Billing gap raises questions about Puerto Rico contract as Lakeland linemen work to restore power grid

LAKELAND, Fla. (WFLA) — Lakeland Electric linemen helping rebuild the power grid in Puerto Rico are being paid between $50 and $60 an hour, depending on experience. But, according to a New York Times report, the company Whitefish Energy billed Puerto Rico’s Public Power Company (PREPA) $319 an hour per lineman.

The contract has since been cancelled with the small Montana-based company, after audits and numerous investigations into how the company was awarded a $300 million contract.

WFLA reached out to Whitefish Energy. A spokesman released this statement:

On September 20, 2017, in response to PREPA’s request, Whitefish emailed PREPA its proposal, which included a list of its labor rates. These are essentially the rates that were in the original contract, subject to an adjustment to account for Puerto Rico’s tax laws. In this first contract, costs such as fuel, housing, food/water, shipping/freight, etc. were to be passed through at cost, plus 30 percent to cover Whitefish’s overhead and other expenses. PREPA compared Whitefish Energy’s rates to the rates in other proposals PREPA received and determined that Whitefish Energy’s rates were competitive with those other rates.

After the contract was signed, PREPA asked Whitefish to change the rate structure of the contract to make it FEMA-compliant, meaning that there would be fixed rates for virtually everything (including lodging, food, fuel, etc.) rather than cost-plus. As part of this contract revision, PREPA required Whitefish to develop one rate for each labor category that would apply to all subcontractors (from APPA utilities to union shops). For example, at least one potential subcontractor provided Whitefish Energy with a proposal that had rates that were equal to Whitefish Energy’s own rates in the contract. Whitefish Energy needed to make sure the fixed subcontractor rates in the contract were sufficient to cover the costs of such subcontractors, as well as Whitefish Energy’s overhead and other costs.  Since each subcontractor has different contracted rates with Whitefish, the overall margin cannot be determined until the final work is performed for each firm. In addition, simply looking at the rate differential does not take into account Whitefish’s overhead and costs for which there is no specified rate in the contract such as insurance, legal counsel (including local Puerto Rico counsel), tools, purchase of equipment, etc.

Keep in mind that there were no ‘market prices’ for this type of storm work on an island that had virtually no power and no external communications, and whose access roads and transportation infrastructure were destroyed. This, combined with PREPA’s failure to maintain its right of ways, meant that the scope of work facing Whitefish was unprecedented, as acknowledged by the U.S. Government. Even basics like finding housing for workers required enormous efforts to arrange clean and safe accommodations. Further, all workers, equipment, tools, food, water, etc. needed to be shipped to Puerto Rico where there was limited port and air space. Whitefish utilized local resources where possible and delivered on its promise to start performing work before any other contractor on that island mobilized. 

Whitefish Energy pays a premium to attract the labor to come to Puerto Rico to work.This time of the year is the busiest time for the utility industry. And as part of our union contract, for storm work we are required to pay overtime 100% of the time. Additional we have had to offer a premium rate on top of that for labor to leave the overtime projects they are on at home and to and leave their families. These premiums are in base wage, additional per diems (beyond those specified in the contract) and benefit/fringes. So they add a lot of cost to our rate structure.”

The cancelled contract runs through November, and then a new company is expected to take over. Lakeland Electric workers plan to stay and work with the new company.

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