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Thursday, September 29, 2005 - Page updated at 12:00 AM

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Katrina contracts worth billions raise worries about waste

By Seattle Times news services

Katrina contracts


Here are some of the larger contracts awarded for Katrina cleanup:

Debris removal

AshBritt, Mississippi cleanup, $500 million

Ceres Environmental Services, Louisiana cleanup, $500 million

Environmental Chemical, Louisiana cleanup, $500 million

Phillips and Jordan, Louisiana cleanup, $500 million

Emergency housing

Bechtel National, $100 million

Fluor, $100 million

CH2M Hill, $100 million

The Shaw Group, $100 million

Ice and power

IAP Worldwide Services, $107.9 million

Levee repair/dewatering

Kellogg, Brown & Root, $16 million

The Shaw Group, $19 million

Roofing repair

The Shaw Group, $14.9 million

Sources: Army Corps of Engineers, Federal Emergency Management Agency

WASHINGTON — Lawmakers who approved more than $60 billion to help rebuild the Gulf Coast after Hurricane Katrina said yesterday there are worrisome signs of wasteful spending.

Citing no-bid contracts and relaxation of government spending rules to speed the flow of money to the stricken area, House members said government auditors need to be aggressive in their oversight.

"I fear that the days are soon upon us where we will see daily reports of exotic, unnecessary and grossly overpriced purchases of goods and services under the guise of providing hurricane relief and recovery," Rep. Jay Inslee, D-Wash., said at a House Energy and Commerce subcommittee hearing.

Sens. Tom Coburn, R-Okla., and Barack Obama, D-Ill., raised concerns Tuesday about a $236 million deal with Carnival Cruise Lines to provide temporary housing on the Mississippi River and off the Gulf Coast.

Inslee said the per-person cost was $1,275 a week, nearly twice the typical cost of a weeklong cruise for a normal passenger.

Richard Skinner, inspector general for the Department of Homeland Security, said the Carnival deal is "something that concerns us as well" and his office would look into it. He said he has assigned 60 auditors and investigators to review Katrina contracts and his office will need more money to complete the task.

The New York Times reported this week that more than 80 percent of the $1.5 billion in contracts signed by the Federal Emergency Management Agency (FEMA) to clean up were awarded without bidding or with limited competition.

The newspaper, citing government records, said more than 15 contracts exceed $100 million, including five of $500 million or more. Most were for clearing trees, homes and cars; purchasing mobile homes; or providing trucks, ships, buses and planes.

Already, The New York Times reported, questions have been raised about the political connections of two contractors — The Shaw Group and Kellogg, Brown & Root, a subsidiary of Halliburton — that have been represented by lobbyist Joe Allbaugh, President Bush's former campaign manager and former head of FEMA.

Bills have come in for deals that apparently were clinched with a handshake, with no documentation to back them up, Skinner told the newspaper.

Some industry and government officials questioned the costs of debris-removal contracts, saying the Army Corps of Engineers had allowed a rate that was too high, the newspaper said.

Congressional investigators also are looking into the $568 million awarded to AshBritt, a Pompano Beach, Fla., company that was a client of the former lobbying firm of Mississippi Gov. Haley Barbour, the newspaper reported.

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

Bechtel, awarded a contract that could be worth $100 million, is under scrutiny for its oversight of the "Big Dig" construction project in Boston, The New York Times reported.

Kellogg, Brown & Root, given $60 million in contracts, was rebuked by federal auditors for unsubstantiated billing from the Iraq reconstruction and criticized for bills such as $100-a-bag laundry service. All the companies have defended their performance.

Congress has approved more than $62 billion in Katrina aid. Inspectors general from Homeland Security, the Pentagon and other agencies appeared before the oversight subcommittee yesterday to describe efforts to ensure the money is spent wisely.

They announced several new audits intended to stem fraud, including aggressive review of no-bid contracts and government credit-card spending. The limit on credit-card purchases for Katrina-related items was increased from $2,500 to $250,000.

"The abuses and failures we've seen in Iraq; we don't want to duplicate those here at home," Inslee said, referring to cases of questionable costs by firms with ties to the White House, such as Halliburton.

Inslee said he would call for creation of a chief financial officer with responsibility for watching overall spending related to Katrina. Other recent proposals include a special inspector-general's office, a bipartisan anti-fraud commission and expansion of responsibilities of the special inspector general for Iraq reconstruction to include the Gulf Coast.

Rep. Charles Pickering Jr., R-Miss., said at the hearing that he wants to know why such a large number of those new contracts are going to companies from outside the region where Katrina struck.

"This is a devastated area trying to get people back to work, working with companies from all over the country. But not their own companies," Pickering said. "As you can imagine, that creates a lot of frustration."

Rep. Michael Burgess, R-Texas, questioned FEMA's decision to order 100,000 trailers for emergency housing in the aftermath of the storm. One contract was awarded to Bechtel, which has strong ties to the Bush administration, in an open-ended deal whose cost has yet to be set.

Skinner said Homeland Security had stopped delivering new trailers and vigorously would review contracts that may have been awarded improperly based on political connections.

Homeland Security Secretary Michael Chertoff said Tuesday that contracts found to be inappropriate could be renegotiated. Skinner said yesterday some contracts could be terminated.

The Energy Department's inspector general, Gregory Friedman, said the agency planned to review deals struck with companies such as BP and Marathon Oil, to borrow oil after Hurricane Katrina disrupted supplies. The government had loaned refineries some 13.2 million barrels of crude and separately sold an additional 11 million barrels from the government's petroleum reserve.

Compiled from The Associated Press, Reuters, The Washington Post and USA Today

Copyright © 2005 The Seattle Times Company

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