The U.S. Senate held hearings yesterday looking into the costs associated with relief and recovery efforts by the federal government in response to Hurricane Katrina. Some of the revelations are shocking.
Here are some excerpts:
There were a number of ways, testimony showed, in which costs ballooned. For example, it showed that large companies, already familiar players with federal bureaucracies, who landed gigantic federal contracts in the storm's immediate aftermath, subcontracted from 70 percent to 99 percent of their work. That led to a curious and costly arrangement: overhead and profit margins for the big companies of up to 47 percent, and multiple tiers of subcontractors that sometimes stretched five or six companies deep, said Patrick Fitzgerald, the U.S. Army's auditor general.
"Although it awarded . . . fixed-price contracts, corps contracting officials negotiated higher prices for most task orders issued under three of the four contracts," Fitzgerald said, noting that in some cases the price per cubic yard rose by $4.86 during negotiations.
"Contract files didn't include explanations of how the government estimate was reconciled with the final agreed-to price," Fitzgerald testified.
Lt. Gen. Carl Strock with the Army Corps of Engineers agreed the documentary omission must be rectified, but while Coburn praised Strock's dedication for cutting short a vacation to appear, the senator was clearly irked by the lack of answers Strock and the others provided.
The corps came under fire in other ways, too. St. Tammany Parish President Kevin Davis opened his remarks by reminding the senators and Jindal, "I have to continue my dealings with the corps and FEMA." He then proceeded to depict them as near-gangsters who force local officials to let the corps handle matters even if the parish already had the issue in hand.
"At one point the corps was in my office, urging me to cancel the (debris-removal) contract and go with them," Davis said. "It was a very uncomfortable situation. I wanted my legal teams there. I finally told them, 'I think we're getting into an area that's very gray and I don't want to be there.' "
As it happened, St. Tammany's in-place contracts when Katrina hit carried prices of between $7 and $14 per cubic yard, at least 50 percent lower than prices paid by the corps, according to most estimates. Davis estimated the savings to taxpayers in St. Tammany alone at $42 million by forgoing the corps' demand to help.****
In particular, the senators wanted to know why FEMA hired both the corps, which takes a percentage of the total contract in what amounts to a management fee, and then paid one of the mega-contractors to perform essentially the same role. In effect, testimony showed, FEMA built a thick layer of bureaucracy at the top that skimmed some money before the relief funds entered into the maze of layers below.
Burnette said she was intrigued by the idea. Neither she nor Strock could say what percentage the corps received on the blue roof and debris-removal tasks it handled. Spending to date on those contracts has topped $1.6 billion.
The senators appeared even angrier when FEMA simply blew off the second round of testimony, the one that featured local officials. A stunned Coburn stopped that portion of the hearing after a few minutes and asked whether any representative from FEMA had stayed to listen or take notes. For a moment no one spoke, and then Strock raised his hand.
"No, general, you're with the corps, not FEMA," Coburn said. "No one from FEMA stayed around to listen to this and hear what's going on? That's part of the problem right there."
The last paragraph is quite illuminating.
What this hearing is shaping up to show is that the government, that is empowered by the people, instead of using taxpayer money for the purpose of providing relief to its citizens that are suffering, is, for the most part, just moving money around from agency to agency and claiming that the money is going to help us. Well its not.In the meantime, the Gulf Coast continues to pull itself up by its own blue-suede boot straps.