U.S.: Katrina Contracts Went To Iffy Firms

Sen. Rob Portman, R-Ohio, is pursued by reporters as he turns into a restricted corridor in the Capitol for closed-door talks with fellow Republican members of the Joint Select Committee on Deficit Reduction, in Washington, Tuesday, Nov. 15, 2011. / AP

FEMA exposed taxpayers to significant waste — and possibly violated federal law — by awarding $3.6 billion worth of Hurricane Katrina contracts to companies with poor credit histories and bad paperwork, investigators say.

The new report by the Homeland Security Department's office of inspector general, set to be released later this week, examines the propriety of 36 trailer contracts designated for small and local businesses in the stricken Gulf Coast region following the 2005 storm.

It found a haphazard competitive bidding process in which the winning contract prices were both unreasonably low and high. Moreover, FEMA did not take adequate legal steps to ensure that companies were small and locally operated, resulting in a questionable contract award to a large firm with ties to the Republican Party.

"Based on our analysis, we concluded that FEMA contracting officials exposed the agency to an unacceptable level of risk," according to the report by the office of inspector general Richard Skinner.

The audit was requested by Sen. Byron Dorgan, D-N.D., chairman of the Democratic Policy Committee, following complaints last year by some small business owners that they were unfairly shut out of the contracting process. It is the latest to detail mismanagement in a multibillion-dollar hurricane recovery effort that investigators say has already wasted more than $1 billion.

The report also comes after FEMA acknowledged earlier this month that it would not have a federal plan ready for responding to emergencies before the approaching hurricane season, which begins June 1.

In response, FEMA in the report disagreed that the wide price variations put taxpayers at risk. The agency contended that it was comfortable with bidders' financial viability based in part on past performance. In cases where contract prices appeared unreasonably high, those would be offset with lower payments later on subsequent work orders, FEMA officials said.

In the immediate aftermath of Katrina, FEMA handed out lucrative no-bid contracts for cleanup work to large, politically connected firms such as Shaw Group Inc., Bechtel Group Inc., CH2M Hill Companies Ltd., and Fluor Corp.

Following heavy criticism, FEMA director David Paulison pledged to rebid those large contracts. He ultimately reopened only a portion, awarding 36 contracts which the agency said would be prioritized for small and local businesses.

Among the winners was joint venture PRI-DJI, which received $400 million worth of contracts. DJI stands for Del-Jen Inc., a subsidiary of Fluor, one of the original, no-bid winners which has donated more than $930,000 to mostly GOP candidates since 2000.

"It's not what you know, what your expertise is. I don't even believe it's got much to do with price. It's who you know," contended Ken Edmonds, owner of River Parish RV Inc. in Louisiana, a company of 9 people whose application was rejected.

In the audit, investigators said PRI-DJI was eligible to compete because DJI had partnered with PRI, a minority-owned firm based in San Diego, under a federal mentoring program offered by the Small Business Administration.

However, investigators found that PRI-DJI was given special preference even though it was not registered as a small business and "when neither company had its headquarters in Louisiana or Mississippi nor, in any other way, demonstrated that it had a history of working primarily in the impacted states."

Still, the audit noted the bid by PRI-DJI would likely have been selected anyway — without the special preference — because the price was so low.

Moreover, FEMA did not have formal criteria to determine whether a contractor should be considered local, did not require corroborating paperwork, and watered down requirements under federal law so that a company with only minimal Gulf Coast ties would be given special consideration, according to the audit.

Prices also varied greatly. Some were so high that investigators deemed them unreasonably excessive and wasteful; others were so unreasonably low that taxpayers faced "an unacceptable risk of poor performance."

For example, FEMA:

• Accepted bids as low as $74 and as high as $4,720 to completely refurbish used travel trailers. FEMA estimated this service should cost $295 per trailer.
  
  
• Accepted bids from companies with weak financial statements, incomplete and missing financial documentation, and negative net worth. The Defense Contract Audit Agency determined that at least three bidders presented high financial risks, but FEMA allowed the contracts to go forward.

[j0hnwi11iams]

Nice city youz gutz there. Be a shame if anything were to, say, "happen" to it.

[sero5]

This sort of corruption is nothing new. The heads of major corporations will feed cash to politicians of either political party in power. Then they reap lucrative federal contracts and tax loopholes. In the end, its the average middle class worker who pays for this corruption.

[vincan-2009]

You are lying to say Louisiana is run by democrats. It is republicans that have kept Blanco from being able to help this state. They have stood in the way just like the republicans in Washington. Bush and his henchmen did not want to help Louisiana at all because they have this unbelievable political slant on everything. Louisiana having a Democratic governor was all it took for Karl Rove to want to bully her and therefore our state. They are corruption at its worst.

