White House Blasted On Katrina Contracts

The Bush administration has shown little progress — and in some cases backtracked — on its pledge to do a better job in awarding contracts to small, Gulf Coast businesses for Hurricane Katrina work, a congressional analysis shows.

The review of federal contracts from five government agencies, conducted by the House Small Business Committee, is the latest to document missteps in the award of billions of dollars of lucrative government work since the 2005 storm.

The findings were provided Wednesday to The Associated Press in advance of a hearing by the committee Thursday at which officials from the five agencies were to testify about the contract awarding system.

The committee's review found that small businesses in Louisiana had an overall net loss of $8.9 million in contracting dollars since April, when the agencies reaffirmed their commitment to give smaller companies a share of the work. The loss was due in part to a decision at the Homeland Security Department to modify several existing agreements instead of awarding significant new contracts.

In addition, the review found the five agencies — Homeland Security, General Services Administration, Defense, Veterans Affairs and Small Business Administration — had claimed falsely that 259 contracts were awarded to small businesses when in fact they went to large companies or ineligible recipients. That created the false impression that more than $95 million in contracts was awarded to small companies, when they actually went elsewhere.

Overall, about 7.4 percent of Katrina contracts so far have gone to small businesses in Louisiana, down from 12.5 percent in April, according to the committee.

"There is absolutely no excuse for failing to use local companies that are responsible for this region's recovery," said Rep. Nydia Velazquez, D-N.Y., who chairs the House panel. "I can assure you that this committee will continue to hold the federal government accountable for making sure this money is properly invested in the region."

Russ Knocke, a DHS spokesman, responded that the department has been working to fix errors but could not immediately say how many. He said the committee had not provided its information to the department despite requests by DHS; the committee said the data on which it based its analysis was available publicly.

For many weeks after the 2005 hurricane, small and local companies were shut out of Katrina work in favor of large concerns with extensive government and political ties. Following public criticism, Homeland Security's Federal Emergency Management Agency pledged to rebid four large trailer contracts and give the work to small companies.

FEMA ultimately rebid only portions of the work. Government investigators later found FEMA did not take adequate legal steps to ensure that the new companies were small and locally operated, resulting in a questionable contract award to a large company with ties to the Republican Party.

"This is a priority," GSA Administrator Lurita Doan told Congress in April. "You look at the list of who these businesses are, and you can eyeball them and say, 'Is that really a small business?' You have to do that. And if the heads of the agencies are going to be committed, that will make the difference."

But since then, Homeland Security has handed out 43 new contracts worth nearly $12 million to large companies or ineligible recipients. In contrast, it modified contracts to small Gulf Coast companies, resulting in a contract loss of $9 million in Louisiana.

In addition, 106 contracts worth $13 million were miscoded by DHS as going to small businesses, when in fact they were not. That's up from 61 contracts found by the committee in April.

Paul Schneider, DHS undersecretary for management, acknowledged in April that "there clearly has been errors in coding" and pledged action to fix them. Knocke said Wednesday the department believed that has been done, but contended it couldn't fully address the committee's concerns without its data.

Other findings:

• Since April, only 6 percent of new GSA contracts for Katrina work — about $61,000 out of roughly $978,000 — went to small Louisiana businesses. At the VA, the percentage was even lower: 0.7 percent, or $25,435 out of $3.6 million.
• Out of the $95.6 million in total contracts that were inaccurately claimed as going to small business, more than $77 million, or 81 percent, were awards by the Defense Department.

In the coming weeks, Homeland Security inspector general Richard Skinner also was expected to release audits on the four no-bid Katrina contracts worth $400 million that were initially awarded in 2005 to four large politically connected companies.

The four companies were among six that also won new contracts worth up to $250 million each after open bidding in August.

By Hope Yen