FEMA: Poor Management or Corruption?

Posted by D. Cupples |  It's not just defense spending that should send taxpayers' eyebrows up to their hairlines.  Last year alone, FEMA reportedly wasted $30 million maintaining trailers for Mississippi's Hurricane Katrina victims.

In one case, FEMA spent $229,000 on contracts to support one family in a single trailer for one year.  Wouldn't it have been more cost effective to build a modest house?  Today'sWashington Post reports:

"By not awarding work to contractors with the lowest bids, FEMA misspent $16 million, said the Government Accountability Office, Congress's [non-partisan] audit arm. The agency misspent an additional $15 million on inspections that it could not prove were performed, preventive maintenance for which contractors falsified documents, and emergency repairs on trailers that FEMA did not own....

"The GAO report listed numerous examples of rigged bids and overpayments. In one case, FEMA could have spent $32.5 million instead of $48.2 million if it had awarded maintenance work to the five low-bid vendors instead of to all 10 pre-selected contractors, according to the report...."

"After FEMA paid a company $1.8 million to clean septic systems for a 61-trailer site, the contractor pocketed $1.5 million in profit and paid $300,000 to a subcontractor to do the work. FEMA did not exercise an option it had to reassign the work to a cheaper company .

"FEMA also awarded maintenance contracts to two companies that falsified bid proposals, shared pricing information, and had the same people serving as president and operating officer. In another case, a FEMA officer awarded a $4 million contract for paving a trailer site, which GAO said could have been done for $800,000, one-fifth the cost." (Washington Post)

This is not the first time FEMA has come under fire.  In August 2006, the House Oversight Committee released a report titled "Waste, Fraud and Abuse in Hurricane Katrina Contracts," which states that 19 contracts worth almost $9 billion were "plagued by waste, fraud, abuse or mismanagement."

For example, FEMA paid $3 million for 4,000 "camp beds" that were never used.  That's $750 per "camp bed" -- almost as much as I paid for my Beauty Rest pillow top with memory foam (House Report, p 4).  Most unsettling were odd purchases and credit card abuse (agencies have credit cards to buy small items without red tape), including the following examples (House Report, p6):

   * $8,000 for 63-inch plasma TV

   * $63,000 for 20,000 pairs of dog booties

   * $??? for 20 boats at twice retail price, only 8 are in FEMA's records.

One problem is that FEMA (and the Army Corp of Engineers) kept handing out contracts without competitive bids.  In other words, the lucky contractors got to name their prices. This was expected in the first month or so after Hurricane Katrina, because timing was so crucial.  However, by June 2006 (9 months after Katrina), about 70% of the contracting dollars went to contractors without competitive bidding (House Report, pp. 2-3). 

Another problem involved multiple layers of subcontractors (i.e., expensive middle men). Throughout the chain, primary contractors marked up the costs of subcontractors that actually did the work (House Report, p 5).  That's what defense contractors have been doing in Iraq. One example of inflated costs: the taxpayers spent about $2,500 per job for roof work that should have cost less than $300 per job.  It all adds up.

As of August 2006, more than 1,300 cases of procurement fraud and abuse were under investigation in August 2006, including bribery-related schemes (House Report, p 6-7).  Has such waste continued due to incompetence on FEMA's part or corruption?

Related BN-Politics Posts:

* Contractors: Driving up War's Costs?

* Contractors: Driving up Healthcare Costs

* New Orleans: Still Suffereing After 2 Years and Billions of Dollars

* Embassy in Iraq: Waste, Bad Planning, or Contractor Fraud?

* How the Energy Department Incinerated Tax Dollars

* Defense Dept. Rewarding Bad Contractor Performance?

* Contractors Offering Bribes to Army Personnel?

* How DOD Flushes Tax Dollars Down Latrine

* Taxpayers Losing Money to Engorged Contractors

* Audit Red-Flags Contractor in Iraq

* There's Something About Blackwater

Another problem involved multiple layers of subcontractors (i.e., expensive middle men). Throughout the chain, primary contractors marked up the costs of subcontractors that actually did the work (House Report, p 5).  That's what defense contractors have been doing in Iraq. One example of inflated costs: the taxpayers spent about $2,500 per job for roof work that should have cost less than $300 per job.  It all adds up.

As of August 2006, more than 1,300 cases of procurement fraud and abuse were under investigation in August 2006, including bribery-related schemes (House Report, p 6-7).  Has such waste continued due to incompetence on FEMA's part or corruption?

Comments

[J. Lynne]

I keep seeing all these reports about overspending and fraudulent spending but I never see any reports about what's done about it. I mean, if you have a child who's misbehaving and just tell him he's misbehaving but don't dish out any punishment, the child isn't going to change his behavior.