Payments on Katrina Contract Halted After Billing Questions
Thursday, November 17, 2005
The federal government has suspended payments on an $80 million contract to an Alabama company that built base camps for emergency workers responding to Hurricane Katrina after auditors reported finding billing and documentation problems, a spokeswoman for the Federal Emergency Management Agency said yesterday.
The case is the first in which action was taken on apparent faults in the many contracts federal officials signed, often with little or no competition, in the rush to send aid to the Gulf Coast region.
The contract with Mobile-based Clearbrook LLC included billings that were "mathematically inaccurate indicating over $3 million in overcharges," according to a Nov. 10 letter by field auditors from the Department of Homeland Security's inspector general's office.
The auditors also said that a first payment of $4.9 million was made for work performed before the effective date of the contract and that their concerns were "compounded by the complete lack of documentation supporting price reasonableness." They recommended that payments be stopped until the issues were resolved.
FEMA spokeswoman Nicol Andrews said the agency is following the inspector general's recommendation and that the suspension would remain in effect while the contract is being reviewed further.
Bruce Wagner, Clearbrook's president, said in an interview yesterday that he was upset by the action against his company because no one had informed him of any problems with its work or billings. He said that he talked to inspector general officials involved in the case and that they said his contract had been reviewed by a consultant who was not experienced in examining such work.
The DHS inspector general's office received extra funding and rushed auditors to the Gulf Coast after some members of Congress threatened to set up a separate office to probe the huge contracts being awarded for hurricane recovery.
Wagner said his firm started work before Katrina hit, setting up a camp for first responders at the request of a federal official who gave him a billing number without a written contract, which was a common practice at the time of the storm. He said he has checked the accuracy of his billings and found no $3 million overcharge.
"I want to be audited now," Wagner said. "I'm one of the good guys."
Clearbrook has several Katrina-related contracts totaling at least $145 million, according to data FEMA sent to Congress last week. They are to provide prefabricated housing built by an Italian company, sewage treatment services, and tents and food for the seven base camps.
Wagner said the suspended payments appear to cover all his contracts, not just the $80 million one for base camps. He said his firm will start charging the government interest on late payments for work already completed.
Separately, the Pentagon's inspector general is auditing an Army Corps of Engineers contract used to provide ice after Hurricane Katrina and is examining another to install temporary roofs on homes after the disaster.
The ice contract with IAP Worldwide Services Inc., based in Cape Canaveral, Fla., came under scrutiny after reports emerged that the Corps of Engineers ordered twice as much ice as it needed in the days after the disaster. Millions of pounds of ice were sent to storage, some as far away as Maine.
"As a government contractor, audits are a routine part of our business," said IAP spokeswoman Arlene Mellinger.
Members of Congress have also asked whether the Corps of Engineers is paying too much for the blue tarps it uses to temporarily repair damaged roofs. The Corps of Engineers has said it costs $2,400 to $2,600 per roof to install the tarps, including labor, materials and administrative costs. The Pentagon's inspector general is "currently examining the issues raised" by Reps. Bennie G. Thompson (D-Miss.) and William J. Pascrell Jr. (D-N.J.) about the roofing contracts, Assistant Inspector General John R. Crane said in a letter.
Staff writer Renae Merle contributed to this report.