Senate hearing examines 23-year HMS F�E9nix alliance for Puerto Ricos maritime transport; senators press for studies, costs and board records

San Juan E28094 A Senate committee continued its review of Senate Resolution No. 31 on April 20, 2021, questioning the Authority for Public-Private Partnerships (APP) about a 23-year alliance contract awarded to HMS FE9nix Puerto Rico LLC to operate Puerto Ricos maritime transport system. APPs executive director, Lic. FermEDn Fontanes, outlined the procurement history, contract terms and compliance mechanisms; senators repeatedly asked for the underlying feasibility study, detailed cost estimates and minutes showing the ATM boards approval.

Fontanes told the committee that APP began the process in 2017, issued a draft request for qualifications and later a request for proposals, and selected HMS as the preferred proponent on June 14, 2019 after evaluating submissions from five firms. He said APPs recommendation and the alliance contract were approved by the ATM board of directors, the secretary of transportation and the governor, and were submitted to the Financial Oversight and Management Board (referred to in the hearing as the Junta de SupervisiF3n Fiscal) for approval because the contract exceeded $10 million.

He described a two-phase contract: a three-year Phase 1 transition during which ATM retains most operational risk and reimburses HMS for certain costs while HMS implements a ticketing platform and evaluates assets; and a Phase 2 lasting about 20 years in which HMS would receive a fixed annual payment, retain fare revenues and assume the operational and maintenance risk. Fontanes said APP and HMS designed performance metrics and liquidated-damage provisions tied to timeliness, missed trips and customer-notification requirements; example deductions cited by APP were $5,000 per metric per month, with escalating remedies and termination rights for persistent noncompliance.

On fares and residents protections, Fontanes said resident fares for the islands would remain unchanged during Phase 1. In Phase 2 the operator may request non-resident fare adjustments no more often than once every three years and any increases are subject to ATM and Federal Transit Administration (FTA) approval; APP presented maximum cumulative cents-per-trip increases over the 23-year term for Vieques and Culebra.

Senators pressed APP on several recurring concerns. The presiding senator asked who authored the desirability and feasibility study; Fontanes named APP-selected consultants including Steer Davies, KPMG, Hunton & Williams and outside legal advisors and agreed to provide the alliance report and the study to the committee. Lawmakers repeatedly sought the detailed budgets and repair-cost worksheets after citing approximate vessel-repair estimates of $1.5 million to $2.5 million per vessel and an immediate repair need in the $16 millionE2$20 million range; Fontanes said operational staff at ATM hold some of those line-item estimates and committed to provide the breakdowns.

Multiple senators raised questions about use of federal funds and the fate of assets bought with FTA grants, noting ATM retains title to vessels while the operator assumes possession and responsibility for repairs as they reach contract-accepted condition. Senators also pressed whether the Oct. 5, 2020 ATM board meeting that approved the contract was properly constituted, pointing to statutory rules about odd-numbered boards and the law adding an AFAF representative; APP said the minutes reflect quorum and that invitations to join the Zoom meeting were extended to board members.

Other lines of inquiry included projected long-term savings (APP cited present-value savings estimates over 23 years), how the fixed annual payment in Phase 2 was calculated (Fontanes cited an annual government payment in the low thirties of millions of dollars as part of APPs estimates), and the triggers for force majeure or termination. Fontanes explained that force-majeure relief requires documented, prolonged inability to operate (example timeframe cited: 180 consecutive days) and is adjudicated through contract procedures rather than unilateral action.

A senator requested that the committee consider calling the former ATM executive director identified in the hearing record (listed in the minutes as Mara PE9rez) to testify at a future session; the presiding senator said the commission would consider the request. APP agreed to provide the alliance report, the feasibility study, RFP amendments and relevant meeting invitations/minutes within the committees requested timeframe.

The hearing recessed at 12:05 p.m. and the committee set follow-up steps including document production and further hearings to verify procurement records, detailed cost estimates and the ATM boards membership and call minutes.

Quotes from the hearing include: "La autoridad es la FAnica entidad gubernamental autorizada y responsable de implementar la polEDtica pFAblica..." (Lic. FermEDn Fontanes on APPs legal role) and "Usted le estE1 donando los primeros dos aF1os...los activos que fueron pagos por el gobierno federal" (senator criticizing the contract as effectively transferring federally funded assets).

What happens next: APP committed to deliver the feasibility study and related documents; the committee will review those materials and consider calling additional witnesses, including the prior ATM director, before continuing its inquiry.