Monday, June 25, 2018

Puerto Rico Housing contract: Flashbacks of Whitefish scheme

By on January 16, 2018

Dozens of deaths, landslides, floods, thousands of homes destroyed, 15,000 evacuees, 5,000 rescued, outmigration in the tens of thousands and major damage to infrastructure and the environment are part of the aftermath of Hurricane María in Puerto Rico, where it destroyed the electrical grid and disrupted water service and communications island-wide. Picture taken in one of the governor’s helicopter trips to assess the damage. (Courtesy).

SAN JUAN – The Puerto Rico government has a new scandal on its hands. This time, it appears the Housing Department has another irregular contract. With the scandal that developed between the Electric Power Authority and Whitefish Energy Holdings, the U.S. government maintains reservations about granting federal funds to address local emergencies created by Hurricane Maria.

Housing, which manages Federal Emergency Management Agency (FEMA) funds for reconstruction of homes affected by the hurricane, on Dec. 15 granted a $132 million contract to New York company Adjusters International, despite the company not meeting bid requirements.

Daniel Craig, who signed the Adjusters International proposal, was nominated by President Trump to be the second in command at FEMA. In September, the former official withdrew his nomination to the FEMA position when a federal investigation revealed mismanagement of funds while he was a FEMA employee during recovery work in the aftermath of Hurricane Katrina.

Housing repair contract awarded for FEMA-funded program challenged

According to documents obtained by Caribbean Business, Housing granted Adjusters a contract to manage the Tu Hogar Renace (Your Reborn Home) project even though the company did not comply with the main requisite in the request for proposals (RFP) to have a $35 million uncommitted line of credit.

As part of its proposal, the company submitted an NBT Bank letter dated Nov. 15 in which the financial institution established that Adjusters is its client and has a line of credit for $35 million, of which only $9 million was available, and therefore did not meet the requirement established in the RFP.

One day after the original proposals were submitted, Housing amended the RFP to make the financial requirement more flexible. For a company to be considered, the amendment stated bidders should have $35 million available in a bank account, a line of credit for that amount or a combination of both.

The documents do not reveal evidence that Adjusters International showed proof it complied with the financial requirement even after the RFP was amended. Nonetheless, Housing allowed the company to continue to bid despite the RFP stipulation.

Adjusters also did not have a General Services Administration certification, which was required by the RFP. In addition, the company failed to obtain a certificate of good standing with the State Department by the date the proposal was submitted.

State Department files establish that Adjusters submitted its certificate of good standing from the Delaware Department of State, issued Nov. 22, stating the company was incorporated in that state on Nov. 1. With these documents, Puerto Rico’s State Department on Nov. 28 certified Adjusters to do business on the island. On that same date, Adjusters was also authorized as a foreign corporation.

Adjusters International’s Housing proposal was submitted Nov. 21, the final day to hand in documents, thus the company did not meet the incorporation deadline and should have been eliminated from bidding further, but the agency nonetheless allowed it to continue.

Even if the proposal had met the requirements to be considered, it should not have received the 10 bonus points that allowed it to pass the first evaluation round, since its proposal was not made in conjunction with a local company.

To encourage local companies to participate and support the local economy, the RFP granted 10 bonus points to companies that submitted a joint proposal with a local company, which Adjusters did not do. Instead, it informed Housing it had Atkins, LinkActiv Inc. (a call service company), Servium Group and Buffalo Computer Graphics as collaborators. All are stateside companies except LinkActiv.

The roof of a Miramar, San Juan home was destroyed by Hurricane María. (CB photo)

Despite this discrepancy, Adjusters received the 10 bonus points, which allowed it to stay in the competition. Adjusters finally won because it presented lower costs than its main competitor, AECOM Technology Corp., the world’s largest engineering firm, according to Bloomberg data.

AECOM challenged the awarding of the contract with Housing’s bid review board, which gave the agency until Thursday to respond to the AECOM allegations before issuing its final determination.

In the initial hearing last Thursday, Housing’s legal representative, Isla Quiñones, did not respond to process irregularities, claiming she did not have time to prepare for the hearing.

Review Board grants time to Puerto Rico Housing to address contract objections

Meanwhile, Housing Secretary Fernando Gil Enseñat refused to comment on the matter until the review board’s process ends. Requests for comment sent via text message and email to Greg Raab, vice president & executive director of operations and administration for Adjusters International, were not immediately answered.

“The competitive process promoted by the Department of Housing for the awarding of the project management contract included an evaluation of the two best proponents, with the capacity, skill and expertise to perform the services. It was determined that both companies are technically tied, but the award to the selected contractor implies a saving of $21 million in federal funds,” Enseñat explained in written statement Tuesday.

“The challenge of AECOM requests that the state pay more than $20 million for the same services, without producing added value for the project,” he added.

“Regarding the contract awarded to Adjusters International Inc., we will not make additional expressions until the matter, which has been challenged by its main competitor, is resolved by the relevant forums,” he said.

“It is important to highlight that the arguments with which the losing bidder is raising controversy, and which will be adjudicated opportunely by the corresponding forums, do not affect the technical capacity or the price of the selected company,” he concluded.

In a letter to the island’s fiscal oversight board, Housing indicates that Congress created the board to oversee the fiscal operations of the elected government of Puerto Rico. Housing rejects the argument that Adjusters International did not prove its financial resources. The letter is in response to one AECOM lawyers sent to the fiscal board to halt the granting of the contract amid the indicated irregularities.

According to Housing, the amended RFP that relaxed the financial strength requirement defeats the argument that Adjusters International’s proposal should have been rejected outright for not complying with the main requirement. The agency does not refer to any other irregularity.

The final contract is subject to a fiscal board review before it becomes effective.

The home repair pilot program is similar to ones established in other U.S. jurisdictions after natural disasters.

Although the Puerto Rico Housing Department establishes the RFP requirements and is in charge of evaluating candidates, the project is financed in its entirety with FEMA funds. The program is intended to help some 75,000 families make minor repairs to their homes that were impacted by Hurricane María.

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