[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]




 
 SIFTING THROUGH KATRINA'S LEGAL DEBRIS: CONTRACTING IN THE EYE OF THE 
                                 STORM

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 4, 2006

                               __________

                           Serial No. 109-160

                               __________

       Printed for the use of the Committee on Government Reform


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
                      http://www.house.gov/reform


                                 ______

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                     COMMITTEE ON GOVERNMENT REFORM

                     TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut       HENRY A. WAXMAN, California
DAN BURTON, Indiana                  TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota             CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana              ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio           DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania    DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah                   WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee       DIANE E. WATSON, California
CANDICE S. MILLER, Michigan          STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio              CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California          LINDA T. SANCHEZ, California
JON C. PORTER, Nevada                C.A. DUTCH RUPPERSBERGER, Maryland
KENNY MARCHANT, Texas                BRIAN HIGGINS, New York
LYNN A. WESTMORELAND, Georgia        ELEANOR HOLMES NORTON, District of 
PATRICK T. McHENRY, North Carolina       Columbia
CHARLES W. DENT, Pennsylvania                    ------
VIRGINIA FOXX, North Carolina        BERNARD SANDERS, Vermont 
JEAN SCHMIDT, Ohio                       (Independent)
------ ------

                      David Marin, Staff Director
                Lawrence Halloran, Deputy Staff Director
                       Teresa Austin, Chief Clerk
          Phil Barnett, Minority Chief of Staff/Chief Counsel


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on May 4, 2006......................................     1
Statement of:
    Perkins, Randall, president AshBritt, Inc.; George Schnug, 
      CEO, AmeriCold Logistics, Inc.; Neal Fox, member, Board of 
      Advisors, FedBid, Inc.; and James Necaise, vice president, 
      Necaise Brothers Construction, accompanied by David 
      Machado, staff engineer....................................   135
        Fox, Neal................................................   201
    Machado, David...............................................   216
        Perkins, Randall.........................................   135
        Schnug, George...........................................   196
    Riley, Major General Don, Director of Civil Works, U.S. Army 
      Corps of Engineers; William Woods, Director, Acquisition 
      and Sourcing Management, U.S. Government Accountability 
      Office; Matt Jadacki, Special Inspector General, Gulf Coast 
      Hurricane Recovery, U.S. Department of Homeland Security; 
      Emily Murphy, Chief Acquisition Office, U.S. General 
      Services Administration; Elaine Duke, Chief Procurement 
      Officer, U.S. Department of Homeland Security; and Deidre 
      Lee, Deputy Director of Operations, Federal Emergency 
      Management Agency, U.S. Department of Homeland Security....    30
        Duke, Elaine.............................................    36
        Jadacki, Matt............................................    78
        Murphy, Emily............................................    50
        Riley, Major General Don.................................    30
        Woods, William...........................................    61
Letters, statements, etc., submitted for the record by:
    Clay, Hon. Wm. Lacy, a Representative in Congress from the 
      State of Missouri, prepared statement of...................   116
    Cummings, Hon. Elijah E., a Representative in Congress from 
      the State of Maryland, prepared statement of...............   110
    Davis, Chairman Tom, a Representative in Congress from the 
      State of Virginia, prepared statement of...................     4
    Dent, Hon. Charles W., a Representative in Congress from the 
      State of Pennsylvania, prepared statement of...............   254
    Duke, Elaine, Chief Procurement Officer, U.S. Department of 
      Homeland Security, prepared statement of...................    38
    Fox, Neal, member, Board of Advisors, FedBid, Inc., prepared 
      statement of...............................................   203
    Jadacki, Matt, Special Inspector General, Gulf Coast 
      Hurricane Recovery, U.S. Department of Homeland Security, 
      prepared statement of......................................    80
    Kucinich, Hon. Dennis J., a Representative in Congress from 
      the State of Ohio, prepared statement of...................   250
    Machado, David, staff engineer, prepared statement of........   219
    Maloney, Hon. Carolyn B., a Representative in Congress from 
      the State of New York, prepared statement of...............   101
    Murphy, Emily, Chief Acquisition Office, U.S. General 
      Services Administration, prepared statement of.............    52
    Perkins, Randall, president AshBritt, Inc., prepared 
      statement of...............................................   137
    Riley, Major General Don, Director of Civil Works, U.S. Army 
      Corps of Engineers, prepared statement of..................    32
    Schnug, George, CEO, AmeriCold Logistics, Inc., prepared 
      statement of...............................................   198
    Watson, Hon. Diane E., a Representative in Congress from the 
      State of California, prepared statement of.................   121
    Waxman, Hon. Henry A., a Representative in Congress from the 
      State of California, prepared statement of.................     8
    Woods, William, Director, Acquisition and Sourcing 
      Management, U.S. Government Accountability Office, prepared 
      statement of...............................................    63


 SIFTING THROUGH KATRINA'S LEGAL DEBRIS: CONTRACTING IN THE EYE OF THE 
                                 STORM

                              ----------                              


                         THURSDAY, MAY 4, 2006

                          House of Representatives,
                            Committee on Government Reform,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:30 a.m., in 
room 2154, Rayburn House Office Building, Hon. Tom Davis 
(chairman of the committee) presiding.
    Present: Representatives Tom Davis, Shays, Burton, 
Gutknecht, Platts, Dent, Foxx, Waxman, Maloney, Cummings, 
Kucinich, Clay, Watson, Lynch, Van Hollen, Sanchez, and Norton.
    Also present: Representatives Pickering, Taylor, and 
Melancon.
    Staff present: Keith Ausbrook, chief counsel; Jennifer 
Safavian, chief counsel for oversight and investigations; 
Patrick Lyden, parliamentarian; Steve Castor, counsel; Chas 
Phillips, policy counsel; Rob White, communications director; 
Andrea LeBlanc, deputy communications director; Edward Kidd, 
professional staff member; John Brosnan, procurement counsel; 
Teresa Austin, chief clerk; Sarah D'Orsie, deputy clerk; Phil 
Barnett, minority staff director/chief counsel; Kristin 
Amerling, minority general counsel; Karen Lightfoot, minority 
communications director/senior policy advisor; Michelle Ash, 
minority chief legislative counsel; Jeff Baran, Margaret Daum, 
and Michael McCarthy, minority counsels; David Rapallo, 
minority chief investigative counsel; Earley Green, minority 
chief clerk; and Jean Gosa, minority assistant clerk.
    Chairman Tom Davis. Good morning and welcome to today's 
hearing to examine the Federal Government's contracting 
policies, practices, preparations and response to Hurricane 
Katrina.
    The purpose of this hearing is to examine the contracts in 
place prior to Katrina's landfall and planning efforts that 
took place in anticipation of this catastrophic event; the 
rationale and processes for awarding disaster relief and 
recovery contracts in the immediate aftermath; the internal 
controls in place to ensure that Federal acquisition laws were 
followed and that effective contracting practices were used; 
and the terms and performances of Katrina relief contracts.
    Most importantly, however, I want this committee to learn 
the ways in which the management and oversight of disaster-
related contracting can be strengthened by heeding lessons 
learned after Katrina. We do not want a reoccurrence of some of 
the problems that ensued.
    On August 25, 2005 Hurricane Katrina hit the Gulf Coast 
States of Louisiana, Mississippi, and Alabama with Category 4 
winds and torrential rains causing widespread flooding and 
destruction. By September 9, 2005, Congress had provided over 
$63 billion for disaster relief and is considering another $20 
billion supplemental request.
    The contracting community faced unique and challenging 
circumstances. Acquisition personnel acted to meet pressing 
humanitarian needs, contacting firms in an effort to provide 
immediate relief to survivors and to protect life and property. 
Many firms were called into action on a sole source basis under 
acquisition flexibilities that allow the government to acquire 
urgently needed goods and services in emergency situations. 
Notwithstanding the extraordinary scope of the disaster, a 
significant portion of the immediate response efforts were 
provided through existing contracts that had previously been 
awarded through full and open competition.
    As we learned from our work on the House Select Katrina 
Committee, the circumstances and urgent needs created by the 
storm provided an unprecedented opportunity for fraud and 
mismanagement. Nevertheless, despite the speed and scope of the 
effort, the system, though stressed, seemed to work well.
    Today we want to learn whether the proper procedures, 
vehicles and mechanisms are in place to minimize systematic 
vulnerabilities and meet the challenges posed by catastrophic 
events.
    The committee is interested in pre-disaster acquisition 
planning by Federal agencies, the initial acquisition response 
to the need for immediate relief, and efforts to respond to 
more long-term recovery needs. The adequacy of the existing 
acquisition work force to provide contract management and 
support is going to be examined as well.
    Finally, we will review lessons learned and suggestions for 
improvements in our response to future disasters. Our review 
will include the use of set-asides, including local contractor 
participation, under the Stafford Act.
    In addition, we want to understand the specific roles and 
responsibilities of private companies as contractors to the 
Federal Government. Our witnesses can bring their perspectives 
regarding forward contracting, reverse auctions, the use of on-
line acquisition technology and the challenges that occurred in 
implementing the Stafford Act in preferences for local 
contractors. We will ask what assistance these firms provided 
to agencies, the extent of previous support for agency missions 
during natural disasters, and their participation in 
preexisting disaster relief plans.
    Finally, I am interested in the companies' perspectives 
regarding the most effective contracting vehicles, methods and 
policies.
    Millions of dollars have gone to private firms to help 
prepare for and respond to Katrina. Part of our job is to ask 
what contracts should have been in place before this storm 
arrived and the rationale and process for awarding disaster 
relief and recovery contracts in the immediate aftermath. We 
will ask about the ways in which the management and oversight 
of disaster-related contracting can be strengthened.
    Concerns have been raised with respect to how the Federal 
Government awards contracts in the immediate aftermath of a 
disaster. I hope that we can take the time to understand how 
the procurement system works before we rush to change it. I am 
sure we will learn that there have been mistakes when decisions 
were made quickly. There will be disagreements with contractors 
over pricing and payment schedules, which happens with complex 
contracts under difficult situations.
    We also need to look at and review the local participation. 
Under the Stafford Act agencies and prime contractors are to 
give preference to local subcontractors, but many small local 
businesses continue to complain they are not hired or are hired 
on unfair terms. Questions have been raised about the Corps of 
Engineers' use of limited competition to award contracts for 
debris removal and cleanup, for example.
    At the same time larger firms argue that the projects are 
too big or complicated for small firms to handle. Agencies cite 
the need to hire firms with the track record, financial 
strength and expertise to meet the requirements. They also note 
the challenges posed by managing hundreds of smaller 
contractors.
    This raises a related but important issue. Clearly, we want 
contractors to have the expertise to get the job done, but 
before we can address that issue we need a sufficiently trained 
acquisition work force. Our acquisition laws have been crafted 
to provide enough flexibility for the government to quickly get 
what it wants in emergency situations. I hope we will learn 
what tools, if any, we will need to be better prepared next 
time.
    The officials on panel one will provide an overview of the 
acquisition process and a description of the acquisitions made 
before Katrina. The witnesses will undertake a review of the 
agencies' performances in response to Katrina and their plans 
for the future. The DHS IG and the GAO witnesses will provide 
an overview of their Katrina-related investigations and 
oversight efforts.
    Panel two consists of representative companies whose work 
can highlight particular contracting issues surrounding 
response and recovery requirements. AshBritt is a national firm 
providing debris removal services. AmeriCold Logistics 
contracted to provide ice. FedBid provides reverse auction 
services. And Necaise Brothers is a small local contractor. 
Panel two witnesses are expected to provide an overview of the 
goods and services they provided, a review of their contracts 
with the Federal Government and the unique challenges they face 
carrying out their missions.
    I look forward to hearing from them.
    I would now recognize our distinguished ranking member, Mr. 
Waxman, for his opening statement.
    Before I do that let me ask unanimous consent for Mr. 
Pickering, Mr. Taylor and Mr. Melancon to participate in 
today's hearing. Hearing no objection, so ordered.
    Mr. Waxman.
    [The prepared statement of Chairman Tom Davis follows:]

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    Mr. Waxman. Mr. Chairman, I want to commend you for holding 
this hearing and for your efforts in working on a bipartisan 
basis to get documents from the agencies. This is a hearing 
that we should be doing.
    The picture the documents paint are not very pretty. It is 
hard not to get angry. After Hurricane Katrina devastated the 
Gulf States Americans did what they always do. They opened 
their wallets to get the recovery going. As a Nation we 
committed billions of dollars to make things better and 
Americans asked us to make sure the job was done right. Today 
we examine how that money has been spent, and what we will find 
is massive fraud, waste and abuse, pervasive mismanagement and 
gross incompetence.
    Much of this is summarized in the briefing memo that my 
staff prepared, and I would ask unanimous consent that it and 
the documents it cited be made a part of the record.
    Chairman Tom Davis. Without objection, it will be made part 
of the record. Thank you.
    [The prepared statement of Hon. Henry A. Waxman follows:]

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    Mr. Waxman. One of the first and most basic challenges the 
gulf faced was removing countless tons of debris. The U.S. Army 
Corps of Engineers led this effort and awarded four contracts 
totaling $2 billion to clean up the mess. The debris 
contractors grabbed the money and then committed every abuse 
imaginable. Some sought double payments for the same load. 
Others massaged their travel record to qualify for bonuses for 
long distance transport. And one contractor even picked up 
debris from a public dump and drove it to the Federal site just 
to game the system. The types of fraud and waste in the debris 
contract goes on and on, and it is all summarized in depressing 
detail in this memo.
    Things were not any better in the effort to patch damaged 
roofs. The Federal Government spent millions on contracts with 
companies to install temporary blue plastic sheeting to protect 
damaged homes. But internal government documents show that blue 
roofs that were installed for billing purposes were never 
installed on actual roofs. Overcharges were routine, and 
exaggerating the amount of work actually done seems to have 
been standard procedure.
    The Katrina contracts are a lose-lose proposition. Private 
contractors have exploited the system to make a bundle, 
taxpayers were gouged, and the folks devastated by Katrina in 
Louisiana, Alabama and Mississippi didn't get the help they 
have deserved.
    Who let this happen? Well, the short answer is the Corps of 
Engineers, the prime contractors, the Bush administration and 
Congress. The Corps had the actual responsibility of getting 
the work done and looking out for taxpayers. But the Corps of 
Engineers regularly failed to inspect trucks as they left dump 
sites and repeatedly overestimated the size of the loads 
delivered by the contractors. In a series of damning reports, 
government auditors describe the Corps' assessment as unusually 
high, overly generous, very liberal and consistently on the 
high side.
    The exact same types of problems plagued the blue roof 
contracts. Government auditors found that Corps officials 
entered into an informal agreement with the private 
contractors, not to question bills as long as the bills did not 
exceed the estimate by more than 50 percent. According to the 
auditors, this agreement was, ``excessive and unreasonable and 
does not adequately protect the government from waste or 
abuse.''
    One of the most powerful findings that emerges from the 
documents is how fundamentally flawed the Bush administration's 
entire contracting approach has been. The cornerstone of the 
administration's approach has been to award large umbrella 
contracts to major prime contractors. These contractors do not 
collect the debris themselves and they do not patch the roofs 
themselves. Instead they hire subcontractors to do the work and 
then the subcontractors hire other subcontractors. The theory 
behind this approach is that the prime contractors should have 
the resources and the expertise to oversee these layers of 
contractors effectively.
    What the documents reveal is that this entire approach is 
bankrupt. The government auditors repeatedly report that prime 
contractors were exercising virtually no oversight over the 
subcontractors. They do not know where the subcontractors are, 
what they are doing or whether they have even completed their 
work. This approach builds overhead on top of overhead and 
dramatically inflates costs for taxpayers. Each contractor, 
subcontractor and sub-subcontractor wants a cut even if it is 
not doing any real work, and it is an ideal environment for 
fraud.
    When GAO testifies this morning we will also learn that 
there was inadequate planning, that the agencies failed to 
communicate with each other about who was in charge and that 
there was ineffective contractor oversight because there were 
not enough people on the ground. GAO will also tell us about 
other examples in which millions of dollars were simply thrown 
away because of incompetence and lax oversight.
    What is clear is that contractor looting in Katrina is not 
an isolated incident. Contract mismanagement, deficient 
oversight and exorbitant overcharges have occurred again and 
again since 2001.
    The Bush administration has gone on three spending binges 
in the last 5 years. The first one was the frenzied award of 
huge homeland security contracts after the September 11th 
attacks. The second was the $20 billion spent on Iraq 
reconstruction, and the third is responding to Katrina. All 
three are marked by unprecedented contractor abuse. We are not 
talking about hundreds of thousands of dollars lost to fraud or 
wasteful spending. We are not talking about millions. We are 
talking about billions of dollars, billions squandered or 
looted.
    Scattered through Iraq right now are over 100 partially 
built public health hospitals paid for by U.S. Taxpayers which 
are likely never to be completed. They cost over $180 million. 
The contractor Parsons got paid, but it did not finish its 
work. Last month the New York Times reported on a $70 million 
ditch Halliburton built in Iraq. It appears company officials 
knew their plan for repairing an oil pipeline could not 
possibly work. It didn't. But they still got $70 million and 
American taxpayers bought a ditch.
    Yet, despite the litany of extraordinary abuses, no one in 
this administration seems to care and no senior officials are 
ever held accountable.
    Congress is no better. Given all the billions of taxpayers 
dollars that have been wasted, Americans might think that 
Congress would dig into this problem but in almost every case 
with the exception of hearings in this committee Congress has 
looked the other way. I am feeling particularly frustrated by 
the Katrina looting because we knew it was going to happen. 
That is why I joined with Minority Leader Pelosi last September 
in introducing the Hurricane Katrina Accountability and Clean 
Contracting Act. This legislation would have enacted 
fundamental reforms in time to prevent the Katrina abuses, but 
the bill never received a hearing.
    Administration officials claim we are exaggerating the 
problem, and the day after Leader Pelosi and I introduced our 
Katrina legislation, the President said reforms were not 
necessary and he promised, ``We'll make sure your money is 
being spent wisely and we are going to make sure that the money 
is being spent honestly.''
    Well, I said at the outset we should all be ashamed and I 
mean that, but at the same time I do want to thank Chairman 
Davis for holding this hearing. He is one of the lone figures 
on the Republican side who will ask questions and request 
documents. He does not always go as far as I think he should, 
but he does much more than many of his colleagues. In 
particular, I want to thank him for requesting with us the 
documents from the Army Corps of Engineers, the Department of 
Homeland Security that detail the abuses in Katrina-related 
contracts. These 3,000 pages of documents are the reason we are 
here today, and I look forward to working with the chairman and 
all the committee members in getting to the bottom of this and 
finally holding someone accountable for the unconscionable 
looting and incompetence. We owe that to the American taxpayers 
and we owe it to all those who lost so much in Katrina.
    Chairman Tom Davis. Thank you, Mr. Waxman. Members will 
have 7 days to submit opening statements for the record.
    We will recognize our first panel. We have Major General 
Don Riley, the Director of Civil Works, the U.S. Army Corps of 
Engineers. Welcome. We have Ms. Elaine Duke, the Chief 
Procurement Officer at the U.S. Department of Homeland 
Security. We have Deidre Lee, the Deputy Director of 
Operations, Federal Emergency Management Agency, U.S. 
Department of Homeland Security. No stranger to this committee. 
Thank you for being here. Ms. Emily Murphy, the Chief 
Acquisition Office, U.S. General Services Administration. Thank 
you. We have Mr. William Woods, the Director of Acquisition and 
Sourcing Management, U.S. Government Accountability Office. 
Again, no stranger to this panel. And Mr. Matt Jadacki, who is 
the Special Inspector General, Gulf Coast Hurricane Recovery, 
U.S. Department of Homeland Security.
    It is our policy to swear all witnesses in before you 
testify. Please rise and raise your right hands.
    [Witnesses sworn.]
    Chairman Tom Davis. I think you have heard some of the 
brickbats that have been thrown. I think all of you are capable 
of defending yourselves if you feel it needs it. If you want to 
depart from your written statement, you can say anything you 
would like. We look forward to a rigorous oversight hearing.
    General Riley, we will start with you. Thank you for being 
with us.

STATEMENTS OF MAJOR GENERAL DON RILEY, DIRECTOR OF CIVIL WORKS, 
    U.S. ARMY CORPS OF ENGINEERS; WILLIAM WOODS, DIRECTOR, 
     ACQUISITION AND SOURCING MANAGEMENT, U.S. GOVERNMENT 
ACCOUNTABILITY OFFICE; MATT JADACKI, SPECIAL INSPECTOR GENERAL, 
  GULF COAST HURRICANE RECOVERY, U.S. DEPARTMENT OF HOMELAND 
SECURITY; EMILY MURPHY, CHIEF ACQUISITION OFFICE, U.S. GENERAL 
    SERVICES ADMINISTRATION; ELAINE DUKE, CHIEF PROCUREMENT 
OFFICER, U.S. DEPARTMENT OF HOMELAND SECURITY; AND DEIDRE LEE, 
  DEPUTY DIRECTOR OF OPERATIONS, FEDERAL EMERGENCY MANAGEMENT 
          AGENCY, U.S. DEPARTMENT OF HOMELAND SECURITY

              STATEMENT OF MAJOR GENERAL DON RILEY

    General Riley. Mr. Chairman, thank you. As Director of 
Civil Works, I also command emergency operations for the Corps. 
Thank you for the opportunity to testify today.
    Under the National Response Plan the Corps is assigned as 
the coordinator for Emergency Support Function No. 3, which is 
public works and engineering. Under this function, the Corps 
has an advanced contract initiative program in which we 
competitively award contracts for future use in the provision 
of water, ice, temporary power, temporary roofing, and debris 
removal. Having these contracts in place allows the Corps to 
rapidly respond to emergency situations.
    Due to the unprecedented and widespread devastation in last 
season's storms, the Corps awarded four additional debris 
removal contracts in Mississippi and Louisiana that were open 
to any company. We received 22 proposals and the contracts were 
awarded on the basis of the best value to the government. The 
Army audit award agency is currently reviewing the award and 
administration of these four contracts.
    FEMA also tasked the Corps to provide temporary roofs to 
over 197,000 homes in Florida, Louisiana, Mississippi and 
Texas. We previously awarded several advance contracts for 
temporary roofs in the gulf region and given the magnitude of 
the damage in the 2005 hurricane season, four additional 
contracts were awarded under urgency procedures utilizing the 
ranked proposals from the original competition.
    Additionally, the Corps makes extensive use of standard 
authorities granted to us under the various small business set-
aside programs, especially for Small Business Administration 
registered 8(a) firms. We have instituted high goals for small 
business subcontracting and included a reporting requirement 
that keeps focus on achieving results in these areas.
    Furthermore, we have been following an acquisition strategy 
for our continued mission from FEMA, which includes 
opportunities at the prime level for local disadvantaged 
companies and geographic set-asides for the unrestricted 
portion of the strategy. We work to strike a balance between 
expeditiously providing relief to those in need while doing so 
in the most efficient and effective manner. We immediately 
deployed Corps internal auditors teamed with the Defense 
Contract Audit Agency and the U.S. Army Criminal Investigation 
Command to oversee all emergency response efforts, to note 
actual or potential errors, help mission managers comply with 
their fiscal stewardship responsibilities, and detect instances 
of fraud, waste and abuse. We implement corrective actions 
immediately.
    Finally, for each emergency event we prepare after action 
reports, which include lessons identified from all sources 
during our response efforts. And our intent is to immediately 
correct, strengthen and where necessary adjust supporting 
procedures.
    Again thank you for the opportunity to appear before this 
committee, and I would be happy to answer any questions.
    [The prepared statement of General Riley follows:]

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    Chairman Tom Davis. Thank you very much. Ms. Duke, welcome.

