Oversight board: Puerto Rico’s lobbying laws lag behind rest of the country
Mujica says island is also out of step on contingency fees, extensions in public contracting
By THE STAR STAFF
Financial Oversight and Management Board Executive Director Robert Mujica Jr. said at a board meeting Wednesday that lawmakers must modernize Puerto Rico’s lobbying laws to safeguard public contracting once the board mandated under the Puerto Rico Oversight, Management and Economic Stability Act, commonly known as PROMESA, eventually exits.
“There is a great deal of work ahead to restore the people’s confidence in public procurement,” Mujica said, noting that Puerto Rico remains the only U.S. jurisdiction without a comprehensive lobbying statute. “If you are paid to influence how public money is spent, the public should know it, and it should be transparent.”
He warned that Puerto Rico still allows contingency fees tied to government action -- including contract awards -- despite most states and the federal government banning them. Contract extensions, he added, are another area where Puerto Rico diverges from standard practice.
“In most places, a contract has a defined term,” Mujica said. “If the need continues, the work goes back out to competition. Here, practically no such limit exists.”
Once the board leaves, he said, “no one will provide the independent review the board currently performs before a contract is executed.”
Mujica’s remarks came as he revisited the failed Power Expectations contract, a procurement he said was riddled with omissions, misrepresentations and undisclosed changes that forced the board to revoke its approval for the first time in its history. He traced the timeline back to the Puerto Rico Energy Bureau’s 2025 directive ordering the Puerto Rico Electric Power Authority (PREPA) to address an anticipated generation shortfall of up to 850 megawatts. PREPA needed temporary generation quickly, and the board began reviewing the proposed $5.9 billion, 10‑year contract in January of this year.
From the outset, he said, the board’s infrastructure team had “serious questions,” while the Third-Party Procurement Office (3PPO) repeatedly provided partial answers and challenged the board’s authority to request them. The board conditionally approved the contract on May 8, adding strict milestones, liquidated damages, termination rights, and a performance bond exceeding $1 billion. Final approval followed on June 2.
Soon after, however, the board learned that the agreement had materially changed without disclosure: Enchanted Rock, the company meant to supply the generation equipment, was no longer part of the deal. The required performance bond was never delivered. Enchanted Rock informed the 3PPO that its signature had been forged. Flotek Industries disclosed it had only agreed to deliver 40 megawatts -- far short of the 400 megawatts required. And 66 days after execution, nothing had been built, shipped or delivered.
Throughout the process, Mujica said, the 3PPO continued to provide incomplete information and insisted the board had “no business asking the questions” it was asking. The board revoked its approval on Aug. 14.
“It was unavoidable,” he said. “We now know this contract was never going to deliver the power Puerto Rico’s families and businesses need.”
The episode, he added, exposed deeper structural weaknesses in Puerto Rico’s procurement system. During the review of Act 215 of 2024 -- which sought to raise thresholds for no‑bid contracting -- the board discovered that 22 municipalities impose higher construction excise taxes on government‑funded projects than on private ones, with 15 charging a 10% rate.
“We are unaware of any jurisdiction that sets a different rate based on the source of the funding,” Mujica said, warning that the practice could be deemed discriminatory under federal cost principles and jeopardize recovery funds.
He also highlighted two major fiscal risks: Medicaid financing and pensions. Puerto Rico’s enhanced federal Medicaid match expires next year, and without congressional action, maintaining current benefits could cost the island up to $3.8 billion annually beginning in fiscal 2028.
“I too have made Congress aware of how critical this is,” he said.
On pensions, Mujica warned that 18 recently introduced bills would create long‑term obligations without identified funding sources.
“Pension increases are promises … and promises that we make for decades,” he said, stressing that any new benefits must comply with the court‑approved plan of adjustment. Two of the bills were vetoed last year.
Asked whether the oversight board should take over the evaluation process for a new temporary generation provider, Mujica said the board would intervene more directly if necessary. The 3PPO has reportedly said it wants to withdraw from the process.
“We need the generation,” he said. “If we have to be more involved, we will do it.”
He noted that another procurement -- this one for 3,000 megawatts of long‑term generation -- is underway, but the board has not been given full visibility.
“We don’t know all of the details,” he said. “We don’t want this to happen again.”
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