A month later, no change on Katrina contracts

updated 7:11 p.m. ET Nov. 11, 2005

WASHINGTON - Despite a month-old pledge, the Federal Emergency Management Agency has yet to reopen four of its biggest no-bid contracts for Hurricane Katrina work and won’t do so until the contracts are virtually complete. A promise to hire more minority-owned firms also is largely unfulfilled.

The no-bid contracts for temporary housing, worth up to $100 million each, were given to Shaw Group Inc., Bechtel Corp., CH2M Hill Inc. and Fluor Corp. right after Katrina struck. Charges of favoritism helped prompt last month’s pledge by FEMA acting director R. David Paulison, but now officials with the Homeland Security Department, which oversees FEMA, say the contracts won’t be awarded again until February.

The disclosure dismayed some lawmakers and business groups that believe the Bush administration has not done enough to ensure Katrina contracts are spread around. In particular, they say small and minority-owned businesses in the Gulf Coast have been shortchanged.

‘FEMA’s performance falls far short’
FEMA promised to boost the number of contracts given to minority-owned businesses but in the last month the percentage has increased only slightly, from 1.5 percent to 1.8 percent of the $3.1 billion awarded. That’s still well below the 5 percent of federal contracts normally set aside for minority-owned firms.

“FEMA’s performance falls far short,” said Mississippi Rep. Bennie Thompson, ranking Democrat on the House Homeland Security Committee. “The federal government must make a major shift in both policy and implementation if the lives of the people of the Gulf Coast are to be effectively rebuilt and restored.”

Thompson said he would introduce legislation to require the Homeland Security Department to maintain a permanent database for small and minority-owned businesses to be hired as prime contractors, rather than lower-paid subcontractors.

“I am from Mississippi, and I know sharecropping when I see it,” Thompson said.

Harry Alford, president of the National Black Chamber of Commerce, decried the dearth of small and minority Katrina contracts as “shameful.” But he’s hopeful, noting that President Bush met with him and other minority leaders Thursday to discuss how to improve business opportunities.

“Less than 2 percent of contracts going to minority-owned businesses is totally unacceptable,” Alford said. “Now is show time. We’ve been hurt. I think our concerns have been taken seriously, and I believe we’re going to work it out.”

Political connections?
FEMA also has been criticized for the no-bid contracts. Officials said they awarded those contracts to speed recovery efforts that might have been slowed by competitive bidding, but critics saw it as a way to reward politically connected firms.

Bechtel CEO Riley Bechtel served on Bush’s Export Council from 2003-2004, and the Shaw Group’s lobbyist, Joe Allbaugh, is a former FEMA director and friend of Bush. Both companies have denied political connections played a factor.

On Oct. 6, acting FEMA chief Paulison declared he was “no fan of no-bid contracts” and pledged to reopen the four deals. But in testimony to Congress on Tuesday, Greg Rothwell, Homeland Security’s chief procurement officer, said rebidding won’t be done until February.

“Until then, the four companies will continue their work,” he told a Senate hearing chaired by Sen. Olympia Snowe, R-Maine, whose panel is reviewing government efforts to help small businesses rebuild.

FEMA will post advertisements for the work sometime this month. The work will not be prioritized for small or minority-owned businesses, but winners of the deals must submit written plans to DHS detailing efforts to award 40 percent of their subcontracts to small businesses.

Separately, FEMA will set aside up to $1.5 billion worth of work for small companies to maintain trailers housing Hurricane Katrina evacuees. The 15 contracts worth up to $100 million each will be awarded by Feb. 1, with eight of them specifically designated for minority-owned businesses.

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