                    STATEMENT OF ELAINE DUKE

    Ms. Duke. Thank you. Mr. Chairman, Congressman Waxman and 
members of the committee, thank you for the opportunity to 
discuss the Department of Homeland Security acquisition program 
and our role in providing support to FEMA and its response to 
Hurricane Katrina.
    I am a career executive and have spent most of my 23 years 
of Federal service in the procurement profession. On January 
31, 2006, I was selected as the Department's Chief Procurement 
Officer.
    Accompanying me today is Ms. Deidre Lee. Ms. Lee joined the 
new FEMA leadership team in April. She brings a wealth of 
acquisition experience that will greatly contribute to FEMA's 
success in improving its disaster response and recovery 
operations. She can answer any questions that the committee may 
have concerning FEMA's plans on moving forward.
    As the Chief Procurement Officer for the Department of 
Homeland Security, I provide oversight and support to the eight 
procurement offices within the Department. In addition to the 
Federal Emergency Management Agency, the seven other 
procurement officers are the U.S. Customs and Border 
Protection, Transportation Security Administration, Immigration 
and Customs Enforcement, the Federal Law Enforcement Training 
Center, U.S. Coast Guard, U.S. Secret Service, and the Office 
of Procurement Operations.
    Collectively these eight procurement offices obligated over 
$7 billion for supplies and services in support of the DHS 
mission in fiscal year 2005. Because eight of the seven 
contracting offices report to the heads of their components, I 
strive to achieve functional excellence among the offices 
primarily through collaboration. I use the DHS Chief 
Acquisition Officers Council, comprised of the head of each 
contracting office, to integrate the contracting function while 
maintaining the components' ability to meet the customers' 
unique needs.
    My top three goals for the DHS acquisition program are, 
first, to establish an acquisition system whereby each 
requirement has a well-defined mission and a management team 
that includes professionals with the skills to achieve the 
correct mission results.
    My second goal is to build a DHS acquisition work force. 
One initiative under this goal is improving and broadening the 
DHS fellows program. Under the fellows program we recruit 
recent college graduates to ensure DHS has a qualified cadre of 
acquisition professionals to support its mission now and in the 
future.
    My third goal is to assure more effective buying across the 
eight contracting offices for the use of strategic sourcing and 
supplier management.
    On a Federal level as a member of the Federal Chief 
Acquisition Officers Council, I will continue co-leading Ms. 
Emily Murphy, my colleague at General Services Administration, 
the Federalwide effort of developing a contingency contracting 
program so that the procurement community has the tools to 
provide an integrated Federal response to an incident of 
national significance.
    Our response to Hurricane Katrina revealed the need for 
improvements in how we respond to such devastating events. For 
the acquisition community we recognize the need for increased 
staffing and we are hiring additional personnel. We also 
recognize the need for additional longer term contracts to 
improve FEMA's ability to respond to emergencies.
    I will continue to work closely with FEMA's senior 
leadership to ensure it successfully obtains the resources 
authorized to build their acquisition core and to fulfill the 
commitment to recompete contracts as appropriate. We are 
addressing that area with the award of many disaster-related 
contracts, including the competitive award of the planned 
individual assistance, technical assistance contracts. We have 
developed an overall contingency contracting strategy that 
provides immediate response to disasters while taking full 
advantage of the Stafford Act's preference for local 
contractors.
    I thank the committee for your aid in this effort, and I am 
happy to answer any questions you may have and look forward to 
working with you in the future.
    [The prepared statement of Ms. Duke follows:]

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    Chairman Tom Davis. Thank you. Ms. Murphy, thanks for being 
with us.

                   STATEMENT OF EMILY MURPHY

    Ms. Murphy. Good morning, Chairman Davis, Ranking Member 
Waxman, and other distinguished members of the committee. Thank 
you for inviting me here this morning to testify on GSA's 
actions in the aftermath of Hurricane Katrina and how we serve 
the taxpayers' interests in the procurement process in times of 
urgent need. These are timely topics as we are roughly 1 month 
away from the beginning of the next hurricane season.
    In the past 8 months the men and women of GSA have worked 
diligently to help respond to the call for assistance and even 
now we are working to be more proactive. We must apply the 
lessons from Katrina to every disaster that strikes in the 
future. Immediately after Katrina GSA activated our contingency 
contracting plan, supplementing with contracting officers from 
all 11 regions and GSA's headquarters, 7 days a week, 24 hours 
a day. Every member of my staff that we could warrant, we 
warranted immediately to provide additional assistance to those 
in the field. In our Office of Commercial Acquisition alone, 
GSA associates worked nearly 9,500 collective hours on over 
1,100 requisitions for items such as diapers, bottled water, 
portable restroom facilities, computers, pumps, generators and 
tents. Additionally we transferred nearly $2 million worth of 
property from excess inventory to State and local governments, 
including $332,000 in Federal property donated to the Furniture 
for Schools Program in the affected areas.
    Of the total 203 GSA managed office space locations within 
the FEMA declared disaster area, 14 buildings were closed due 
to sustained damage. That includes 189 lease locations and 14 
GSA-owned locations, comprising in excess of 3.4 million 
rentable square feet of lease space and 1.8 million square feet 
of owned space.
    On October 10, 2005 just 40 days after Katrina's landfall 
on the gulf coast the entire Federal work force affected by 
Katrina was returned to full operational status with 
replacements and temporary space.
    In response to fleet operational requirements GSA assigned 
over 700 vehicles including vans, pickup trucks and buses for 
immediate need, team short term basis to Federal agencies in 
support of their aid and relief work in the affected storm 
area.
    As of April 18, 2006, GSA had procured over $630 million in 
products and services in support of Hurricane Katrina. We made 
every effort to comply with the Stafford Act and $483 million, 
or 77 percent, of those procurements were awarded to small 
businesses, with 53 percent to local small businesses. This 
work occurred amid pressure to execute contracts quickly, 
challenging working conditions and widespread logistical and 
communications disruptions.
    One example: On September 1, GSA was asked to quickly 
establish a 500-operator call center in Chicago. At the time 
FEMA was unable to meet the demand of the approximately 50,000 
calls a day. As you will recall, this unprecedented urgent need 
received national media attention and the President promised to 
do whatever was necessary to ensure that people got answers. By 
September 2 GSA leasing specialists had signed a letter of 
intent for 60,000 square feet allowing for $405,000 of 
electrical work and $280,000 of cabling work to begin. Within 1 
week we had the center up and operational and ready for 
contractors to go in and begin work.
    Nothing is to suggest that everything went perfectly in 
Katrina and we are working right now to ensure that we are 
better prepared in the future. That includes stressing training 
so that we give acquisition professionals the tools that they 
need to be successful as they respond to disasters, a 
partnership with the Federal Acquisition Institute and the 
Defense Acquisition University to make sure that additional 
courses are available on a real-time basis, and making sure 
that go kits, including things like satellite phones and just 
basic supplies, are available to our acquisition professionals 
as we deploy them to the field.
    As Elaine mentioned, we are co-chairing the CAO Council's 
Working Group on Incidents of National Emergency, and we have 
also gone back through the OMB response plan, gone and reviewed 
all of our significant acquisitions that we did in response to 
Hurricane Katrina to make sure that we bid not just the 
appropriate contracts at the time of the initial acquisition, 
but that continued to be the appropriate response going 
forward.
    In sum, we take seriously the trust placed in us by our 
Federal customers and by the taxpayers. We have learned lessons 
from Katrina and we will continue to apply those in the future. 
And we very much look forward to working with this committee, 
OMB and the other agencies to continue to support their 
missions.
    Thank you.
    [The prepared statement of Ms. Murphy follows:]

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    Chairman Tom Davis. Thank you.
    Mr. Woods.

                   STATEMENT OF WILLIAM WOODS

    Mr. Woods. Thank you, Mr. Chairman, Ranking Member Waxman, 
other members of the committee. I appreciate the opportunity to 
be here today to talk about the work of the Government 
Accountability Office and looking at the Katrina-related 
contracts.
    Let me first mention the approach that we took and make a 
couple of points there. We coordinated very closely as we began 
to look at Katrina-related contracts with the rest of the 
oversight community, particularly the inspectors general, Mr. 
Skinner at the Department of Homeland Security, Mr. Jadacki and 
the rest of their colleagues, to make sure that we could avoid 
duplication of effort whenever possible. Those consultations 
resulted in a couple of understandings among our representative 
organization. First, it was very clear that the inspector 
general community was devoting a significant amount of 
resources looking at the award of these contracts, the 
competition, the pricing issues, that sort of thing. And where 
we felt that we could make the greatest contribution at the 
Government Accountability Office is looking at the execution of 
those contracts. So we decided to devote a significant effort 
looking at the monitoring or surveillance of contractor 
efforts.
    The other accommodation that we were able to reach is that 
we satisfied ourselves that certain contracts had quite 
adequate oversight by the inspector general community, 
particularly the debris removal contracts. So we decided that 
we did not need to devote any additional resources looking at 
the debris removal contracts.
    I want to summarize very briefly our findings in looking at 
these contracts, but before I do I want to recognize the hard 
work and extraordinary effort of all of the responders at the 
Federal, State and local level and the contractors who devoted 
a significant amount of effort in responding. We can all have 
our differences about the outcomes and we will have our debates 
about the challenges that they face, but there can be no 
disagreement, it seems to me, about the effort that was put in. 
Many of these people were volunteers from agencies that are 
represented at the table and a number of other agencies, and I 
wanted to recognize that effort.
    Let me summarize very briefly our findings. We found 
shortcomings in three primary areas: First was planning, second 
communications, and third was work force. And in each of these 
areas I will summarize very briefly the challenges that the 
agencies faced but then also talk about some of the experiences 
that we learned about from other organizations, private sector 
organizations, other companies, State and local governments 
that also responded to challenges and maybe there are some 
lessons learned for the Federal Government in these areas.
    First in the area of planning, we found insufficient 
numbers of pre-awarded contracts. Some agencies had pre-awarded 
contracts. The Federal Emergency Management Agency had some but 
clearly not enough. They did not adequately anticipate the 
needs for temporary housing, for example, or the need for 
public buildings.
    By contrast, the Corps of Engineers, you heard earlier 
about their Advanced Contracting Initiative that enabled them 
to have the contract, the preawarded contract, in place in 
order to be able to respond.
    Similarly, we found that in the State of Florida, they have 
a very comprehensive data base of the amount of supplies and 
services that are going to be needed. They prequalify their 
vendors so that they are able to very, very quickly enter into 
whatever contracts are needed after the onset of the event.
    In the area of communication and responsibilities, we found 
a couple of instances where it was very clear that agencies--
one agency did not have a good understanding of what another 
agency was doing. Let me give you one specific example. In the 
area of ice, the Corps of Engineers was responsible for the 
contracts for ice. FEMA placed the requirements for ice, but 
FEMA did not understand how the Corps of Engineers went about 
contracting for ice, and, as a result, ordered twice as much 
ice as was needed. This resulted in a very difficult situation 
when the ice arrived to the region and there were insufficient 
distribution and storage facilities in order to be able to 
handle the quantities that arrived.
    By contrast, when we looked at other organizations, for 
example, CSX Transportation, one of the approaches that they 
take is they conduct joint training exercises with all 
organizations that are going to be responsible for responding, 
including the contractors. And that enables them to anticipate 
some of the difficulties that might arise after the event 
occurs.
    And then, third, in the area of work force, we found that 
there were insufficient numbers of contract monitors, 
specifically in the blue roof program and also in the temporary 
housing area for the trailers. The lack of onsite contract 
monitors delayed both of those programs.
    Again, by contrast, when we looked at some other 
organization, Land Star Transportation and Wal-Mart, for 
example, they place a premium on being able to redeploy 
employees in a very, very fast turnaround response time to be 
able to respond to the needs of their customers.
    With that summary, I will be happy to take whatever 
questions the committee may have.
    Chairman Tom Davis. Thank you.
    [The prepared statement of Mr. Woods follows:]

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    Chairman Tom Davis. Mr. Jadacki.

                   STATEMENT OF MATT JADACKI

    Mr. Jadacki. Good morning, Mr. Chairman, members of the 
committee, and guests. Many of the comments that I am going to 
make, my opening statement kind of echoes what my colleague 
here, Bill Woods, said regarding some of the cooperation and 
coordination findings. So I will try to be brief.
    In the aftermath of a major disaster such Hurricane 
Katrina, the Federal Government is obligated to ensure a number 
of important safety and security measures for its citizens. The 
government is responsible, among other things, to take 
immediate steps to mitigate damage or harm to its citizens; 
ensure that roads are clear of debris, to allow emergency 
workers access to affected areas; provide temporary shelters 
for disaster victims; and provide minimum repair to buildings 
to enable victims to return to their homes, to prevent further 
damage.
    As we review the Federal Government's response to Hurricane 
Katrina, we asked the question: Did the Federal Government meet 
its obligations? Unfortunately, as my testimony indicates and 
our findings of some of our reviews, there are still many 
weaknesses in the Federal Government's response and recovery 
efforts. We are still in the process of fully evaluating the 
overall contracting efforts in predisaster planning related to 
Katrina. Again, we are working closely with the Government 
Accountability Office and with the other Federal Inspector 
General's Office.
    To date, my office has published over 40 reports, many of 
these dealing with contracting issues. Many of these reports 
pertain to FEMA's procurement activity, including contracts for 
technical assistance, cruise ships, mobile homes, base camps, 
guard services, to name a few.
    We are also undertaking several major reviews of FEMA 
contracts and we plan to vigorously review contracts led by 
FEMA and other DHS components regarding disaster-related 
activities.
    FEMA's core mission is to respond to emergencies and 
procure emergency supplies and equipment. For example, ice, 
food, water, travel-trailer mobile homes base camps on a 
recurring basis. Therefore, planning for these procurements 
would represent sound business practice. Because of the 
unpredictable nature of emergency operations, such planning 
cannot always be used to select specific sources in advance. 
However, for each type of procurement such as ice, water, food, 
predisaster planning can identify prospective sources of 
supplies and services, delineate how competition will be 
sought, promoted, and sustained during emergency operation, 
describe how Stafford Act requirements for preferences of firms 
affected by the disasters will be met; lay out source-selection 
procedures for each type of procurement; and establish 
communication systems and processes and publicize them in order 
to have prospective sources know how to contact FEMA 
procurement personnel.
    Because this disaster planning did not take place, FEMA, 
and many other components of the Federal Government, found 
itself hastily entering into contracts, with little 
competition, for disaster commodities. Understandably, in the 
aftermath of a disaster, government agencies award contracts 
under expedited contracting methods, as authorized by the 
Federal Acquisition Regulation in order to quickly respond to 
victims' needs. DHS alone ordered 3,400 contracts worth $5.3 
billion in the immediate aftermath of Hurricane Katrina. We 
understand that the immediate response is needed to provide 
victims essential aid; however, we suggest that many of these 
response requirements are the same for every disaster.
    A degree of predisaster planning can and should take place. 
Predisaster planning should include establishing standby or 
call contracts with vendors to provide essential goods and 
services required to facilitate immediate response operations 
or to meet the needs of disaster victims.
    For example, call contracts, ice, water, food, tarps, 
transportation, travel-trailers, and other items commonly 
procured shortly after disaster strikes should be in place and 
ready in short notice. A call contract allows for cost 
specifications, terms, and conditions to be negotiated in 
advance, negating the need for intensive contract negotiations 
during a crisis. This is a common business practice in the 
private sector and in other Federal agencies.
    I submit to you why we are here today: to learn lessons 
learned in the past--in this case the Federal Government's 
response to devastation caused by Hurricane Katrina--in order 
to not repeat the same mistakes.
    Because of the nature of disaster operations, we understand 
that predisaster planning has to be flexible. However, 
predisaster planning should balance the Federal Government's 
capabilities with those of the private industry, including 
distributors, wholesalers, retailers, manufacturers, and 
service providers. We suggest use of caller standby contracts 
with prenegotiated prices, quantities, terms and conditions, 
and specifications to facilitate procurement operations in the 
immediate aftermath of a disaster.
    We understand that FEMA is aggressively pursuing and 
recruiting contracting officers and COTRs to augment its 
contract staff. In addition, it established a separate contract 
office to handle the procurement activity for the gulf region. 
These are important first steps to provide additional oversight 
controls and support for recovery operations throughout the 
gulf region.
    More importantly, it positions FEMA to better meet the 
procurement demands of the future.
    Our hope is that the lessons learned from our findings will 
help address these weaknesses and not allow us to repeat 
historical mistakes but, rather, take these lessons learned and 
turn them into solutions solved.
    Mr. Chairman this concludes my prepared remarks. I would be 
happy to answer any questions.
    [The prepared statement of Mr. Jadacki follows:]

