GOV CONTRACTS FOR HURRICANES REQUIRE KEEN OVERSIGHT

By Diane M. Grassi

Hurricane Katrina was the first and greatest blow to the United States Gulf Coast region when it set down on August 29, 2005, but it was subsequently followed by failing levees in the greater New Orleans, LA area, only to be hit again by Hurricane Rita some four weeks later, leaving New Orleans, southern Louisiana, southern Mississippi and now southeast Texas in dire need of emergency assistance. All three episodes combined have but complicated the clean up and restoration of a vital region of the country, a major U.S. port. In addition, over 300,000 homes were permanently lost with at least 200,000 families requiring federal housing, not to mention the loss of thousands of jobs.

The U.S. has a challenge on its hands, like no other, in terms of the expanse of uninhabitable land and infrastructure which is has been destroyed. In that effort, local, state and federal governments along with the private sector have been urged to proceed cautiously and as equitably as possible, according to numerous government officials and business leaders hit hardest in the communities most badly hurt.

Congress has thus far approved appropriations of over $62 billion for the emergency financing of Hurricane Katrina. Figures for Hurricane Rita to date are just now being discussed so there will be more emergency funding for it as well as President Bush is expected to ask the Congress for a third special appropriation within the next three weeks. Of concern however, is how the money will spent, which contractors will be the recipients of these monies, how much the local communities will be able to have a fair chance of partaking in the restoration process and the essential oversight to alleviate waste and fraud.

The Government Accountability Office (GAO) which monitors public spending on behalf of the Congress is expected to audit the contracts won by U.S. firms. Contracts have so far been secured for repairing the New Orleans’ flood levees, rebuilding naval facilities, providing temporary housing and mobile homes, providing trucks, ships, buses and planes and the immense task of removal of debris and hazardous materials. Contracts were awarded by the Army Corps of Engineers and FEMA. More than 15 contracts exceed $100 million with five worth $500 million or more. Additionally, more than the 80% of those contracts executed by FEMA were no-bid contracts or with limited competition in addition to guarantees that contracts will be given a certain profit.

“You are likely to see the equivalent of disaster profiteering,” according to Danielle Brian, Director of the Project on Government Accountability, a non-profit government spending watchdog group. Richard L. Skinner, the Inspector General for the Department of Homeland Security, overseeing Hurricane Katrina contracts said, “When you do something like this, you increase the vulnerability for fraud, plain waste, abuse and mismanagement.”

Skinner’s comments were in reference to two major contractors, also no-bid contracts, utilized in Iraq as well. One is Kellogg, Brown & Root (KBR), a subsidiary of Halliburton, now represented by Joe Allbaugh, President Bush’s former campaign manager, former Director of FEMA and friend of recently resigned FEMA Director Michael Brown. KBR is repairing damage to three naval bases as well as damage assessments, repairing roofs and restoring power. Skinner also said, “Bills have come in for deals that apparently were clinched with a handshake, with no documents to back them up.”

The other contractor to which Skinner refers is the Shaw Group, also represented by Allbaugh. It is a Louisiana construction firm which won a $100 million contract from FEMA for housing and support services and a $100 million contract from the Army Corps of Engineers to pump floodwaters out of New Orleans. Additionally, AshBritt, Inc., a Pompano Beach, FL company, was awarded a $568 million contract for clean up in Mississippi as part of an ongoing contract with the Army Corps of Engineers, signed in 2003. In addition, Ashbritt was a client of the former lobbying firm of Governor Haley Barbour of Mississippi.

Also of concern is the track record of recent work done in Iraq by KBR, including a five-year oil infrastructure contract instead of the standard one-year contract. Whistleblower, Bunnatine Greenhouse, was the chief contracting officer for the Army Corps of Engineers, and has since been demoted after her protest to what she saw as unethically awarding such a contract to KBR. In addition, KBR was cited for lost property and equipment in Iraq as well as leaky pipelines, necessary to carry water to the oil fields which still are not working properly, thus delaying the production of oil to date. KBR also was responsible for rebuilding a pipeline network in Northern Iraq but could not complete the project for non-specified reasons. A government audit is presently in play regarding that project. Iraqi officials also have been critical of KBR for using foreign contractors and shoddy equipment, overseen by U.S. officials with little experience in the oil industry.

Given the risk of graft and the need for accountability, Richard Skinner has just appointed Mathew Jadacki to the new Office of Hurricane Katrina Oversight. Jadacki was a former FEMA auditor. The Department of Homeland Security is one of 13 different agencies and departments to have inspector generals auditing hurricane contracts. President Bush recently said. “We’ll make sure your money is spent honestly by sending a team of inspector generals down there to review all expenditures.” The Congress also is drafting additional legislation in this oversight effort and also to investigate what went wrong with both Hurricane Katrina preparedness and its aftermath.

The Office of Management and Budget wants its say in oversight too as well as the various local and state governments in the Gulf region. However, due to the potential for more bureaucratic overkill, resident businesses of the affected communities may get lost in the mix. While all government contracts supposedly require the preference for work going to the affected communities, many small businesses feel they simply cannot compete with multi-billion dollar corporations with contracts already in place.

Will Nelson of the National Association of Minority Contractors, a non-profit trade association, said that he went to Biloxi, MS two weeks ago to submit a bid on behalf of minority contractors and was shut out by local officials. “The door was slammed in our face,” he said. Additionally, access to key government personnel for small contractors in the region is nearly impossible for those left only with toll-free phone numbers to call. It will be largely left to the discretion of the large corporations to subcontract with those most in need who have the capability to work and to hire local workers, in an effort to get back their livelihoods.

And it will take a great deal of perseverance and integrity on the part of all levels of government, agency officials and the private sector in order for hurricane contracting oversight not to become as entangled and as unwieldy as the relief effort itself. What is of concern to many in Congress is for proper oversight while contracts are being negotiated and not for a call for investigations after the fact. And others in Congress are wisely calling for revisiting pork barrel legislation recently passed by Congress for fiscal year 2006 such as the $286 million transportation bill which was cited for $24 billion in special projects or about 9% of the entirety.

There will be so very many expenses yet to be realized at this juncture in the hurricane recovery effort which will require serious thinking on the part of our lawmakers, not for the benefit of their political lives, but for the benefit of the lives of the American people most tragically at a loss and for the future health of the U.S. economy. Hopefully, many this time will be up to the task.