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Multiple Layers Of Contractors Drive Up Cost of Katrina Cleanup
"Our purview of a contract goes to the prime contractor only," said Jean Todd, a Corps contracting officer.
But watchdog groups that monitor federal contracting say Katrina has taken the contract tiering system to a new extreme, wasting tax dollars while often cheating companies at the low end of the contracting ladder. In some cases, the groups say, companies in the top and middle rungs contribute little more than shuffling paperwork from one tier to the next.
"It's trickle-down contracting: You're paying a cut at every level, and it makes the final cost exponentially more expensive than it needs to be," said Keith Ashdown of the watchdog group Taxpayers for Common Sense. "And in almost every case, the local people who really need to be making the money are at the bottom of these upside-down pyramid schemes."
The gap is particularly large for roof repairs. Four large companies won Army Corps contracts to cover damaged roofs with blue plastic tarp, under a program known as "Operation Blue Roof." The rate paid to the prime contractors ranged from $1.50 to $1.75 per square foot of tarp installed, documents show.
The prime contractors' rate is nearly as much as local roofers charge to install a roof of asphalt shingles, according to two roofing executives who requested anonymity because they feared losing their contracts. Meanwhile, at the bottom of the contractor heap, four to five rungs lower, some crews are being paid less than 10 cents per square foot, the officials said.
At least the prime contractors for roofing and debris removal owned equipment that could be immediately applied to the job at hand. In the world of Katrina contracting, this has not always been the case.
For example, one company hired as an ice vendor owns no ice-making equipment. Landstar Systems Inc., a $2 billion Florida company placed in charge of the bus evacuation of New Orleans, is a transportation broker that specializes in trucking and has no buses of its own. In 2002, the company was awarded a $100 million contract to provide emergency transportation services for the federal government during major disasters. The contract, which is administered by the Federal Aviation Administration, was expanded in the fall to a maximum $400 million. Landstar declined a request for an interview.
Thousands of New Orleanians had been stranded in the Superdome for more than 48 hours by the time FEMA issued the first order for a bus evacuation early on the morning of Aug. 31. The order was passed to Landstar, which then turned to other companies to locate buses, according to an official chronology prepared by the Department of Transportation. Landstar hired Carey International Inc., of Washington, which then hired the BusBank, of Chicago, and Transportation Management Systems of Columbia, Md. Bus Bank and TMS called private charter-bus companies -- some from as far away as California and Washington state -- asking them to send buses and drivers to New Orleans.
More than 1,100 buses eventually responded, some arriving four days later, after traveling hundreds of miles. Daily earnings averaged about $700 per bus, according to bus company owners. Landstar's daily earnings were nearly $1,200 per bus, government records show.
"A lot of that money is going to brokers who didn't have to do anything," said Jeff Polzien, owner of Red Carpet Charters, an Oklahoma bus company that sent coaches to New Orleans as a fourth-tier subcontractor.
Lower pay is hardly the worst problem subcontractors face. With many tiers to navigate, money trickles down slowly, delaying payment by weeks and months, and frequently imposing hardships on the smallest firms.
Several bus company owners said they were still owed tens of thousands of dollars for work they did in the fall. For some, the delays have been ruinous.
Thomas Paige, owner of Coast to Coast Bus Line of Dillon, S.C., laid off staff, and two of his four buses were repossessed by creditors after payment for his New Orleans work fell behind by three months.
"I went to New Orleans to help people -- and hopefully to help myself -- but now I feel like I've dug a ditch and fallen into it," Paige said. "If I would have known what I know now, I never would have gotten involved. It's just not worth it."