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    Chairman Tom Davis. I thank all of you very much.
    Let me start the questions, Mr. Woods. Let me start with 
you. We have heard Mr. Waxman's assessment, and I didn't ask 
him for a grade, but I don't think it is a passing grade in 
terms of how this worked out.
    We know the administration said, basically, mistakes were 
made. But they have been very defensive about what happened.
    What is your overall assessment of the performance of the 
acquisition agencies and the contractors, and how would you 
grade the performance of our acquisition system in response?
    And I am going to ask you the same thing, Mr. Jadacki. Let 
me ask you. You have been through this before. You have seen it 
is an emergency, you discount a little bit for that, but how 
would you grade it?
    Mr. Woods. Well, I think you can't underestimate it and 
fail to give full appreciation to the circumstances. Clearly, 
the agencies did the best that they could under the 
circumstances. But those circumstances just greatly overwhelmed 
the planning that was in place, the work force that was 
dedicated to the effort and to the systems.
    Chairman Tom Davis. Let me ask you--you are GAO, so you 
don't have to answer to anybody but Congress, and we rely on 
you to call the balls and strikes here.
    This storm was not only predicted, it was predictable. I 
mean, everyone knew sooner or later you could get a storm of 
this magnitude. You started off with three deficiencies in your 
report. And the first one was planning.
    Now, everybody here tried to do the best they could. I 
don't think Mr. Waxman or myself are going to question anybody 
there on the ground. But at the end of the day, how would you 
rate the planning for this?
    Mr. Woods. The planning was not where it needed to be for 
the level of the storm that hit, clearly.
    Chairman Tom Davis. Anywhere close?
    Mr. Woods. I don't believe so. They were overwhelmed by 
what actually occurred.
    Chairman Tom Davis. And, in fact, we had gone through an 
exercise, Hurricane Pam, just a few months before, that 
predicted a storm of large magnitude as this in the New Orleans 
area, didn't hit the Mississippi coast. So in the planning, 
could you give them a passing grade?
    Mr. Woods. That's correct. There were lessons learned from 
that exercise Pam, but, clearly, the results of that learning 
were not translated into adequate planning for Katrina.
    Chairman Tom Davis. So on the planning side, is it fair to 
say we get an F on that? It was not anywhere near where it 
needed to be.
    Mr. Woods. I am not sure I would want to give them a grade, 
but it is clearly not where it needed to be, sir.
    Chairman Tom Davis. You can't give them an incomplete. I 
mean, in this case it came.
    Mr. Woods. We can certainly go that far, to give them an 
incomplete.
    Chairman Tom Davis. On communications, the other--let me 
ask you, Mr. Jadacki, taking a look at the planning and 
everything else on this, planning wasn't anywhere near where it 
needed to be for a storm of this magnitude, and yet for years 
this has been predicted and we drilled on this, and this was a 
worst fear.
    What do you have to say about that?
    Mr. Jadacki. I mentioned in my opening remarks the 
predisaster planning had to be there. I had an opportunity--I 
did have the opportunity when I was working for FEMA to attend 
the Hurricane Pam exercise. And, quite frankly, I was kind of 
shocked at some of the scenarios that were being predicted a 
year before the disaster, and actually watched the events 
unfold on TV. It was eerie. But, again, they were predicting 
during that exercise that hundreds of thousands of people would 
be displaced from their homes, that the levees would break, the 
waters would rise. So it is not a surprise on anybody's part 
about the predisaster planning.
    I know that FEMA, for a number of years, had discussed the 
notion of a catastrophic housing program; what to do when a 
number of people were displaced in those homes and had to be 
moved.
    Normal disasters, if there is a normal disaster, people 
would evacuate 50 miles inland, the disaster would be over, and 
they would eventually go back.
    In this case, people were evacuating to almost every single 
State and some territories, staying in hotels, staying in 
travel-trailers and apartments and those types of things. That 
type of planning would really help to go a long way.
    Chairman Tom Davis. So the planning here was nowhere near 
where it needed to be?
    Mr. Jadacki. No.
    Chairman Tom Davis. And everything else flows off that, 
because once you don't have the planning in place and the 
assets prepositioned and it is in your face, you do the best 
you can at that point. But more mistakes are likely to ensue 
under that circumstance than if you had those things in place.
    Mr. Jadacki. I agree. I think we were overwhelmed. The fact 
we had hundreds of thousands of citizens that had to leave 
their homes for extended periods. What to do in that case? It 
didn't include procurement.
    Chairman Tom Davis. Let me just go to the panel and ask on 
the other side, now we have a new hurricane season coming up. 
What is different this year than last year? How are we assured 
that if this happens--you still drive through and there is 
still debris on the ground months afterwards.
    In fact, the thing that caught me the most on my third 
visit down there was how much debris is still on the ground, 
although I recognize that there was a lot of debris to start 
with, and you have to put it somewhere. We will get to that in 
this panel and the next panel.
    What is different this year on the planning that makes us--
should make everybody feel safer?
    I will start with General Riley.
    General Riley. Sir, if I may, in particular in the planning 
for the Advanced Contract Initiative, once again we will have 
in place advanced contracts for procurement of ice and water; 
also construction of temporary roofs and removal of debris.
    In addition to that, we have our contracting community; we 
are strengthening our procedures for hiring of local 
contractors.
    Chairman Tom Davis. Can I make--I hear you. But, you know, 
Home Depot or Wal-Mart, any of these groups, could have gotten 
assets there a lot quicker if you had just given it to them, 
than some of these other companies. They have a supply train 
and a way to get things moved around. They have--in some cases 
they are closer to the points where these things hit than some 
of these governments sites that are prepositioned there.
    I had the president of Home Depot say they wanted to give 
stuff away at cost. We didn't have a mechanism to accept that. 
We didn't have a mechanism to accept millions of dollars 
donated to us from around the world.
    Do we have that in place this year?
    General Riley. Sir, as far as the delivery----
    Chairman Tom Davis. It is not just to you; I am going to 
ask Ms. Duke, and Ms. Murphy; and, Dee, if you want to climb 
in, you are new to this on this side this year.
    General Riley. As far as the delivery of commodities, in 
particular you mentioned ice and water and logistics that the 
Corps procures. We have those contractors in place and they are 
ready. They have many of them already, of course, a great deal 
stored for this year, and we had some stored for last year as 
well that we used in the initial days.
    So those types of things I think is an initial good 
preparation for this season for the procurement of commodities.
    For debris removal in the case of our advanced contract, 
last year we saw the storm was coming into Louisiana and 
Mississippi, so I spoke to the contractor the day prior, on 
Sunday--Saturday, excuse me--2 days prior to landfall. He had 
his equipment and personnel staged in Florida and in Texas, 
ready to move into the storm from both sides.
    So those are the kinds of things we had in days before. And 
then long-term preparation, we have many actions going on to 
prepare ourselves better for this season.
    Chairman Tom Davis. But, again, the last time--for example, 
shelters. We were very inadequate on the shelters for Katrina.
    Thank goodness that the Convention Center didn't get 
flooded; that it was--it happened to be on higher ground. That 
was almost--I mean we were lucky in that case. That wasn't 
something that was picked because it was predicted. It was set 
for 1,000 people and 30,000 people showed up, and the next day 
another 30,000 people showed up, and they ended up in the 
Convention Center instead of the stadium.
    I think we just didn't imagine something that--the planners 
never imagined something of that magnitude hitting; is that 
fair to say?
    General Riley. Sir, I guess I would characterize it--
certainly in the Hurricane Pam exercise you noted, that 
planning did go through, that type of thought process. What was 
actually in place was similar to hurricanes that happened in 
the previous season in Florida. So that type of magnitude, 
clearly the magnitude of this one clearly overwhelmed the 
people and the property and the emergency response force.
    Chairman Tom Davis. I guess what I would just--one of my 
counsels is sitting back here, and, having gone through all the 
hearings is that for all the planning, for all of the contracts 
that you have in advance, you always need a plan B just in case 
it becomes something else. And in this case, it wasn't a plan 
B.
    It was kind of, you know, we kind of invented it as we went 
along, and the result of that was not just additional cost to 
taxpayers but loss of life and property.
    Let me just ask some of the other agency heads how you view 
that same question. How are we ready for this next year?
    Ms. Duke. I will start and then, Mr. Chairman, if Dee wants 
to add any additional specifics. I will begin for DHS.
    Chairman Tom Davis. Let me say, Ms. Duke and Ms. Murphy, 
that a lot of the planning on this is above your pay grade when 
it comes to planning and prepositions. You are procurement 
officers. But some of the planning over this stuff is really 
not your job, so I'm not trying to single you out. But it was 
very inadequate in this case and I wanted you to give any 
assurance for next season that it gets better and that there is 
a plan.
    Ms. Duke. Yes, Mr. Chairman. We are working in two general 
areas in planning. One is the people side, and one is the 
contract side. When the last hurricane season hit, FEMA had in 
place less than a dozen contingency contracts to be prepared 
for the hurricane season. This year, with FEMA, there is over 
70 contract actions that we are working to have in place and 
prepared before the hurricane season.
    These include some renewal, some additional new actions, so 
we are expanding the number of contingency contracts we have in 
place. So we are not reacting after a disaster hits.
    On the people side, that is an area that I am, from the 
Department, working with FEMA extensively on also. One of the 
things we did is hire Ms. Lee.
    As you mentioned, Mr. Chairman, procurement does not have 
the total responsibility for delivering the mission activities. 
It is a tool by which we deliver. One of the things Ms. Lee 
brings is the acquisition and expertise.
    Chairman Tom Davis. You don't have to convince the 
committee about Ms. Lee's expertise. We are happy to see her 
there.
    Ms. Duke. The other thing that her position brings, and her 
individually, is integration of the different functions of the 
acquisition process in the FEMA. And we think that is going to 
help a lot in the planning.
    In terms of--we also have a director of the learning lab, a 
new senior executive, Ms. Tina Burnett, who is a new senior 
contracting person in FEMA that will lead the actions we have 
taken.
    Chairman Tom Davis. I gotcha.
    Dee, let me ask you. You are new. You are sitting here in 
the shop. You come over from GSA, and you were in DOD and were 
head of Office of Procurement Policy under President Clinton, 
and very highly regarded by both Mr. Waxman and myself. How do 
you see it? Are we better off than last year?
    Ms. Lee. Yes, sir. In my vast 4 weeks' experience, we are 
doing the things Elaine talked about. One of the things that is 
really working with the technical community to understand the 
requirements, make sure we have the contracts ready to go and 
meet those requirements. We are looking at, as you mentioned, 
the learning lab.
    The other thing we are looking at is real-time ability to 
order as needed. And we are actually looking at piloting the 
possibility of doing some on-line or reverse auction on the 
site, on time, which of course would require what people 
mentioned was free registration of the contractors, telling 
contractors how we are going to do that.
    So we are going to do a little bit of that, a lot of 
contracts in place and also more long-term planning. We are 
already looking for 2007 and putting in place contracts that we 
think are needed.
    Chairman Tom Davis. Thank you. Ms. Murphy do you want to 
say something?
    Ms. Murphy. One of the things we did was we went back and 
adapted the Federal procurement systems so we can identify all 
the procurements we made in conjunction with Katrina. We looked 
at reviewing the kinds of contracts we did against the 
contracts we already have in place, 18,000 contractors under 
the multiple award schedule, trying to identify where those 
contracts are so we place BPAs against them. So we have those 
available, going forward, to meet the additional needs. We 
worked with our global supply program to make sure we have the 
contracting resources in place there, in case FEMA or anyone 
else needs to access those.
    And we have been working to make sure that those we deploy 
in the field, that don't have Internet access, can't reach the 
central contractor registration to find the 400,000 vendors the 
government has already registered doing business with us, they 
have a thumb drive, another way of accessing that.
    Chairman Tom Davis. We didn't get into communications, but 
it wasn't interoperability; just plain operability went down. 
And there was no real contingency planning. We did find that 
some of the key decisionmakers were getting their news from 
CNN, not all of it accurate.
    My time is up. Mr. Waxman.
    Mr. Waxman. Thank you, very much, Mr. Chairman, and I want 
to thank all the panelists for their testimony. If there is not 
this advanced planning, then the government found itself, Mr. 
Woods, scrambling to try to deal with the problems. Isn't that 
the result of the inadequate planning?
    Mr. Woods. I think that is a fair statement, sir.
    Mr. Waxman. And so, as I understand it, they needed four 
contracts to provide temporary housing. They had only one in 
place, so they had to move quickly.
    I want to focus on the debris, the debris area, because 
after the hurricane struck, there was a lot of debris that had 
to be removed, and there were no contingency contracts in place 
for debris removal.
    The government then rushed into four $500 million contracts 
for debris removal. And the government's own evaluation of 
these contracts disclosed a host of problems. Seems everywhere 
the auditors looked, they found taxpayers were losing out.
    Here is how the debris removal was supposed to work. Trucks 
were supposed to pick up the debris and take it to dumps. When 
the trucks arrived, officials from the Corps of Engineers were 
supposed to make sure that they were full. Since contractors 
are paid by the cubic yard, the more debris they collect, the 
more they are paid. Then when trucks leave the dump, the Corps 
is supposed to make sure they are empty so the government 
doesn't end up paying twice for the same debris.
    Now, that is supposed to be how it is supposed to work. But 
I want to examine how it actually worked. I have an audit, 
dated September 25th from Mississippi. It states, ``that 
auditors observed a self-loading truck exiting the dumpsite 
without completely unloading the debris from its truckbed.'' As 
a result, the audit found the contractor was, ``fraudulently 
being paid twice for the same load.'' In other words, drove off 
with the truck, didn't unload at all, came back and then said, 
well, I have more debris and so, in effect, they are being paid 
twice.
    This wasn't an isolated occurrence.
    A month later, auditors observed four trucks leaving the 
dumpsite in Laurel with a considerable amount of debris 
remaining in the trucks.
    General Riley, are you aware of these audit findings?
    General Riley. Yes, sir; I am. And I thank you for bringing 
that up. That is exactly why we deployed auditors. I arrived at 
the Louisiana State Emergency Operations Center the day prior 
to landfall. My experience from the previous year's storm was 
those emergency operations are very vulnerable to fraud and 
abuse. And so on the day following landfall, I issued an order 
to deploy all of our auditors and also called for the Army's 
Criminal Investigation Division. And then, within 3 days, they 
were arriving.
    Mr. Waxman. Let me go through some of these audits with you 
because you are familiar with them. From the documents, if the 
Corps is not really making sure that what is being done is done 
right, and we are paying for what work was actually done, 
contractors can see an opportunity for abuse. And there are 
documents numbered 137, 156, 162, 213 and 16, and they say that 
across the gulf region the Corps failed to inspect the trucks 
as they left the dumpsites.
    Let me read to you what one of those audits said about the 
Corps' failure to inspect the trucks. ``This provides the 
opportunity for truck drivers to leave debris in the bed of the 
truck while receiving full credit for each load, resulting in 
government overpayments to the contractors and minimizing the 
amount of debris being cleared.''
    General Riley, how would you react to this lack of 
oversight?
    General Riley. Well, what I would react to is that is 
exactly what I told our auditors to go out and find. When they 
arrived, I told them to find out what is going wrong. Don't 
tell about me about what is going right, although they did and 
did that very well.
    But what I wanted to know was, I knew that this type of 
situation--and we did have an advance contract in place, and 
they worked and they moved in immediately, the day following 
the storm, and began to work. We found that we then needed to 
complete larger contracts, which we did, for Louisiana and 
Mississippi because of the enormity of the storm.
    So those inspection reports that you are referring to, sir, 
were exactly what I was looking for. Those, then, were 
coordinated with the contracting officer, the safety officer, 
and then sent to the commanders on the ground to verify that 
corrective action has been taken.
    My intent for those auditors was to go out immediately and 
find it, document it, and correct it where they could 
immediately, and then get the commanders to do their work as 
well.
    Mr. Waxman. Mr. Woods, GAO examined contract oversight in 
the gulf coast. What did you find? Did the Corps have 
sufficient contract personnel on the ground to prevent abuses?
    Mr. Woods. We found that they did not have enough personnel 
in order to be able to adequately monitor contractor 
performance.
    Mr. Waxman. Unfortunately, leaving the dumpsites with 
loaded trucks was by no means the only abuse. The documents 
describe a host of other schemes to enrich the contractors and 
gouge taxpayers.
    They provide one subcontractor, or Halliburton, that 
repeatedly picked up debris from wooded lots on private 
property instead of public rights-of-way, as required by the 
contract, and other contractors overstated their mileage to 
earn an extra $2 per cubic yard because, I gather, if they 
traveled further they got paid more. But they didn't really 
travel further. Still others mixed different types of debris to 
inflate their billings.
    Another report I want to read to you is a Mississippi 
report, dated October 11th, and according to the auditors, 
``they watched the driver climb the citizen dump pile and enter 
the excavator. He proceeded to load his trailer himself. When 
the load was complete, the driver exited the dumpsite. He then 
pulled around the entrance tower and unloaded his trailer with 
the debris he obtained from the citizen dumpsite.''
    In other words, this contractor picked up debris from a 
public dump and then drove it into the Federal dump to game the 
system and pump up its payments.
    General Riley, were you aware of these kinds of abuses?
    General Riley. Absolutely, sir. And, again, I think that 
was why we had 3,000 audit reports. Those were our auditors 
going out and finding that stuff. And what we did then is we 
withheld payment from a contractor until we verify that it has 
been properly accomplished. And then at the end of the 
contract, before we close it out with our retainage of any 
contract award, we will retain funding until we verify the work 
has been accomplished.
    Mr. Waxman. Were there criminal or civil enforcement 
actions initiated?
    General Riley. Yes, sir; there sure were.
    Mr. Waxman. Can you tell us how many?
    General Riley. I would prefer to defer that--but we have, 
and there have been indictments, and that was my whole intent 
for the day after the storm calling the COD down.
    Mr. Waxman. Well, the auditors found that the Corps 
routinely credited contractors with hauling more debris than 
they actually carried. The auditor said that the assessment by 
the Corps were, ``overly generous, unusually high, and 
consistently on the high side.'' And so Corps officials would 
just write down that the trucks were 100 percent full, even if 
they weren't.
    Mr. Jadacki you are the lead IG for the gulf coast recovery 
effort. Do these Corps practices meet your standards?
    Mr. Jadacki. No they don't. Traditionally--I have worked 
for FEMA about 15 years in the Inspector General's office and 
also the CFO's office--the debris removal contracts and debris 
removal activity has been the most problematic, rife for fraud, 
waste, and abuse. And the fact that we have seen in past 
reviews we have done of sites with no monitors, blank tickets, 
things like that, we try to keep a close eye on that.
    In the case of the Corps of Engineers, we are relying on 
the DOD Inspector General to keep an eye on those things. 
However, FEMA also provides debris removal under the public 
assistance program, too, where we rely on the local 
jurisdictions to provide those types of things and provide the 
assurances and oversight and that makes it problematic, too; 
because we are not dealing with one or two entities, you are 
dealing with a number of them. So we are aware of things that 
have gone on in the past and we are establishing controls, 
because they are needed in that program.
    Mr. Waxman. I understand from General Riley he had 
auditors, his auditors, out there to try to flag these 
problems. They did flag the problems, according to what I 
understand--he just told us--and that they were addressed 
immediately.
    But when audits like these keep appearing over and over, 
for month after month after month, across different States, 
different sites, and different contracts, it seems like one 
could conclude that the officials who are in charge of the 
contracts aren't doing their jobs. Did you find them taking 
adequate action?
    Mr. Jadacki. In the case of the debris removal, which we 
are looking at, we found some cases where there were no 
monitors and we took immediate action to get monitors into 
place. The problem I was seeing in this disaster is that it is 
spread out over--there are 63 million cubic yards of debris out 
there, over a land size about that of Great Britain. So having 
oversight of every single site at every single truck is 
problematic.
    I am not saying it shouldn't be done, but just given the 
magnitude of the disaster, it is difficult and it spreads a lot 
of resources thin.
    Mr. Waxman. Mr. Woods, did you have any review of the work 
the Corps did?
    Mr. Woods. We did not look at the debris removal contracts 
at all.
    Mr. Waxman. I am trying to give General Riley an 
opportunity. It sounds like you are saying all these things 
were done properly and all the problems were caught and 
addressed, and the public was protected from their taxpayer 
dollars being wasted. Are you comfortable with a statement like 
that?
    General Riley. No, sir. I am not, because it wasn't all 
done properly, and that is why I called an army of auditors and 
training of quality assurance personnel down, because I knew 
there would be challenges like that when such an enormous storm 
spread out over much territory. But we do have procedures in 
place then to go back and attempt to recoup the money from the 
contractors. And we are doing that to this day.
    Mr. Waxman. Of course, if the Army Corps took the 
contractors' word and gave them credit for full load of debris, 
when they didn't have a full load of debris, there is no way to 
check that afterwards; they just got paid, and they are going 
to continue to hold that.
    General Riley. We will verify the load tickets and go back 
and all that. Now, all the reports you are referring to there 
are internal audit reports that is exactly what I wanted them 
to find.
    And what we did then is take--as new quality assurance 
personnel continued and updated the training of those 
personnel, ethics training every single day, training of our 
quality assurance people, personnel, and then commanders on the 
ground working to correct these problems, because over such a 
long period of time, we had over 3,200 from the Corps. Ten 
percent of the Corps of Engineers was deployed on this 
hurricane. Half of those quality assurance personnel required 
training.
    Mr. Waxman. I see the red light and my time is up. But I am 
pleased you are trying to go back and check these things. What 
I am afraid of is, from your own audit reports, the debris 
removal contracts have been a great deal for the contractors 
but not a good deal for the taxpayers and the victims who are 
still suffering in the gulf coast, and we are trying to catch 
up with money that has just fallen right through the cracks. 
And we are not talking about a small amount of money. We are 
talking about a huge amount of money. So we hope you will stay 
on it.
    Thank you, Mr. Chairman.
    Chairman Tom Davis. Thank you, Mr. Waxman.
    Mr. Shays.
    Mr. Shays. Thank you, Mr. Chairman. I want to thank you 
again for the hearings you conducted, the Katrina hearings. And 
thanks to people like Mr. Taylor, who were there participating, 
we learned that this was a storm of biblical proportions. And 
one of the points that in my criticisms--and I have tremendous 
criticisms--I mean, the committee had tremendous criticisms, 
and we said basically the White House was in a fog, we said 
Homeland Security was missing in action, we said FEMA was, 
frankly, derelict. We said the Governor and the Mayor of New 
Orleans simply were a part of the problem.
    Having said that, people point out to me that we--the loss 
of life, given the biblical proportions of the storm, was 
relatively small. I mean, in Mr. Taylor's district, 10 miles 
in, the water was 20 feet high. And I asked Gene Taylor to 
describe to me why that was so. And he said in Mississippi they 
have a culture of dealing with storms, and that the last great 
storm, I think Mr. Taylor told me was when he was younger, but 
his parents kept teaching him. And he passes it on to his kids 
and so on.
    So I want to acknowledge that we must have learned 
something, but I think it was more the folks living down there 
than the Federal Government.
    Mr. Riley--excuse me, General. What I am to gather from the 
dialog you have had continually with Mr. Waxman is a lot of the 
criticisms, the abuses, were abuses that your own people 
discovered, correct?
    General Riley. Yes, sir. That's correct.
    Mr. Shays. So this isn't a big surprise you were 
discovering and trying to deal with it. So I gather from this 
is when you are dealing with a storm of such huge proportions, 
you were trying to just get out there and deal with it; and 
oversight was important, and very important, but it simply was 
second to just helping people as quickly as you could.
    That is acceptable to me in the initial stages. Are some of 
these criticisms, though, and findings happening now? Or did 
they happen then, but are no longer happening now?
    General Riley. Sir, my belief is that we have sufficient 
procedures in place, all the towers, the landfills that are 
constructed, quality assurance personnel.
    Mr. Shays. Let me ask this question, though. The sightings 
that Mr. Waxman was pointing out, which were serious, were 
those reports that were done a year ago? Are they reports you 
found a month ago? This was still happening?
    General Riley. Sir, these were through the fall; October, 
November primarily--September, October, November.
    Mr. Shays. Of what year?
    General Riley. Last year, during Katrina primarily.
    Mr. Shays. You are still doing the cleanup; correct?
    General Riley. Yes, sir.
    Mr. Shays. Are you still uncovering this same kind of 
corruption?
    General Riley. Sir, we uncover it in places where we have a 
new volunteer deployed to the storm that are quality assurance 
personnel. We train them as they come in.
    Mr. Shays. But it is happening, but it----
    General Riley. Yes. Much less frequency, of course. And 
then we go back and verify, and the commanders on the ground 
assure us.
    Mr. Shays. Ms. Lee, I know you are new to FEMA, but what 
blows me away about FEMA was the continuous stories of how they 
kept saying ``no'' to voluntary help, ``no'' to this effort, 
``no'' to that effort. It was constant: No, no, no.
    We had people willing to offer help and so on. But I have 
two major industries in my district, folks who are basically 
international suppliers of water. And they said when they 
wanted to provide water into the region, they had to negotiate 
with an individual who basically worked out of his kitchen, and 
that FEMA gives out contracts for water for housing and so on 
to very small individuals, sole source.
    Is that accurate? Is that--or can you describe the part 
that I am missing that makes me feel a little more 
understanding of this?
    Ms. Lee. Mr. Shays, I was not at FEMA last year so I can't 
tell you exactly how that was done. I will tell you that 
currently we are prepositioning. We kind of have a three-stage 
thing; we are actually pushing things out and prepositioning in 
the States in coordination with the----
    Mr. Shays. That it not answering my question.
    So you have a major international water company that is 
willing to provide water at below cost, for free. And they were 
having to negotiate with someone who basically worked out of 
their kitchen.
    Ms. Lee. Sir, I will have to get the details for you 
because I am not familiar with that particular activity.
    Mr. Shays. This was systematic. I then had the largest RV 
company, trailers and so on, and they had to work with someone 
who basically was working out of a small office, who knows 
where. They had no professional background, they just had the 
contract. And so I guess you're new and can't answer it.
    Can you, Ms. Duke, respond to this question?
    Ms. Duke. I just started as the chief procurement officer 
in January. I do know what we are doing for this hurricane 
season, like Deidre, but we can get back to you on those 
specific situations.
    Mr. Shays. Would anyone on the panel be able to respond to 
this question? Inspector General or whomever?
    General Riley. Sir, I can only respond in particular to the 
ice contract. FEMA asked us to procure the ice for them and 
deliver it to staging areas, where they would distribute it 
from there. But our--we used our advance contract for that. 
That was competed, full and open competition. So after that----
    Mr. Shays. Who ended up getting the contract?
    General Riley. It was the Lipsky ice contract. They have 
had it for the 2 years that I have been----
    Mr. Shays. How big a company?
    General Riley. Sir, I can't tell you that.
    Mr. Shays. Where are they located? Do they get it for all 
FEMA or just part of FEMA?
    General Riley. Sir, we actually look to the States to 
procure ice first. And if they are not able to, States will 
request FEMA. FEMA will ask us.
    Mr. Shays. Does one person in this country have the ice 
contract or is it done district by district?
    General Riley. No, sir. It goes up to FEMA headquarters and 
they will ask the Corps, then, to procure the ice. And we will 
do it through our single large contract.
    Mr. Shays. I will tell you my suspicion. My suspicion is 
some people get these contracts. They have the ability to say 
no. They can tell the big company, don't even come in, you have 
to work through me. And I think it is a huge problem.
    Thank you, Mr. Chairman.
    Chairman Tom Davis. Mrs. Maloney, 5 minutes.
    Mrs. Maloney. Hi. I want to thank all of you for being 
here, and particularly my colleagues from the gulf States that 
have suffered so much. And it is very disturbing to see so much 
money that was wasted, that could have been used to rebuild 
homes.
    [The prepared statement of Hon. Carolyn B. Maloney 
follows:]

