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Mammoth Energy Services Addresses FEMA Documents and Contract Compliance Issues

Strategic Insights

— 2 min read

Mammoth Energy Services, a Delaware-based energy infrastructure company, has recently released information addressing two documents from the Federal Emergency Management Agency (FEMA) related to hurricane repair work performed by its subsidiary, Cobra Acquisitions LLC, in Puerto Rico. The company's work was part of a contract with the Puerto Rico Electric Power Authority (PREPA) to repair the island's electrical grid after Hurricane Maria. The FEMA documents in question are a Determination Memorandum and a draft Cost Analysis, both of which raise contract compliance issues.

Key Takeaways:

  • Mammoth Energy Services' subsidiary, Cobra Acquisitions LLC, performed hurricane repair work in Puerto Rico for the PREPA under a contract executed in October 2017.
  • FEMA has issued a Determination Memorandum dated May 26, 2021, related to the contract, which gives PREPA 60 days to file an appeal.
  • A draft Cost Analysis prepared by FEMA found that Cobra's overall average rate is lower than other contractors reviewed, and that the company's costs appear reasonable given the circumstances on the island.
  • The Cost Analysis also found that Cobra's duration of work for electrical work appears to be reasonable, and that the company's overall average rate with a 9% tax markup falls in line with the Memorandum of Understandings (MOUs) and is lower than Whitefish rates.
  • FEMA has no reason to believe that the cost of the work performed by Cobra is not reasonable.
  • Two contract compliance issues were raised by FEMA, which Cobra addressed in a response that is available on the Mammoth Energy Services website.
  • PREPA has recently become aware in court filings that FEMA has obligated approximately $250 million for costs incurred under the second contract.
  • Mammoth Energy Services has provided additional documentation to support its claim, including the FEMA Determination Memorandum dated December 23, 2017, two FEMA memoranda, and a Freedom of Information Act (FOIA) data report.

Statistics:

  • $250 million: The approximate amount obligated by FEMA for costs incurred under the second contract.
  • 60 days: The time period given to PREPA to file an appeal following the receipt of FEMA's Determination Memorandum.
  • 9%: The tax markup added to Cobra's rates in the Cost Analysis.
  • 13 pages: The length of the draft Cost Analysis document.
  • 4 separate instances: The number of confirmations made that the work performed by Cobra was within the scope of the PREPA contract and was at a lower overall cost than other contractors on the island.

Sources:

  • https://www.edgar-online.com/filing.php?FormID= filings&OrgId=&SIC=&SICKEY=&XJ=&Show=&date=2021-06-08&tab=abstract&i=-20210608x
  • https://www.mammothenergy.com/ir/
  • FEMA Determination Memorandum dated May 26, 2021
  • FEMA draft Cost Analysis document

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