Halliburton, Bechtel, and the Shaw Group have been awarded substantial contracts for reconstruction projects in areas affected by Hurricane Katrina. With normal contracting rules and oversight suspended as the Federal Emergency Management Agency (FEMA) struggles to show progress in its handling of the disaster, contracts have been awarded to companies represented by former members of the Bush administration with little review.
Two lobbyists, Joe M. Allbaugh and James Lee Witt have offered their services and connections to companies seeking government contracts for Katrina-related work. Allbaugh is a close friend of President George W. Bush and former FEMA head Michael Brown and was his 200 presidential campaign manager and head of FEMA from 2001 to 2003, while Witt is close former President Bill Clinton and is a former FEMA director. Two of Allbaugh’s clients, Kellogg Brown and Root (KBR), a subsidiary of Halliburton (Halliburton is also represented by former deputy transportation secretary in the Bush administration, Kirk Van Tine), and the Shaw Group have already received substantial federal contracts. Witt’s clients include Nextel and Harris Corp., a telecommunications equipment company, both of whom could seek federal contracts.
However, with billions of dollars being awarded to private companies, there is reason to be concerned that the money is being allocated based on political connections rather than the quality of work that can be expected. The work of both Halliburton and Bechtel in Iraq has been the subject of intense scrutiny, with widespread reports of fraud and other forms of contract abuse. Moreover, the first contracts were awarded without competitive bidding using “cost-plus provisions” that guarantee a predetermined amount of profit even if costs exceed the original estimate.
In light of the companies’ performance in Iraq and the methods being used to award contracts, there are concerns that FEMA may not be able to properly manage the spending. In Monday’s Wall Street Journal, Steven Schooner, a contracting expert at George Washington University’s law school, described the contracting and oversight process as a “recipe for disaster” likening FEMA’s capacity to manage the reconstruction effort to that of the Coalition Provisional Authority (CPA) in Iraq, both of which can be characterized by their lack of internal resources and significant time pressures.