[GRAPHIC] [TIFF OMITTED] T8897.078

[GRAPHIC] [TIFF OMITTED] T8897.079

    Mrs. Maloney. I tell you, I want to applaud the work of 
Henry Waxman on his reform legislation for contracting. But 
when you hear of thousands and thousands of trailers that never 
even left Arkansas--because you didn't need them, but paid 
hundreds of millions of dollars for them. And it is really 
upsetting, particularly when you know how so many people are 
suffering. My colleague, Mr. Taylor, his entire home was 
destroyed, as was many people's in the gulf region.
    And I can understand that right after Katrina you had to 
scramble quickly to do some contracts. You handed out these 
massive $500 million each to temporary housing missions, and 
these were not given full and open competition. FEMA pushed to 
put them through. And after the immediate crisis had passed, 
DHS and FEMA seemed to recognize that these huge contracts had 
been awarded in haste and should be open to competition.
    On October 6th, acting FEMA Director Paulson testified 
before the Senate, promising that all four contracts would be 
rebid. Around the same time, Greg Rothwell, then the DHS Chief 
Procurement Officer, assured our staff that the contracts would 
be reopened to competition.
    And so I would like to ask Mr. Woods, according to the 
Federal procurement law, there are exceptions to the normal 
rules of competitions in cases of emergencies; is that correct?
    Mr. Woods. That is correct, Mrs. Maloney.
    Mrs. Maloney. But after the emergency passes, would you 
agree it makes sense to open things up to competition to make 
sure that the taxpayer gets the best value for the dollar?
    Mr. Woods. Yes. After a certain period of time, whatever 
exigency might have existed at the time passes, and there is 
time for full and open competition procedures.
    Mrs. Maloney. When Director Paulson and Rothwell committed 
to doing just that, opening up these huge blanket contracts for 
bid for competition, that commitment was with the Federal 
acquisition rules; is that correct?
    Mr. Woods. Well, I think you would probably have to check 
with DHS on that. My understanding is some of the contracts for 
the installation have been awarded competitively.
    I am not sure about the status of the large contracts that 
you referred to earlier.
    Mrs. Maloney. Well, I know that some were awarded, if I 
remember correctly. Reading the briefing materials, roughly 30 
out of 70 were; but massive amounts, even after the tragedy, 
were no-bid sole source contracts. And after these two 
gentlemen committed to opening it up to competitive bidding, 
that never happened.
    Instead, FEMA and DHS slowly backed away from their pledges 
to rebid these contracts. And then in November, FEMA officials 
said the contracts would not be rebid until February. But then 
in March, FEMA announced that the contracts would not be rebid 
at all and would, in fact, be extended.
    Now, isn't that in contradiction to Federal law? You can 
have an exception for an emergency, but when the emergency is 
over--and the emergency was over--you can no longer hide behind 
a no bid contract.
    Mr. Woods. Well, your premise is absolutely correct. 
Certainly at the time of the event, Federal law and the Federal 
Acquisition Regulation permit contracts to be awarded in less 
than full and open competition procedures. And as time goes on, 
that reason dissipates, and at some point we would expect that 
agencies would comply with all of the full and open competition 
requirements.
    The exact schedule and timing of these contracts that you 
are referring to, I am not familiar with the details on the DHS 
plans in that respect.
    Mrs. Maloney. And another thing I find so disturbing is the 
same trend we saw in Iraq, where you give huge contracts to 
Halliburton, and they build a ditch or whatever, and it doesn't 
employ the people there; and then you had these huge contracts, 
blue roof contracts, $2,480 per roof to nail blue roof-covers 
on them. The local workers told us it would only cost $300. I 
am sure Mr. Taylor and others from the Gulf region would have 
liked the local workers and the local businesses down in the 
gulf region to have the opportunity to bid on housing, on the 
roofing, on the removal of the debris and on all the other 
things that happened down there, so they are double hit.
    No. 1, you hear from Mr. Waxman just a whole litany of the 
contracts not fulfilling their obligation, being 10, 20, 30 
times more expensive than if you would bid it to the local 
communities. So would I like to ask Ms. Duke.
    You have now, Ms. Duke, you have now succeeded Mr. Rothwell 
as the Chief Procurement Officer for DHS. And did you make the 
decision not to rebid these contracts?
    Ms. Duke. No, ma'am.
    Mrs. Maloney. Who made that decision?
    Ms. Duke. We are rebidding the contracts. Would you like me 
to review the strategy?
    Mrs. Maloney. We were told in March they were not going to 
do it. Who made that decision?
    Chairman Tom Davis. Gentlelady's time has expired. But why 
don't you explain to her?
    Ms. Duke. We have a multipart strategy. One is that the 
existing four contracts are only being used to complete the 
installation of trailers in Louisiana. We have awarded some 
local small business and small disadvantaged business contracts 
that are going to continue to do the maintenance and then 
deactivation of the trailers that were installed in response to 
Katrina.
    Additionally, we are competing--and that is out for bid 
now--the national individual assistance, technical assistance 
contracts that will be awarded on a national level. And we are 
working with GSA to award some contingency regional contracts.
    Mrs. Maloney. So you are taking all these no-bid contracts 
and rebidding them as a competitive contracts now?
    Ms. Duke. Yes.
    Mrs. Maloney. All of them are now going to be competitively 
bid?
    Ms. Duke. Yes.
    Mrs. Maloney. I think Mr. Taylor and others who live in the 
gulf region would like to know about your plans and how they 
can advertise to local workers and local businesses how they 
can bid on these contracts.
    Believe me, many people are capable of getting a job done 
besides Halliburton. And I am very pleased that you are going 
to let the American people compete for the work and the dollars 
of the American government.
    Chairman Tom Davis. Thank you. Thank you. I don't think it 
is limited to just American companies either.
    Mr. Pickering.
    Mr. Pickering. Thank you, Mr. Chairman, and thank you for 
allowing me to participate in the hearings today.
    I have two principles, one objective. One, what is best for 
the taxpayer? Two, what is best for the disaster communities 
and the local community? And one objective: Find the facts and 
fix the problem.
    There has been a lot of rhetoric. And I have been on the 
Senate Committee on Katrina; the Senate committee, we have had 
our investigations. And I am more concerned now not about 
assigning blame, but making sure that as we go into the next 
hurricane season that we have the right assumptions that will 
lead to us the right outcomes and the right model.
    And so to achieve that, I want to very quickly go through 
and establish some quick facts.
    Mr. Riley, in Mississippi, you have been tasked, mission-
assigned to do debris cleanup. And as I understand it, you have 
been in charge of roughly 21 million cubic yards of cleanup and 
debris, is that correct.
    General Riley. Yes, sir; that's correct.
    Mr. Pickering. And what is the cost to the Corps of that 
cleanup, the debris cleanup?
    General Riley. Sir, there are different costs depending on 
what type of debris we pick up.
    Mr. Pickering. Just bottom line, what have you spent in 
Mississippi? And what will you spend by the time you complete 
your mission sometime in the end of May?
    General Riley. Sir, the major contract in Mississippi was 
for $500 million.
    Mr. Pickering. It's gone over that amount.
    General Riley. Yes, sir. Certainly we have gone over that 
now, but I don't have the exact figure for that.
    Mr. Pickering. Let me see if I can get some clarity. My 
understanding is that Ashbritt does the cleanup, that there is 
an average of $26 per cubic yard, and that is from taking the 
debris from the very beginning to its final destination, about 
$26 a cubic yard; is that correct?
    General Riley. Yes, sir. And it depends on if they need to 
take it to a temporary reductionsite; on average, $26.
    Mr. Pickering. After the $26, your overhead management is 
roughly $5 a cubic yard; is that correct?
    General Riley. Sir, our overhead management is about--it is 
about 16 percent of the cost.
    Mr. Pickering. If you multiply out $26 plus about 16 
percent, that is about $5.
    General Riley. Yes, sir.
    Mr. Pickering. So your total cost is $31 a cubic yard; is 
that correct?
    General Riley. Correct, sir.
    Mr. Pickering. Now at the same time, we have had local 
companies, local entities that have done cleanup and debris 
removal. And based on our investigation, on average, you are at 
$31 a cubic yard, and local communities, local contracts, are 
at around $15 a cubic yard. Do you agree or disagree with that 
figure?
    General Riley. Sir, there is no way I can compare it 
because you really--we don't know what types of debris they are 
doing. Are they taking it to a temporary reductionsite? Is it 
hazardous material? Is it vegetative? Is it construction and 
demolition?
    So I really can't make a comparison, nor do I have the 
knowledge what FEMA is paying local contracts.
    Mr. Pickering. Mr. Jadacki--am I pronouncing it correctly?
    Mr. Jadacki. Jadacki.
    Mr. Pickering. Have you looked at cost; Corps cost, local.
    Mr. Jadacki. We look at the local routinely when we do our 
reviews, when the locals decide to do it themselves under a 
public assistance program. Again, the price ranges depending on 
the type of debris, how far it has to be hauled.
    Mr. Pickering. On average.
    Mr. Jadacki. I have seen it anywhere from about $13 to mid-
$20 per cubic yard.
    Mr. Pickering. On average, about $15, $16. All of our 
research--all of our committees, House committee, Senate 
committee, local investigations--on average, $14, $15.
    Mr. Jadacki. That is in the range we have seen.
    Mr. Pickering. So let's do the math. At 21 million cubic 
yards at Mississippi times $15, on average, that is $315 
million. At 21 million cubic yards times the Corps cost, $31, 
that is $651; a differential of over $300 million. Local is 
half, Corps is twice as much.
    Is that pretty close? That is pretty accurate, isn't it? So 
let's go back to my first principle: Best for taxpayer. Local, 
national or Corps, based on those figures what would you say?
    Local, best; cheaper; faster; better for the local 
community? Would anybody disagree with that on the panel?
    All right, let's go to some of the other things and, again, 
just trying to establish the facts.
    Now, the Florida model is what I have just talked about. 
They preposition, precontract, and it is all local State. Is 
that correct? The Florida model.
    Mr. Woods. Yes, sir. When we looked, they don't necessarily 
always precontract, but they do know--they have a very good 
idea of the supplies and services that they need, and they have 
a very good idea of the vendors that are capable of supplying 
those.
    Mr. Pickering. Do they use national contracts or Federal 
Government contracting agencies to do that?
    Mr. Woods. They contract on their own.
    Mr. Pickering. And what is the result to the taxpayer and 
to the local communities?
    Mr. Woods. In what respect?
    Mr. Pickering. What costs more? What helps local 
communities recover faster, better?
    Mr. Woods. I don't have an answer to that. I don't have a 
basis for comparison on that.
    Mr. Pickering. As Inspector General your job is to be the 
advocate for the taxpayers; is that correct?
    Mr. Jadacki. That is correct.
    Mr. Pickering. What would you say; Florida model or 
national model is best for the taxpayer?
    Mr. Jadacki. Again, I don't have a basis.
    Mr. Pickering. It is pretty clear, isn't it? I mean the 
evidence is not close. The facts aren't even close here.
    What is the intent of the Congress and the Stafford Act? It 
is to promote the recovery of local economies and to give 
preference to local contractors; is that correct?
    Mr. Jadacki. [Nods in the affirmative.]
    Mr. Pickering. Mr. Chairman if I could just have 2 more 
minutes?
    Chairman Tom Davis. Gentleman asked unanimous consent for 2 
more minutes. Without objection.
    Mr. Pickering. Could you respond on the record, Mr. 
Jadacki? Is the local model better for the taxpayer, yes or no?
    Mr. Jadacki. In some cases, I am going to count, in some 
cases I think the locals may be overwhelmed with debris 
removal, and you may need an element of a national organization 
coming in to do it.
    Mr. Pickering. Mr. Chairman, for the record, if there was a 
local community and debris removal that was incapacitated, they 
would not have been able to perform in Mississippi at half the 
cost and twice as fast.
    There is a false assumption that leads to a bad outcome. 
And that is local companies and local economies are 
incapacitated. Therefore, we have to come in from the Federal 
agencies, and national contracts, and displace them and replace 
them. It hurts the local community and it hurts the taxpayer. 
That is a false assumption. And if we are going to fix this 
problem for the next storm, we have to remove that assumption 
from our model and from our thinking, Mr. Chairman----
    Chairman Tom Davis. Thank you, it keeps them incapacitated 
when you have people who are able-bodied to do stuff and you 
bring outsiders to do it. I think the gentleman's point is well 
taken.
    Mr. Pickering. Thank you, Mr. Chairman.
    Chairman Tom Davis. Gentleman from Maryland.
    Mr. Cummings. Thank you very much, Mr. Chairman, and thank 
you for holding this hearing. Thank you for your leadership.
    Let me just say that I was looking at an article from back 
on December 13, 2005, and it says ``Katrina victims living in 
barns.'' It doesn't say ``some folks from overseas somewhere.'' 
They are not refugees, but U.S. citizens, living in barns.
    And I want to just look at this whole issue of travel-
trailers and modular homes. FEMA bought more than 26,000 
manufactured and modular homes for nearly a billion dollars. 
But only 100 of these were used.
    Not one has been sent to the most ravaged parts of 
Louisiana, Mississippi, because of FEMA's own regulation bans 
their use in floodplains. FEMA also spent $1.7 billion to buy 
114,000 travel-trailers. More than $1 billion of these funds 
was spent without full and open competition. But now, over 
23,000 of these mobile homes and travel-trailers sit unused. 
Nearly 11,000 are rusting on runways at airports in Arkansas as 
we sit here today.
    Again, maybe all of these rules were followed, but how in 
the world do we justify this to people sitting in homes, 
shaking their heads about the absolute incompetence of their 
own government?
    And to Mr. Jadacki, tell us, other than Michael Brown, what 
higher-ups have been fired? Because I can tell you that there 
is not a person in this room--if we had the incompetence that 
we have here and the failure to communicate and all the things 
we have heard--there would have been a whole lot of heads 
rolling. They would not be sitting doing the job.
    Other than Michael Brown, can you list the higher-ups who 
have been fired, so the American people can get some 
satisfaction?
    Mr. Jadacki. I am not aware of anybody that was fired for 
this, sir.
    Mr. Cummings. I am sorry?
    Mr. Jadacki. I am not aware of anyone that has been fired.
    Mr. Cummings. Nobody has been fired other than Michael 
Brown?
    Mr. Jadacki. No, I am not aware of it.
    Mr. Cummings. Huh.
    Now let's go back to why? What is the situation? There is a 
list of these questions, and the committee has been great. And 
I hear about the emergency, and the emergency is one thing; but 
as Mrs. Maloney said, we are past the emergency. This happened 
back around August; is that correct? Katrina? Am I right?
    Mr. Jadacki. Correct.
    Mr. Cummings. All right. We have September, October, 
November, December, January, February, March, April, and now we 
are in May.
    Are we still having trailers sit on lots? Somebody please 
answer. Mrs. Duke.
    Ms. Duke. We are continuing to install trailers in 
Louisiana, yes.
    Mr. Cummings. What does that mean? How many trailers are we 
installing?
    Ms. Duke. We have about 18,000 additional trailers to 
install in the next 60 days.
    Mr. Cummings. So what does that mean in total?
    Ms. Duke. In total, we have about 150,000 trailers and 
manufactured homes that would be installed for the victims.
    Mr. Cummings. They have already been installed?
    Ms. Duke. No. That includes the ones to be installed over 
the next 60 days.
    Mr. Cummings. No; this is what I am asking you: We are 9 
months after Katrina; we are in the 9th month. I am asking you, 
there are people sitting here right now that basically do not 
have a home. They are trying to figure out what is going on 
with our government--one of the most powerful governments in 
the world; and they are trying to figure it out, why it is that 
we can't get it straight after 8 or 9 months.
    What I'm asking you is, what is the demand and how far have 
we gone toward that demand for homes for Americans--not 
refugees, Americans.
    Ms. Duke. We have installed 130,000 of the 150,000 of known 
households that need trailers. We have been working closely--
all the remaining trailers are in the New Orleans area; we have 
been working closely with the local government and have 
clearance now with all the remaining group sites, and are 
installing those, and we have a commitment that they will be 
installed within the next 60 days. We are working closely with 
the New Orleans area representatives on that.
    Mr. Cummings. Mr. Woods, you are from GAO; is that right?
    Mr. Woods. Right.
    Mr. Cummings. One of the things we are trying to do is have 
accountability. We, as elected officials, have to be 
accountable to our constituents. Government employees need to 
be accountable to the Americans citizens.
    You have done the report. You have looked at all of this. 
What the complaint is that I hear from various people, one 
person blames another. One person says, you send them over 
here, and then they say, you send them over there; but in the 
meantime, a lot is not getting done.
    How do we bring accountability to all of this so that it 
works for the American people? I am concerned about the next 
storm, but I am concerned about the aftermath of this one.
    Mr. Woods. Yes, sir, there is no question that 
accountability is extremely important here. I think this 
hearing is one good example of bringing light to bear on these 
issues and ensuring accountability.
    I think focusing on the future is, of course, important. 
Where do we go from here? How do we fix what's wrong, not only 
identifying what's wrong, but assigning accountability? What 
are the solutions and how do we move forward?
    Mr. Cummings. Have you made recommendations for 
accountability?
    Mr. Woods. Yes, we have, sir.
    Mr. Cummings. Very well.
    [The prepared statement of Hon. Elijah E. Cummings 
follows:]

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[GRAPHIC] [TIFF OMITTED] T8897.027

    Chairman Tom Davis. I thank the gentleman.
    Mr. Clay.
    Mr. Clay. Thank you, Mr. Chairman I will try to stay within 
the 5-minute time limit.
    Ms. Lee, I understand that the Justice Department is moving 
forward on prosecuting a sheriff, Billy McGee, who bravely 
seized a pair of 18-wheelers full of ice from a military post 
and distributed it to people in need. He provided a vital 
assistance to the people of Forrest County. He should be 
applauded for his leadership.
    Secretary Chertoff has been asked to look into this matter 
to determine the cause of the bureaucratic breakdown. Are you 
familiar with the case?
    Ms. Lee. No, sir, I am not.
    Mr. Clay. Well, he was a sheriff in Forrest County, MS, who 
commandeered two trucks full of ice. And I am just wondering, 
why are we going after prosecuting him when he provided 
essential services to people?
    Let me go to Mr. Jadacki and maybe you can tell me how many 
prosecutions have occurred for fraud and ripping off U.S. 
taxpayers. Do you have any count on that?
    Mr. Jadacki. Yeah. There's literally been hundreds of 
prosecutions and indictments. I have statistics I can share 
with you after the hearing.
    But we're working closely with the Department of Justice to 
establish a Katrina task force that is based at LSU in Baton 
Rouge. In my experience working with the inspector general for 
a number of years, it had to be multimillion dollars or high-
profile cases before U.S. attorneys would even consider taking 
a case. In this case, they're prosecuting fraud at the $2,000 
level in some cases, a lot of individual assistance fraud going 
on right now, and are shifting gears right now into a lot of 
contract fraud issues I know they're investigating right now.
    But I know there's been about 14,000 complaints that have 
been received by the Katrina hotline that we set up 
collectively for the Federal Government; and I know there's 
been a number of indictments, arrests and prosecutions thus 
far, and the number keeps growing.
    Mr. Clay. Thank you for that response.
    Ms. Lee, what repercussions did FEMA have for staff for 
approved contracts which overcharged taxpayers and charged 
twice what local firms bid? Have you had to fire any employees 
that made these--that made those horrible decisions?
    Ms. Lee. Mr. Clay, I have been at FEMA for 4 weeks, and we 
are continuing to look at the contracts that are in place to 
make sure that they're proper and to make sure that we're 
forward looking and that our people are trained and ready to go 
for the next season.
    Mr. Clay. Ms. Lee, prior to your arrival, did anyone take 
any action against employees who made these terrible decisions?
    Ms. Lee. Sir, I do not have that information.
    Mr. Clay. No one has briefed you on that?
    Ms. Lee. No, sir.
    Mr. Clay. I mean, look, I am kind of disappointed in this 
entire panel, in the lack of responses. Mr. Pickering did not 
get many answers out of you. Let me see if I can get another 
one from you.
    How about you, Mr. Woods? How did the Army Corps of 
Engineers justify paying double what local Mississippi 
businesses would have bid for classrooms, on the modular 
classrooms?
    Mr. Woods. I'm glad you raised that sir. We issued a report 
just this week that discussed the procedures that the Corps of 
Engineers went through to acquire classrooms. They were 
assigned the mission by FEMA to acquire portable classrooms. 
They went about that very quickly, and they awarded the 
contract under an existing agreement with an Alaskan Native 
firm.
    That firm came in with an initial price; later it came in 
with a higher price. And our concern and our conclusion was 
that the Corps had information before it that really should 
have led the Corps to enter into negotiations with that firm 
rather than just accept the prices offered by the firm.
    Mr. Clay. Thank you for that.
    Let me get my last question in. Ms. Lee back to you. GAO 
reported that FEMA spent $10 million to renovate a military 
barracks in Alabama, but according to GAO's report--and I find 
this astonishing, it had only six occupants, six. Now, I am 
sure everyone in the room is calculating that. It comes out to 
about $1.6 million per person.
    But I do not want to make light of this; this is dead 
serious. Can you explain how FEMA threw away $10 million that 
Congress appropriated to help the victims of Hurricane Katrina?
    And that will be my last question. I want to hear it.
    Ms. Lee. Sir, I can tell you that FEMA is taking and has 
taken the many, many reports and studies that have been 
completed; and those that are continuing to be in work, we are 
taking all of those recommendations, taking all of those 
things. We have an action plan and are working through the 
numerous recommendations.
    And, of course, the audits per se--as the general said, we 
work through in each contract. We go back and work with the 
contractors, we recover the funds when that is possible. We 
take action if there is criminal action. So we will be working 
through all those activities.
    Mr. Clay. Ms. Lee, what should happen to the FEMA employee 
who squandered millions of taxpayers' dollars? What should 
happen to them?
    Ms. Lee. Sir, if we have an employee who took a criminal 
act, we need to take the appropriate action.
    Mr. Clay. This was stupid. Why don't you do something about 
stupidity over there.
    Thank you, Mr. Chairman. I'm sorry.
    [The prepared statement of Hon. Wm. Lacy Clay follows:]

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    Chairman Tom Davis. Thank you very much. Let me just add, 
was the Alaska Native contract--is that a competitive contract 
or was that sole-sourced on that?
    Mr. Woods. That was sole-sourced. There was an existing 
agreement with the firm, and they placed a noncompetitive order 
under that agreement with the Alaska Native firm.
    General Riley. Sir, of course, the initial agreement was 
competed by the Army. It was an existing agreement by the Army 
that we went to, that they had competed earlier, and we went to 
that.
    Chairman Tom Davis. So this is like a task order?
    General Riley. Yes, sir.
    Chairman Tom Davis. OK. Ms. Watson.
    Ms. Watson. I want to thank you, Mr. Chairman, for holding 
this hearing. We need more of them.
    And I want to apologize to the panel for having your 
superiors send you here when you are brand-new and you do not 
have the background.
    I just heard it said that there were 130,000 mobile homes 
that have been instituted. Our report from our staff who do the 
research--and this report is marked May 3rd says that FEMA 
purchased 26,722 manufactured and modular homes at a cost of 
$915 million, but only 100--100, not 130,000--of those homes 
have been used to house evacuees or the relief workers.
    If that is not true, I would like you to submit it to me in 
writing, please.
    And I would hope, Mr. Chairman, that next time we have 
people here who are onsite, not new people who have to carry 
the load for ridiculous mistakes that were made by FEMA during 
a time of crisis.
    One of the cornerstones of sound contracting practices is 
full and open competition. And I heard that Halliburton--and we 
have $9 billion missing as it relates to Iraqi services--they 
get the contract firsthand.
    But anyway, in the case of Hurricane Katrina, full and open 
competition has been the exception rather than the rule. So as 
you plan forward, take that into your consideration.
    Mr. Jadacki, I would like to walk you through some numbers 
from the semiannual report to Congress released by the 
President's Council on Integrity and Efficiency on April 30th. 
According to this report the Federal Government has awarded 
$9.7 billion in private contracts for the recovery; is that 
right?
    Mr. Jadacki. That's correct.
    Ms. Watson. According to this report, a huge majority of 
the contracted amount, $9.3 million, was awarded in 1,203 
contracts worth more than $500,000. True?
    Mr. Jadacki. That is correct.
    Ms. Watson. The gold standard for Federal contracting is 
full and open competition, OK?
    Mr. Jadacki, of the 1,203 contracts worth more than 
$500,000, what percentage were issued with full and open 
competition?
    Mr. Jadacki. I believe about 700 were awarded with limited 
competition, so that would leave about a quarter of those with 
full and open competition, about 25 percent possibly. I do not 
have the numbers in front of me, but roughly that much.
    Ms. Watson. OK. At the Department of Homeland Security, 
54.6 percent of these large contracts were awarded on a sole-
source basis without any competition at all.
    Why is the administration so adverse to competition and why 
does it hand out over two-thirds of the contracts on a 
noncompetitive basis?
    Mr. Jadacki. I cannot answer the question on the 
administration.
    I know that during the crisis, immediately after the 
disaster, a lot of contracts for immediate needs and 
necessities were awarded on verbals or with limited 
competition.
    Again, as Mr. Woods pointed out, after the crisis period is 
over, the agencies need to go back and take a look and see 
whether the services or goods are still needed and whether 
those contracts need to be renegotiated or terminated, if 
necessary.
    Ms. Watson. September 2005, September, FEMA awarded $3.1 
billion in contracts which is--57 percent of which was 
noncompetitive.
    October 2005, FEMA awarded $595 million in contracts, 75 
percent which were not full and open competition.
    November 2005, FEMA awarded $256 million, or 80 percent, 
without full and open competition.
    And as of February 13th of this year, FEMA awarded 
approximately $4.8 billion of contracts for reconstruction; 62 
percent of these were awarded without competition.
    And we mentioned the rebidding of four large contracts, and 
as of March--this is May--as of March 2006, FEMA announced that 
these contracts would not be rebid, but would be extended.
    I really don't understand why we are not protecting the 
taxpayers' dollars.
    I have been down there to the lower Ninth in Louisiana. It 
is a shame to see the debris still in place and to look at 
that. Something is wrong and somebody has to be held 
accountable for it, and Ms. Duke and Ms. Lee and Ms. Murphy, 
you have that on your shoulders now to see that we do a better 
job for American citizens.
    Ms. Lee. Yes, ma'am.
    Ms. Watson. Thank you, Mr. Chairman.
    [The prepared statement of Hon. Diane E. Watson follows:]

