with at least one outfit that knows a thing or two about doing disaster recovery:

    The Army Corps of Engineers, which is overseeing power restoration in Puerto Rico, did not hire Whitefish because its prices were more than double what the agency considered reasonable, according to the Senate Committee on Homeland Security and Governmental Affairs.

    Oh, but there's more: Whitefish's no-bid contract actually doesn't allow any government agency -- FEMA, the Puerto Rican government, or anyone else -- to audit or review their spending. So Whitefish is charging anything it pleases, it seems, like triple the going rate for aviation fuel and double the normal cost for helicopters that are outfitted to build transmission lines. That comes to $4000 an hour to rent a helicopter, again, twice what industry experts say is necessary.

  • Oh, but they have to pay for the workers' food and lodging! One of the subcontractors brought in by Whitefish, Jacksonville Electric Authority, billed Whitefish for its own overhead costs, so the total came to about half of what Whitefish then billed PREPA. But hey, Whitefish has a lot of extra costs, doesn't it?

    A spokeswoman for Jacksonville Electric said she was not concerned about the markup because Whitefish was also handling food and lodging. (However, Whitefish is also charging Prepa another $412 a day per worker for food and lodging.)

    Yes, $412 a day for food and lodging. And that's on top of the inflated pay for the workers. Johnny Rodríguez Ortiz, the president of Puerto Rico's organization for retired electrical workers, told the Times,

    They are paying $3 million for hotels and $80 a day each for food [...] I just had lunch with my wife, and it cost me $14.

    Yeah, but that's in the city, not out in the wilds of the Puerto Rican Outback, where apparently food costs about what it did during the Alaska gold rush.

  • These are totally fair rates and Whitefish is being punished for being successful! Whitefish's CEO, Andy Techmanski, has complained that all the investigations (four by congressional committees, plus Homeland Security's Inspector General and the FBI) are nothing but a "witch hunt." Company spokesperson Chiames explained that Whitefish wasn't gouging the Puerto Rican government, no, not one bit:

    “The rates in the contract were fairly negotiated between Prepa and the company and were based on the mutual knowledge about the difficulty of the work and associated risks.”

    He said the company was making a “single digit” profit on the Florida workers because costs in Puerto Rico were higher.

    Again, that's not what the utilities who contracted with Whitefish seem to think. A spokesperson for the Kissimmee Utility Authority, whose workers are working under Whitefish, said the company was charging Whitefish "straight costs" and that under the mutual aid agreements in place after most disasters, "nobody is marking anything up." A former PREPA chair, Luis Aviles, told the Times that the normal cost for a lineman in Puerto Rico would range from $60 to $100 an hour. And maybe more for a disaster: “Let’s say you put an overage on it, because it’s a special emergency circumstance. But $300 an hour? No way.”

  • Kickbacks? What kickbacks? The retired utility guy, Johnny Rodríguez, said he thought Whitefish was probably jacking up costs to pay kickbacks to corrupt local officials, which he said has been common in the past. Mind you, PREPA and Whitefish deny any impropriety, although PREPA couldn't really talk about it, you see, since now the matter is under investigation and the records are no longer public, don't you see? PREPA's chief executive, Ricardo Ramos, has explained that Whitefish was the only company that had responded to a call for help after the previous hurricane, Irma, hit the island, which sounds like maybe a lame excuse. But don't worry, he had other lame excuses, too!

    At a recent news conference, Mr. Ramos explained that Whitefish’s prices for subcontractors were high because initially it had to cover things like food and lodging. His explanation was unclear, though, because the contract has separate line items for such expenses.

    He said that some of the more contentious clauses, like the one that suggested FEMA had reviewed and approved the deal, were included by accident, in what he described as “an oops.”

  • You know how it goes -- there's an emergency, the only contractor you have in your Rolodex happens to be from the same town in Montana as Secretary of the Interior Ryan Zinke, and you're in a big hurry, so you add in language saying FEMA had approved the contract, which it hadn't, not at all.

    That's an "oops" all right.

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    [NYT]

    Doktor Zoom

    Doktor Zoom's real name is Marty Kelley, and he lives in the wilds of Boise, Idaho. He is not a medical doctor, but does have a real PhD in Rhetoric. You should definitely donate some money to this little mommyblog where he has finally found acceptance and cat pictures. He is on maternity leave until 2033. Here is his Twitter, also. His quest to avoid prolixity is not going so great.

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