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Fiscal Control Board Toughens Contracting Rules for Puerto Rico

New rules require Puerto Rico to get the board overseeing Puerto Rico's debt crisis to get its approval on all contracts $10 million and up.
Image: A worker of Puerto Rico's Electric Power Authority (PREPA) repairs part of the electrical grid after Hurricane Maria hit the area in September, in Manati
A worker of Puerto Rico's Electric Power Authority (PREPA) repairs part of the electrical grid after Hurricane Maria hit the area in September, in Manati, Puerto Rico October 30, 2017. REUTERS/Alvin BaezALVIN BAEZ / Reuters

WASHINGTON — The financial board in charge of resolving Puerto Rico’s fiscal crisis voted Tuesday to make Puerto Rico's government get its approval before awarding contracts of $10 million or more.

The requirement is part of a new contract policy adopted by the Financial Oversight and Management Board created by Congress to steer Puerto Rico out of its multibillion-dollar debt.

The approval requirement applies to contracts or series of contracts that have an aggregate value of $10 million. It starts with contracts entered into Nov. 6 and after, said Natalie Jaresko, executive director of the Financial Oversight and Management Board of Puerto Rico.

However, those executed before that date are subject to review by the board, Jaresko said in the board’s Tuesday meeting in San Juan, Puerto Rico. Also, the board will review other contracts below $10 million at random to ensure compliance with federal contracting regulations.

Under the policy, the board will respond to submitted contracts within seven days of receipt. The board says an internal working group will review the contracts.

Jaresko said the board is adopting the plan “to ensure contracts are consistent with federal programs, particularly those relating to funding and reimbursement for disaster aid funding."

The stricter contract review policy comes amid continued questions about Puerto Rico’s electrical authority's award of a $300 million electrical grid repair contract to the small Montana based company Whitefish Energy.

Puerto Rico’s governor has canceled the contract and Democrats in Congress have called for an investigation by the Government Accountability Office, GAO.

Related: Democrats Call For Investigation Into Whitefish Energy Contract in Puerto Rico

The contract was discussed in a Senate committee hearing on hurricane response in Washington Tuesday. Brock Long, Federal Emergency Management Agency administrator, told the Senate panel that the contract would have raised red flags at the agency if FEMA been involved in approving it, which has said it was not.

“There is no lawyer inside FEMA that would have agreed to the language in that contract,” Long said.

A House committee hearing that was scheduled for Tuesday and was to include testimony from San Mayor Carmen Yulín Cruz was canceled. Cruz has been critical of the Trump administration response to Hurricane Maria. Long has previously dismissed her criticisms as “political noise” and said FEMA had “filtered out the mayor a long time ago.

Cruz tweeted a video addressing the cancellation and asking "What are they afraid of?" She said she was already in Washington when the hearing was canceled.

The ranking Democrat on the committee Rep. Bennie Thompson of Mississippi also criticized the cancellation in a series of tweets.

The Puerto Rico fiscal oversight board delayed a vote on an ethics policy proposed by Puerto Rico’s representative on the board. The board delayed the vote so its lawyer could review the proposal and ensure it does not duplicate rules already in place.

The proposed ethics rule would prohibit members of the board from involvement in review of a contract or in ex-parte communications with parties involved in awarding a contract or promoting self interest in a contract.

Separately, the Army Corps of Engineers has posted notice that it plans to increase the ceiling on a $240 million contract with Fluor Corp., an Irving, Texas-based company, by $600 million for a total potential contract of $840 million. The company had previously built a coal-fired plant on the island.

“We have to get approval for that, and we have to get the funding,” said Jeff Hawk, public affairs officer for the Army Corps of Engineers, which is working with the Puerto Rico Power Authority to restore the island’s electrical grid.

Related: On 38th Day Since Maria Hit, There Was Light in Utuado, Puerto Rico

The Corps and Federal Emergency Management Authority must approve the contract, he said.

Hawk said the island will see grater activity this week as the corps brings in a lot of equipment, such as bucket trucks and utility poles and workers.

He said a ship will be coming in from the Port of Charleston, South Carolina with that equipment trucks and other things they and contractors need for the work. The movement of equipment and supplies to Puerto Rico has been given priority at the port, he said.

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