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Trailer Parks and Tarps: The Shaw Group and Fluor

by Sam Finn Cate-GumpertSpecial to CorpWatch
August 27th, 2007

In a burst of optimism, residents of the country’s largest FEMA temporary trailer park for Katrina evacuees named their housing site "Renaissance Village." The virtual town of over 500 white trailers is run by the Keta Group on behalf of the Shaw Group, a major construction company based in nearby Baton Rouge, the state capitol. Set on a 62-acre field in Baker, Louisiana, it has a basketball court, a tent for community activities, laundry rooms and a playground. Carol Spruell of Catholic Charities called it the “Taj Mahal” of FEMA parks.(42)  

But two years later the “renaissance” that residents dreamed of has yet to materialize. Many feel isolated, abandoned and simply want to return home. During the first year after Katrina, residents were already speaking of an oppressive prison-like atmosphere. The site is surrounded by a chain-link fence and protected by armed guards. Residents had to wear identification badges at all times, while security guards blocked all outsider access to the camp and prohibited residents from giving interviews.(43)  

Drug use has become rampant with some trailers used exclusively as drug distribution centers. Furthermore, one resident, Michael Whins, told 225 magazine, a local Baton Rouge paper, that Keta employees took "the lion’s share of donations intended for park residents" such as kids' bikes.(44)  

And recently it turned out that the toxic atmosphere was a literal as well as metaphoric description. The trailers were recently reported to be contaminated with formaldehyde, a known carcinogen.(45)

The Shaw Group provided services in the Gulf Coast under previously existing contracts with the U.S. Army Corps of Engineers, the National Aeronautics and Space Administration, Jefferson Parish and other local government agencies. Immediately following the hurricane, it won no-bid contacts from the Army Corps and FEMA to assist in the dewatering of New Orleans and to provide temporary housing for displaced families and individuals.(46)

Shaw’s trailer park contracts are not the only controversial ones. In a May 4, 2006 memorandum, the U.S. House of Representatives Government Reform Committee – which looked at negligence, wastefulness and over-billing in several different kinds of work – singled out Shaw’s performance as problematic.

The committee’s report examined the so-called "Blue Roof" contracts, where destroyed roofing was to be replaced with blue plastic tarpaulins. When the work was carried out at all, the committee found "consistently inflated charges and unsatisfactory supervision and oversight."(47)

A month after Katrina hit, inspectors with the Army Corps showed up at one work site where Shaw was supposed to have replaced roofing with the blue tarpaulins, and found that "there was no blue roofing plastic installed despite the contractors assertion of completion." In another location, the Army Corps documents how Shaw "listed 4 times as many square feet covered than was actually covered." The Army Corps also reported that "[Shaw’s] failure to maintain adequate inspection and quality control procedures over its roofing subcontractors and crews has a compounded effect in potentially harming the government." All of the seven locations visited by inspectors were deemed entirely inadequate, and "scheduled for rework."

Fluor

In the weeks and months following the storm, the doled out lucrative, no-bid contracts to politically connected companies. Texas-based Fluor Corp., one of the largest procurement and construction companies in the world, was one of four companies awarded contracts worth $400 million each to provide the ubiquitous “FEMA trailers” to homeless residents.(52)  The Fluor Political Action Committee donated more than $500,000 in the 2006 election cycle; when it gave directly to U.S. Congressional candidates, 74 percent of its campaign contributions went to Republicans.(53)

When small, local businesses complained that all the reconstruction work was going to out-of-state corporations, FEMA director David Paulison pledged in October 2005 to rebid the four large trailer contracts. But instead of rebidding the original contracts, the agency eventually asked for bids on a different project: 36 contracts for trailer maintenance and removal, totaling about $3.6 billion. The bid guidelines stated, “this procurement is a 100 percent small business set-aside,”(54)  and promised that Louisiana businesses would get preference.

Those good intentions seem to have been thrown out the window. The company that came away with the biggest piece of the pie, PRI-DJI, received $400 million of the new contracts. A federal audit showed that DJI stood for Del-Jen Inc., a wholly owned subsidiary of the Fluor Corp. The subsidiary company had partnered with Project Resources, Inc., a minority-owned firm in San Diego, to become eligible.(55)

Other companies that provided Louisiana addresses weren’t listed in Louisiana’s database of corporations, and a New Orleans Times-Picayune reporter who visited one address found the office occupied by a different company.(56)

Local business owners were outraged: “I was mad, to put it mildly,” Kenny Edmonds of River Parish RV's Inc. told the Times-Picayune when his bid was rejected, and he learned who had gotten the contracts. Politicians were equally steamed: “This is not acceptable,” U.S. Senator Mary Landrieu, a Democrat from Louisiana, told the Times-Picayune.(57)

Several small business owners who didn’t win contracts have filed formal complaints, a process that usually suspends the contracts in question. FEMA, however, decided against that course of action. A spokesman told the Times-Picayune that the bidding process was fair, the winners were well-qualified and said the contracts were too urgent to be delayed. “We are not going to stop the work, because families depend on our support,” the spokesman said.(58)

Eliza Strickland 

The company even billed for the same work another contractor, LJC, had done. Out of the 11 buildings auditors sampled, 50 percent showed overcharging.

Critics say that it was Shaw's high-powered connections that helped it win lucrative no-bid contracts immediately after Katrina. The company’s chief lobbyist is Joe M. Allbaugh, of Allbaugh Company LLC, a former FEMA director (he retired right before the disaster) and long-time Bush supporter. Shaw Group executive vice president, Edward Badolato, was deputy energy secretary under both presidents Ronald Reagan and George Bush senior.

Perhaps that’s why Badolato sounded so confident when he addressed a group of lobbyists and corporate executives attending the Katrina Reconstruction Summit in Washington, DC. There was no need to worry about getting work in the Katrina-devastated South, he assured the eager contractors, "there’s going to be plenty for everybody down there."(48)  

Soon after that remark, Shaw was awarded an initial $100 million no-bid contract that was later expanded. Three other corporations (Bechtel, CHM2Hill and Fluor) won similarly lucrative contracts. Today each of those contracts is worth almost $1 billion.(49)

The charges of possible cronyism and flawed work are vigorously denied by company CEO Jim Bernhard, who founded the Shaw Group in 1987. Bernhard has overseen the company’s growth from a small pipe fabricator in the energy and chemical industries to a major multinational with approximately 20,000 employees and 170 offices in strategic locations around the world. He argues that Shaw was the logical choice for this work, given the fact that the company specializes in disaster recovery and is the largest corporation in the state.

At a November 2, 2005, hearing of the U.S. House of Representatives Select Katrina Response Investigation Committee, Bernhard told lawmakers: "These emergency response contract awards were not made without consideration of previous Shaw experience. …. Shaw had the capability, Shaw had the capacity. Shaw was participating in an ongoing solicitation process, but urgent circumstances demanded urgent acquisitions which resulted in the awarding of these contracts, which for the most part are being performed by local subcontractors under federal cost accounting standards and subject to the most stringent of audit requirements."(50)

These four major contracts are now under investigation by the Department of Homeland Security inspector general. A final report on each company will released in two to three months [fall 2007].(51)

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