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SMALL, LOCAL, AND LEFT OUT

by Rita J. KingSpecial to CorpWatch
August 16th, 2006

A look at FEMA’s records shows that about 60 percent of the $6 billion in contracts granted thus far has gone to “small businesses” in keeping with federal procurement law that requires at least 23 percent of such contracts benefit small business. But the number is deceiving: A large number of contracts went to small businesses, but their net worth was just 13 percent of the total amount granted by FEMA. The rest went to “other than small business.”

Five percent of contracts are normally set aside for minorityowned business, but post-Katrina, only about 1.5 percent of the initial major federal contracts went such firms, in part because federal affirmative action regulations were suspended immediately following the storm. The Department of Labor said the relaxed rules were necessary to cut down on paperwork and get the job done quickly, usually by big firms already enjoying a familiar relationship with procurement agencies. “It was about saving lives, protecting property, and going to who you go to, to get what you need,” said DHS spokesman Larry Orluskie. (20)

Local businesses fared even worse. In the initial aftermath of the storm, a surge of no-bid contracts emanated from FEMA, but only 10 percent (in dollar value) of those contracts went to businesses headquartered in the three worst-hit states. Now nearly a year later that percentage has grown to 16.6 percent, or $1.17 billion, of the total contracts awarded nationwide Meanwhile, firms from Virginia alone have laid claim to more than 30 percent of FEMA’s largesse (again, in dollar value).

The Army Corps of Engineers notoriously awarded a no-bid $39.5 million contract to Akima Site Operations, a firm based more than 3,500 miles from where Katrina made landfall, to provide 450 portable classrooms to Mississippi. Local businessman Paul Adams of Adams Home Center, said he submitted a bid at half the price but was rejected. Adams is suing the federal government and Akima.

Congressman Bernie Thompson of Mississippi demanded an investigation into the Akima deal. The Army Corps defended the contract, saying it was the fastest way to get the classrooms and restore normalcy, but the GAO released the results of its investigation in May 2006, and revealed that the Army Corps accepted Akima’s proposed price “even with the information that the cost was significantly less.”

“We believe that the Corps could have, but failed, to negotiate a lower price,” the GAO concluded

Thompson insists that the contract was cronyism, pure and simple.

Akima’s parent company, Nana, hired lobbying firm Blank Rome, the CEO of which, David Girard-diCarlo, was former Homeland Security Secretary Tom Ridge’s fundraiser when Ridge was the governor of Pennsylvania.

Blank Rome lobbyists, according to its website, also include Mark Holman, a former deputy presidential assistant at Homeland Security, and Ashley Davis, who served as a Homeland Security assistant to Ridge.

“There are a lot of questions about waste, fraud and abuse,” Thompson said. “...They’re selling trailers for $88,000, but you can buy them off any lot for $42,000.”

John Wood, CEO of Akima Management Services, which runs Akima Site Operations, said that Nana’s lobbying and political operations played no role in the contract.

Thompson said he wasn’t buying it, noting that “hundreds of companies from Mississippi” tried unsuccessfully to score contracts-or even hear back on their respective queries. (21) Even if a contract was awarded to a small local business, it doesn’t necessarily mean the company ever got paid.

Ron Kennedy of Coastal Environments, Inc. (CEI) told CorpWatch that the small Baton Rouge-based company was awarded a $3.1 million contract to begin restoring the coastline and wetlands for 16 affected parishes throughout Louisiana with an eye toward redeveloping the areas. CEI was to augment FEMA’s Emergency Support Function (ESF) team.

Dr. Sherwood Gagliano, CEI’s president, was the author of an ambitious 2003 plan to redivert the Mississippi river and restore coastal barrier islands and marshes along the southern Louisiana coast. Some experts contend that the plan, had it not been suddenly defunded by the federal government, might have prevented the worst of the flooding from Katrina. Post- Katrina, CEI was asked to come up with a recovery plan for the resurrection of St. Bernard Parish, where 65,000 properties had been destroyed and the community was crippled further by the loss of firefighters, hospitals and emergency care.

Almost as soon as CEI arrived, it was apparent that FEMA’s team was unfocused. After only 45 days of ground work, the FEMA crew packed up, pulled out and left many wondering if the protection of the wetlands-which might prevent massive damage from future storms-is a priority.

“We were paid $150,000 on a $3.1 million contract,” said Kennedy, adding that the company has continued creating plans for St. Bernard Parish. “We’re still working, but we’re not getting paid. FEMA has offered no explanation. FEMA has hired people from all over the United States. They come to Louisiana and they don’t even know where St. Bernard Parish is. We’ve been doing this for years. We’ve got historical data and information about what the situation is and how to correct it. Why not have small businesses on active status instead of big corporations?”

“FEMA says they are giving a certain amount of money to small businesses but then they pull it. How many times has this happened? What’s the real number of payments made under small business and [other] set asides? I can assure you we’re not the only ones.” (22)

Two local (but hardly small) firms had more success — the Shaw Group of Baton Rouge (Allbaugh’s client), and Boh Brothers of New Orleans. Boh Brothers received two no-bid, cost-plus contracts from the Army Corps two days after the hurricane to help repair the gash in the 17th Street levee. Their contract for the repair of the I-10 “Twin Span” bridge over Lake Pontchartrain was bid, reviewed, and signed in record time. On Sept. 9, bids were opened at 1 p.m., reviewed and approved by 3:30 p.m. and the contract was signed by 5:15 p.m. (23) Since then, the company has won $22 million in additional contracts, several competitively bid, to shore up levees and help pump water out of the city. (24) 

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