Disaster Profiteering

Many Contracts for Storm Work Raise Questions

http://www.nytimes.com/2005/09/26/na...rssnyt&emc=rss

(Gold9472: I made up a new phrase. We already had "War Profiteering"...)

By ERIC LIPTON and RON NIXON
Published: September 26, 2005

WASHINGTON, Sept. 25 - Topping the federal government's list of costs related to Hurricane Katrina is the $568 million in contracts for debris removal landed by a Florida company with ties to Mississippi's Republican governor. Near the bottom is an $89.95 bill for a pair of brown steel-toe shoes bought by an Environmental Protection Agency worker in Baton Rouge, La.

The first detailed tally of commitments from federal agencies since Hurricane Katrina hit the Gulf Coast four weeks ago shows that more than 15 contracts exceed $100 million, including 5 of $500 million or more. Most of those were for clearing away the trees, homes and cars strewn across the region; purchasing trailers and mobile homes; or providing trucks, ships, buses and planes.

More than 80 percent of the $1.5 billion in contracts signed by the Federal Emergency Management Agency alone were awarded without bidding or with limited competition, government records show, provoking concerns among auditors and government officials about the potential for favoritism or abuse.

Already, questions have been raised about the political connections of two major contractors - the Shaw Group and Kellogg, Brown & Root, a subsidiary of Halliburton - that have been represented by the lobbyist Joe M. Allbaugh, President Bush's former campaign manager and a former leader of FEMA.

"When you do something like this, you do increase the vulnerability for fraud, plain waste, abuse and mismanagement," said Richard L. Skinner, the inspector general for the Department of Homeland Security, who said 60 members of his staff were examining Hurricane Katrina contracts. "We are very apprehensive about what we are seeing."

Bills have come in for deals that apparently were clinched with a handshake, with no documentation to back them up, said Mr. Skinner, who declined to provide details.

"Most, if not all, of these people down there were trying to do the right thing," he said. "They were under a lot of pressure and they took a lot of shortcuts that may have resulted in a lot of waste."

Congress appropriated $62.3 billion in emergency financing after Hurricane Katrina struck. So far, a total of $15.8 billion has been allocated from a FEMA-managed disaster relief fund, of which $11.6 billion has been committed through contracts, direct aid to individuals or work performed by government agencies.

An examination of the contracts granted to date and interviews with state and federal officials raised concerns about some of the awards.

Some industry and government officials questioned the costs of the debris-removal contracts, saying the Army Corps of Engineers had allowed a rate that was too high. And Congressional investigators are looking into the $568 million awarded to AshBritt, a Pompano Beach, Fla., company that was a client of the former lobbying firm of Gov. Haley Barbour of Mississippi.

The investigators are asking how much money AshBritt will collect and, in turn, what it will pay subcontractors performing the work, said a House investigator who did not want her name used because she was not authorized to speak publicly about the matter.

The contracts also show considerable price disparities: travel trailers costing $15,000 to $23,000, housing inspection services that documents suggest could cost $15 to $81 per home, and ferries and ships being used for temporary housing that cost $13 million to $70 million for six months.

For some smaller companies, the recovery work will be an extraordinary test. For example, Aduddell Roofing and Sheet Metal, an Oklahoma City business run by a former steer wrestler, shares with a partner a $60 million contract to install temporary roofing on houses in Mississippi. Aduddell's single biggest contract before this was for $5 million, company executives said.

Some businesses awarded large contracts have long records of performing similar work, but they also have had some problems. CH2M Hill and the Fluor Corporation, two global engineering companies awarded a total of $250 million in contracts, were previously cited by regulators for safety violations at a weapons plant cleanup.

The Bechtel Corporation, awarded a contract that could be worth $100 million, is under scrutiny for its oversight of the "Big Dig" construction project in Boston. And Kellogg, Brown & Root, which was given $60 million in contracts, was rebuked by federal auditors for unsubstantiated billing from the Iraq reconstruction and criticized for bills like $100-per-bag laundry service. All of the companies have publicly defended their performance.

Representative Bennie Thompson of Mississippi, the ranking Democrat on the House Homeland Security Committee, complained that FEMA and other federal agencies were delivering too much of the work to giant corporations with political connections, instead of local companies or minority-owned businesses.

"There is just more of the good-old-boy system, taking care of its political allies," Mr. Thompson said. "FEMA and the others have put out these contracts in such a haphazard manner, I don't know how they can come up with anything that is accountable to the taxpayers."

As of last week, the federal government was spending more than $263 million a day on the recovery effort.

