Whitefish Energy

Last week, it was announced (or revealed) that a tiny company in Montana called Whitefish Energy Holdings had been awarded a $300 million contract from the Puerto Rico Electric Power Authority (PREPA) to restore electricity on the island. That massive size of the contract given the experience and size of Whitefish, has been met with skepticism by Republicans and Democrats alike and amid the outcry, PREPA is now moving to cancel the contract (after a plea from the Governor of Puerto Rico).

Whitefish is a small company which according to reports has been in existence for two years and until recently, had just two full-time employees. Whitefish's CEO disputed that number claiming that the company had 20-40 full-time employees working projects in Arizona, Montana and Washington State. It now has 350 workers on site in Puerto Rico however most of these workers are actually subcontractors. It has been widely reported that the Interior Secretary, friends with Whitefish's CEO had something to do with the award. Whitefish denies this maintaining that contract was made with PREPA through Linked-In.

The contract which has now been made public, will make the controversy even more poignant.  Whitefish charges $240 per hour for a general foreman and $227 per hour for a lineman. Per diem allowances are set at $80 per day for meals and $332 per day for lodging. Airfare is billed at $1,000 each way. For subcontractors (most of the labor), the rates are even higher. A general foreman costs $336 per hour and a lineman $319 per hour. Given that the medium rate for electrical linemen is about $36 per hour, these contracted rates seem beyond the pale.

The contract also has a nice little "no audit clause". The clause reads:

In no event shall PREPA, the Commonwealth of Puerto Rico, the FEMA Administrator, the Comptroller General of the United States, or any of their authorized representatives have the right to audit or review the cost and profit estimates of the labor rates specified herein.

No doubt all Government contractors would like to have this clause in their contracts.

By the way, PREPA is $9 billion in debt, filed for bankruptcy last July and has had a long history of maintenance problems and corruption allegations.

This will be an interesting story to follow and events unfold. Obviously, there is a lot more to the story that what has been made available so far.