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    Chairman Tom Davis. Let me just note that we have these 
folks here because they are the decisionmakers today and that's 
who we have to get at.
    But during the Katrina hearings, we did get some of the 
people who had made the decisions earlier, and they were 
appropriately chastised.
    Mr. Lynch.
    Mr. Lynch. Thank you, Mr. Chairman and ranking member. I 
also want to welcome and thank Mr. Taylor and Mr. Pickering for 
their participation.
    The central mission of this committee is to provide 
oversight of government contracting practices, whether it be 
Halliburton or KBR in Iraq or major highway projects in which--
in my district where Bechtel was involved.
    But basically what we are trying to do is two things: One 
is to ascertain the costs of the work being done, and second, 
try to determine whether or not it is reasonable or not.
    So when we figured out the costs of providing temporary 
housing after Katrina, we sought to do our job on this; and in 
particular, I want to look at the Carnival Cruise Lines 
contract, which caught my eye. I must admit I have never been 
on a cruise, but the numbers here are stunning I think. I 
actually live in a pretty high-cost-housing State, and I wanted 
to make sure that these numbers were right.
    According to what we have from DHS, the Carnival cruise 
ship contract is now over, so we can take a good look at it--
the cost--the total picture, it cost $236 million, $236 
million. It ran for 6 months, and based on the occupancy 
figures that we got--now, when Ms. Watson and the chairman led 
us down on a codelright after the hurricane--and I know there 
were some problems with getting people onto the cruise ships, 
and I do not know why, but there was--but based on the 
occupancy figures from DHS, it cost over $53,000 to house each 
individual on board the ship. That comes out to about $300 a 
night for an individual and, obviously, $600 a night for two 
people.
    Now, the way that GSA looks at this is, we try to do comps; 
that is shorthand for comparable properties or comparable 
accommodations. And so what I did was, I asked, we all asked 
minority staff to come up with some comps on what $600 a night 
for a couple might get us and what $300 a night might get us 
for an individual so we would know whether or not those are 
reasonable.
    Now, this is a fairly boilerplate process, but I have to 
admit even though I come from, I represent the Ninth 
Congressional District in Massachusetts, which includes Boston, 
which is fairly high in terms of housing costs, I have to admit 
I was extremely surprised when I got the results.
    Mr. Chairman, I don't know if we have the ability, I know 
we have some photographs of the properties we came up with to 
basically--I would like to put them up. Here is one property 
where we could have put people up at for $300 a night, or $600 
a couple. It is the Bellagio Hotel and Casino in Las Vegas, 
which is pretty nice. I have never been there either, but it 
looks nice; and it is rather stunning that when we think we are 
trying to do temporary housing for these folks, this is what we 
are paying for them. And you could stay in this hotel in a 
suite, not just a room, you could get a full suite for the 
money we paid to house these folks in the cruise line rooms.
    Second, I asked them to do a broad assessment. The next 
property that they came up with was actually, it looks a little 
bit like the chairman's house down in Virginia, but it is not. 
It is actually a castle; it is a 12th century gothic castle. 
You could actually rent this for less money than we paid to put 
up these folks on the Carnival cruise ships.
    If it was not the taxpayers paying for this, this would be 
humorous. And if it was not the fact that the folks that we 
were trying to help went without our help. That is the other 
side of this. It is not just of the shortfall on the taxpayers' 
side, but the fact that the goodwill of the American people was 
put forward; it just never reached the people we were trying to 
help. And they desperately needed our help.
    This castle actually has a premier golf course, as well as 
an equestrian center for those who play polo. It is just a good 
indicator of what we could have done.
    Last, there is also another comp here and this is actually 
the Trump Towers, this is the Trump World Tower in New York 
City. This is where Bill Gates and, I think, Derek Jeter live. 
This would have been cheaper. It would have been cheaper to put 
our folks up at Trump Towers than it was to have FEMA house the 
hurricane survivors on these Carnival cruise ships.
    Now, the exasperating part of this is that Carnival Cruise 
Line followed the rules. That's what bothers me. They followed 
the rules. They did not commit fraud. They have actually stayed 
within the guidelines and were able to get away with this, 
within the rules, within the law, within the guidelines, and 
that's a disgrace. That's a disgrace.
    I want to ask Ms. Lee what controls are in place to prevent 
the administration from awarding contracts like these, which 
are frankly absurd and shocking to the average sensibilities 
out there, not only those of the Members of Congress but also 
of the American taxpayer.
    Ms. Lee. Mr. Lynch, as has been talked about here by the 
other members, we strive to have competitive activities and to 
plan ahead. As you well mentioned and have discussed, in times 
of emergency, things are done much more expeditiously; and 
sometimes, in hindsight, we say, well, we could have done 
things differently.
    So what we're trying to do this year is plan ahead, make 
sure we're better prepared and have contractors ready and 
activity ready to respond to the emergencies that we face in 
the future.
    Mr. Lynch. I am going to let this go, Mr. Chairman, because 
I feel I have used up my time. We had advance notice of this. 
You think, people in the water, you automatically think boat, 
you think cruise ship, probably a good idea.
    It was the administration of the contract and what we paid 
these folks that was decided afterward where we fell down.
    And I am going to leave it at that, but I am going to ask 
an open question for anybody on this panel. Can anybody justify 
this contract and what the American taxpayer paid for what we 
got and what the people in New Orleans and Louisiana and 
Mississippi got?
    OK. Thank you.
    I yield back.
    Chairman Tom Davis. Thank you. Let me say, my understanding 
of the whole cruise ship issue is, the government got 
themselves in a situation. The cruise ships had to cancel 
passengers and everything to go there, and they basically said, 
if we can break even.
    I do not think they are the culprits here. The culprit is 
the government was reduced to that was their best option, given 
the planning of it, I think is the gentleman's point.
    Mr. Lynch. That is not my understanding, Mr. Chairman.
    Chairman Tom Davis. We held previous hearings on that in 
our Katrina committee, and the cruise ship had to cancel 
passengers that were already booked to make themselves 
available.
    But the government got themselves--that was the best thing 
to do because they hadn't done the planning.
    Mr. Lynch. If you compare what they would have gotten?
    Chairman Tom Davis. Correct, but they were already booked.
    Mr. Lynch. They weren't getting $600 a room.
    Chairman Tom Davis. But cruise ships also have beverages 
and everything else that go with the rooms.
    Mr. Waxman. Mr. Chairman, they would have expenses with 
these other passengers because they would be traveling and 
moving from port to port on a cruise. Here they were in one 
place, so they got compensated for what they would have had and 
then some.
    Chairman Tom Davis. Well, that is the government's fault 
for negotiating that. My point is, at the end of the day, we 
had few options; and had proper planning been in place, we 
would have had other options for handling this and bringing 
cruise ships in. They advertised out and only a couple cruise 
ships responded. Everybody was booked.
    Mr. Van Hollen.
    Mr. Van Hollen. I want to thank you, Mr. Chairman and Mr. 
Waxman, for your leadership on this issue. I want to thank all 
the witnesses that are here to testify.
    I must say the American people, listening to the testimony 
today and the stories that have come out regarding waste, fraud 
and abuse, I think have to be disappointed that a number of 
unscrupulous contractors decided to take advantage of a 
situation, and that there were not mechanisms in place to 
better prevent that. Because as has been said, people 
throughout this country responded after Hurricane Katrina. 
People opened up their homes, their hearts and their wallets.
    What we have learned more recently is, there were a lot of 
people who--while most Americans are opening their wallets, 
there were a few people heading down there to fill up their own 
wallets at the expense of the victims of a natural disaster. 
And I think it is incumbent upon all of us to learn the lessons 
and put in place better mechanisms to prevent that from 
happening in the future.
    I just want to focus in on one of the particular cases and, 
General Riley, if I could ask you about the whole issue of the 
blue roofs. Obviously it is a good idea after a hurricane to 
try and cover up the roofs of houses that have been blown off. 
If you have a roof that has disappeared and blown off, you want 
to prevent further damage and put a tarp or something over it. 
But you also want to make sure it is done in way that you don't 
gouge the taxpayer.
    And so I want to ask you a couple questions about the blue 
roof contracts, because I believe a lot of work that has been 
done by the Army Corps of Engineers reveals that sort of gross 
waste, fraud and abuse in this area.
    And I understand--and this is based on the documents that 
have been provided to the committee--that contractors could not 
locate their crews in the field and that they didn't ensure 
that the workers were being paid, that they failed to followup 
that the work was actually done before submitting the bills to 
the Federal Government.
    So let me just ask you about what value you believe the 
prime contractors added to this process. My understanding is 
that what the Corps has found is, they hired subcontractors 
who, in turn, hired subcontractors who, in turn, hired 
subcontractors. There were at least three tiers of 
subcontractors, and the work was not done, and thousands of 
dollars, on average, were paid per roof in the end.
    So if you could, explain what value, if any, you think the 
American taxpayer got out of paying those prime contractors.
    General Riley. Sir, if I might, the beauty of the blue roof 
program vice debris program is, we can go back and verify every 
single roof and the size of that. Our quality assurance 
personnel were all issued cameras, so when they went around, 
they inspected the roofs. And then at the end, before we close 
out the contract, we make them go back and verify how much 
plastic was actually installed on the roof. We can in a much 
simpler fashion verify what the contractor has done or not 
done.
    In some cases, we found that the contractors' quality 
control that they had in place--we are responsible for the 
quality assurance, to make sure that they have a quality 
control program in place, and that's where our auditors and our 
assurance people find out where it may be lacking and we need 
to strengthen the contractual controls.
    But in the end we win when it comes to blue roofs because 
we go back and check every single one of them.
    Mr. Van Hollen. Have you made sure that the contractors 
didn't get paid for the work that was not done?
    General Riley. Yes, sir, before we close out the contracts, 
we inspect every one of those roofs. There are differences with 
different roofs, but we can verify it through witnesses, 
through neighbors, through camera views that we have to do our 
work in that fashion.
    Mr. Van Hollen. How about the prime contractor? My 
understanding is one of the prime contractors, the Shaw 
company, claimed themselves that the roofing has been 
completed, that was part of their job on your behalf was to go 
out and find out whether the work had been completed.
    They said it had been completed, but when your folks went 
out, they found that there was no blue roofing installed 
despite the contractor's claims of completion. The auditors 
concluded that the prime contract, ``is failing to adequately 
monitor and inspect the roofing efforts of its subcontractors 
and crews, as required.''
    They went on to make other findings. Were you aware of 
these particular reviews with respect to that prime contractor?
    General Riley. Not those particular, but I certainly 
believe the auditor report when they tell us that a contractor 
isn't doing his job of quality control, because we're highly 
interested. We pay them to do that as part of the contractual 
agreement, so that's why we send our auditors out to find them 
out.
    Mr. Van Hollen. Has the prime been penalized for their 
failure? Have they stated it to you?
    General Riley. In this contractor, I believe there is a 
retainage that we withheld, and he won't get paid until we 
verify the roofs.
    Mr. Van Hollen. Let me just, if I may, Mr. Chairman, in 
closing--one of the criticisms that's been leveled, and I think 
a fair criticism, is a failure to hire more local contractors 
who are more familiar with the territory and cut out the four 
or five layers of middlemen involved in this. But this morning 
there was a report on National Public Radio with respect to 
some of the new contracts that had been let in this effort to 
get more local contractors. And as it turned out, despite I 
guess efforts to do so, a lot of contractors on that turned out 
to be from out of State.
    In fact, one of the biggest winners was PRI-DJI, which were 
two joint-venture California firms; and it turned out that one 
of the partners in that joint venture was, in fact, a 
subsidiary of one of the large firms that received an initial 
no-bid contract.
    This question, I guess, goes as well to representatives 
from FEMA, DHS. What precautions are being taken to make sure 
that people are not gaming the system and essentially trying to 
end-run the effort to go to local contractors by simply finding 
a local contractor, but really the main profits and benefits go 
to some big out-of-State entity?
    Ms. Lee. I believe you are talking, if I understand the 
reference correctly, about the small business contracts that 
are being let before regional support to take over the 
maintenance of the temporary housing. One of the principles of 
that competition was, in fact, that we would compete with a 
preference for locals; and that preference happened to be a 30 
percent price differential, so any local would be priced at 
what they proposed and any nonlocal would have a 30 percent 
price differential applied.
    And because of the importance of getting it right for the 
taxpayer, there is a balance there. And so in some cases if a 
local's price was not within those parameters, a nonlocal could 
have won it. But it was a small business or an 8(a) company.
    Mr. Van Hollen. So under this case it could have been a 
situation where the bid from the out-of-State big one was that 
much----
    Ms. Lee. Yes, sir. If those are the contracts we are 
talking about, yes, sir.
    Ms. Duke. And that preference under the Stafford Act is the 
way FEMA has done it traditionally. Recently, the Stafford Act 
was amended to allow set-asides for only local businesses, and 
we will be using that new authority given to us by Congress.
    Mr. Pickering [presiding]. Thank you.
    Mr. Taylor.
    Mr. Taylor. Thank you, Mr. Chairman. I appreciate your 
letting me sit in on this hearing. I am going to take a little 
bit different tack than my colleague from Mississippi, and I 
think it is different from being actually in the storm and near 
the storm.
    Colonel, I agree that in the immediate aftermath of the 
storm, things were so chaotic with the lack of fuel, lack of 
electricity, no flushed toilets, I mean, go down the list--no 
food--that you almost had to bring in help from outside. But 
within about 30 days things were starting to get halfway back 
to normal. Within 30 days, there were banks open. Within 30 
days, there was some fuel available locally and an occasional 
grocery store.
    What troubles me is that these contracts were let for a 
value of money--in the instance of debris removal, $500 
million--that was not reached for several months. And what I am 
seeing in the case of both FEMA and the Corps--and I hope this 
is wrong, because this is in a publication prepared by staff--
it says, you are not looking at shorter contracts, you are 
looking at 5-year contracts.
    For the ladies from FEMA, geez and Pete, I have never seen 
more incompetence than in the delivery of FEMA trailers; and I 
would ask the staff to give you two letters that I sent to your 
Secretary, Mr. Chertoff, February 7th.
    There is a lady in the room who reports for the hometown 
paper. She reported a couple of months ago that it cost $70,000 
for a FEMA trailer, which got a number of phone calls to my 
office. In fairness to FEMA, I wrote to your boss and asked, 
what does one cost? What does it cost to deliver to Hope, 
Arkansas? What does it cost to bring it from Hope, AR to 
Purvis, MS, from Purvis, MS to Kiln, MS, from Kiln, MS, to a 
home site?
    It is 90 days later; they have never answered that.
    Now, if you are proud of the job you are doing, I would 
think you would want to get back to me in a hurry and say, no, 
it is nowhere near $70,000.
    It has been 90 days, so the only number in the minds of the 
people of south Mississippi is what Ms. Grandinette published 
in the Sun Herald is $70,000.
    So what I am saying is, I hope the staff report is wrong 
because if you are telling me the answer to contracts that are 
too big and too long is to make them bigger and longer, that is 
insane. The only people who have a longer contract than that 
are U.S. Senators.
    And I am serious. Public school teachers get a 1-year 
contract. In Congress we get a 2-year contract; it keeps both 
of us on our toes. A shorter contract, in my mind, is a better 
contract. You can always put options in there for someone who 
is doing a good job to continue it.
    On the flip side, if you give someone a 5-year noncompete 
contract, you can almost bet there is going to be feather-
bedding. You can almost bet they are going to have every 
brother-in-law in the contract. You can almost bet that they 
will be paid for their mistakes.
    In the case of the Bechtel contract at their site on Main 
Avenue, the day I went they had 30 trailers that they had 
cannibalized. Say let's say it is only $15,000 a trailer. By 
pulling out the air conditioning unit on that $15,000 trailer 
and leaving it open to the rain, you have now got $200 worth of 
a scrap aluminum, which was a $15,000 trailer.
    Next to it were approximately 200 trailers that had been 
removed for quality reasons. Ninety percent of them came from 
one manufacturer; the same name is on them. I am not going to 
say it publicly because I don't feel like paying for a libel 
suit, but you know the name.
    I say, 90 percent of the rejects are coming from one 
manufacturer. You are buying from five manufacturers. Why do 
you keep buying from these guys? And your answer was, we've got 
a contract. We've got a long-term contract.
    So long contracts create the kind of inflexibility that 
leads to the public being angry, leads to me being angry and 
leads to the feeling of the public that you are throwing away 
money as you are not meeting their needs.
    And again, I'm sorry it's you two ladies here today. I wish 
your boss was here to take your place. But you are the only 
folks from FEMA here today.
    Again, it boggles my mind.
    And I will use the converse, OK? The general over there 
took a beating from Mr. Waxman, but apparently the information 
Mr. Waxman used was an internal study conducted by the general 
to see if his operation was being done right, and they found 
that people were cheating them. I saw nothing like that in the 
case of the FEMA trailers. The trailer would arrive at Purvis, 
MS. And because so many people were calling me, I took the time 
to walk through it myself.
    It arrived at Purvis. They would check the gas. No one 
bothered to see if the microwave worked. No one hooked it up to 
a water hose to see if you had plumbing leaks. No one ran it 
through something as simple as a pressure washer to see if it 
leaked from the outside. So at that point, it is no longer the 
manufacturer's problem; it is the taxpayers' problem. So you 
have a second contractor paid a fortune to send people out to 
individual locations all over south Mississippi to fix the 
things that should have been fixed when we, as a Nation, 
accepted delivery.
    Why are you paying one driver to take it from the factory 
to Hope, AR, and another to Purvis, MS, when we know we are 
buying 35,000 of these things. Why don't you put a whole bunch 
of them on a train? I mean, simple business decisions that 
anybody who has said, we need to get better--you never in the 
entire process of that contract got better. In fact, your best 
day for delivering trailers, if my memory is right, was in 
October. You delivered about 350 in 1 day. By November, you 
were going slower than that. December, you were going slower 
than that. January, you were going slower than that.
    So everyone else on Earth has a learning curve and gets 
better. Y'all never got better because your contractor had no 
incentive to get better because he had a noncompete, no-bid 
contract, and so he got paid for every mistake he made. If a 
trailer was brought to a site and the site was not ready and it 
came back, the driver got paid. And he got paid the next day to 
bring it back to the same site.
    Tell me that's a good idea. Tell me that's good for the 
taxpayers, because I can tell you about lots of citizens who 
are living on their mother-in-law's couch or in an Astro Van, 
waiting for that trailer, who were enraged to see it pulled up 
only to be taken away.
    It is a travel trailer. Every weekend moms and dads across 
America go to travel parks, hook it up to a water hose, hook it 
up to a sewer tap, plug it into the electricity. It is not 
complicated. Why did it take six inspectors to go look at the 
site?
    These are things that average Mississippians were seeing 
every day as their blood was boiling, as they were waiting for 
their trailer that, by the way, their fellow citizens were kind 
enough to provide; but everyone knows their fellow citizens had 
to pay way too much for it and it took too long to deliver.
    So we are going into another hurricane season. If you look 
at the NOAA weather boards, the Gulf of Mexico is 10 degrees 
warmer today than a year ago today. The Navy oceanographic lab 
tests tells us we are in for 10 years of this. This is not 
Greenpeace; this is the U.S. military.
    So what's the plan for the 39,000 travel trailers that are 
now in south Mississippi? Are you going to move them? Are you 
going to stage them in the event of a storm? Are you going to 
tell people to take them with them?
    Because let me tell you--and I am so much luckier than 
most--when folks lost everything, suddenly that's all they have 
left in the world, and they waited 2, 3, 4, 5, 6 months to get 
this, you know what the tendency is going to be? I am not 
waiting 6 months for the next one. I am taking this with me. So 
they will hitch it behind a Toyota pickup truck or a Dodge 
Dart, and if we thought we had evacuation problems before, when 
an undersized vehicle is trying to pull that travel trailer out 
in high winds on clogged roads, think of the problems you will 
have.
    The next thing is--I asked Secretary Chertoff this months 
ago when he was looking for suggestions--again, it has become 
their cocoon. It is just human nature. It is the one place I 
have left that's safe in the world. There is going to be a 
tendency not to leave that cocoon.
    And I asked Secretary Chertoff for something as simple as 
taking that travel trailer, sticking it in a wind tunnel, stick 
a television camera in there and let people see what is going 
to happen to it, because it is going to fly apart. And the 
walls will become shrapnel and people are going to get killed.
    Three months later, we are that much closer to hurricane 
season, and we have not heard a word.
    Ladies, again, you just happen to be the representatives 
from FEMA who are here. I'm sorry you had to be the ones. I 
wish it was a couple of guys I could pick on. But these things 
are real concerns, real waste that your agencies have to 
address. And it is a shame that we did not do it the first 
time, but truly it would be shameful behavior on the part of 
our Nation if we do not address it before this summer.
    I would like to hear your thoughts on that.
    Ms. Lee. Mr. Taylor, I received this letter and we will get 
you an answer, and I apologize for any delay; we will certainly 
look into that. And we will be happy to bring over people if 
you want a specific briefing on the housing plan or the 
evacuation plan because there are plans. So I would be happy to 
have the expert program managers come over and give you and 
your staff or any other members those briefings if you would 
like more details.
    Mr. Taylor. Let's just start and again I am going by a 
staff memo that might be incorrect so if it's incorrect you 
tell me. But if your answer and if the Corps's answer to 
contracts that are already too long is to make them 5 years, 
that is insane. And if that's what you plan on doing 
administratively, I think this committee needs to know, because 
we need the opportunity to try to prevent that legislatively, 
because that is the not the solution.
    So that is the first question: Are you really looking at 5-
year contracts?
    Ms. Lee. We are looking at contracts with longer terms with 
options, as you mentioned, so we will continue to monitor the 
performance.
    We have also put in place contracts that have an ordering 
period and so you can order against them for a certain period, 
but if the performance is not acceptable at any time we can run 
another competition and get additional support. Or if someone 
is really not performing, of course, there are normal remedies, 
which is either termination for default because they are not 
performing properly, or we can terminate for convenience.
    So we do have those flexibilities.
    Mr. Taylor. Because this is a real-life scenario; again, 
people are waiting for that trailer, it is not a big deal.
    It is a big deal, trying to find a place for them to live; 
someone is not getting the job done.
    What is your recourse and how quickly can you put someone 
else on that job? Because I can tell you your representatives 
that I dealt with, to a man or a woman, said, We are stuck with 
this contract with Bechtel. They are going to get the first 
35,000 trailers. There is absolutely nothing we can do about 
it.
    And believe me that is not a good thing for them as 
citizens. It is a horrible decision on our Nation's part. So 
how are we going to keep that from happening again?
    Ms. Lee. We are putting in place a variety of contracts. In 
fact, as you mentioned, the individual assistance, technical 
assistance contracts, the proposals are in now. We are 
evaluating those. And what we do plan to do is to have not just 
one, but a number of contracts in place, which we will place 
orders against when the need arises.
    And as we have talked through here----
    Mr. Taylor. Walk me through that, for instance. How would 
you fix that for instance if it happens again this fall? How 
would you cancel that contract and bring somebody in who's 
going to do a better job of delivering those trailers on short 
notice?
    Ms. Lee. Because we have awarded more than one contract, if 
one contractor is not performing, we will stop placing orders 
against them and place the orders against other contracts that 
are already competitive and in place--kind of the advanced 
contracting concept.
    Mr. Taylor. And that's in place right now?
    Ms. Lee. The proposals are in. We're getting ready to award 
those contracts.
    Ms. Duke. Additionally, there's two changes to the 
contracts that Ms. Lee is mentioning. They are 1-year contracts 
with two options; so they are a maximum of 3 years. Because we 
are constantly looking at our housing strategy, we didn't think 
a long-term contract was in place.
    The second thing is, we share your concern with a single 
chain of custody. So there is a provision to have less changes 
of ownership, if you will, or custody during the installation-
of-trailer process so it is easier to hold either us or the 
contractor, whoever is appropriate, accountable if there are 
damages or any incidents during the process.
    Mr. Taylor. Again, I would welcome the opportunity to visit 
with you at length since I do have some, I think, very valid 
concerns.
    Ms. Duke. Yes, we would like to do that, Mr. Taylor.
    Mr. Taylor. Thank you.
    Chairman Tom Davis. Thank you very much. Mr. Pickering, you 
had one followup, I think.
    Mr. Pickering. Mr. Chairman, I want to take a second to say 
to General Riley, I know that you have been trying to make it 
better on the ground, and your people in Vicksburg have been 
very committed. You have tried to go out and give contracts to 
local companies. You started in December. So a lot of the 
issues that are raised in the last hearing, you have tried to 
address, and I commend you for doing so.
    Unfortunately, the contracting process now allows an 
incumbent contractor to protest in such a way that you are not 
able to fulfill congressional intent and what is best for the 
local community because of the ability of incumbent contractors 
to protest and delay. So I do want to commend you, but that 
goes back to the question Mr. Taylor was raising on trailers.
    Once you go down one path of contracting, you cannot get 
off of it. It takes you a year, year and a half, to take a 
contract away from an incumbent contractor if there is a 
protest process each step of the way.
    So I hope, Mr. Chairman, that we can look at greater 
contract transparency and also ways to give you greater tools 
so that we can fix the problems so you can achieve your 
objectives in a more flexible way.
    Mr. Waxman. Mr. Pickering, would you yield to me?
    Mr. Pickering. Yes.
    Mr. Waxman. I think you are making an excellent point.
    One of the frustrations that I am feeling is that we have 
auditors after the fact, and the auditors can pick up some of 
the problems and sometimes they cannot. But the problem that I 
have seen over and over again, Katrina and Iraq, some of the 
homeland security contracts, is, the government goes to a big 
contractor, gives them the contract. They end up with a 
monopoly over that contract and the work to be done, and then 
they hire subs.
    The government ought to be negotiating with the people who 
can do the job directly. It would certainly make it easier to 
get the job done. It will help the local people, and it would 
be at a fraction of the price.
    And so I think we are making this mistake over and over 
again, and I hope one of the lessons we can learn is, we need 
to rethink how we are doing these big major contracts so that 
we can be more effective.
    Chairman Tom Davis. Thank you.
    Let me add also, particularly in some of these debris 
removal and things like that, it is not a high-skill level, so 
you have local workers that can get into this. It is one of the 
fastest ways to bring the local economies back. And from my 
observations being on the coast three times, the areas where 
you had the locals letting these contracts, it happened 
fastest, there and I think at lower cost, but certainly it got 
to work faster than having to go through the top.
    But I think on those kinds of basic services, it is 
probably in the taxpayers' interest and everybody's interest to 
go local.
    Mr. Taylor. Mr. Chairman, 20 seconds.
    Ms. Murphy, shame on me if I do not mention the good work 
of the GSA. Within 3 or 4 days of the storm, realizing that my 
local offices had been washed away, I think two, three, three 
trailers were delivered by the GSA so you actually had a 
trailer there for my local offices, before phone service, 
before electricity.
    So, again, not everything our Nation did went wrong. And 
for those people who really leaned forward, I want to commend 
you for that.
    Ms. Murphy. Thank you, sir.
    Mr. Pickering. Mr. Chairman, I just wanted to wrap up.
    I know a lot of the things that happened in Katrina were 
based on the policies in place pre-Katrina and that everyone at 
these tables are the implementers of these policies and the 
implementers of false assumptions.
    And so my message, really, to the policy and 
decisionmakers, Secretary Chertoff and President Bush, is that 
we hope to see the policy changes on contracting and any 
reforms necessary legislatively and administratively because, 
Mr. Chairman, we are planning to move major disaster reform 
legislation before the Memorial Day recess, before the 
hurricane season.
    And I will be submitting questions on a number of different 
issues, as well as asking the Department of Homeland Security 
and FEMA to change assumptions and to change policies and to 
communicate back to us in a very timely way as we move major 
disaster reform through the House of Representatives.
    Thank you, Mr. Chairman.
    Chairman Tom Davis. Thank you very much. I will dismiss 
this panel, and we will move to our next panel. We are 
expecting votes some time in the next not too long, so I want 
to move as quickly as I can to get the testimony in.
    We have Mr. Randall Perkins, the president of AshBritt, 
Inc.; Mr. George Schnug the CEO of AmeriCol Logistics; Mr. Neal 
Fox, a member of the Board of Advisors of FedBid, Inc.; and Mr. 
James Necaise, the president of Necaise Brothers Construction.
    It is the policy of the committee that all witnesses be 
sworn before you testify, so when you get up here, if you would 
just remain standing and raise your right hands, we will swear 
you in and begin the testimony.
    Mr. Necaise, I understand you have somebody reading your 
testimony; is that correct, a Mr. Machado?
    Mr. Machado, if you will raise your hand with everyone 
else.
    [Witnesses sworn.]
    Chairman Tom Davis. Thank you for your patience. We will 
just move ahead.
    Mr. Perkins, we will start with you.

