$400 Million FEMA Contracts Now Total $3.4 Billion

washingtonpost.com
$400 Million FEMA Contracts Now Total $3.4 Billion
By Spencer S. Hsu
Washington Post Staff Writer

Four no-bid contracts awarded by the Federal Emergency Management Agency to house Hurricane Katrina evacuees have ballooned in value from $400 million to about $3.4 billion, prompting renewed scrutiny from Congress and federal auditors about the disaster agency's management of the aftermath of the storm.

The Department of Homeland Security's inspector general is, for at least a second time, reviewing the contracts with construction and engineering firms Bechtel Corp., CH2M Hill Inc., Fluor Corp. and the Shaw Group Inc. to provide 150,000 trailers for hurricane victims, even as FEMA expects to competitively award at least $1 billion for similar work in future contingencies within days.

A review is underway into how the contracts were awarded, the parties involved and their documentary support, according to Marta Metelko, spokeswoman for Inspector General Richard L. Skinner. She cited the "dollars and risk associated with sole source contracts."

The contracts, which were quickly awarded as Katrina approached and hit the Gulf Coast, have been repeatedly faulted by Skinner's office, congressional auditors and a Senate investigation for poor safeguards and high costs. FEMA valued the contracts at $2 billion last fall and winter, but the agency has raised the limit for each firm over the past several months.

FEMA Director R. David Paulison and Homeland Security Secretary Michael Chertoff promised Congress last October to re-bid the pacts and spun off $3.6 billion in maintenance and future dismantling of the trailers to 36 small and minority-owned firms in March. But the agency's critics say that has not addressed the entire problem.

Members of Congress say FEMA is unresponsive to complaints and warnings of mismanagement. Outside analysts say that the Department of Homeland Security's staffing shortages and increasing dependence on larger contracts to handle complex new missions feeds an unhealthy cycle, in which firms vying for an ever-growing flow of taxpayer dollars raid agency staff for expertise, weakening FEMA's ability to independently carry out its missions.

Coast Guard Vice Adm. Harvey E. Johnson Jr., FEMA's deputy director since April, said he tracks reports every week of how quickly FEMA is hiring and filling contract management jobs, and said the contracts are large and extremely complex. "I understand . . . how complex [the issues] are, and how many contracts our small staff is asked to complete," he said. "I see nothing that indicates there is any favoritism whatsoever."

FEMA deputy operations director Deidre Lee said the contracts' growth was justified "given the scope of Katrina. We ended up putting over 150,000 trailers and this for all the work, hauling, installing, prepping and set-up."

Spokesmen for Bechtel, which has its headquarters in San Francisco; CH2M Hill, of Englewood, Colo.; Fluor, of Irving, Tex.; and Shaw, of Baton Rouge, La., said they had received no information or requests from the DHS inspector general's office about a review, but routinely cooperate with audits by the office.

"We have delivered on every task they asked us to perform," CH2M Hill spokesman John Corsi said.

Shaw spokesman Chris D. Sammons said: "We are confident that our activities are fully in compliance with respect to all of those [federal and state] regulations."

In May, numerous protests of inflated prices and awards to a Fluor subsidiary led Sens. Byron L. Dorgan (D-N.D.) and Mary Landrieu (D-La.) to call on Skinner to begin another inquiry.

"It's hard to overstate the incompetence involved in all of these contracts," Dorgan said. "We have repeatedly asked them for information, and you get nothing."

The initial contracts began under murky circumstances. Two FEMA officials have said the four firms were tapped even before Hurricane Katrina made landfall, and the Shaw Group announced on Aug. 30, one day after the hurricane struck, that it was in contact with FEMA to mobilize assistance. Its stock rose 21 percent in two days and 32 percent that week after the news.

FEMA publicly announced contracting with the firms for housing on Sept. 8, in what company and government officials have said were letter contracts or agreements worth as much as $100 million. FEMA this week said that the initial contracts had a ceiling of $500 million each, and were awarded Sept. 3 to Fluor and Sept. 30 to the other three companies.

FEMA raised the ceilings of the contracts -- to $950 million for Shaw in February, to $1.4 billion for Fluor in March and to $575 million for Bechtel last month. It expects to raise the CH2M Hill contract to $530 million. FEMA has paid the firms $1.9 billion, and obligated $1 billion based on company charges, whose payment is subject to negotiation.

Skinner told Congress in February that the initial awarding of the housing contracts appeared justified by the emergency, but he concluded in a formal March report that "FEMA had not adequately defined the roles, responsibilities, expectation for deliverables, or performance measures for contractors," leaving taxpayers vulnerable to poor performance and abuse.

Shaw has installed 34,500 of 35,700 housing units expected to be completed by Sept. 30; Fluor, 49,000 of 53,000 units; Bechtel, all 36,000 units; and CH2M Hill, 23,000 of 28,000 units, FEMA said last week. The contracts will end "a couple of months" later, FEMA said.

In total, FEMA has contracted to pay as much as $7 billion for the 150,000 trailers, or about $46,000 per trailer. By law, the agency is required to provide storm victims housing for 18 months, although that term could grow.

Steven L. Schooner, co-director of George Washington University Law School's Government Procurement Law Program, said Homeland Security's high visibility and urgent needs dramatize a government-wide failure by Congress and recent administrations to solve a worsening contract workforce crisis.

"In both gulfs, Iraq and Louisiana, Congress seems to be able to find money to send auditors and inspector generals onto the battlefield after the fact to bayonet the wounded," Schooner said. "But nobody seems to find money to put contracting officers on the ground to do it right the first time."

Chertoff has championed the re-engineering of FEMA to tap private expertise for tasks including registering victims and clearing debris. Prearranging contracts, for example, could have avoided FEMA's post-Katrina spending of $1.8 billion to provide hotel rooms and cruise ship cabins to storm victims at three to six times the cost of what it paid them to rent apartments, and to buy 26,000 mobile homes, many of which could not be used under agency rules.

Nevertheless, the agency has been slow to carry out such changes, even though its housing needs were identified after four hurricanes hit Florida in 2004.

FEMA's Johnson acknowledged, "We do need more contracting staff and more procurement staff."

Since Katrina, FEMA has boosted the number of contracting officers from 50 to 90, aiming for a total of 134, plus 30 more who may be available in emergencies, said Lee, who joined FEMA in April.

DHS procurement chief Elaine C. Duke said FEMA is working on 70 new contracting projects to help with emergencies, dealing with logistics, government aid, housing inspections and more. "If you look at all that's been done, a year -- or, really, 10 months -- had been a really short time," she said.