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US: Katrina Contract Payments May Be Limited

by Lara Jakes JordanAssociated Press
January 12th, 2006

Federal inspectors want to suspend or limit payment on some post-Hurricane Katrina contracts to save millions of dollars they regard as potentially wasteful spending, a government review recommends.

The findings by inspectors general at 21 agencies are part of a review of contracts and grants distributed after the Aug. 29 storm, and in the aftermath of hurricanes Rita and Wilma.

In one instance, investigators found that mathematical errors contributed to $3 million in overbilling by a private contractor providing food and lodging at base camps across Louisiana.

In a second, federal authorities began work on a $28.4 million temporary housing project for evacuees even before the funds were approved.

The review obtained Wednesday by The Associated Press also said work was authorized without spending limits for four housing and construction companies awarded no-bid contracts immediately after Katrina.

In all, the government handed out more than 4,700 contracts valued at more than $8.1 billion in the 90 days after Katrina hit, according to the Dec. 30 report to Congress.

"Usually, disaster response periods last 72 hours," the 141-page review said. "In this case, the initial response to help the millions affected by the hurricanes lasted approximately three months."

It was prepared for Rep. Edward Whitfield, R-Ky., chairman of the House Energy and Commerce subcommittee on oversight and investigations.

A spokesman for Whitfield said he had no immediate comment.

Only a few of the audits across the government have been completed; most of those finished were done by the Homeland Security Department.

It oversees the Federal Emergency Management Agency, which was responsible for distributing the bulk of the post-Katrina funds for private contracts and grants to state and local programs.

The department found that:

  • Mathematical errors contributed to more than $3 million in overcharging by Clearbrook, LLC, a private contractor that provided food and lodging at base camps in Louisiana. FEMA agreed to suspend payment to Clearbrook, as recommended by inspectors. Clearbrook officials have said that the inaccurate bills were tallied by an accounting firm that has since been fired.
  • Four no-bid contracts to housing and construction companies were authorized without spending limits immediately after Katrina hit. The contracts - to Bechtel National Inc., CH2M Hill Constructors, Inc., Fluor Enterprises, Inc., and Shaw Environmental, Inc. - were initially estimated to cost up to $100 million each. Investigators have called for negotiating a spending cap and payment schedule with the companies.
  • The Veterans Affairs Department began work on a $28.4 million temporary housing project for evacuees, even though FEMA had not yet approved the funds. That project should "continue work at its own risk" of not being reimbursed," the inspectors found.
  • FEMA paid $2.7 million more than aid requested by officials in Jefferson Davis Parish, La. Inspectors said FEMA needed to ensure that better damage estimate procedures were followed.
Congress in September approved $62 billion in hurricane relief aid. The review estimated that $57 billion had been spent, allocated or otherwise obligated as of Nov. 30.




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