Etheridge: Billions Wasted on Katrina Contracts

News Release
Congressman Bob Etheridge
North Carolina

August 28, 2006

Contact: Joanne Peters
Phone: (202) 225-4531

Etheridge: Billions Wasted on Katrina Contracts

WASHINGTON -- Today the U.S. House of Representatives Homeland Security Committee released a report requested by U.S. Rep. Bob Etheridge (D-Lillington) that detailed billions of dollars of wasteful spending on contracts awarded for the recovery and reconstruction following Hurricane Katrina. The report, "One Year Later: Katrina's Waste," found that one year after Katrina the Department of Homeland Security has still not made changes that would protect the American people and prevent this kind of waste in the future.

"The Administration's failed leadership puts lives at risk and these irresponsible contracting processes have cost taxpayers billions of dollars," said Etheridge the Ranking Member of the Homeland Security Subcommittee on Investigations.

"Congress must exercise its oversight of FEMA and the Department of Homeland Security to reform the contracting process. This is not only about saving taxpayers money: it's about ensuring that FEMA gets the job done. A year after Hurricane Katrina hit, the damage is still not cleaned up in the Gulf Coast, and these contracting processes are partly to blame."

The report identified $7 billion in contracts, much of which was spent wastefully. At the time Katrina struck, the Federal Emergency Management Agency's procurement office had only one-third of the staff that senior Department of Homeland Security leaders knew were needed to perform the office's day-to-day functions.

On June 14, Etheridge, the Ranking Member on the Subcommittee on Investigations, asked the Chairman of the subcommittee to hold hearings on contracting abuse. As of today, a hearing still has not been scheduled.

The report found the waste was caused by:

Sole-source contracts being issued at exorbitant prices;
Local and small businesses being excluded from recovery contracts;
Contracts with four or more layers of subcontractors collecting a cut, while the people doing the actual work receive pennies on the dollar
Rushed decisions made in the midst of a crisis because funding was never provided for proper planning
A failure to rebid competitively contracts that were issued sole-source in the days immediately before and after the storm.

To read the full report, please visit www.house.gov/etheridge/KatrinaReport.pdf.

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