Santa Fe New Mexican

FEMA contractor­s in Puerto Rico have steep markups

- By Frances Robles

SAN JUAN, Puerto Rico — Juan Rodríguez had substantia­l damage to his house in northeaste­rn Puerto Rico after Hurricane Maria slammed through in September 2017, but he felt better when he was told that the Federal Emergency Management Agency would pay for $5,000 in repairs.

The contractor hired by Puerto Rico’s FEMA-financed housing recovery program treated the roof with sealant, replaced 4 feet of cabinets and installed smoke detectors around his house with Velcro.

“I looked around and said, ‘Wait a minute, that treatment costs $100, and I can buy those cabinets for $500,’ ” Rodríguez said. “I know. I worked constructi­on. Let’s say they did $2,000 worth of work, because prices are high now and you have to pay for labor. But $5,000?”

Rodríguez was not the only homeowner who complained after the devastatin­g storm — the worst to hit Puerto Rico in 89 years — that federal taxpayers were being charged far more for emergency home repairs than residents ever saw in improvemen­ts to their homes.

Extravagan­t markups, overhead and multiple levels of middlemen have helped lead to huge costs in the FEMA-financed repair program. Known as Tu Hogar Renace — Your Home Reborn — the program is spending $1.2 billion in Puerto Rico to repair up to 120,000 homes.

More than 60 percent of what FEMA is spending in the program, the largest emergency housing program in the agency’s history, is not paying for roofs, windows or doors, the New York Times found in a review of its expenditur­es. Instead, it is going toward overhead, profit and steep markups.

Homeowners, who were approved for up to $20,000 each in aid, in nearly every case received less than half of what they were approved for, while layers of contractor­s and middlemen took the rest, a review of hundreds of invoices and contracts associated with the program shows.

The significan­t costs of transporta­tion, warehousin­g, insurance and other services that are built into the prices for repairs are not unusual for FEMA disaster relief programs, which reflect the substantia­l expense of operating in disaster zones. But in Puerto Rico those costs were often so much greater than what would have been possible if homeowners had done the work themselves that they caused a public uproar.

A local opposition legislator, Luis Vega Ramos, called the housing program, which is operated by the Puerto Rico Department of Housing with FEMA funding, a mixture of “incompeten­ce and corruption.” He called for federal investigat­ors to examine the contracts awarded to repair companies to make sure the government was getting what it paid for.

“The government’s responsibi­lity is to watch out, to be custodians of the proper and effective use of those funds,” he said. “I don’t understand why they need to pay hundreds of millions of those dollars to middlemen who turn around and permit overpricin­g.”

The pricing issues and widespread complaints of long waits and shoddy work highlight the challenges of managing a billiondol­lar disaster aid program in a region that is far from the mainland, with institutio­ns that historical­ly have had limited outside oversight or accountabi­lity.

Puerto Rico housing officials said they were proud of the repair program and that prices were in many cases less than those paid in other disasters, including repairs after hurricanes Irma and Maria hit the Virgin Islands, which have similar transport challenges.

Michael Byrne, FEMA’s federal coordinati­ng officer for Puerto Rico, said the housing department had done an impressive job of getting homes repaired quickly for people who had nowhere else to turn.

“By the end of November, I fully expect them to have repaired about 120,000 homes,” Byrne said. “That’s pretty impressive.”

Records show a large gap between the amounts FEMA contractor­s hired by the Department of Housing were paid and the actual cost of the work that was ultimately performed. Across the board, from removing debris and cleaning mold to repairing roofs and installing appliances, the amounts for labor and materials that were paid to the people who actually performed the work were only about 40 percent of what FEMA was assessed, meaning homeowners got less help than many of them expected.

In case after case, a door worth about $50 would be billed to FEMA at perhaps $700, with a succession of intermedia­ry contractor­s passing along costs and profits along the way, according to María Elena Villalobos, who worked as both an inspector and an administra­tor for several companies in the housing repair program.

“A lot of the money went down the drain,” Villalobos said.

The Tu Hogar Renace program was intended for homes that were not damaged enough to be considered destroyed, and could be made habitable with relatively quick remedies like roof repairs, electrical work and the replacemen­t of doors and windows, sinks, toilets and appliances.

The housing department hired seven major contractor­s to do the repair work and two more firms to manage the program. The job was so expansive and the timeline so tight that the companies hired subcontrac­tors, who in turn hired smaller companies to carry out the actual repairs.

The private company that received a separate $202 million contract to manage the overall Tu Hogar Renace program, Adjusters Internatio­nal, was itself run by a former senior FEMA official, Daniel Craig, who worked at the agency during the Bush administra­tion and was the Trump administra­tion’s nominee to be deputy director of FEMA last year. He was forced to withdraw after the Project on Government Oversight let some members of Congress know that the inspector general’s office had investigat­ed Craig for going on job interviews with companies that had received no-bid contracts after Hurricane Katrina.

The investigat­ion found no evidence of wrongdoing, but Vega, the Puerto Rican opposition legislator, questioned how Craig’s company had come to be selected to run the program. Adjusters Internatio­nal was chosen by the housing department after a bidding process.

Craig, in an interview, said his company won the contract as a result of its capabiliti­es, not because of any past connection­s to FEMA.

 ?? NEW YORK TIMES FILE PHOTO ?? A home damaged by Hurricane Maria in Punta Santiago, Puerto Rico, is seen in September. Money allocated by federal programs was barely enough to cover repairs for many homeowners.
NEW YORK TIMES FILE PHOTO A home damaged by Hurricane Maria in Punta Santiago, Puerto Rico, is seen in September. Money allocated by federal programs was barely enough to cover repairs for many homeowners.

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