STATEMENTS OF RANDALL PERKINS, PRESIDENT AshBRITT, INC.; GEORGE 
SCHNUG, CEO, AmeriCOLD LOGISTICS, INC.; NEAL FOX, MEMBER, BOARD 
 OF ADVISORS, FedBID, INC.; AND JAMES NECAISE, VICE PRESIDENT, 
 NECAISE BROTHERS CONSTRUCTION, ACCOMPANIED BY DAVID MACHADO, 
                         STAFF ENGINEER

                  STATEMENT OF RANDALL PERKINS

    Mr. Perkins. Mr. Chairman, committee members, my name is 
Randy Perkins, and I'm president of AshBritt, Inc., an 
environmental services company with expertise in a range of 
disciplines that fall into one or more of these four divisions: 
disaster recovery services, solid waste services, engineering 
services and special environmental services.
    Your committee's letter to me, dated April 20th, asked that 
I address three matters, the first of which was that I provide 
an overview of AshBritt and the goods and services that it 
provides; the second of which concerns AshBritt's role as the 
contractor to the Federal Government; and the third of which 
requests my own personal views regarding certain contracting 
vehicles, methods and policies.
    In response to the first request regarding AshBritt's goods 
and services, I would observe my firm has, especially over the 
last decade, created a network of resources capable of dealing 
with a range of services from emergency needs such as road 
clearance, debris removal to demolition of unsafe structures, 
decontamination and fire suppression reports.
    Regarding the committee's second area of interests in 
AshBritt's roles and responsibilities as a contractor with the 
Federal Government, it is first necessary to explain Hurricane 
Katrina's size and scope elevated the Federal response from the 
usual circumstances of FEMA oversight of the local and State 
governmental contracts for storm damage recovery to one in 
which FEMA tasked the U.S. Army Corps of Engineers with the, 
usually, locally initiated contract responsibilities.
    Ordinarily, AshBritt deals with a city, county or local 
agency in assisting its efforts to recover from a natural 
disaster, while achieving compliance with the rules and 
regulations promulgated by FEMA for reimbursement to the local 
government entity. However, AshBritt in the year 2002 has been 
successful in a nationwide competitive selection process 
through which the U.S. Army Corps of Engineers pre-positioned 
contractors for separate geographic regions of America as a 
resource in the event of a major catastrophe such as that 
subsequently caused by Hurricane Katrina.
    AshBritt was in the third year of its contracting involving 
the Louisiana/Mississippi region when FEMA made the decision to 
task the Katrina debris removal to the Corps. The specific role 
given AshBritt is detailed in its contract with the Corps of 
Engineers and consists of debris collection, temporary storage 
at reductionsites, debris reduction, and quality assurance that 
includes supervision to ensure compliance with governmental 
requirements and regulations. AshBritt's experience and 
expertise results from years of dealing with dozens of local 
government entities around the United States.
    Finally, the committee expressed a third area of interest 
asking my personal views of contracting vehicles, methods and 
policies, generally concluding with my views of the set-aside 
and local contractor provisions under the Stafford Act. I do 
not feel qualified to suggest Federal policies for contracting. 
I do feel qualified to comment about one aspect of the U.S. 
Army Corps of Engineers pre-positioned contractors process, and 
that is the geographic selection.
    The Corps of Engineers specifically chose to select 
experienced contractors with ability to respond to emergency 
situations, but did not want the contractor to potentially be 
incapacitated by the same emergency. I concur with this 
assessment; consequently, I have no complaint that the Corps of 
Engineers did not select my firm or another firm in Florida as 
the pre-position contractor for the State of Florida. A 
Tennessee firm was selected.
    Similarly, an Alabama firm was selected--excuse me. 
Similarly an Alabama firm with which AshBritt is familiar and 
who AshBritt works with was selected for the State of Alabama, 
but is working as a contractor for response to need resulting 
from the damage caused by Hurricane Rita in Texas. This kind of 
geographic pre-positioning is good planning for an event of the 
magnitude of Hurricane Katrina.
    Regarding any other Federal contracting policy, I do not 
have the expertise in Federal contracting policy to make 
legislative or regulatory suggestions, but I can and am proud 
to outline what AshBritt has done in the furtherance of its own 
Federal contractual tasks and in compliance with existing laws 
and regulations. Thank you.
    Chairman Tom Davis. Thank you very much.
    [The prepared statement of Mr. Perkins follows:]

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    Chairman Tom Davis. Mr. Schnug.

                   STATEMENT OF GEORGE SCHNUG

    Mr. Schnug. Chairman Davis, Mr. Waxman, invited guests, my 
name is George A. Schnug, and I am the chief executive officer 
of AmeriCold Logistics. Thank you for inviting me to appear 
today. I appreciate your interest in this issue and I hope my 
comments today are helpful and responsive. I have submitted a 
copy of my statement for inclusion in the record.
    AmeriCold Logistics is a leading, national, third-party 
provider of integrated temperature-controlled supply chain 
solutions. We are headquartered in Atlanta, GA, and have 100 
facilities and over 6,500 employees across North America. We 
have 545 million cubic feet of temperature-controlled warehouse 
capacity and ship 60 billion pounds of freight annually for 
over 1,500 active customers.
    The 2005 hurricane season was our first assignment with the 
Federal Government during a natural disaster. Prior to this 
occasion, the only work our company had done for the Federal 
Government was under contracts with the Department of 
Agriculture for storage of food commodities in our Carthage, 
MO, and Bettendorf, IA, warehouses. Our company's first 
experience with disaster assistance came in the aftermath of 
Hurricane Dennis. In July 2005 FEMA requested that 310 
truckloads of ice be disorder in AmeriCold facilities in 
Thomasville, GA, Montgomery, AL, and Ft. Worth, TX.
    Weeks later and days prior to Hurricane Katrina making 
landfall, we are requested by FEMA to manage the loading, 
staging and subsequent delivery of these truckloads of ice to 
affected regions. AmeriCold was successful in accomplishing 
this task with little notice at an extremely condensed time 
line. Our ability to redeploy personnel and resources due to 
the existing size and scale of our organization, our 
warehousing and transportation technology, and our established 
contractual relationships with an extensive network of common 
carriers were key components of this success. Our success in 
our initial activities led FEMA to request additional 
warehousing and services for AmeriCold.
    Our company's experiences with disaster preparedness 
response have led us to develop the following suggestions that 
I respectively submit for your consideration. We believe each 
of these items will lead to more efficient response at a lower 
cost to the Federal Government.
    No. 1, the Federal Government must prepare and maintain a 
supply chain network plan that identifies private industry 
providers and locations necessary for storage and distribution 
of relief commodities. A supply chain network plan is an 
analysis that identifies the optimal operational locations. The 
objective is to locate both manufacturing and distribution 
facilities within the nearest proximity of the end market.
    In commerce, a successful plan places inventory in 
locations that minimize storage and transportation costs, while 
also supporting quantity and schedule requirements of the next 
receiver. In a disaster response scenario, the objective is to 
reduce travel which, unaddressed, consumes time, the scarcest 
resource.
    Two, the Federal Government must procure and maintain an 
inventory of essential commodities, essential for initial 
relief aid. AmeriCold recommends contracting in a manner that 
provides predisaster funding to officially build inventory at a 
lower purchase price, provides for rotation of commodities to 
avoid waste and maintains adequate reserve stock. Multiyear 
contracts would allow contractors to form alliances of 
complementary skills and make investments in assets and people 
necessary to efficiently and cost-effectively perform. This 
would include relationships with local contractors, which we 
effectively used in 2005.
    Further, the Federal Government should consider entering 
into a triparty agreement with manufacturers and retailers for 
water and ice, allowing FEMA to procure and rotate product 
through normal retail distribution channels. FEMA's evolving 
concept of prestaged commodities to support all hazards 
response is a good first step in this direction.
    Three, the Federal Government should utilize a single 
integrated system to monitor and control the storage and 
movement of all commodities at all times. It is essential to 
establish and maintain total asset visibility at all times. A 
single warehouse inventory management system should identify 
the location, manufacturer, date of manufacture, and on-hand 
inventory at a minimum. This information is essential for 
inventory deployment as well as stock rotation and reverse 
logistics.
    AmeriCold, for example, uses a Web-based system that 
delivers real-time information on customer orders, inventory 
and transportation status. We maintain total asset visibility 
and accountability whether inventory is located in one of our 
warehouses, a third-party warehouse or in a trailer. An 
integrated system of this type is essential to support multiple 
facilities and carriers, product identification, and rotation.
    Four, the Federal Government should develop a virtual fleet 
of transportation carriers managed by one party rather than a 
single asset-based carrier that faces constraints on peak 
demand.
    AmeriCold demonstrated the ability in 2005 to obtain 
carrier capacity utilizing its precontracted network of over 
400 common carriers when supply was scarce to others. AmeriCold 
coordinates, routes, dispatches and monitors fleet activities 
for over 220,000 temperature controlled truckload in the year.
    An integrated transportation and warehouse system, as 
previously described, is essential to making this 
recommendation successful. AmeriCold has processing systems in 
place that can quickly incorporate local carriers into its 
fleet and assure they are paid for their services on a timely 
basis.
    I would be happy to go into further details about my 
testimony and suggestions during the question and answer 
period. Thank you.
    Chairman Tom Davis. Thank you very much.
    [The prepared statement of Mr. Schnug follows:]

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    Chairman Tom Davis. Mr. Fox.

                     STATEMENT OF NEAL FOX

    Mr. Fox. Chairman Davis, Ranking Member Waxman, members of 
the committee, I am Neal Fox, procurement consultant and member 
of the board of advisers of FedBid.
    It is an honor to testify concerning FedBid's to help the 
Federal Government improve disaster-related procurement. FedBid 
is a small business that offers online procurement services, 
including reverse auctions and other competition methods 
through its Web site, FedBid.com.
    This Internet-based marketplace enables public sector 
buyers to purchase commercial items in a dynamic competition 
environment. FedBid operates much like a reverse eBay, 
providing an online forum where many sellers bid on Government 
requirements, and prices drop as sellers seek to underbid each 
other.
    It is a user-friendly regulatory compliant means to help 
agencies procure commodity products and services.
    By automating the procurement process, FedBid significantly 
reduces the amount of time required to complete a procurement 
transaction, which is especially important during a crisis 
where time is of the essence, but controls are still needed.
    FedBid ensures a fair competition for all parties, is 
compliant with Federal procurement regulations, and keeps the 
government buyer in charge of the procurement.
    To use FedBid, a buyer posts the requirement at Fedbid.com, 
and sets the duration of the competition. Thousands of 
potential sellers are notified automatically of the requirement 
and could submit multiple bids until a preset time period 
expires.
    When bidding ends, the government buyer reviews the bids 
and decides whether to accept one of them based on best value 
and makes the award using government purchase card through 
FedBid e-payment capability or a purchase order.
    Detailed transaction information provides enhanced 
reporting and clear accountability. FedBid has successfully 
demonstrated that Federal Government agencies can quickly and 
efficiently procure commodities at the lowest available market 
prices using their process.
    Today, Federal buyers for more than 60 U.S. Federal 
contracting offices within 18 Federal agencies use FedBid's 
innovative tools. Overall, Federal agency customers have used 
FedBid to make over $400 million worth of purchases resulting 
in a net average savings of approximately 11 percent better 
than government price estimates. FedBid also increases small 
business utilization since it brings far more companies into 
the competition than most other methods.
    Nearly 70 percent of all dollars awarded through FedBid go 
to small businesses, and 80 percent of those dollars are non 
set-aside awards. With FedBid, both government and small 
businesses win.
    For crisis procurements, FedBid can provide the government 
with an extremely effective first line of defense against no 
bid and sole source contracts that put the government at 
increased risk. FedBid enables fast yet competitive 
procurements. For example, in one competition lasting just 2\1/
2\ hours, over 1,000 sellers were notified, seven sellers bid, 
and the government saved over 22 percent. And the awardee was a 
small woman-owned firm.
    With FedBid, good procurement does not need to suffer due 
to urgency.
    Buyers can access over 400,000 Federal Government 
contractors, and additional vendors can be added to FedBid's 
data base easily, usually in about 10 minutes. This allows 
State or local authorities to maximize the use of local 
vendors. In fact, there are over 1,100 sellers from the gulf 
coast States registered on FedBid today.
    Federal agencies, under the authority of the Stafford Act 
or Local Community Recovery Act, can also use FedBid to reach 
local vendors. Although FEMA did not utilize FedBid in the 
immediate aftermath of Hurricane Katrina, the agency recently 
began a FedBid pilot program.
    FedBid has only been used by FEMA at one office for 2 
months, yet significant improvements and pricing discounts, 
data availability, reporting capability and other benefits have 
already been achieved. In this short time, FEMA has used 11 
reverse auctions for items totally approximately $400,000 and 
average nearly 13 bidders bidding a total of 46 times. Total 
savings approached $75,000, nearly 19 percent below independent 
government estimates.
    We applaud FEMA's action to look for ways to improve their 
procurement processes that lead them to use FedBid starting in 
March 2006.
    FEMA's currently looking into expanding the use of FedBid 
to other procurement offices. And we anticipate the opportunity 
to replicate our initial success throughout FEMA and be ready 
to provide immediate support when the next disaster requires 
urgent procurement action. We also appreciate the committee's 
efforts on this important matter. And I would be pleased to 
entertain any questions from the committee.
    Chairman Tom Davis. Thank you very much.
    [The prepared statement of Mr. Fox follows:]

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    Chairman Tom Davis. Mr. Machado.

                   STATEMENT OF DAVID MACHADO

    Mr. Machado. Mr. Chairman, ladies and gentlemen of the 
committee, I would like to thank you for inviting Necaise 
Brother Construction Co. to these hearings and allow us this 
historic opportunity to testify.
    My name is David Machado. I am a staff engineer for Necaise 
Brothers. And I will be presenting our company's testimony, 
seated next to me is James Necaise, vice-president of Necaise 
Brothers.
    I would first like to state not only are we speaking out 
for Necaise Brothers, but also for all other local Mississippi 
contractors that have been slighted by the government's current 
practice of hiring out-of-state contractors to perform work 
that is critical to the rebuilding of not only the physical, 
but the emotional infrastructure of our community.
    We have all felt injustice from truck drivers, to chain saw 
operators, we have had to scrape and claw to be afforded an 
opportunity to rebuild the very place we call home.
    In these next 5 minutes, I hope I can convey to you the 
frustration we have experienced as a result of the Hurricane 
Katrina disaster service procurement process.
    Necaise Brothers Construction is a Mississippi corporation 
based out of Gulfport, MS. We employ 36 local citizens and work 
with local subcontractors to employ hundreds of local 
residents.
    Necaise Brothers history of disaster relief services dates 
back many years before Hurricane Katrina. James's father, 
Herman Necaise, president of Necaise Brothers Construction, 
began his roots in the field of debris removal back in 1969 
with Hurricane Camille.
    A resident of Hancock County, MS, Herman used his own dump 
truck to haul debris from the devastated Bay Saint Louis, MS 
area. On August 29, 2005, Katrina challenged Necaise Brothers 
like no other storm had in the past. My family, Herman, James, 
as well as many of our employees, all lost their homes through 
the ravages of Katrina.
    Despite the hardening blow, Necaise Brothers retained every 
single employee it had prior to the storm.
    We are proud to say that despite our personal losses, our 
company was the first responder for numerous municipalities and 
local governments across the Mississippi coast in the immediate 
hours following Katrina.
    Necaise Brothers crews cleared vital roads of debris for 
emergency personnel such as search and rescue, fire police, and 
power crews to aid those in need.
    Once emergency operations were successfully completed, 
Necaise Brothers concentrated its effort on debris removal, 
reduction and demolition for our local governments. The city of 
Long Beach, MS, contracted with Necaise Brothers to remove all 
debris from public right of ways as well as demolish and remove 
debris for over 600 right of entries citywide and maintain 
sites for debris disposal. Necaise Brothers is proud to say 
that the city of Long Beach recovery effort is one of the elite 
on the coast.
    Over 1 million cubic yards of debris have been removed and 
disposed of from the city of Long Beach, and our contract is 
within 10 percent of the engineer's estimate.
    On April 7, 2006, Necaise Brothers was awarded a contract 
under a solicitation with the U.S. Corps of Engineers, 
Vicksburg, MS, consolidated contracting office for the 
demolition of private, commercial, and public structures or 
buildings damaged by Hurricane Katrina and removal of related 
debris.
    AshBritt, a Florida contractor, prevented Necaise Brothers 
from performing over $150 million in cleanup work awarded to it 
by the Corps by filing a protest with the GAO.
    This was not the first administrative challenge that 
AshBritt made in an attempt to block the award to contract to 
local Mississippi firms.
    Prior to the award of Necaise Brothers, AshBritt protested 
the procurement claiming that the Stafford Act did not allow 
the Corps of Engineers to include a set aside for local 
contractors.
    The GAO validated the Corps's approach and rejected 
AshBritt's challenge. AshBritt's procedural challenge delayed 
Necaise Brothers' performance of its contracts by 4 months. All 
the while, AshBritt was performing the work intended for 
Necaise Brothers.
    In addition to the GAO, Congress with broad bipartisan 
support has recently encouraged the Corps's attempts to 
implement the Stafford Act as it applies to Hurricane Katrina 
cleanup contracts in H.R. 4979, the Local Community Recovery 
Act of 2006.
    The bill provides explicit direction to Federal agencies 
that geographic preference for the award of contracts are 
specifically encouraged.
    The following congressional record clearly reflected 
Congress's intent to remove further interference by AshBritt in 
the procurement progress. I would like to read comments made by 
Congressman Oberstar. Last week, the GAO issued its ruling its 
decision in the matter of AshBritt with reference to the file 
number dated March 20th, and in the most part, said we think 
AshBritt misses the point when it argues that some sort of 
preference short of a set-aside also implements the Stafford 
Act's preference for using local business to clean up disaster-
related debris. The question here is not whether some lesser 
form of preference might have satisfied the act's intent, but 
where the preference chosen was an abuse of agency discretion.
    Since the language in the statute does not specifically 
restrict the application of the preference and since the use of 
set-aside is consistent with statutory goal of assisting firms 
in effected area, we do not view the Corps' decision to 
implement the Stafford Act preference with a set-aside as an 
abuse of the agency's discretion to implement the statutory 
scheme. That settles it.
    The Corps has the authority. That authority has been 
affirmed by the Government Accountability Office and the 
contracting should proceed. The GAO decision so clear, so 
precise, so unequivocal, in my judgment, and in previous 
experience with the Corps and with the GAO, should ward off any 
lawsuit or further appeal by AshBritt. You think they will be 
very wise to accept the judgment of the GAO and allow the 
procedure to go forward.
    Congressman Oberstar goes on to say, I think it is a good 
legislative outcome. It is a good direction to the Corps. It 
will be good for the people of Mississippi.
    It will be a good lesson for workers and smaller 
contractors in other hurricane affected gulf States. It will 
set a good precedent for the future.
    On April 10, 2006, AshBritt filed yet another protest. 
Despite the prior ruling by the GAO and a clear congressional 
mandate, the Corps of Engineers refused to lift the automatic 
stay, which would have allowed Necaise Brothers to begin its 
work.
    If AshBritt's second GAO protest was allowed, all remaining 
work intended to be completed by Necaise Brothers will now be 
finished by AshBritt. Having no other alternative on April 20, 
2006, Necaise Brothers filed an application for preliminary 
injunction in requesting that a Federal judge intervene to stop 
the Corps from allowing AshBritt to complete the work 
rightfully awarded to Necaise Brothers.
    Immediately after the filing of the application for 
preliminary injunction on April 20, 2006, the Corps of 
Engineers terminated Necaise Brothers contract, citing delay 
caused by protests, thus allowing as separate to continue with 
the debris removal process. Not only is this a slap in the face 
to Necaise Brothers and local contractors, it prolongs 
unnecessary burdens to taxpayers.
    If past recovery efforts were examined, they would show 
that competitively bidding projects to local companies under 
the Stafford Act reduces the cost of debris removal by 25 to 
100 percent.
    This puts money back into the devastated local economies 
and boosts morale as local citizens are allowed to take charge 
of their own recovery process.
    Meanwhile, back on the Mississippi gulf coast, our office 
continues to be inundated with calls from local workers and 
contractors, pleading for an opportunity to clean up and 
rebuild their community. Unfortunately, at this time, all we 
can do is redirect their calls. What is particularly disturbing 
about this experience is that the Corps had the tools to allow 
Necaise Brothers to perform, to seek a stay which could have 
been overriden. But the Corps choose not to do so. Thank you.
    Chairman Tom Davis. Thank you very much. I gather you are 
not looking for a subcontract right now. But we appreciate your 
testimony.
    [The prepared statement of Mr. Machado follows:]

