In response to a recent New York Times article accusing FEMA contractors of charging steep markups on Puerto Rican hurricane recovery efforts, Sens. Bernie Sanders, Elizabeth Warren, and others sent a letter to the Department of Homeland Security (DHS) Inspector General (IG) on Thursday demanding a federal investigation into these claims. According to The New York Times, more than 60 percent of what FEMA is spending in the largest emergency housing program in the agency’s history is going toward overhead, profit, and steep markups, instead of actual home repairs.
In October 2017, FEMA announced the creation of the Tu Hogar Renace (Your Home Reborn) program in Puerto Rico, which provides temporary repairs to damaged roofs, windows, doors, walls, and water heaters to “return the home to safe, habitable and functional conditions.” Seven major contractors were hired by the U.S. Department of Housing and Urban Development (HUD) to conduct the repair work and two firms to manage the program.
On November 26, The New York Times published an article accusing FEMA contractors of spending more than 60 percent of their budget on overhead, profit, and steep markups during the hurricane relief effort in Puerto Rico. On Thursday, Sens. Richard Blumenthal, Dick Durbin, Bernie Sanders, and Elizabeth Warren co-signed a letter addressed to Acting DHS Inspector General John Kelly requesting a federal investigation into these accusations of rampant abuse and misspending by FEMA subcontractors.
“Records show that these contracting and pricing processes led to ‘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,” the senators wrote in their letter. “For example, FEMA paid for about 12,400 people to receive generators at a cost of $3,700 each, when the cost of devices, supplies, and labor actually amounted to only $880 each. In another instance, FEMA paid $666 apiece for new bathroom sinks, when the contractors who actually bought and installed them paid only $260 apiece. Another example revealed that while FEMA paid almost $4 a square foot to repair roofs, the work was done by subcontractors for only $1.64 a foot. Multiple companies that were subcontracted to execute this work have expressed their concerns about these payment discrepancies, and several have even registered complaints with FEMA and Puerto Rico’s consumer affairs agency, saying that the markups ‘amounted to illegal price gouging.’”
The senators also pointed out that at least two of the FEMA contractors, Excel Construction and Adjusters International, had ties to the Trump administration prior to receiving the contracts in Puerto Rico. Adjusters International was awarded a $202 million contract to manage the program, while its owner, Daniel Craig, was nominated for Trump’s deputy director of FEMA last year before withdrawing his nomination after being investigated by the IG’s office for similar corrupt activities following Hurricane Katrina. Excel Construction received a federal contract in Puerto Rico after donating $100,000 to Trump Victory, a joint fundraising committee set up by the Trump campaign and the Republican National Committee.
“We remain very concerned by reports that FEMA has awarded multi-million dollar contracts for hurricane-related aid to multiple unqualified companies,” the senators continued. “We are also concerned about the most recent news regarding the markups and overhead costs associated with its $1.2 billion Tu Hogar Renace program. This is especially troubling when Mr. [Michael] Byrne has cited ‘cost and administrative burden’ as his rationale for rejecting multiple calls from us and others in Congress for FEMA to implement the Disaster Housing Assistance Program (DHAP) – a housing program for hurricane evacuees that was much-needed.”
The senators concluded by asking why the repairs in Puerto Rico took so long to be conducted. How were the contractors hired? Did FEMA conduct any oversight? And how has FEMA responded to contractor complaints of markups amounting to “illegal price gouging?”