"There was a crisis situation and a lot of very quick contracting was done," said Greg Rothwell, the chief procurement officer at the Department of Homeland Security. "We will be looking at every invoice we get to make sure we were not paying extraordinary prices."

While several federal agencies have approved contracts, FEMA and the Army Corps of Engineers, by design, have spent the most so far, according to the list of contracts from federal government agencies assembled by The New York Times.

Much of the spending has been in large amounts, but the contracts also include entries like $80,000 from a company called Bama Jama for clothing adorned with the E.P.A. logo and $3,300 for Doc's Laundry and Linen in Baton Rouge.

Rapidly buying the goods and services needed to respond to an emergency is difficult for any government agency. Federal contracting rules allow agencies to approve deals without standard competitive bidding in "urgent and compelling circumstances."

To provide some safeguards, federal agencies can hold an open competition in advance for products routinely needed in emergencies. Such agreements are known as "indefinite delivery, indefinite quantity," or I.D.I.Q. contracts.

The Defense Department relied on that type of contract in assigning Kellogg, Brown & Root to perform more than $45 million in repairs to levees in New Orleans and military facilities in the gulf region.

Records show, however, that FEMA did not use this approach for the blue sheeting used to cover holes in roofs, a standard item in the disaster tool kit. Instead, the agency bought $6.6 million of the material from All American Poly of Piscataway, N.J., on Sept. 13, without full competitive bidding.

Before signing contracts with mobile-home and travel-trailer makers worth in excess of $1 billion, FEMA said it did solicit bids. But the awards were made without the standard open competition required for government contracts.

Mr. Rothwell, of the Homeland Security Department, said FEMA needed to expand its number of I.D.I.Q. agreements so that when disasters struck it could bring in contractors more quickly and at a competitive price.

The two most expensive services the government has signed contracts for so far are manufactured housing and debris removal, which alone have totaled $2 billion, according to contracting records.

The debris contracts have attracted the scrutiny of investigators from the House Homeland Security Committee, in part because of the price agreed to by the Army Corps of Engineers.

AshBritt, which has won the biggest share of those contracts, is being paid about $15 per cubic yard to collect and process debris, federal officials said. It is also being reimbursed for costs if it has to dispose of material in landfills.

But three communities in Mississippi, which found their own contractors rather than accept the terms offered by AshBritt, have negotiated contracts of $10.64 a cubic yard to $18.25 a cubic yard, including collection, processing and disposal.

And other experts have questioned AshBritt's fees. "Let me put it to you this way: If $15 was my best price, I would rebid it," said Mike Carroll, a municipal official in Orlando, Fla., with experience in hurricane cleanup.

AshBritt has cleaned up debris for FEMA and other government agencies after other hurricanes. Besides possessing a huge roster of subcontractors and the logistics expertise to route hundreds of trucks, the company is also politically well connected.

According to Senate filings, AshBritt paid about $40,000 in the first half of 2005 to Barbour Griffith & Rogers, the Washington lobbying firm co-founded by Governor Barbour of Mississippi, who is also a former chairman of the Republican National Committee.

AshBritt officials declined to comment on the Hurricane Katrina contracts. Jean Todd, a federal contracting officer who helps oversee the AshBritt deal for the Army Corps of Engineers, said she was determined to ensure that the price was fair.

"We have auditors that will be looking at all of this," Ms. Todd said.

FEMA has led the effort to line up contractors to install tens of thousand of temporary homes. The scale of the job is still unclear - depending on demand, FEMA may downsize its plans - but the agency has been rushing to buy as many travel trailers and mobile homes as it can. It has signed five contracts each worth more than $100 million with major manufacturers. And it has scoured the country, buying up whatever it can find on dealers' lots.

That has turned into a bonanza for businesses like Wagner's RV Center in Suamico, Wis., which sold 69 trailers to FEMA for $1.3 million.

"In a single sale, we cleared out most of our leftover inventory from the 2005 model year," said Leonard Wagner, the owner of the RV center. "That does not happen very often."

For some small businesses, what started off as big contracts have quickly grown into giant ones. Aduddell Roofing, the Oklahoma City business, was first hired with a partner on a $10 million contract. In a matter of weeks, that deal had grown into a $60 million contract.

The project is being run by Timothy Aduddell, the company's president, who until recently was on the professional rodeo circuit, said Ron Carte, the chief executive of Zenex International, the company that owns Aduddell.

"You have to be there to see it," Mr. Carte said of the hurricane work. "As Mr. Aduddell says, 'It's pretty cowboy.' "