That No-Bid Contract to Fix Puerto Rico's Grid Wasn't Only One
(Bloomberg) -- While federal emergency managers have assailed Puerto Rico’s no-bid contract to restore power, they are issuing noncompetitive awards themselves at the fastest rate in nearly a decade.
The U.S. Federal Emergency Management Agency awarded $200 million in single-source contracts in the fiscal year that ended September 30, the most since 2008, according to federal contracting data compiled by Bloomberg Government. It awarded nearly that much last month alone.
"FEMA seeks to maximize the use of competitively awarded contracts," Jenny Burke, an agency spokeswoman, said by email, adding that the agency uses sole-source contracts "when necessary."
In bypassing normal contracting procedures to fund food shipments, provide temporary housing or restore communications in Puerto Rico, Florida and Texas, the Federal Emergency Management Agency adopted a similar no-bid approach that it criticized when Puerto Rico’s electric utility awarded a $300 million contract to a tiny Montana company to rebuild its grid.
While FEMA needs to get money spent to help those in need, no-bid contracts are worrisome, said Neil Gordon, an investigator at the Washington-based nonprofit Project on Government Oversight.
"Lack of competition in contracting is a recipe for trouble," Gordon said in an interview. Bidding "acts as a natural check on contractor abuses."
This year’s total is set to soar past year’s: In just the first month of the 2018 fiscal year, FEMA awarded $189 million in noncompetitive contracts, the data show. The last time the agency awarded that level of single-source contracts in a month was 2005, right after Hurricane Katrina.
There are different reasons why FEMA awards money without holding a competitive bid process. The agency can claim it’s bypassing competition because of the urgency of the need, or because of a limited supply of the product or service it requires. FEMA can also skip the bidding process by awarding what are called "follow-on" orders, extending a contract that has already been awarded without holding a new bid.
Still, the agency’s process for awarding money has drawn the attention of the U.S. Government Accountability Office, the congressional watchdog agency. "We are looking at FEMA contracting concerns in light of the recent hurricanes," Marie Mak, director of the GAO’s Acquisition and Sourcing Management Team, said in an email.
Following Hurricane Maria, which destroyed the electric grid, miles of roads and thousands of homes in Puerto Rico, critics on and off the island have focused on the federal government’s slow response. With much of the island still without electricity, lawmakers questioned the contract that Puerto Rico Electric Power Authority awarded to a Whitefish Energy Holdings LLC to restore power.
In awarding the contract, officials told Whitefish that the work would be paid for by FEMA; on Sunday, after the agency expressed concern about the contract, Puerto Rico canceled it. FEMA Administrator Brock Long told a congressional hearing Tuesday that FEMA wasn’t involved in the contract, and wouldn’t have approved it.
But in one key respect, the Whitefish contract is similar to contracts that FEMA awards: It went outside the normal competitive bidding process.
Some of the money FEMA awarded through those noncompetitive contracts went to companies that are household names. Since August, Verizon Communications Inc. has gotten almost $17 million in no-bid FEMA awards. Over that same period, AT&T Inc. got $6 million in noncompetitive awards. Neither company responded to requests for comment.
The biggest contract was for Disaster Solutions Alliance LLC, which got a $122 million award for providing food to hurricane survivors in Puerto Rico. Disaster Solutions is a joint venture between AECOM and a subsidiary of Canada’s SNC Lavalin Group Inc., according to AECOM spokesman Brian Leary.
Burke, the FEMA spokeswoman, said the Verizon and AT&T contracts were awarded "on a sole-source basis, when FEMA determines only one source is capable of performing the required work." Burke added that the Disaster Solutions contract "was a sole source follow-on to a prior contract, which Disaster Solutions won competitively."
In other cases, the type of work those companies are providing isn’t clear. In September, FEMA awarded International Business Machines Corp. a $7.9 million, no-bid contract for work described by the government as including "operations and maintenance," "advising on architecture design" and "systems testing." A company spokesman didn’t respond to a request to comment.
FEMA’s noncompetitive awards also go to companies that are less well known to the public. They include Marsh & McLennan Cos Inc., whose subsidiary Guy Carpenter & Co LLC won an $8 million, no-bid award from FEMA, for "broker support service" related to flood insurance.
"Guy Carpenter does not publicly comment on clients," Laura Schooler, a company spokeswoman, said.
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