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Last Updated: Tuesday, 27 September 2005, 16:52 GMT 17:52 UK
Row surrounds Katrina relief plan

By Gavin Stamp
BBC News business reporter

A house in New Orleans destroyed by Hurricane Katrina
The bulk of the contracts awarded have been for debris removal

Contracts awarded for the Hurricane Katrina relief effort are being investigated amid claims of waste of money and political bias.

The Federal Emergency Management Agency (Fema) and other public agencies have awarded $11.6bn (6.5bn) in contracts and aid for Katrina clear-up duties.

But there are concerns that contracts were awarded with limited or no competition.

A senior figure within the Department of Homeland Security said he was "very apprehensive" about the process.

Fema disclosure

More than $62bn in federal funding has been approved for the relief effort after what could be the costliest natural disaster in US history.

So far, 15 contracts worth more than $100m have been awarded for debris removal, construction of temporary housing and transport services.

Five contracts worth more than $500m have been handed out.

We want to make sure the money is being properly used and distributed
House of Representatives' Homeland Security Committee spokesman

The New York Times reported that 80% of Fema contracts were awarded without bidding or following limited competition, according to government records seen by the newspaper.

The agency has responded to concerns about the integrity of the process by agreeing to publish details of all contracts it has overseen.

But the US House of Representatives has already begun an investigation into how contracts were awarded amid concerns over inconsistencies in pricing and the capacity of some firms to fulfil huge orders.

Value for money

The House's Homeland Security Committee is examining whether taxpayers are getting value for money in the clear-up process and whether local firms have been given a fair chance to bid for work.

"We want to make sure the money is being properly used and distributed," a Committee spokesman told the BBC, while adding that individual firms were not being investigated.

Full accountability was critical, he stressed, given the huge amount of money being spent.

"We want to ensure the money is reaching where it needs to go and we are taking the right steps forward in accordance with the law."

Water being pumped out of New Orleans
Private contractors are helping to pump water out of New Orleans

A senior figure within the Department of Homeland Security, which ultimately oversees the relief effort, said he had concerns about the lack of documentation relating to certain contracts.

"Most, if not all, of these people down there were trying to do the right thing," Richard Skinner, the department's inspector general, told the New York Times.

"They were under a lot of pressure and they took a lot of shortcuts that may have resulted in a lot of waste.

"When you do something like this, you do increase the vulnerability for fraud, plain waste, abuse and mismanagement."

Urgent circumstances

Federal agencies are permitted to approve public contracts without normal competitive bidding in "urgent and compelling circumstances".

Many goods and services were sourced under "indefinite delivery, indefinite quantity" contracts (IDIQ) which require firms to bid in advance to supply products needed in standard emergencies.

We are performing this work for the government under two pre-existing, competitively awarded contracts
Halliburton spokeswoman

The Homeland Security Department said Fema needed to increase its use of IDIQ contracts in future to ensure goods could be sourced competitively in the event of a disaster.

The department said it would study all invoices from the relief effort to ensure public agencies had not paid well above market rates.

Political allegations

Allegations of political favouritism have also surfaced.

The ranking Democratic member of the House Homeland Security Committee claimed the contract process had become politicised.

"There is just more of the good-ol'-boy system, taking care of its political allies," Bennie Thompson, a Mississippi Congressman, told the New York Times.

The New York Times reported that several companies which had been awarded contracts had links with prominent Republican politicians.

Kellogg, Brown & Root, which secured contracts worth $60m, is owned by Halliburton, once headed by Vice-President Dick Cheney.

Both Kellogg and Shaw Group, another successful contractor, have been advised by Joe Allbaugh, a former campaign manager for President George W Bush and former head of Fema (although Shaw's founder and chief executive, J.M. Bernhard, is also the chairman of the Louisiana Democratic Party).

Open competition

Halliburton said its contracts were awarded on a competitive basis and although Mr Allbaugh was a consultant for the firm, he had no involvement with the contracts and had no lobbying responsibilities.

"We are performing this work for the government under two pre-existing, competitively awarded contracts," a Halliburton spokeswoman told the BBC.

Shaw Group's two $100m contracts - to pump water out of New Orleans and to provide temporary housing - were also awarded competitively.


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