Published March 24, 2006
WASHINGTON – FEMA has broken its promise to reopen four multimillion-dollar no-bid contracts for Hurricane Katrina work, including three that federal auditors say wasted significant amounts of money.
Officials said they awarded the four contracts last October to speed recovery efforts that might have been slowed by competitive bidding. Some critics, however, suggested they were rewards for politically connected firms.
Acting FEMA Director R. David Paulison pledged last fall to rebid the contracts, which were awarded to Shaw Group Inc., Bechtel Corp., CH2M Hill Inc. and Fluor Corp. Later, the agency acknowledged the rebidding wouldn't happen until February.
This week, FEMA said the contracts wouldn't be rebid after all. In fact, they have been extended, in part because of good performance, said Michael Widomski, a spokesman for the Federal Emergency Management Agency.
"They are continuing the work," Widomski said, and the agency is now focused on competitive bids for disaster relief contracts for the next hurricane season beginning June 1.
"We looked at the lessons learned from Katrina," Widomski said. "We're painstakingly looking at what best fits the needs of disaster victims and taking bids for future work."
An additional $1.5 billion in work promised to small businesses also has yet to be awarded.
A review by the Government Accountability Office of 13 major contracts said last week the government had wasted millions of dollars, due mostly to poor planning by FEMA. Among the 13 were three of the four no-bid contracts for temporary housing, worth up to $500 million each, that went to three major firms with extensive government ties.
The preliminary review did not address the validity of no-bid contracts issued right after the Aug. 29 storm. The fourth housing contractor, the Shaw Group, was not included in the audit.
The Shaw Group's lobbyist, Joe Allbaugh, is a former FEMA director and friend of President Bush. Bechtel CEO Riley Bechtel served on Bush's Export Council from 2003-2004, and CH2M Hill Inc. and Fluor Corp. have done extensive previous work for the government.
The companies have denied political connections played a factor.
"Our work was awarded based on performance," said Brad Jones, spokesman for CH2M Hill, which is based in Englewood, Colo.
The latest disclosure has brought complaints from some lawmakers, who say the Bush administration has not done enough for small businesses. Democrats, in particular, have urged limits on no-bid contracts, which they say are unfairly handed to large companies with political connections.
A House panel chaired by Republican Rep. Tom Davis of Virginia plans to hold at least one hearing next month on Katrina contracting. That was announced after the GAO's audit results were released.
"The administration has promised to help local and small businesses get contracts to help rebuild the Gulf Coast, but they keep letting them down," said Sen. John Kerry of Massachusetts, top Democrat on the Committee on Small Business and Entrepreneurship.
On Thursday, Kerry sent a letter to Paulison that called for quicker action in ensuring small businesses get "their fair share of reconstruction contracts."
FEMA had promised last October to boost the number of contracts given to small and minority businesses, partly by setting aside up to $1.5 billion worth of work to maintain trailers housing Katrina evacuees. It said those contracts would be awarded by Feb. 1.
Yet those 15 contracts — eight of which are designated for minority-owned businesses — have yet to be awarded due to the high volume of applications, according to Widomski. He said the agency hoped to announce the winners by early next month.
Since October, the percentage of FEMA contracts given to minority-owned businesses has increased slightly, from 1.5 percent to 2.4 percent of the $5.1 billion awarded. Some 5 percent of federal contracts normally are set aside for minority-owned firms.
"The department must step up to the plate," said Mississippi Rep. Bennie Thompson, the top Democrat on the House Homeland Security Committee. "It has a long way to go and it should have begun the journey yesterday."
On Oct. 6, acting FEMA chief Paulison declared he was "no fan of no-bid contracts" and pledged in a congressional hearing to reopen the four deals. But after the firms complained they hadn't been told, officials with the Homeland Security Department — which oversees FEMA — pushed the timeframe back to February.
Widomski said FEMA now will allow the four major firms to complete their Katrina work. FEMA, meanwhile, has posted advertisements for multiyear contracts for relief work in coming hurricane seasons, with awards expected by June.
Those contracts will not be prioritized for small or minority-owned businesses, but winners of the deals must submit written plans detailing efforts to award 40 percent of their subcontracts to small businesses.
"It makes good sense to get the contracts in place in a well-thought out way," Widomski said.