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Montana entrepreneur who sparked controversy during Puerto Rico hurricane response wins $4M no-bid PPE contract

(CNN) Almost three years after a tiny Montana company ignited a firestorm of controversy when it signed a massive contract to repair Puerto Rico's hurricane-battered electricity grid, the firm's CEO has won another disaster relief deal: supplying the federal government with protective gear in the fight against the coronavirus.

A new company co-led by Andy Techmanski, the CEO of Whitefish Energy, signed a no-bid, $4 million contract in late June to provide reusable isolation gowns for the Department of Veterans Affairs, according to federal contracting records.

Whitefish won a $300 million contract to help rebuild Puerto Rico's electricity grid after the devastating Hurricane Maria in September 2017, even though it had limited experience in disaster relief and just a handful of employees when the storm hit the island. The deal was cancelled by the island's governor barely a month later amid allegations of price-gouging and questions surrounding how Whitefish got the job.

Years later, Puerto Rico officials have said there were no improprieties in how Whitefish's contract was awarded and no problems with the company's work -- although two federal agencies are still reviewing the deal and its costs. The company is still waiting for a more than $106 million payment from Puerto Rico's bankrupt electric utility, according to records from the utility.

Now Techmanski says he wants to put the controversy behind him and focus on his new venture. His new company, Merrow-FORLOH Medical, is a partnership between FORLOH, an outdoor apparel brand recently launched by Techmanski, and Merrow Manufacturing, a more than 180-year-old textile company in Massachusetts that calls itself the largest domestic manufacturer of PPE.

Merrow-FORLOH has produced more than 1.5 million gowns for hospitals and state governments, according to the company. Under the $4 million contract with the VA, the company will provide a total of 100,000 reusable gowns over the next four months, a VA spokesperson said. She said Techmanski had no interaction with the agency during the contracting process.

At a time when some hospitals are again facing PPE shortages amid a new spike in coronavirus cases and government agencies have scrambled to secure masks and gowns from abroad, Techmanski and Merrow say building up a domestic PPE manufacturing base should be a crucial priority for the U.S.

Still, contracting experts say the fact that officials awarding the deal couldn't consider Whitefish's history shows a potential weakness in federal contracting. Federal rules say that agencies can only evaluate vendors by looking at past performance by that company, not the record of other companies run by the same people, according to Trevor Brown, a professor at Ohio State University and an expert in government contracting.

"The contracting officer, the person actually doing the purchasing, is not allowed to go look at what the other company did," Brown said. "If this is a new company, it has no past performance."

Controversial contract

The new federal contract comes as legal battles and federal inquiries are still playing out over Whitefish's work in Puerto Rico.

When Hurricane Maria hit Puerto Rico in September 2017, Techmanski suspected that Whitefish's experience using helicopters to rebuild power lines could be useful in Puerto Rico's mountainous terrain. He started reaching out to officials on the island through LinkedIn, he said.

He ended up taking a flight to Puerto Rico just days later, reviewing toppled power lines with officials from the Puerto Rico Electric Power Authority and signing a $300 million contract with the utility in a dimly lit conference room. PREPA officials said they chose Whitefish because it was the only bidder not to require a large downpayment from the cash-strapped utility, and because it was willing to handle the logistics of getting workers to the island.

A Whitefish Energy Holdings worker repairs power line towers after the passing of Hurricane Maria in Manati, Puerto Rico on October 31, 2017.

But the company had never led any job at the scale of the Puerto Rico reconstruction, which drew attention on the mainland. Critics zeroed in on the fact that Techmanski lived in the same small Montana town as then-Interior Secretary Ryan Zinke, and Zinke's son had previously worked a summer job for Whitefish. Techmanski and Zinke have repeatedly said the secretary had nothing to do with the company winning the contract, although Zinke said Whitefish reached out to him after it was signed to get assistance delivering resources to the island. Zinke left the Trump administration in January 2019 after facing ethical issues.

Whitefish's contract charged PREPA up to $319 an hour for linemen working on the reconstruction project, which some observers said at the time was inflated. The New York Times reported that the company was paying some linemen only $63 an hour even as it charged the utility much more. Techmanski told CNN the company's rates were reasonable considering the risk and the logistical difficulties of working on the island, and that his prices were in "the middle of the pack" compared to other bidders.

Another provision of the contract specified that federal and local authorities would not be allowed "to audit or review the cost and profit elements of the labor rates" Whitefish was getting paid. FEMA administrator Brock Long testified before Congress that "there's no lawyer inside FEMA that would have ever agreed to the language that was in that contract to begin with." The contract was eventually amended to remove that provision.

