FEMA contracts have skyrocketed to $3.4 billion

WASHINGTON – 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 under way into how the contracts were awarded, the parties involved and their documentary support, according to Marta Metelko, spokesman for Inspector General Richard 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 cap for each firm over the last 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 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.

FEMA’s deputy director since April, Coast Guard Vice Adm. Harvey E. Johnson Jr., 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,” Johnson said. “I see nothing that indicates there is any favoritism whatsoever.”

Deidre Lee, FEMA deputy operations director, 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.”

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 one day after the hurricane struck, on Aug. 30, 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.