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    Chairman Tom Davis. I will start with Mr. Pickering.
    Mr. Pickering. Mr. Chairman, the testimony illustrates the 
difference--Mr. Necaise, you started doing cleanup at the Long 
Beach Municipality right after the storm, is that correct?
    Mr. Necaise. Mr. Pickering, we started doing cleanup the 
day after the storm. My company and other local companies moved 
in to clear the roads for Gulfport, Long Beach, and other 
cities. We were there right after the storm.
    Mr. Pickering. You were not incapacitated?
    Mr. Necaise. No, I was not. I lost my house, but I was 
there the next day to work.
    Mr. Pickering. And your story is repeated across the 
disaster area in Mississippi where local communities, even 
against advice of the Corps of Engineers, contracted with their 
own companies, and from the storm we have county after county, 
city after city, local company after local company that weren't 
incapacitated.
    Mr. Necaise. No.
    Mr. Pickering. Mississippians, we are pretty resilient 
people, aren't we?
    Mr. Necaise. We are.
    Mr. Pickering. So this assumption of incapacitation, in 
your opinion, would that be a false assumption?
    Mr. Necaise. It is a false assumption. And at no time after 
the storm did I see first 2 weeks AshBritt, the Corps of 
Engineers, anyone. It was a local citizens cleaning up their 
own mess, opening the streets, for as Dave mentioned, the 
ambulance, recovery efforts. At no time did I see the Corps. I 
did not see--I did not experience the Corps or AshBritt until 
the night, city of Long Beach, I was signing my contract for 
the city of Long Beach debris removal, and that night, the 
Corps and Mr. Perkins were giving their presentation to the 
city officials on why they should use the Corps.
    I was disturbed during this presentation. One of the things 
stated that if the city of Long Beach used the Corps, they 
would not have to worry about matching funds. If they used the 
local contractor, they could be subject to matching 5, 10 
percent.
    And the other thing was, if they went with the Corps, 
instead of locals, they would not have to worry about being 
audited by FEMA.
    And that, to me, is a scare tactic used to the local 
governments, the local officials, to bring the Corps in here. I 
have a bid to the city of Pass Christian for debris removal.
    You stated earlier, $14 a yard; $12.90 a yard. A million 
yards in 35, that is an extra cost in this one small town of 
$20 million the taxpayers had to pay. That money could have 
been used for something else. It could have been used for 
housing. It didn't have to go leave the State of Mississippi. 
$20 million on the smallest community in Harrison County. 
Wasted.
    Mr. Pickering. Mr. Perkins, you said in the Harrisburg 
American the moment anyone can shove me out that makes any kind 
of financial or common sense, we will stand down.
    Now, Mr. Necaise was on the ground the day after the storm. 
He cleaned up at half the cost that you did.
    Does that make financial or common sense to you?
    Mr. Perkins. I think it is first, important for this 
committee to understand how this process works.
    Mr. Pickering. That is not what--I did not ask you to 
educate us on the process. I have learned what the process was. 
Mr. Perkins, what I asked was he incapacitated?
    Mr. Perkins. Again, I have one way to answer. Would you 
like me to answer, sir, or do you want debate it for the next 
10 minutes.
    Mr. Pickering. Was he incapacitated and were other local 
contractors incapacitated?
    Mr. Perkins. I will answer it my way if you would like to 
hear it. This process works by the local governments of the 
State of Mississippi requesting the Governor of their State, 
once they have assessed the situation, which they did during 
the first 5 to 7 days after Katrina made landfall, demanding 
that of their Governor, that this was beyond their ability from 
a local level to handle the magnitude of response in the 
cleanup that was needed, therefore, triggering FEMA to pass a 
Corps of Engineers and bringing in AshBritt under our 
competitivey-procured contract that we had for almost 10 years.
    And I maintain that it made zero sense to answer your 
question to do what the Corps of Engineers was trying to do 
when they went to rebid our contract. Absolutely I still 
maintain that today.
    Mr. Pickering. But when they rebid the contract, that was 
December 20th. At that time, at 3 months after the storm, so 
even if, let's just say there was some limited incapacitation 
or that we needed supplemental help of capacity, why does it 
make sense at that point in December for financial reasons, for 
congressional intent reasons of the Stafford Act and the 
recovery of local economy, why does it make financial sense to 
pay twice as much to have out-of-state contractors at a point 
when all of our local contractors are on the ground and can do 
the work. At that point, sir, why did you continue to protest 
and delay and game out the system?
    Mr. Perkins. Nobody was gaming the system, sir, regardless 
of how you like to characterize it. Speaking specifically to 
this bid abstract that Mr. Necaise has, if you examine the 
requirements put forth in that specific procurement, it falls 
short about two-thirds of the services that were currently 
provided for the Corps of Engineers.
    So if you are going to sit here and discuss and debate 
numbers, you need to compare apples to apples not apples to 
freight trains. It is just not the same thing.
    Mr. Pickering. What is your comparison of Necaise disposing 
of 1 million cubic yards of debris at what 12, 14?
    Mr. Necaise. There were 12 bidders on this one particular 
project. My company was third. We were third lowest. Out of 12, 
nine of the contractors were between $12 and $14 a yard. They 
were all local. The job--the description of the job was 
removing the debris, maintaining the dump sites. The debris 
reduction and that cost come out to $12, $12-and-something 
cents a yard. It is no difference, doing what we are doing for 
$12.90 what they are getting $36 for.
    I mean, you compare apples to apples, and apples to freight 
trains, garbage is garbage. You pick it up. You put it in the 
dump, you get rid of it. There is no difference here.
    I get paid one amount, he gets paid one amount. He gets 
paid, to me, it looks like 125 percent more. Federal 
Government, our taxpayers are paying this.
    Mr. Pickering. Thank you. Mr. Chairman, one final question 
for Mr. Perkins.
    Mr. Perkins, on your $500 million contract, what is your 
profit on that?
    Mr. Perkins. The $500 million contract that we have that 
the pricing structure of that contract was negotiated with the 
contracting department, contracting specialist of the Army 
Corps of Engineers. In that process, we are negotiating a 
profit margin and a G&A and an overhead number for field 
operations etc. We went through the Federal procurement rules 
and regulations to establish that price, it was deemed 
reasonable, and that is as much as I have to say on that.
    Mr. Pickering. Mr. Perkins, on December 6th, you had a 
meeting in my office in which you said you had a 25 percent 
process on that contract so $500 million contract, was your 
profit $100 million?
    Chairman Tom Davis. Did you back off 25 percent, is that 
about ballpark?
    Mr. Perkins. It is a little overstated, but we are so far 
away from closing out our books and taking into account all the 
various issues that we are dealing with, I will let you in a 
few months.
    Chairman Tom Davis. Mr. Waxman's time.
    Mr. Pickering. Let me just, for the record, make sure that 
I understand, you made a 25 percent profit. This is not what is 
common sense or the best interest for taxpayer for the country 
or for the local communities. Your protest is about your 
profit. With that, I yield back, Mr. Chairman.
    Mr. Perkins. You are wrong, Congressman. You can 
characterize it however you want, I'm sorry, Mr. Chairman, I 
was answering his question.
    Chairman Tom Davis. I just want to ask why is the contract 
and the services you are providing different from what Mr. 
Necaise--why are they not apples to apples? What are you doing 
differently?
    Mr. Perkins. First of all, I know what that proposal or bid 
they put out requires. Second of all, we are working for the 
Army Corps of Engineers. The administration, the safety, the 
project management, the oversight required working for that 
agency is significantly greater than working for cities or 
counties directly.
    Chairman Tom Davis. I'm not after you. I am just trying to 
understand what services were you providing different than what 
Mr. Necaise has provided?
    Mr. Perkins. Part of our contract, quality assurance, 
disposal costs, specialized work items, hazardous materials, 
asbestos monitoring, mediating pools and subsurfaces voids, 
imminent dangers, trees and limbs, etc. They are not even close 
in the requirements that were under some of these local bids 
that were put out initially after the storm and we are required 
to perform under contract. They don't even come close.
    Chairman Tom Davis. I just wanted to make sure I got--Mr. 
Waxman.
    Mr. Waxman. Thank you, Mr. Chairman. One of my biggest 
concerns is that gap between what the prime contractors are 
being paid and what the people who actually do the work are 
being paid. Now the documents for the Army Corps show that for 
both debris removal and the blue roof contracts, there are as 
many as four layers of contractors between the government and 
the worker, each taking a financial cut.
    Now, Mr. Perkins, for your debris removal contract, how 
many layers of subcontractors does AshBritt employ and how many 
layers stand between the government and the workers?
    Mr. Perkins. Zero.
    Mr. Waxman. So you did the actual work yourself? You did 
the subcontracting?
    Mr. Perkins. Yes, sir, Mr. Waxman, and I concur I 
completely agree with the problems that you see with that. 
Those are related to the contracts in Louisiana. Our contracts 
in Mississippi, every subcontractor working on the job gets a 
check directly from AshBritt. There are very few instances 
where some of the local Mississippi companies such as some of 
the truckers that are independent----
    Mr. Waxman. That is not what I was asking. How many 
subcontractors do you hire under your prime contract?
    Mr. Perkins. At one point, we had several thousand. But 
they were all working directly for us. There was no tiering on 
our project.
    Mr. Waxman. You had the contract with the Army Corps of 
Engineers and then you hired subcontractors to do the work?
    Mr. Perkins. That's correct.
    Mr. Waxman. And did they have subcontractors?
    Mr. Perkins. As I was just getting ready to answer, in very 
few cases, we allowed a subcontractor, and there were 
Mississippi subcontractors, to hire people underneath them, and 
this was mainly at the request of some of the smaller guys who 
only had one truck or two trucks or worked for these guys on a 
regular basis, and felt comfortable in that situation. But it 
is our typical policy as a company we do not allow multiple 
tiering at any level.
    Mr. Waxman. One document we have shows a prime contractor 
and three tiers of subcontractors and press articles have 
reported the same. Do you dispute the accuracy of these 
reports? Maybe not your company, but for the work that is 
generally being done by prime contractors?
    Mr. Perkins. I can dispute it for my company because I know 
it is statutorily incorrect, but I have personal knowledge that 
is the case on some of the other Corps contracts in Louisiana. 
It is a common practice which we do not employ. I think it 
delays the cleanup. It increases the cost. And it just creates 
confusion and takes longer to get the job done.
    Mr. Waxman. How much has AshBritt paid for every cubic yard 
of debris hauled?
    Mr. Perkins. We are paid a combined price of $23 a cubic 
yard, not $26 as was mentioned earlier when on the first panel.
    Mr. Waxman. The Washington Post reported that local 
officials and business people knowledgeable about the contracts 
say the companies are paid $28 to $30 a cubic yard. Is that an 
inaccurate figure?
    Mr. Perkins. I can tell you from my contract with Army 
Corps of Engineers, it is inaccurate. I do know in Louisiana 
they were paying upwards of 30, 40, 50 percent more than what 
we are being paid in Mississippi.
    Mr. Waxman. When you get down to the people who have the 
trucks and actually doing the hauling, how much do they get 
paid per cubic yard?
    Mr. Perkins. As I said earlier, we sat down with 
contracting. This was not AshBritt just throwing a number at 
the wall and hoping they accept the first one we threw out. The 
process--we did not have our contract definitized for the first 
30 days. We negotiated with the Corps of Engineers contract 
specialists, we gathered costs within the first, actually it 
was 21 days, we paid on average--there are multiple parts of 
this contract. It is not just picking it up. It is picking up. 
It is transporting it. Running the temporary debris sites, 
hazardous wastes, multiple functions that are captured in this 
aggregate rate we get paid. But for simply picking it up and 
hauling it from point A to the temporary disposal site, the 
average price was in the $10-a-yard range which I might add, 63 
percent of the dollars we have spent to date have gone to 
Mississippi contractors, so if we pay, on average, more than a 
lot of the bids went for in some of the other areas of the 
State.
    Mr. Waxman. What do you do to earn the extra amount of 
money that you otherwise pay to the subcontractors?
    Mr. Perkins. We are engaged in this business 365 days a 
year. We spend months and months training and planning with the 
Army Corps of Engineers. It costs my company upwards of 
$800,000 a year to maintain a contract that potentially has 
zero dollars, zero revenue against it. We plan. We train. We 
manage. We provide project oversight. We assume all the risk 
involved. We carry the job of over $100 million before we 
received our first penny from the Federal Government. We have 
$100 million payment performance bond on this project.
    Mr. Waxman. Let me ask you this: Maybe your not the one in 
the best position to answer it, because you have an interest in 
your company, but what bothers me is that--and conditions were 
difficult after Hurricane Katrina hit--but the approach that 
the Army Corps uses for these contracts seems to me flawed. 
Instead of the government hiring and managing contractors, we 
outsource that work to companies like AshBritt. And then they 
go out and other companies like yours go out and subcontract, 
it seems to me highly inefficient leading to higher overhead 
and in many cases worse results.
    Let me ask you about the cure notice. You got a cure 
notice, it is interesting to me that you got a cure notice 
where other companies did not get a cure notice even though the 
audit showed they had problems.
    Why were you singled out for a cure notice?
    Mr. Perkins. I don't necessarily know that we were singled 
out, but I can address our cure notice. The Corps of Engineers 
through its normal Federal procurement and contracting 
practices issued us a cure notice for what they felt were 
several deficiencies we had on the project. We addressed them. 
We corrected them, and we moved on, and 6 months later, we are 
still working.
    Mr. Waxman. As I understand, you have been cited again. 
They didn't terminate your contract. Did they ever take action 
after the subsequent violation of the cure notice?
    Mr. Perkins. In a contract of this size and with thousands 
of contractors working and the magnitude of work that was 
taking place, it is routine to get letters maybe weekly on 
certain areas that they would like us to perform in a better 
way, if you will. It is normal. It is a normal thing that takes 
place.
    Mr. Waxman. Let me get clear on one point because my time 
has expired.
    Mr. Burton. Henry, I would like to get one or two questions 
in.
    Mr. Waxman. Just a minute. It seems to me you are saying 
you are getting $23 and your subs are getting $10. That would 
mean your cut is more than half.
    Mr. Perkins. That is not correct?
    Mr. Waxman. Tell me what the exact figures, are.
    Mr. Perkins. I am not going to divulge my profit margin, 
first of all, because it is not set. I don't know what that 
number is going to be. But part of that cost is picking it up, 
part of that cost is hauling to the temporary disposal site 
managing the dump site processing it, burning it, separating 
it----
    Mr. Waxman. Let me ask the chairman if he would get from 
you all of the figures, because I think we ought to have the 
accurate figures, if it hasn't yet been determined, we ought to 
find out where that is and what the determination will be and 
what your plans are. I think it is the taxpayers' money and we 
ought to have it.
    Chairman Tom Davis. Thank you very much. Mr. Burton.
    Mr. Burton. I think it is a good idea, Henry, and I concur. 
I would like to see all those figures myself.
    Mr. Pickering. Would the gentleman yield? Would Mr. Perkins 
provide that information to the committee?
    Mr. Perkins. What information are you looking for 
specifically?
    Mr. Pickering. All of your contract information going into 
the specific pricing.
    Mr. Perkins. I think if you request that information, first 
and foremost, from the Corps of Engineers, they have all that 
information. They have all the backup, the supporting documents 
of how we came to our price, who is being paid what and what 
the G&A and profit and overhead numbers should be, and that, by 
the way, those numbers are set by the Federal Government. They 
are not set by me.
    Mr. Pickering. That information is proprietary, and they 
would not--the question is, can they release that information?
    Mr. Perkins. You have to ask them that.
    Mr. Waxman. Would you object?
    Mr. Perkins. Would I object to divulging proprietary 
information that I have worked hard for 15 years to build a 
business, become the best? I would have certain objections to 
just giving my competitors nationwide an unfair advantage.
    Mr. Waxman. You would have to honor a subpoena.
    Mr. Burton. Where did I lose control of my time?
    Chairman Tom Davis. Keep going.
    Mr. Burton. I think that we--Mr. Chairman, would I suggest 
that if it is at all possible to get this information, we 
should get this information. I would urge we do that. Let me 
just ask you a couple of questions, sir.
    This was a competitive bidding process, right?
    Mr. Perkins. Yes, sir, it was. It is a prepositioned 
contract. It dates back almost 10 years.
    Mr. Burton. And you were the low bidder?
    Mr. Perkins. We were selected based on our capability, our 
expertise and best value of the Federal Government, that is 
correct.
    Mr. Burton. And you were not the only bidder?
    Mr. Perkins. Going back on the prepositions, there was, at 
one point, 40 companies nationwide, but on the latest $500 
million contract, there were 22 contractors, of which two were 
very large businesses from Mississippi.
    Mr. Burton. But you were not the only bidder?
    Mr. Perkins. Yes. No, we were not.
    Mr. Burton. Now as I understand it, after you got the 
contract, the Corps started going back on this, under what law 
is that?
    Mr. Perkins. Stafford Act? Stafford Act.
    Mr. Burton. The Stafford Act to try to renegotiate the 
contract and that is when you went to court, is that correct?
    Mr. Perkins. The Corps put out a solicitation back in 
December.
    Mr. Burton. But did you go to court?
    Mr. Perkins. No, sir we didn't go to court. We exercised 
our rights and filed a protest with the GAO.
    Mr. Burton. And the GAO responded how?
    Mr. Perkins. The GAO, based on what we submitted in our bid 
protest, I am sorry in this initial protest on our merits 
issued a statutory stay as law allows them to do.
    Mr. Burton. And so if the contract went forward, even 
though they tried to use the Stafford Act to change it.
    Mr. Perkins. That is correct.
    Mr. Burton. So you still have the contract right now?
    Mr. Perkins. Yes, sir, we do.
    Mr. Burton. I don't have any questions other than I would 
like to see those figures, Mr. Chairman, if at all possible.
    Chairman Tom Davis. Thank you very much. We have 5 minutes 
left in the voting. We have a series of votes. So I am going to 
suggest we take a recess and come back here in an hour. That 
will give us time for the votes. That will give you all time to 
get lunch.
    Mr. Perkins. Great.
    [Recess.]
    Mr. Shays [presiding]. Call this hearing to order. I 
welcome all our witnesses again. I am sorry for the delay a 
bit, appreciate your participation. And at this time, we are 
going to go back to 10 minutes a Member, and we will just keep 
coming back until we sort this all out. I want to say to our 
participants, you will have a chance to make sure your story is 
clear, if you have a longer answer, I will give the Member a 
little more time. We just want to know the truth whatever the 
truth is. And we will get at it.
    So with that, Mr. Taylor, do you have a house to live in 
yet, or are you still homeless?
    Mr. Taylor. My brother has taken me in, Mr. Chairman, thank 
goodness for my brother. I understand these gentlemen very 
well.
    Mr. Chairman, a couple of things I would like to clear up 
for the record. Some of the communities in south Mississippi 
chose to use the Corps of Engineers. Some did not. And that was 
made on a community-by-community basis, and to clear the air 
some communities were indeed incapacitated. The city of 
Waveland City Hall no longer exists, there was nothing there. 
Every vehicle that belonged to Bay Saint Louis and Waveland and 
most of the vehicles that belonged to Hancock County either 
were destroyed or went underwater. So their options, to this 
day, the city of Bay Saint Louis continues to operate out of a 
temporary trailer, Hancock County operates out of a temporary 
trailer, city of Waveland operates out of a temporary trailer.
    So I hope no one in any way would cast aspersions upon 
those cities that chose to use the Corps because they lack the 
local resources when that decision was made as far as the 
cleanup. And I think the communities that could do it 
themselves did it themselves and by and large they did very, 
very well. So again for clarification.
    What I would like to ask the members of this panel is I 
think I am seeing a lot of duplication of effort. I think I am 
seeing the Corps being paid to do something and to a certain 
extent, your company is being paid to do something that the 
Corps probably could be doing themselves.
    If the Corps had gone out and, for example, given safety 
specification, you must pass this safety test, if the Corps had 
gone out and said you must be covered by insurance, should 
there be an accident in picking up the debris or delivering the 
debris so that the people of the United States are not held 
liable, what I would like to ask of you all is could the Corps 
have done a better job of specking these jobs out, so that it 
would not take a large mega corporation in order to bid on it 
to where if a guy really did have a truck, he could bid on it, 
or if a guy had 10 trucks, he could bid on it.
    But what I think I saw was a system that really did cater 
to the bigger contractors. And you know, if we are trying to 
help devastated people, the last thing I want to do is exclude 
a guy who had a truck who is looking for a job.
    So I will open it up to the panel.
    Because I can tell you from being stopped at gas stations, 
the convenience stores, the hardware store, I had a lot of guys 
who had a truck, or a front-end loader, who felt like they 
didn't get a fair shake in the process. And again, in fairness, 
if we are trying to get Mississippi contractors in there, we 
ought to start about individuals and work up to companies from 
there.
    Mr. Perkins. Congressman, I will respond to that. I don't 
think it is realistic to expect a small company to be able to 
serve and meet the requirements in a prime contractor role with 
the magnitude of devastation that Katrina created. I do think 
it is fair for this committee, State and local government to 
expect that their local contractors are treated fairly and 
equitably and given every chance that they can to participate. 
And I think we have accomplished that, and I think we have 
succeeded our goals 10-fold as far as the Stafford Act 
requires.
    Could there have been in some of the smaller communities, 
some smaller contracts let and some of the more rural counties 
to local small business where they could have had a chance to 
serve as a prime contract and succeeded? In hindsight, the 
answer to that would be yes.
    Mr. Taylor. Can I followup on that, and I want to open this 
up to all the panel, I presume there were times when you told 
your company or your companies, told someone, we can't use you. 
If there had to be a prevailing theme in that, what was it that 
would have prevented someone from doing work, and if there is 
something that needs to be addressed between now and the next 
hurricane season, what are those things that need to be 
addressed?
    So again, so that individual who does own his own front end 
loader, does own his own dump truck, lost his house trying to 
make a little money to start building his next house, so he 
will have a better shot at it next time.
    Mr. Perkins. I think when you're going back to the original 
$500 million procurement, when you look at the number of the 
Mississippi companies who responded to it, I believe it was 
two, when you go to the subsequent procurement, which was an 8A 
a HUD zone, and unrestricted procurement, there was also only 
several Mississippi companies that submitted responses to that 
proposal. What this shows me is that, in a fair, open 
competitive situation, the ones who felt that they were capable 
to serve in that role submitted a proposal. The ones that 
didn't, obviously didn't.
    I still maintain the fact that we have spent upwards of 
$280 million to date with Mississippi companies, of which 70 
percent of those are from the impacted area. I don't think 
there was a public outcry from Mississippi companies that they 
weren't being treated fairly.
    Unfortunately, there were a handful of companies that felt 
that they should have had our role as the prime contractor, and 
I think that is where a lot of these problems originated from.
    But to correct it on a go-for-it basis, as a Corps of 
Engineers, our contracts expire December 31st of this year, 
they are going to reprocure those contracts. I guess, look at 
some way that after the event happens, and the initial Corps of 
Engineers contractor mobilizes and begins recovery operations 
that they immediately begin to identify areas in impacted areas 
where they can let out smaller contracts. This was new for 
everyone. Katrina was the worst natural disaster to ever hit 
the country. The breaches in the levee in New Orleans took a 
lot of the focus away from what the Corps of Engineers would 
have normally done and the precedent was set, and in my 
opinion, I talked to the Corps of Engineers about this is to 
look forward and find a way to change that.
    Mr. Taylor. Again, the question I am asking you is was 
there prevailing reason or a prevailing theme, was there one or 
two things that those people who were local, who didn't get 
work, could have done work, could have done so that they got 
work, and if there is anything that we need to change between 
last hurricane season and next hurricane season. Yes, sir.
    Mr. Necaise. Let me say one thing, let me back up. The city 
of Pass Christian which the Corps and AshBritt were responsible 
for. I contacted Mr.--the problem is the small contractor is 
excluded from the out-of-state contract, or when out-of-state 
contractor is prime.
    After this job was bid, this job was bid on a Thursday, I 
believe. By Friday, the city of Pass Christian decided to go 
with the Corps. I contacted Mr. Perkins myself to see if I 
could subcontract from him since I have already bid on the job, 
I want one of the cheapest contractors for this particular job 
and I was declined. He had enough people to do the job, and 
most of his contractors from what I have seen in Pass Christian 
were either from the State of Florida or Michigan, and the 
problem I see is the small contractors are excluded when a 
large contractor from another State is awarded these contracts.
    Now, I have no problem with a large contractor being 
awarded this contract if he is from that State. He is going to 
take care of his own, which is Mississippi contractors.
    But I was declined to subcontract.
    Mr. Machado. To answer your question about is a small 
company capable of meeting the Corps' guidelines and as far as 
performing these contracts, we were awarded the contract. So I 
think the obvious answer to that question is yes. We are 
capable. It is a management operation. It is putting the people 
on the ground to pick the trash up. And it is a management 
operation.
    We were awarded the contract by the Corps on a best value 
basis. So the answer to your question, Congressman Taylor, is 
yes. The small guys can do it.
    Mr. Taylor. Just for my information, was all of your work 
done by Necaise Brothers equipment or did you turn around and 
hire an individual with a front-end loader or dump truck? How 
did that work for your company?
    Mr. Smith. Congressman Taylor, let me make sure you 
understand what happened in this situation. There was a 
preposition contract that AshBritt had been awarded. Necaise 
never actually got to perform any work because of the protest 
filed by AshBritt both presolicitation, preaward and post award 
protests that caused the delays such that Necaise never got to 
perform the work.
    Mr. Taylor. Did you perform any work in any of the other 
cities, Gulfport, Biloxi.
    Mr. Necaise. I did. And I used my people that work for me, 
my own crews. And I also hired subcontractors from south 
Mississippi.
    Mr. Taylor. What did that subcontractor have to bring with 
him as far as--and this is truly in the form of a question. Did 
