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CNE: Disaster spending in P.R. goes mostly to U.S.-based firms, violating Stafford Act

Federal relief and recovery spending in Puerto Rico is mostly being used to contract mainland firms, which suggests that Stafford Act provisions have, up to this point, been sidestepped or ignored.

Moreover, existing trends signal that local economic development opportunities stemming from post-disaster funding are possibly lower than expected, according to an analysis revealed by the Center for a New Economy.

The Robert T. Stafford Disaster Relief and Emergency Assistance Act establishes that “when awarding emergency response contracts during the term of a major disaster or emergency declaration by the President of the United States under the authority of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, preference shall be given, to the extent feasible and practicable, to local firms. Preference may be given through a local area set-aside or an evaluation preference.”

But the study shows that during the 11-month period up to Aug. 22, 2018, almost $5 billion have been obligated by federal agencies for work conducted in Puerto Rico through contract spending. However, almost $4.3 billion has been awarded to firms based in the mainland U.S., while a little over $490 million — barely 10% of the total — has been awarded to companies based in Puerto Rico.

“The data shows that, thus far, the gap in funding between local and mainland firms is increasing,” the CNE said.

“Despite the clear mandate of the Stafford Act, the provisions to foster local activity in the post-disaster relief and reconstruction efforts are not being adequately implemented in Puerto Rico,” according to the CNE’s study conducted by Deepak Lamba-Nieves, research director, and Raúl Santiago-Bartolomei, research associate

“Congress recently approved a policy to increase the federal contracting of small local firms in Puerto Rico, but the effects of such measures have yet to take place,” the study noted.

Traditionally, federal disaster response has been thought of as the “silver lining” that stems from a catastrophic event, given the millions of U.S. government dollars that are pumped into the local economy. It is expected that federal funding for recovery will help jumpstart a depressed and battered economy through investments that will have a multiplying effect and potentially steer Puerto Rico’s economic growth rate into positive territory.

But almost a year after the hurricane’s passing, disbursements of appropriated funds from the federal government to the government of Puerto Rico have been few and far between.

“While it may be too early to reach sweeping conclusions regarding the effects of federal disaster spending and the efficacy of Stafford Act provisions on the Puerto Rican economy, maximizing potential development opportunities will require consistent oversight and monitoring of federal procurement practices,” the study noted.

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This story was written by our staff based on a press release.

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