As scrutiny over Whitefish grew and Congress and federal agencies moved to investigate, PREPA cancelled the contract in late October 2017 at the request of Puerto Rico Gov. Ricardo Rosselló, who said it had become a "distraction." Whitefish continued working through November.

Techmanski argues that Whitefish performed well in perilous conditions over its two months on the job, pointing to PREPA documents that show it successfully restored power to five transmission line segments. "We essentially got pulled down into the swamp and used as a political toy," he said.

Fernando Padilla, a PREPA project management officer, said in an email that there were no problems with the quality of Whitefish's work. In addition, Puerto Rico's comptroller reviewed Whitefish's contract and concluded in 2018 that there were no irregularities in how it was awarded, according to local media reports. The comptroller's office did not respond to a request for comment.

Whitefish Energy Holdings workers chat as they repair power line towers after the passing of Hurricane Maria in Manati, Puerto Rico on October 31, 2017.

The company that took over the work after Whitefish left -- Cobra Acquisitions -- ended up charging the government far more than Whitefish, according to PREPA budget documents. It also fell into legal trouble: Two Cobra executives and a FEMA official were arrested in 2019 and charged with federal bribery and fraud crimes. Whitefish was not accused of wrongdoing.

Still, the probes into Whitefish's work in Puerto Rico aren't over, even almost three years later. The Department of Homeland Security's inspector general's office told CNN this week that its audit into Whitefish's Puerto Rico contract is still ongoing. And a FEMA spokesperson said the agency "continues to review documentation pertaining to the Whitefish Energy company," including assessing whether it complied with laws and regulations and "ensuring that the work performed is eligible and costs are reasonable."

In federal bankruptcy court, meanwhile, Whitefish has been fighting to get paid. PREPA, which is going through bankruptcy, has paid Whitefish $36.9 million and still owes the company an additional $106.4 million, according to the utility's most recent cash flow report, from April 2020. In court filings, Whitefish has claimed it is also owed millions more due to the delays in getting paid, based on its contract.

Some local observers say that the controversy over Whitefish looks less problematic in retrospect, especially compared with the companies that came after them.

Whitefish "should never have been hired in the first place, but we have no evidence of there being any impropriety with them," said John Mudd, a lawyer in Puerto Rico who's followed the legal saga over the hurricane recovery but isn't representing any of the companies involved. "They did their job."

From power lines to PPE

In the years after pulling out of Puerto Rico, Whitefish received several other smaller jobs from the federal government performing electrical work. But Techmanski said the controversy over the Maria response -- and the $100 million hole in his budget -- became an inescapable drag on the company.

An avid hunter, Techmanski said he decided to follow his "dream" of building an outdoor apparel company that manufactures its clothing in the U.S.

The company, FORLOH, which is based at the same Whitefish, Montana address as Whitefish Energy and employs several of the same executives, was scheduled to launch earlier this year. But when the coronavirus hit, Techmanski said he realized that the sophisticated waterproof fabric the company was developing for hunting jackets -- the same kind of material used in military parachutes -- could also be used to make PPE.

He partnered with Merrow Manufacturing, a Massachusetts-based textile company that's also turned its production line to masks and gowns. Charlie Merrow, the company's CEO, said the two companies had originally been discussing the development of technical fabrics for hunting gear.

"It was perfect timing for both companies to be able to act," Merrow said. "Unless the two companies had been in the same room together at that moment, this would not have happened."

Merrow said he hadn't known about Whitefish's history when the two companies joined forces, but that wouldn't have stopped him from working with FORLOH.

So far, their company has manufactured more than 1.5 million level one and level two isolation gowns, sending them to hospitals and state governments, Techmanski said.

The VA contract for 100,000 gowns charges $40 per reusable gown. While that's higher than prices other federal agencies have paid for gowns from other companies, Merrow-FORLOH's gowns can be washed and reused 600 times, according to the company, while many other reusable gowns can be used far less. Christina Noel, a VA spokesperson, said the price was attractive because some single-use disposable gowns are currently going for $4 to $5 each on the market.

The Merrow-FORLOH contract was awarded without a competitive bidding process because no-bid contracts "can help provide the flexibility needed to ensure that we receive the required supplies in time to support clinical needs," Noel said. The gowns will be used at VA hospitals in Maryland, Pennsylvania, Virginia, Washington, D.C. and West Virginia, she said.

After Hurricane Maria, Techmanski said he doubted he'd ever get involved in high-stakes disaster relief again. Now, he said he jokes to his friends that "I'm the guy you probably want to be next to when a disaster hits."

Returning to disaster relief efforts "makes me a lightning rod," Techmanski said. "But I can hold my head high and say we saved thousands of lives."

CNN's Drew Griffin contributed to this report.