Hurricane Sandy’s $180 million federal tab tops cost of Irene

December 2, 2012

The federal government has awarded more than $180 million in contracts tied to Hurricane Sandy in the month since the largest Atlantic storm on record struck the Eastern Seaboard.

The tally has surpassed what the government spent on Hurricane Irene, which in August 2011 killed at least 45 people and caused floods in Vermont and western Massachusetts that washed away bridges and leveled homes.

The Sandy spending includes awards for floating shelters, ambulances and emergency supplies. Demands for more federal assistance from hard-hit New York and New Jersey may “pose a significant challenge’’ for agencies amid U.S. budget cuts, said Robert Burton, who was the top procurement official at the White House Office of Management and Budget under President George W. Bush.

“The costs will continue for years, much like Hurricane Katrina,’’ said Burton, now a partner at the law firm Venable in Washington. “Something as severe and tragic as Sandy clearly is going to involve years of costs.’’

Contract spending related to Sandy so far pales in comparison to the estimated $19.6 billion in contracts after Hurricane Katrina, the 2005 storm that killed more than 1,800 people on the Gulf Coast and is the costliest U.S. natural disaster to date. Federal agencies awarded about $179 million in contracts tied to Irene. The hurricane, which resulted in at least 40 deaths, ranks as the sixth-costliest in the United States with about $15.8 billion in damages.

Sandy struck Oct. 29, flooding New York City’s subway system and leaving more than 2 million residents in the state without power. In New Jersey, it caused massive flooding and outages. The storm killed more than 100 people and left thousands homeless.

U.S. lawmakers representing states affected by the storm asked President Obama in a Nov. 21 letter to request additional disaster-assistance funds.

New York Gov. Andrew Cuomo (D), who has said he is seeking a special federal appropriation for relief, estimated the cost of the storm to the state at $33 billion.

“Katrina, which is the obvious comparison, in many ways was not as impactful as Sandy,’’ Cuomo said. “Because of the density of New York, the number of people affected and the number of properties affected was much larger in Hurricane Sandy than Hurricane Katrina.’’

‘Fiscal pressures’

Katrina, along with Hurricane Rita less than a month later, destroyed or damaged 215,000 homes, compared with 305,000 in New York from Sandy, Cuomo said. In New York, 265,000 businesses were damaged or destroyed by Sandy, compared with 18,500 by Rita and Katrina, he said.

“I understand the fiscal pressures Washington is under,’’ Cuomo said. “I know that the taxpayers of New York cannot shoulder this burden.’’

Jason Klitenic, who was deputy general counsel of the Department of Homeland Security from 2003 to 2005, said there might be debate over storm spending as agencies shift from initial emergency contracting to “big ticket items,’’ such as rebuilding and taking preventive measures.


Sandy contracts surpass total for Irene (The Washington Post/SOURCES: Data compiled by Bloomberg, Unisys Weather)

Sandy’s demands come as Congress and the White House try to avert a so-called fiscal cliff of automatic spending cuts and tax increases. The reductions, known as sequestration, would begin early next year and total $1.2 trillion over a decade.

“There is a pot of money and it is finite,’’ said Klitenic, a partner at the law firm Holland & Knight in Washington. “The timing of this is so important. We are in the midst of this fiscal cliff and a budget crisis, and this just reminds all of us that something as basic as a storm, which of course is out of our hands, can have wide, sweeping financial implications.’’

Moira Mack, an OMB spokeswoman, said that there are sufficient resources in the U.S. Disaster Relief Fund to respond to the “immediate needs and impacts of the storm well into next year.’’

Burton, the former OMB official who served during Katrina, said offices such as the Federal Emergency Management Agency may shift some spending because of long-term concerns related to Sandy. That might lead to contract cancellations, he said.

Taxpayer dollars were wasted during Katrina because government procurement workers weren’t prepared to handle emergency contracts, Burton said. After the disaster, his office advised contracting officers to take steps such as tapping existing contracts to support the relief effort, rather than starting from scratch with new awards. “The response to Sandy shows that there was some value to the lessons learned from Katrina,’’ he said.

Floating shelter

American Medical Response provided medical support, personnel and transportation in 15 states, according to Dan Watson, a FEMA spokesman. The Greenwood Village, Colo.-based company was the biggest recipient of Sandy-related contracts, with an order valued at as much as $45 million, according to data compiled by Bloomberg.

The second-biggest recipient of Sandy-related contracts was closely held Estes Express Lines, based in Richmond, with about $23.3 million in awards. The firm coordinated distribution of 600 loads of water, meals, blankets, cots, generators and baby formula in New Jersey and New York, said Ken Niemaseck, a division vice president at the company.

Other contracts included the use of three ships as floating shelter and office space, so emergency workers don’t “strain or compete for local lodging resources that displaced residents require,’’ said Meghan Keck, a Department of Transportation spokeswoman. More than 32,000 meals have been served on the ships so far, compared with 230,000 meals during Katrina.

“Katrina was actually the first time ships were used in this capacity, so I would say the primary lesson learned was how helpful the ships could be in relieving strained housing resources and providing office space for emergency response workers close to areas that needed help,’’ Keck said in an e-mail.

— Bloomberg Government

With assistance from Brian K. Sullivan in Boston, Martin Z. Braun in New York and Freeman Klopott in Albany, N.Y.

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