Katrina Redux: New Disaster, Same Contractors

June 11, 2010

Ben Fox of the AP reported earlier this week on foreign firms going to Haiti to try and capitalize on the long and expensive reconstruction process. One contractor, which we have written about previously is Ashbritt. Fox writes:

Pompano Beach, Florida-based AshBritt Inc. so far has invested $25 million in its Haitian reconstruction operation covering a soccer field.

Now all Perkins [the CEO of Ashbritt] needs is a government contract to make his investment pay off.

Fox notes that Ashbritt received some $900 million for debris removal following Hurricane Katrina, but does not point to the controversy that surrounded Ashbritt. As we wrote in early February:

AshBritt found itself involved in controversy after Hurricane Katrina, when “some questioned whether AshBritt’s political donations or lobbyists paved the way for its fat federal contracts.” The Miami Herald reports that these questions led to Congressional hearings which:

[A]ired objections that local contractors were passed over in favor of AshBritt. A 2006 congressional report examining federal contract waste and abuse noted AshBritt used multiple layers of subcontractors, each of whom got paid while passing on the actual work to others.

An August 2006 House Committee on Oversight and Government Reform investigation revealed that:

Ashbritt Inc., one of the prime contractors hired by the Corps, testified in Congress that it received approximately $23 per cubic yard for debris removal in Mississippi.38 In contrast, a local contractor testified at the same hearing that it could have removed the debris for just $12.90 per cubic yard, a savings of 44% for the taxpayer.39

The removal of debris in Haiti has been a major impediment to relief efforts. As Ashbritt has made investments and cultivated high-level political connections to try and gain an upper hand in the contracting, it is certainly worth pointing out their past waste in undertaking nearly the exact same task.

Although Fox notes that no “major reconstruction contract has been awarded”, many of the same contractors who were implicated in the controversy after Hurricane Katrina have already received US government contracts, and stand to receive many more.  After Katrina, the Department of Homeland Security, Federal Emergency Management Agency (FEMA) came under the most scrutiny.

A Department of Homeland Security Inspector General report from 2008 states:

The urgent need for housing pressured FEMA to act quickly. No-bid contracts were awarded to Fluor Enterprises, Inc. (Fluor), Shaw Group (Shaw), CH2M Hill Constructors, Inc. (Hill), and Bechtel National, Inc. (Bechtel).

The contracts were awarded under the Individual Assistance – Technical Assistance Contract (IA-TAC), which allows FEMA to quickly allocate funding to approved contractors. The IG report states that:

the combination of deficiencies in acquisition planning and contract oversight led to waste of government funds and questioned costs of $45.9 million…

The contracts originally had a ceiling of $100 million each, however when all was said and done, the combined contracts totaled $3.2 billion. These were the largest FEMA contracts in the aftermath of Katrina, and represented 30 percent of total spending by FEMA.

In the immediate aftermath of the earthquake in Haiti, FEMA awarded contracts, again under the IA-TAC, to two of the same contractors; The Shaw Group and CH2M Hill. According to the Federal Procurement Database System (FPDS) the contracts were worth $20,909.20 and $64,563.45 respectively. The CH2M Hill contract was reportedly awarded under “Non-Competitive Delivery Order”, while Shaw Group received their contract through open competition. The contract description is the same for both companies: “The contractor shall perform services related to the mass migration and sheltering of victims of the 12 January 2010 earthquake in Haiti.” Although the original contracts were relatively small, both companies have a contract ceiling of $375 million. If their work after Katrina is any indication, the original contract amounts have very little to do with the total amount spent.

In addition to the controversy after Katrina, the Project on Government Oversight’s Federal Contractor Misconduct Database includes both CH2M Hill and The Shaw Group. CH2M Hill has had seven instances of misconduct according to the database, resulting in nearly $3 million in penalties (not including the multiple undisclosed amounts). The Shaw Group has had four instances of misconduct, including a $6.2 million settlement last year for Government Contract Fraud. 

Another Katrina contractor that has already received US government money in Haiti is Fluor, also part of the Inspector General report cited previously. In addition to their work around Katrina, a USA Today report from 2005 notes that:

Federal court records show Fluor agreed to pay $3.2 million in 1997 to settle allegations that its FD Services division padded repair bills for cleaning up U.S. Navy bases in South Carolina after the 1989 strike of Hurricane Hugo. Fluor also agreed to pay $8.5 million in 2001 to settle allegations that it billed the government for work done for other clients, court records show.

The Federal Contractor Misconduct Database lists a total of 23 instances of misconduct for Fluor, with penalties totaling close to $200 million, including a $12 million fine for anti-union labor practices just last year and a pending case concerning the provision of faulty trailers to the gulf coast after Katrina.

Although the contracts that have been awarded to CH2M Hill, the Shaw Group and Fluor are relatively small, the companies are now well placed to have a larger role in the multi-year reconstruction process, as shown by the $375 million contract ceiling for CH2M Hill and Shaw Group. Following Katrina, these contractors were shown to have been wasteful in the provision of shelter.  In Haiti, with the hurricane season now underway, and well over a million and half Haitians still living in makeshift camps, the provision of reliable transitional housing is imperative to avoid another catastrophe. It is therefore of the utmost importance that there is adequate oversight of these contractors and others who have a history of waste and abuse.

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