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Court wants arguments against Adjusters Intl.’s Puerto Rico Housing contract appeal by Feb. 21

By on February 16, 2018

SAN JUAN – The Court of Appeals gave until Wednesday, Feb. 21, for arguments to be presented against the request from Adjusters International / Rising Phoenix to have the cancellation of its contract to manage a $133 million home-repair project in Puerto Rico revoked, as determined by the local Housing Department’s Bid Review Board.

After learning of the court order, Secretary Fernando Gil Enseñat ordered the contract’s suspension lifted, allowing Adjusters to continue working on the project while the dispute is resolved.

The order is in response to an appeal filed by Adjusters on Thursday afternoon after the suspension of its contract was announced.

The Housing Department said Wednesday that Adjusters had yet to present any invoices and thus had made no payments yet. Although Adjusters’ contract is with the local department, Housing’s payments will be reimbursed by the Federal Emergency Management Agency (FEMA), which has yet to comment on the controversy.

Puerto Rico Housing Department suspends contract with Adjusters International

In Thursday evening’s order, the appellate panel–judges Fernando Bonilla Ortiz, Misael Ramos Torres and Carlos Vizcarrondo Irizarry–halted the suspension of the contract decreed by Gil Enseñat after the Bid Review Board declared the agreement with Adjusters null and that it should be canceled.

Warning: Contract cancellation could be expensive

The review board based its decision on a flawed adjudication process, saying the Bid Board’s Evaluating Committee “erred in evaluating the proposal of Adjusters, to the point of arbitrarily applying evaluation criteria.”

The contract, which is capped at $133 million, was signed Jan. 5 for Adjusters to serve as project manager of the “Tu Hogar Renace” program for minor repairs to nearly 75,000 homes damaged by Hurricane Maria in September.

According to Adjusters, to date, some 48,000 applications have been received, of which approximately 15,000 have been approved subject to home inspection. Of the 6,500 that have already been inspected, about 5,500 have a contractor assigned to perform the work.

In previous interviews with Caribbean Business, the Housing secretary said the project should take about two months to complete. In addition, he anticipated that the need for the contracted firm to have adequate liquidity was based on invoices, which would have to be certified and then paid by the Federal Emergency Management Agency [FEMA]. “The company has to be able to operate without charging anything for some time while the entire billing process takes place,” the official explained.

Specifically for not being able to prove the company’s liquidity in its submitted proposal is one of the reasons why the review board determined to recommend the cancellation of the contract.

Contrary to law

“The present request for judicial review is presented urgently to prevent the decision issued by the Bid Review Board, which is contrary to law and poorly notified, is used as a basis to interrupt the ongoing work carried out by Adjusters in the homes of thousands of Puerto Rican families waiting to return to their properties after being affected by the devastating forces of hurricanes Irma and María in Puerto Rico,” reads the petition signed by law firm Adsuar, Muniz, Goyco, Seda & Pérez-Ochoa PSC, which represents Rising Phoenix Holdings Corp., the name under which Adjusters contracted with the Housing Department to manage the program.

The company changed its corporate name just before signing the contract with Housing as part of last-minute adjustments to try to comply with the liquidity requirements established by the department.

Housing announces contract suspension

In the document, the company argues that the Bid Review Board’s resolution is not binding because that body was constituted illegally. On Wednesday CB learned that the Housing secretary, “to ensure the transparency of the review process,” although not required, requested the Justice Department to appoint the members of the review board who would judge the awarding process.

Adjusters argues that Bid Review Board regualtions establish that its members be appointed by the Housing secretary, and since they were named by Justice in this case, their decision is deemed ultra vires.

Adjusters further states that the board erred and abused its discretion in issuing a resolution after the expiration of the period provided by law to resolve the motion for reconsideration. The deadline was Feb. 12, but the resolution was issued on Feb. 13.

It also argues that the board erred in assessing the validity of the contract award under formal bidding rules, when the contract was evaluated under an informal request for proposals (RFP).

Likewise, it maintains that the board abused its discretion in assuming that the proposal should have been disqualified from the start for not complying with core requirements such as the liquidity test and the General Services Administration certifications.

“The entire administrative record in this case demonstrates that the award of the contract in favor of Adjusters was reasonable and consistent with the terms of the RFP and its interpretation. All the proposals submitted in response to the RFP were evaluated in an equitable manner, in accordance with the established evaluation criteria,” the company said in a press release.

Company attorney warns canceling Puerto Rico Housing contract could be expensive

Irregularities bring back memories of Whitefish contract

The contractor also stressed that the suspension of its agreement would have affect the progress of repair work on the homes of hurricane victims and would result in higher costs for the government because their contract was $21 million less than the competing bidder’s.

The contract to manage the project raised controversy after AECOM / CPM JV challenged its awarding to Adjusters / Rising Phoenix, a company whose second-in-command, Daniel Craig, reportedly withdrew from consideration as President Trump’s nominee for a top position at the Federal emergency Management Agency [FEMA] after media reports were published of a federal investigation into mismanagement of federal funds while working on Hurricane Katrina recovery efforts.

The matter has been called reminiscent of the contract awarded to Whitefish Energy Holdings to repair Puerto Rico’s electricity grid after Hurricane Maria, which Gov. Ricardo Rosselló ordered canceled.


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