Katrina and Contracting: Blue Roof, Debris Removal, Travel Trailer Case Studies
FIELD HEARING -- New Orleans, Louisiana
April 10, 2006
Congress has appropriated over $100 billion and President Bush recently requested a $20 billion supplemental for a record breaking recovery effort in the Gulf Coast region. With tens of billions of tax payer dollars yet to be spent, it is crucial that the Administration cuts out the waste, fraud and abuse. This hearing will focus on the Blue Roof, debris removal, and travel trailer programs and ask tough questions regarding reports of unreasonable costs and excessive multi-layered contracts.
Neither the Federal Emergency Management Agency (FEMA) nor the US Army Corps of Engineers were able to confirm or deny direct allegations of unreasonable costs and overhead for the Blue Roof program, debris removal and the use of travel trailers for temporary housing as reported by local media and initial government analysis.
The federal Gulf Coast recovery is fraught with waste due to lack of pre-planning and oversight.
Processes to apply cost controls and reasonability analysis before a contract was signed were either not used or were not in place.
Prices paid under contracts (both prime contracts and all their sub-contracts) are not available to the public or to Congress. This is by policy, not by statute.
FEMA and the US Army Corps of Engineers are unable to justify the excessive number of layers utilized in the current method of vertical contracting.
Prices being paid the highest level of contractors for blue tarps to temporarily protect damaged roofs are costing the same price as what a new, permanent shingle roof would cost. Similar escalation of cost is seen in the trailer temporary housing program and the debris removal program. The cost of multi-tier layering is leading to about 75% of the money going into these programs being diverted to layers of subcontractors and fat-cat prime contractors who are not doing the actual work.
Impact on Taxpayers:
Gulf Coast businesses, especially small businesses, are being shut out of participating in the recovery efforts because they can not get “in” to the multi-tiered subcontracting scheme except at the very bottom where low profitability is prohibitive. Meanwhile, fat-cat contractors from out of state get rich while doing none of the real work and paying sub-standard fees to those “little guys” who do the actual work.
Without sunshine applied to contracting, Congress and the American people are unable to determine for themselves whether or not our tax dollars are being spent efficiently and effectively.
We could be losing up to 75% of reconstruction money to overhead for multi-tiered subcontractors rather than helping actual victims of the disaster. With $100B already approved and the President requesting another $20B this year, the dollars involved here are not trivial.
The lack of cost controls, reasonability analysis and other fiscal foresight with the Gulf Coast recovery indicates a broader, systematic problem with federal procurement policy. Untold billions of tax dollars fall between the cracks
These Findings Demand a Response:
Congress and the Administration should consider alternative methods for government contracting, which are not as susceptible to unreasonable inflation, overhead, and waste.
FEMA, and its partner agencies such as the Army Corps of Engineers, must immediately allow complete transparency to Congress and to the public regarding all contracts and sub-contracts for relief activities. Approps legislation on the supplemental and in the long-term, authorizing language, is likely required to force this accountability, starting with S.2590, a bill to require full transparency on all government procurement..
A Chief Financial Officer, as provided in S.1700 (with 25 co-sponsors), should be appointed to oversee the Katrina recovery efforts, providing pre-emptive oversight rather than the post-hoc Inspector General efforts after it’s too late.