[randalds]

"Among the winners was joint venture PRI-DJI, which received $400 million worth of contracts. DJI stands for Del-Jen Inc., a subsidiary of Fluor, one of the original, no-bid winners which has donated more than $930,000 to mostly GOP candidates since 2000."

Looks like they got their money's worth from their "contributions" (read "Bribes") to the republican party. Just like with the big pharmaceutical companies, or big oil, or war contractors in Iraq. There is no part of America that this administration is not more then happy to sell and scr*ew the taxpayers at the same time. They are the most corrupt administration in US history. In fact they're not really a presidential administration, they're a criminal enterprise. A crime family. And the US taxpayers, including the ones for generations to come, are the ones that they're stealing from. These are even regular old corrupt politicians any longer. They're out and out criminal thieves who should all be in prison, from Bush and Cheney on down!

[pakaal]

lanative1 wrote: "This is patently biased. I live here. The quote from the LA RV dealer was neatly inserted to look like he lost out to some huge Republican owned corporation. In reality, the bid went to a local Democrat Legislator and his family when they had no experience in the RV industry.... And for those who believe the Federal Government should be the Calvary...."

In my opinion, the point of the article wasn't the bad management of the companies awarded contracts (Republican OR Democrat), it was the bad management of FEMA itself in picking those unqualified companies. And the audit has come because of a Democrat Senator, so obviously the "Democrat Legislator" you mention is in the crosshairs at this point. In other words, Democrat targeting bad businesses, including Democratic-legislator-owned. Sounds fair to me.

Finally, regarding your point about Federal government not being "The Cavalry"; in fact that's specifically what FEMA is for - Federal Emergency Management. This isn't about "your house burning down" as you say, this is about billions of dollars of damage to thousands of homes and neighborhoods, because of a large-scale disaster. I'm sure as someone like yourself "on the bayou" knows all too well, Katrina was a devastating occurrence, not comparable at any level to "a house burning down."

[chuckabn]

The Federal Government was slow and should've done more, but no one failed as miserably as the local and state governments (run by Democrats) who fell on their faces to mess up their response. They've had years to prepare for this and instead funnelled money to their own agendas. Everyone I've ever met from that state says it is the most corrupt local and state governmental system in the country. Republican, Democrat, government basically just means favors for the rich supporters. From Hollywood to corporate America wealthy agendas come first. Nothing new under the sun. It is a huge joke that "anyone can be president in the USA". Yeah, anyone who is rich, well-connected, and ruthless. Some politicians have some good intentions, but basically it's the game. Absolute power corrupts absolutely. One last thing, I can't believe N.O. reelected that idiot Nagin. I'll never go back to that city.

[huskerarmy]

lanative1, It's not "bias" to point out the continued chronyism of this administration unless, you believe that GOPer contractors are simply more deserving. While these GOPer firms continue to wallow at the public trough and exploit the misery of Katrina victims, their plutocrat tools contine to exploit racist and sexist suspicions and make scapegoats of local officials.

[huskerarmy]

"If they had any sense here, they would have copied Mississippi's plan to the letter."
Aside from the laughable assertion that any state should model itself after Mississipi, it's a scam to suggest that the issues facing Mississippi were the same as those facing Louisiana. And yes FEMA was established in 1979 to assist in just such emergencies. In part because it was recognized that those who are themselves underwater, may not be the best to mobilize rescue, relief operations. In the years since, it has been the perogative of many sate governors to call on FEMA at a time of national disaster. Those on the right may not believe in FEMA, but that did not give Bush the right to deliberately sabatage its ability to function. As for the contracts, the lion's share of FEMA contracts went to four firms with ties to the GOP. Four no-bid contracts together worth $400 million to Shaw Group Inc., Bechtel Group Inc., CH2M Hill Companies Ltd., and Fluor Corp. that were awarded without competition. And Ashbritt and Acquisition Solutions, with ties to Mississippi Republican Gov. Haley Barbour, was awarded a $500 million contract.

[jjreding-2009]

Why am I NOT surprised at more cherry contracts going to partisan agencies and firms. Is there NOTHING that this administration doesn't sully with it's controversies? And these AREN'T hatchet-job witch hunts like the Republicans committed against the Clinton administration. All those things that were 'investigated' were smoke, but there is solid factual evidence (even admitted to by the federal budget office) available here. I'm so sick of the current administration I can't think straight anymore.

[lochlan-2009]

Bush and his cronnies are all thieves, no surprise there. Wake up America, your representation has corporate interest foremost in their agenda and your paying for it. Of course, we're not doing anything to keep big business from bribing these guys, except maybe,(and that's a big maybe) a slap on the wrist and only when they really get caught, smoking gun in hand.
Yet they're still in office, never mind jail.