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KATRINA: Government overpaid $32 million for Katrina evacuation contract

by Leslie MillerBoston Globe
January 20th, 2006

A bill for busing evacuees from New Orleans in the aftermath of Hurricane Katrina was $32 million more than it should have been, and the government paid it without question, the Transportation Department inspector general said Friday.

Landstar Express America was given 570 specific tasks to supply enough vehicles to haul thousands of truckloads of goods and thousands of busloads of people after the hurricane struck.

The inspector general's office reviewed six of the tasks that have been paid for by the Federal Aviation Administration, which was the contracting agency.

The example of the bus service to New Orleans "underscores the need to ensure that all pending invoices are accompanied by some type of documentation that substantiates that the goods and services were provided as billed," according to the report signed by Assistant Inspector General David Dobbs.

The report said the FAA overpaid Landstar for two of those six tasks; for one, the agency paid a $59,082,000 partial payment "with no documentation showing the actual amount of services provided to that date," the report said.

What happened was this: the Federal Emergency Management Agency asked for 1,105 buses from Aug. 31 through Oct. 7 to evacuate people from New Orleans. In early September, Landstar asked for an advance of $59,082,000.

"We said, 'If this is going to be this large a task, and we have to pay our contractors, we need an advance,"' said Henry Gerkens, chief executive of Landstar System Inc., the Jacksonville, Fla., company that owns Landstar Express America.

But only about 400 buses per day were needed, and they cost much less than originally thought -- $27,081,859, or $32 million more than the FAA should have paid for that week.

FAA paid the invoice anyway.

The inspector general's staff met in mid-October with the FAA's contracting officer and to back up the invoices from Landstar for services during the week, the report said.

Several weeks later, Landstar came up with documentation showing how many buses had actually been used.

Landstar repaid the money that day, and the inspector general noted that it was the company's action that allowed the government to recover the money.

"To characterize that as an overpayment is a gross inaccuracy," Gerkens said. "The government still owes us about $200 million."

The Transportation Department issued a statement saying it will work with the inspector general "to ensure that appropriate steps are taken to further improve our ability to respond to disasters while at the same time protecting the taxpayers interests."

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