Report: Government Wasted Millions in Katrina Contracts

Published March 16, 2006

| Associated Press

The government wasted millions of dollars in its award of post-Katrina hurricane contracts for disaster relief, including at least $3 million for 4,000 beds that were never used, congressional auditors said Thursday.

The Government Accountability Office's review of 13 major contracts -- many of them awarded with limited or no competition after the Aug. 29 hurricane -- offers the first preliminary overview of their soundness.

Waste and mismanagement were widespread due to poor planning and miscommunication, according to the five-page briefing paper released Thursday. That led to money being paid for services, such as housing or ice, that were never used.

"The government's response to Hurricanes Katrina and Rita depended heavily on contractors to deliver ice, water and food supplies; patch rooftops; and provide housing to displaced residents," said the report by the GAO, Congress' auditing arm. "FEMA did not adequately anticipate needs."

Nicol Andrews, a spokeswoman for the Federal Emergency Management Agency, said the agency was working hard to improve its awarding of billions of dollars of government contracts as it prepares for the next hurricane season.

"We have been working with (Homeland) Secretary (Michael) Chertoff to incorporate unprecedented levels of oversight in FEMA contracting," she said. "However, in the event of a disaster when minutes count, we have the authority to do what it takes to move quickly."

By and large, the initial criticism of FEMA from members of Congress and others was that the agency moved too slowly to assist hurricane victims.

Of more than 700 contracts valued at $500,000 or greater, more than half were awarded without full competition or with vague or open-ended terms, including politically connected companies such as Halliburton subsidiary Kellogg, Brown & Root, Bechtel Corp. and AshBritt Inc.

Democrats, in particular, in recent weeks have called for limits on no-bid agreements, which they say have been awarded to politically influential companies at the expense of a slow Gulf Coast rebuilding effort.

"Previous reports of waste in the aftermath of Katrina have been bad, but this one is worse," said Rep. Henry Waxman of California, the top Democrat on the House Government Reform Committee.

"The Bush administration has learned nothing from its disastrous contract management in Iraq," he said. "The administration seems incapable of spending money in a way that actually meets the needs of Gulf Coast residents."

The bipartisan leaders of the Senate Homeland Security and Governmental Affairs Committee said the report's findings were troubling.

"After a disaster strikes is too late to start the contracting process for critical goods and services," said committee chair Sen. Susan Collins, R-Maine. "Known emergency commodities and services must be pre-positioned."

Sen. Joe Lieberman, D-Conn., said the GAO report reveals "a serious, ongoing problem."

"Taxpayer dollars will be spent for years to come on Katrina response and recovery, and investigations of corruption and mismanagement are still in their early stages," he said. "Government auditors and prosecutors must redouble their efforts."

The GAO report released Thursday speaks broadly and does not address the validity of no-bid contracts; those reviews are under way by inspectors general at Homeland Security and other agencies. But it found significant problems in its general review of the 13 contracts, most of which were awarded without a full competition.

According to the report, the GAO praised government agencies for their "hard work" in securing contracts after the disaster, but said millions of dollars could have been saved if they had heeded prior warnings by the GAO to hire more people, prearrange contracts and improve staff training.

Among the findings:

--Nonexistent communication with local officials led to misjudgments on the need for temporary housing. They included $3 million that FEMA spent for 4,000 base camp beds that were never used and $10 million to renovate and furnish 240 rooms in Alabama that housed only six occupants before being closed.

--Poor coordination between FEMA and the Army Corps of Engineers contributed to waste in an Americold Logistics LLC's contract for ice. "The local Corps personnel were not always aware of where ice might be delivered and did not have authority ... resulting in inefficient distribution," it said.

--Inadequate planning led to the award of a Mississippi contract for classrooms without competition. "Information in the contract files suggests the negotiated prices were inflated." A review of that specific contract, with Akima Site Operations LLC, was continuing.

--FEMA had only 17 of the 27 monitors it deemed necessary to oversee the installation of temporary housing in four states, leading to inadequate controls.

The 13 Katrina contracts reviewed involve the following 12 companies: C. Henderson Consulting; Americold Logistics; Clearbrook LLC; CS&M Associates; Gulf Stream Coach Inc.; Morgan Building & Spas Inc.; Bechtel National; Fluor Enterprises Inc.; CH2M Hill Constructors Inc.; E.T.I. Inc.; Ceres Environmental Services Inc.; and Thompson Engineering Inc.

Some of the firms, including Gulf Stream Coach and Bechtel, have close ties to the Bush administration or have contributed significantly to the GOP.

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