Puerto Rico-Whitefish fiasco a byproduct of flawed DC incentives

The Puerto Rico fiasco continues as the Puerto Rico Electrical Power Authority (PREPA) has repeatedly failed to get the lights back on. The island’s citizens were assured that electricity would be fully restored by the end of the year, but the failure of PREPA’s poorly executed contract with Whitefish Energy likely set the island back by months.

Despite having little real experience in restoring transmission lines and only two full-time employees, the inept officials at the power authority inked a contract with the Montana-based firm.

{mosads}After the fishy contract with Whitefish was cancelled on Monday, taxpayers are reminded why transparency and real oversight is needed to move forward with disaster relief in Puerto Rico.

The company selection process wasn’t the only questionable part of the PREPA’s plan to restore electricity. The contract drawn up with Whitefish was littered with questionable clauses that seemed designed to protect the business from any sort of oversight.

The agreed-upon bid schedule defies any sort of sane accounting. Under the “powerline labour (sic)” category, both foremen and general foremen billed at an emergency rate of more than $200 an hour. Even generic “groundmen” clean up were compensated at an hourly rate of $188. 

The Puerto Rican government boxed itself into a corner, voluntarily barring itself from questioning these absurd provisions: “In no event shall [government bodies] have the right to audit or review the cost and profit elements.” 

Taxpayers cannot even be sure if they’re getting an honest hour of work for these jacked-up rates because the government “waives any claim against Contractor related to delayed completion of work.”

While the focus on PREPA and its inept decision-making is long-overdue, the authority’s (along with the Puerto Rican government’s) actions stem from flawed incentives coming from Washington, D.C.

The U.S. Army Corps of Engineers (USACE) offers a 100 percent cost-sharing plan alternative to the “mutual aid” offered by utilities, providing cash-strapped state and territorial governments with an easy go-to option in times of peril. 

But USACE’s projects are rife with schedule delays and cost overruns. In February, the Government Accountability Office (GAO) took the corps to task for repeatedly setting back completion times for the Olmsted Locks and Dam Project and billing far over projected costs.

Unfortunately, this is only the latest in a saga of failed expectations for the organization. In 2006, the GAO reported systematic “errors, mistakes and miscalculations…invalid assumptions and outdated data” used as a part of USACE’s build and response processes. 

Little has changed since then, as calls for reform go unheeded. And when a free, ineffective service predictably underwhelms, desperate officials are more likely to seek out seedy contracts. In a rush to recover from disasters, officials force taxpayers to foot the bill for a contract they’ve never seen from a company they’ve never heard of.

But there’s another way. Honest governance can be bolstered with a few simple transparency reforms that encourage the public to be actively engaged in the contracting process. Tying federal funding to the adoption of the Open Contracting Data Standard (OCDS) would keep contracts in the light of day for every step of the process.

The standard, which is currently being piloted in Canada and the United Kingdom, would require contractors to publish data in real time for every phase of the contract completion process. In addition, summary records for each contract would be available for the public to see, resulting in less of a reliance on leaks. 

Although the United States has a way to go in reaching OCDS-style transparency, encouraging reforms in the federal government show the way forward for state and territorial governments like Puerto Rico.

The new version of “USAspending.gov,” for instance, offers an interactive way of mapping contracting awards, showing completion timelines and detailed spending breakdowns.

Even though state-led efforts like “Ohio Checkbook” lack comprehensive breakdowns of how money is spent within each contract, even mapping out awards by time, location and agency is a promising start for engaging the public. 

Ultimately, institutions like the Federal Oversight Board and PREPA will continue to be hamstrung by poor incentives and resulting decisions. But ensuring that contracts are web-accessible will hold these organizations accountable until more fundamental reforms can be enacted.

Furthermore, the FBI and congressional investigators need to investigate the full extent of corruption and side-deals that plague San Juan.  

For now, dedicated leakers have forced PREPA’s hand in canceling Whitefish’s $300 million contract and accepted the help of other utilities. For the sake of Puerto Ricans and taxpayers across the country, policymakers should make this accountability permanent. 

Ross Marchand is a policy analyst with the Taxpayers Protection Alliance.