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Big Katrina Contractors Win More FEMA Work

By Griff Witte and Spencer S. Hsu
Washington Post Staff Writers
Thursday, August 10, 2006

The four giant construction firms that received controversial no-bid contracts to house Hurricane Katrina evacuees last September will be earning up to $250 million apiece to do similar work after future disasters, the Federal Emergency Management Agency said yesterday.

Unlike the Katrina deals, the contracts announced yesterday were awarded after a bidding process. But most of them went to the same four firms: Bechtel Corp., CH2M Hill Cos., Fluor Corp. and Shaw Group Inc. Two new consortia of companies were also chosen for a share of the work. Together, the six winners will receive up to $1.5 billion for hauling and installing temporary trailers to house evacuees during future emergencies.

"These contractors are there and prepared to support us should disaster strike," said Deidre Lee, FEMA's deputy director of operations and chief acquisitions officer.

Lee stressed that the awards were made based on open competition from a field of 13 proposals and that winners were chosen because they offered the best combination of price and capacity to do the work.

But some questioned why the same four companies that received the no-bid Katrina work also won most of the work this time around.

"It just smells like this was a fixed fight from the get-go," said Keith Ashdown, vice president of the watchdog group Taxpayers for Common Sense. "This is going to leave a lot of people that are trying to compete for this kind of work feeling like if they don't have the money or the political connections, they can't get these contracts."

FEMA came under intense criticism last year for awarding contracts on the fly in the weeks after Katrina struck, a practice that outside investigators have since concluded left the government vulnerable to waste and abuse. The four no-bid contracts for temporary trailers became prime examples of the problems with the agency's approach, as questions arose about how the companies, all giants in their field, were chosen .

The trailer contracts were originally supposed to be worth $400 million total but have ballooned in recent months to about $3.4 billion. They are still being reviewed by the Department of Homeland Security inspector general's office, and they have been cited in numerous investigations for poor oversight and high costs.

In October, FEMA Director R. David Paulison vowed to put the contracts up for bidding. But only part of the work ended up being competed for. In the spring, FEMA spun off the maintenance and eventual dismantling of the trailers to 36 small and minority-owned businesses under a $3.6 billion deal.

Meanwhile, Bechtel, CH2M Hill, Fluor and Shaw continued their work under the original, no-bid contract, as costs rapidly grew. Shaw will now receive up to $950 million for the work, Fluor will get up to $1.4 billion, Bechtel will receive as much as $575 million, and the CH2M Hill deal is expected to go as high as $530 million.

Lee said FEMA did not rebid more of the work because the four companies had already begun setting up the trailers and bringing in new contractors would have delayed the process.

In a conference call with reporters yesterday, Lee initially attempted to cast the new contracts as a rebidding of the original deals. But she later conceded the new contracts are separate and that work will continue into September under the old deals even now that the new ones have been awarded.

She said the four companies were not at fault for the escalating costs and that the ultimate price tags were justified by the extraordinarily high demand for housing. "That's why the amount kept increasing -- because we kept ordering more work," Lee said, adding that the companies have "met our requirements."

Altogether, FEMA is paying up to $7 billion for 153,000 trailers, or about $46,000 per trailer. About 132,000 are now occupied by storm victims. Under law, FEMA provides housing aid for up to 18 months, meaning that the trailers will have cost about $2,500 a month.

Lee acknowledged that the incumbent firms had a leg up on their rivals for the contracts announced yesterday because of their performance under the initial deals but said the agency sought to be fair to all competitors, pointing to the selection of the two multiple-firm consortia in addition to the four giants.

One of those groups includes DynCorp International LLC, Parsons Corp. and Dewberry. Fairfax-based Dewberry worked extensively in the Gulf Coast under a FEMA contract to rebuild public infrastructure. The other consortium was led by PBS&J, also a major player in government engineering and construction work.

Lee said the plan in future emergencies is for the six winners to begin work setting up temporary housing for evacuees but hand off the job as soon as possible to local companies.

Rep. Bennie Thompson (D-Miss.), ranking member of the House Homeland Security Committee, said that he would have liked to see FEMA do more to reach out to firms other than the major national players but that the agency's approach to the contracts discouraged that.

"The bundling of so many different types of services under these contracts assures that small businesses are once again kept out of the game," Thompson said.

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