he have to post his own bond, bring his own insurance?
    Mr. Necaise. Insurance, supplied insurance, if an 
individual come to me and all he had was a truck, I put him on 
with one of my personal crews. If a company comes to me with 
their own equipment, I give them their own area to work. They 
were responsible for the area. But if there was people just had 
a backhoe or front-end loader or excavator or truck, not a true 
crew, I would take them and put them with one of my crews and 
pay them. I made sure the individual got a chance to work, not 
just the subcontractors that had companies that were capable of 
doing it, but if an individual had something they wanted put to 
work and didn't have enough forces to take on a subcontractor 
role, I put them under my wing and kept them with me and paid 
them to work with me.
    Mr. Taylor. Just for the record, since you did some of this 
work, I am going the ask the whole panel the same question. 
What--if you choose to answer it, what was your profit margin 
on something like that and how do you define profit margin? 
Since everybody is defining it slightly different.
    Mr. Necaise. Profit margin, it depends, I don't know profit 
margin because, we had, like I said, people working directly 
under me as one of my crews, I had to pay X dollars per yard 
for whatever they brought and other contractors had the whole 
package, the trucks, the equipment to load, they got X amount 
of dollars, so until we break it all out, I would say our 
profit margin was somewhere in the neighborhood 20 percent.
    Mr. Taylor. You are speaking for Necaise.
    Mr. Necaise. For Necaise.
    Mr. Taylor. Mr. Perkins.
    Mr. Perkins. I am glad you asked that question because I 
want to clarify something that might have been misinterpreted 
earlier, when we were talking around the 25 percent number, 
that number does not encompass my company's profit. The numbers 
that we negotiated we initially went to the Corps of Engineers 
with a number right at that for profit and overhead, not just 
profit. The number was turned down by the Corps in 
negotiations. We subsequently settled on a lesser amount.
    So the profit margin or the markup over the definitized 
number of what it costs to get the work done included a general 
and administrative overhead cost as well as profit.
    Mr. Taylor. Do you have anything to say, Mr. Necaise? OK.
    Mr. Perkins. If I may, Congress Taylor.
    Mr. Fox. If I could add something, sir, I think what you 
are trying to get to is to try to figure out a way to get the 
local vendors into the maximum extent possible, and that is 
what where FedBid, as an online procurement tool comes to play.
    I spent 26 years as a government procurement official in 
the Department of Defense General Services Administration. Now 
I am a private consultant. But the problem in the Federal 
Government is there are not enough people to go out and find 
these folks, like Mr. Necaise and others, to actually award the 
contracts. That is where you need tools. It is like the 
difference between trying to dig out a foundation with shovels 
or using a front end loader. You need the right tools and you 
need a force multiplier like a back end, front-end loader to 
get the job done correctly. FedBid provides that type of a tool 
that can bring people like Mr. Necaise's company into the 
bidding mix whereas in the past the Federal Government has 
defaulted to very large contracts that are run by single 
companies to take care of the issue. And the profit, that is 
where you have tiering of subcontracts. If you use a tool like 
FedBid, you can get on the right people at the right levels at 
the right time.
    Mr. Perkins. Congressman. You asked a question earlier and 
I didn't answer it. We did not exclude any Mississippi 
companies from working on our project. Although I would say 70 
percent of the companies in Mississippi, local Mississippi 
companies could not meet the insurance requirements or 
workmen's comp laws and Mississippi exempts them if they have 
less than 5 employees, those type of things, in the first 30 
days, we provided fuel, we supplemented their insurance through 
our master umbrella policies, we rented equipment for them 
under our national account with the United Rental and our 
Caterpillar dealer and things like that.
    So we did go above and beyond what we normally would have 
done and took on a lot more risks than we would have normally 
took on to try to make sure that all the local Mississippi 
companies that approached us went to work.
    Mr. Shays. Thank you. I am going to claim my time, actually 
it is the only member of this committee right now, you know 
what I will do, I will just say that this is an extension of 
the Katrina hearing, since all of us were involved in the 
Katrina hearings.
    I am first in awe of what took place in the gulf. The 
destruction was beyond my comprehension to see really what 
Mississippi was a 10-mile wide tornado 90 miles long, that is 
what it looked like. And I am struck by the fact that 
Mississippi had less to tear down because it was totally 
destroyed.
    Mr. Taylor. Mr. Chairman, I would like to remind you that 
my insurance company says we had no wind damage. They also said 
the same thing to Senator Lott and a few Federal judges, a few 
retired admirals policemen, firemen.
    Mr. Shays. I understand. And it relates to who pays what on 
insurance. Well, I saw it as a tornado. The damage was just 
like that. And, I am in awe that we didn't lose more lives and 
I appreciate the culture down there that just is in tune to 
what you do.
    Obviously folks in Mr. Melancon in New Orleans, they were 
used to being protected and so they have dealt with something 
as horrific of but a different kind of tragedy. The same result 
though.
    What I am interested in is that I do believe that FEMA is 
broken. I believe it is broken in a big way, I think its 
contracting process defies imagination. Mr. Perkins when you 
respond to questions, I am looking at you and thinking this is 
a man who has probably a very successful business and you are 
probably quite efficient at your business and, you know, if you 
get your profit margin at a certain level, more power to you.
    But having said that, we are trying understand, is this 
system working right? If I was in a member in anywhere near 
this area, and I wasn't seeing local people getting employed--
and not getting employed third hand, but getting employed 
upfront, I would be pretty unhappy.
    Now if you, Mr. Perkins, can make sure that you can hire a 
lot of folks locally and they get paid on time and so on and 
they are happy there's logic to that.
    I understand there are a lot of people who have done work 
down there still haven't gotten paid. And I have a feeling some 
of them are the smaller operations.
    What I am suspicious about with FEMA and, Mr. Schnug, it 
kind of relates in your area and it is not, in any way, a 
disrespect to you, but you can help me understand this.
    You have a contract with FEMA. Tell me what your contract 
is with FEMA.
    Mr. Schnug. Basically I really didn't have a contract with 
FEMA. We contacted them about--we store ice. We stored ice for 
them. We didn't approach them. We didn't go a big rigorous 
program. We had a vendor.
    Chairman Tom Davis. You weren't a broker where all ice had 
to come to before it went out?
    Mr. Perkins. No. We were just a place to put it. They 
inspected our facility. We have facilities throughout the 
south. We have five facilities in Alabama. We have one in West 
Point, MS----
    Mr. Shays. Did you have to work through a broker?
    Mr. Schnug. No.
    Mr. Shays. Who do you work through?
    Mr. Schnug. We worked directly with FEMA. And they would 
direct the ice to us. They had no place to store it.
    Mr. Shays. So they weren't creating the ice.
    Mr. Schnug. They were buying it from other suppliers 
looking for a place. They wanted to inventory ice. They felt 
they were going to have a bad year again, they wanted to 
inventory ice. We had gone to them actually on a different 
idea, which was to have them work with a retailer to buy ice 
and rotate it through so that there would always be ice, but 
they wouldn't have to own it, it could also go right out to 
retail. That was our idea.
    Mr. Shays. Are you saying to me that we are actually----
    Mr. Schnug. You own ice.
    Mr. Shays. We own ice right now and we are storing ice as 
we speak.
    Mr. Schnug. Yes.
    Mr. Shays. And you have a contract to do that?
    Mr. Schnug. Yes.
    Mr. Shays. Why?
    Mr. Schnug. Well, there is a surplus but there is also a 
decision by FEMA to be prepared to always have ice around 
because ice is not made that quickly. It may seem like it is, 
but it takes a large task. I have a retail background so when 
there was a shortage of ice right after Katrina.
    Mr. Shays. Is ice life or death?
    Mr. Schnug. I believe it is. What is represented to me for 
people who are trying to store product, live day to day, they 
are not buying it to keep drinks cold. They take everything out 
of the refrigerator, power is down, how do you keep your own 
food stock in good shape? I am led to believe a lot of people 
in the south live off the land, so to speak, and it is very 
important to keep that product cold. So ice is more of a life 
essential than some people think it is because water systems 
are down, we also stored ice in. Water is a life essential if 
the water system is down. We deliver ice, water and MREs as it 
came down. We got into the business basically to store ice in 
Thomasville, GA, because they felt that would be the first 
responder east or west.
    Mr. Shays. My subcommittee of the Government Reform 
Committee oversees the Defense Department, State Department, 
Homeland Security, and FEMA obviously are part of it. So we are 
going to have hearings about how contracts are made.
    Mr. Fox, can you speak to anything about FEMA and the 
challenge of people having to go through brokers and in order 
to be able to do business with FEMA?
    Mr. Fox. Yes, that is a difficult problem because of the 
way procurement normally works in the Federal Government, 
especially when you have a very large procurement operation 
with a lot of moving parts. The Federal Government has not kept 
pace with technology, unfortunately, when it comes to 
procurement operations and contracting.
    That is where companies, FedBid, being a private company, 
saw a need and stepped in with their own resources at risk to 
create a company that can solve a problem the government has.
    Mr. Shays. I am not looking at about how you are solving a 
problem. I am looking to exploit you. I don't want you to 
exploit us right now.
    Mr. Fox. I am OK with that.
    Mr. Shays. I want you to tell me what you know about the 
contracting process. First, does it happen where you only had 
to go through one person for housing, one person for water, one 
person that people basically had a contract and had a huge 
territory to which they had a monopoly?
    Mr. Fox. I can't speak in detail about FEMA's precise 
contracting operations. But there were not clear lines of 
authority of who was responsible for what areas. That much I am 
sure of.
    The Corps was responsible for some things FEMA was 
responsible for some things. Jointly they were supposed to hand 
things off, but as handoffs go, in a crisis that is difficult. 
I think the key gets back to the preplanning and having the 
capability to have these things sorted out. The lines of 
authority have to be clearly stated before you ever enter into 
this situation. So if people are responsible for certain 
procurement areas, they need to know that ahead of the crisis. 
So if you are going to divvy up the procurement 
responsibilities, that is part of the----
    Mr. Shays. One of the challenges is it appears in many 
instances people who have had the contract were really brokers 
without any resources of any kind. And they were basically 
asking a cut in large companies that were willing to pretty 
much do things for free or well below cost, and they had to go 
through these brokers. And they finally said forget it. Forget 
it. So I understand and I will give you a chance a little later 
to just emphasize how you think you break through that system.
    Where I wrestle, as I listen to this dialog, is Mr. 
Perkins, when you get a contract, do you have a monopoly for a 
whole area and how large is that area?
    Mr. Perkins. There are two ways that a company like 
myself----
    Mr. Shays. Tell me what happened in real life.
    Mr. Perkins. We will procure services. It is very rare and 
far and few in between where Corps of Engineers is tasked with 
direct Federal assistance to come after a major disaster.
    Mr. Shays. I just want an answer. Were you given a certain 
territory----
    Mr. Perkins. We competitively bid and won the States of 
Louisiana and Mississippi and the Alaska region, Pacific 
Northwest.
    Mr. Shays. And no one else could go through, just you? You 
were it?
    Mr. Perkins. When the procurement was put out for bid----
    Mr. Shays. When you won it. You won the bid.
    Mr. Perkins. That is correct, we won the bid.
    Mr. Shays. Why we would have limited it to one? Why 
wouldn't we have, say, to four or five? Why would we just give 
one company such a large bid? Whether you want it or not?
    Mr. Perkins. I think it makes perfect sense. It might be a 
self-serving statement because we won the contract.
    Mr. Shays. But then you are the monopoly. You are the 
emperor. You are the only person they can go through. Why not 
allow for a huge amount of competition and participation?
    Mr. Perkins. You are asking the FEMA and Corps of Engineers 
after the worst natural disaster that ever hit this country 
where--and I can debate Mr. Necaise on the readiness and 
availability of companies in the impacted areas immediately 
after the storm, because I don't think it is necessarily the 
case. But you cannot select companies that don't plan, don't 
train, don't have the resources, don't have the financial 
capabilities to take on this task and the volume of work. It is 
not possible.
    Mr. Shays. I would say it in reverse, given all the volume, 
it is crazy from my standpoint to have just one company be in 
charge. I don't know why we didn't task literally hundreds. And 
it is no disrespect to you.
    Mr. Perkins. I don't take it personally. I don't think it 
is reasonable to expect the Army Corps of Engineers to manage 
100 different contractors in the environment that we were 
working in or that Katrina dumped.
    Mr. Shays. I don't understand why they just didn't just 
give you half of a State or something and give somebody else 
another part and somebody else another part. I just don't 
understand that.
    Mr. Perkins. Like I said earlier, that is a question you 
need to evaluate in the future. I don't think the Corps is 
going to see a $500 million contract again. And I think that 
they realize that things are going to be done different in the 
future.
    Mr. Shays. And I also say, I think it slows up the process 
besides not getting people. I kind of feel like I am an honest 
broker, if that dialog and that is what I am getting right now.
    Mr. Taylor. Gentleman yield? Mr. Chairman, just 
clarification, Corps made the pitch to every municipality and 
every county on debris removal. And I was there for one of 
them, so I think it is fair to say that Corps let it be known 
that their resources, their people, and since it was their 
internal, already Government agency, it was kind of implied 
that we take all the heat if there is a mistake, no one is 
going to be looking over you, the local elected official's 
shoulder.
    It was also kind of implied for those counties and cities 
that chose not to use the Corps, that since we are not going to 
be handling this, we will be looking over your shoulder. So, 
again, based on the capacity of the city in the case of 
Waveland City Hall, Hancock County Courthouse was underwater, 
Bay St. Louis was underwater, Pass Christian, half the city is 
gone. They all decided this is too big for us to do right now. 
We are going to let the Corps do it. Cities like Gulfport 
Biloxi that had fairly large organizations, that's remained 
intact after the storm, they said, we will do it. That is why 
you're going to see a difference from town to town city to 
city. That was a local decision as to who was going to handle 
it.
    Mr. Shays. I hear that part, but what I don't understand is 
why the Corps didn't sector it out.
    Mr. Necaise.
    Mr. Necaise. I believe Hurricane Frederick, the Corps did 
separate jobs after Hurricane Frederick, Corps took over 
several parts of Alabama, and they bid out each town 
separately. There was not a contractor in place to take over 
the whole region. If the Corps took over an area, they bid that 
area out after they acquired the job from the municipality. 
They didn't have someone in place to take over an entire State 
or entire region. If they have it, they bid it out, and there 
may have been 10 bids, 10 different sections.
    Mr. Shays. I hear you. Let me recognize Mr. Melancon.
    And the gentleman has 10 minutes. And thank you, for 
participating.
    Mr. Melancon. Thank you thank you, Mr. Chairman, if you 
will indulge me, and I don't know that I have that many 
questions as much as I have after listening today and having 
sat through Katrina hearings and listening back then, a lot of 
the things that occurred and, of course, I am Louisiana, so I 
can't speak to Mississippi, but, Mr. Perkins, you said that 
AshBritt got to Louisiana, Mississippi and Alabama, contracts, 
where did Shaw, as DCC and CH2M Hill, fit into that picture 
because they are in Louisiana doing work?
    Mr. Perkins. We were the only prepositioned contractor for 
under the ACI contracts. We were mobilized to both the States 
of Louisiana and Mississippi, immediately after Katrina. 
Before----
    Mr. Shays. Just define ACI, Advanced Contracts Initiatives, 
which covers ice, water, blue roofing and some of the other 
power generation and debris removal. But our initial stages of 
operation we provided support services, fuel, housing, meals 
everything else for Government personnel as well as 
subcontractors.
    Subsequently after the $500 million bids were let, they 
shifted AshBritt out of Louisiana to work in Mississippi stand 
alone, and awarded three companies, CH2M and the other company 
aren't part of the debris removal, actually Phillips and Jordan 
out of Knoxville, TN. The ECC out of somewhere in California, 
San Jose area, and Ceres out of Saint Paul, MN.
    Mr. Melancon. That is, I guess, where I am starting, Mr. 
Chairman. The Corps came in and wanted to, well, the two 
parishes that opted to not use the Corps contractor, and I 
don't know if there is any collusion in there or not, but I can 
tell you that my local elected officials in at least one of 
those two parishes got brow beaten and inferred that they were 
going to have to pay a cost share if they did not take the 
Corps's designated contractor, and this is the Corps and FEMA 
in the meetings.
    And if I am not mistaken, I might have had a Louisiana 
person that handles the OEC operations for Louisiana that was 
in those meetings. They occurred on several occasions. And the 
parish officials have had some grave concerns about what took 
place. But continued, they bidded properly, they accepted the 
bid, which was a combination of about three companies that came 
together, it is in one parish, it is going to probably be 
hundreds of millions of dollars, not counting New Orleans, or 
Jefferson or anyplace else, there is enough dollars to go 
around for another 20 years. Yet all I saw were companies 
trying to squeeze other companies out and people using leverage 
to accomplish that.
    And I will have to confer with Congressman Baker, but I 
believe he was quoted as saying about 3 weeks ago, that out of 
the $87 billion that the Congress appropriated before 
Christmas, 25 percent was taken off the top by FEMA for 
administration costs, $9 billion ended up on the ground in 
Louisiana out of that $87 billion, and 75 percent of the damage 
was in Louisiana.
    I'm not criticizing other States just the fact, the 
numbers.
    When it all was said and done, we are still probably months 
and years away from finishing the entire cleanup, the entire 
debris removal, the entire process, and of course we have to go 
through demolishing houses and such.
    The other problem I have is those contractors, not all of 
them but some of those local contractors that did something to 
get hired by PC Equipment, three trucks, Louisiana contractor 
went to one of the big contractors and got hired and apparently 
somebody supervised over those. And I got some that are subbed 
to the sub who are still waiting for their money. And in the 
case of St. Bernard Parish I have tried to put the entire group 
of people, parish officials, government FEMA, the Corps, the 
State OEC and everybody in one room and FEMA refuses to attend. 
I have yet to find out who the person is that makes the 
decisions in Louisiana on whether someone gets paid, or should 
I say allocated money, because all I have gotten when I have 
asked for that information is two or three bureaucrats who say 
bring me a stack of papers that are computer printouts of the 
PWs and said, here, go through it.
    One of the parishes that chose to have its own contractor 
and allocate the Corps contractor for other portions have had 
problems also and became territorial when the parish's 
contractor crossed a street to demolish two homes or pick up 
trash from two homes because the people asked them if they 
would do it and the Corps people came down there and told them 
they cannot do that. These contractors that have been hired by 
the parishes directly did not take the Corps people, believe 
that their people are doing the work cheaper and visibly are 
doing the work faster than are the Corps contractors, while at 
the same time these contractors are having to spend day in day 
out 7 days a week trying to protect the contract they got 
because people are trying to void it, tell them that the parish 
is going to have to pay 10 percent. And God knows none of our 
parishes have any of that money to do anything.
    We in this Katrina committee asked the Corps of Engineers 
and the FEMA people sitting right at that table what the costs 
of debris removal, what the cost of cleanup that they were 
paying for the contract. We were told by a member of the Corps 
we would have to go back and see who it was, that they would 
get us that information. We have followed up the Katrina 
committee and we have still not gotten that information. One of 
my parish presidents asked for that information from the Corps 
and FEMA and never received it and this goes back to last 
October. He then wrote a letter on the freedom of information 
asking for that information and never received it. And I 
convinced him about 2 months ago to file a Federal suit that 
will be heard in June in New Orleans as to what the actual cost 
of cleanup is.
    These parishes wanted to do a good job, get their people 
back up, get their communities back up, resurrect or whatever 
term you want to call it, and it has been a hindrance all along 
because of them, not all of them but the major contractors and 
this, you have to task the Corps contractors or you are going 
to have problems.
    One parish that went back and hired their own people wanted 
to know what number did they have to look for so that they will 
know whether they were getting a good price or not. And that is 
when the game started of we cannot give you that and that is 
where we are now waiting for June to get here so we can get a 
hearing in court. That same parish had its own landfills and 
its contractor was hauling to its landfills. Coincidentally 
their landfill got shut down last month by EPA. But the 
landfill that is 30 miles away still continues to receive the 
debris from this parish and the contractor that was doing this 
work that was using the parish's pits have basically been 
stopped from continuing their work.
    Trailers, I have a contractor that was putting trailers 
down in one parish. He was getting paid by the unit completion. 
The major contractor was getting paid cost plus and his 
experience was that they were very nitpicking and they spent a 
lot of time going back. If they said stake the drain pipes at 4 
feet and it went 4 feet one-quater inch they made them rip them 
up and start all over again. I do not know if that got 
straightened out, and when the guy said something they 
threatened to cancel his contract.
    I can go on, Mr. Chairman, but I think that we would need 
to get the Corps in here, Colonel Vesay, and because of the 
unwillingness and FEMA, and for that matter I am willing to 
bring the Louisiana people in here because we need to know is 
there something actually going on out there.
    Mr. Shays. Let me say to the gentleman, if the chairman 
wants my subcommittee to do it or if he wants the full 
committee to do it, I think there are a number of followup 
hearings that we can have that will get specifically to these 
points and we will make sure that folks come in who are able to 
answer our questions. So I think what we are trying to do is 
answer more questions than we can answer here.
    Let me make this point to you that you would be invited to 
participate as a full member with Mr. Taylor as well as Mr. 
Pickering.
    Mr. Melancon. I acknowledge and I appreciate being allowed 
to do that, and I would leave the decision on subcommittee or 
full committee up to you and Chairman Davis. I just--I am to a 
point, Mr. Chairman, that asking them to come here and pledge 
that they are going to tell the whole truth and nothing but the 
truth, I think that the scare of subpoenas of coming here and 
then having to swear carries a whole lot more water and we 
might get more information. We just have to figure out as a 
committee or your subcommittee what information we would ask 
for, but I would ask that be done.
    Mr. Shays. I would think we could meet that need and I 
think that would be very constructive. Let me ask Mr. 
Pickering, my Staff Director is in the corner wondering what 
have I committed to but we need to take a good look at FEMA and 
this process in general.
    Mr. Pickering.
    Mr. Pickering. Thank you, Mr. Chairman. I just want to 
comment on some of the discussion for Mr. Taylor. What we are 
looking at was several different models. Mr. Necaise looked at 
the model where the Corps contracted in Hugo and that was one 
model. Usually in natural disasters it is done by local 
entities. If you look at the Florida model which has been held 
up as probably the most efficient, they have a State wildlife 
emergency plan in place which includes pre-storm contracts for 
debris removal. So if a city like Waveland is wiped out and 
does not have the capacity, you have the contract in place, but 
you also have the State compliance assistance to help comply 
with any requirements to meet all FEMA standards as they 
achieve that. There is a public policy objective here.
    Now, Mr. Perkins, would advocate that there should be and I 
do not say this in the pejorative, there should be a storm 
chasing industry and that is that you pay a premium to have 
somebody with a capacity that can be mobilized to meet any 
storm at any time. That premium is built into his price and 
into his profit. And in a second I will give you a chance, Mr. 
Perkins, if you disagree with that.
    But one of the reasons you have a higher price than the 
Corps and through a national company like AshBritt is they 
would argue that they have to have the resources, they have to 
store them, and there are a lot of downtimes where they are not 
in use, unlike Mr. Necaise, who is not only there for debris 
removal but he is doing local projects, construction work all 
the time.
    It is clear from the first panel, General Riley did not 
disagree and the Inspector General did not disagree with the 
$31 per cubic yard. Mr. Perkins has said it is $23 and then if 
you add five it is $28, so somewhere between $28 and $31 for 
cubic yardage cost of the national Corps model in Katrina. Now 
we are all entitled to our opinions but we are not all entitled 
to our facts.
    So what I would like to do, Mr. Chairman, is ask that we 
have a full transparency of what the facts are, and I believe 
the only way we can do that is to ask the Corps and Mr. Perkins 
and other major contracts to go ahead and lay on the table for 
us their books, to give us what the cost was in Katrina so that 
we will know which model is most cost effective, the Florida 
model, which is a State-local model or the national Corps 
model. I think that what we will find is that no one disputed 
the average cost of debris in the local communities in 
Mississippi.
    Mr. Chairman, AshBritt did 21 million cubic yards of debris 
removal. Local counties and local contractors did 21 million 
cubic yards in Mississippi. This is going to be a very 
equivalent comparison of what is the most cost effective way 
for us to do this for the taxpayer.
    Now from a macro question, do we want a storm chasing 
industry and pay that premium or is our job objective to 
recover local economies? And what Congress has said not only in 
the Stafford Act but what it just said unanimously in the House 
in the legislation that was passed and what it said unanimously 
in the Senate is that local recovery is our highest policy 
priority.
    Now the Corps tried to carry that out and, Mr. Perkins, I 
do not fault you for playing by the rules and winning the 
contract in 2001, building a company up successfully over a 
number of different hurricanes and disasters. But what I do 
have a problem with is that when the Corps of Engineers tried 
to meet their Stafford Act requirements and to help the local 
economy by having a geographic set-aside for Mississippi 
companies that was protested.
    Now, the GAO rejected your first protest on the geographic 
set-aside, and I want the committee to understand they rejected 
that. Then when the award was given to Mr. Necaise, you 
protested the award of that and they did not say that was the 
preferred outcome. They said that the only way to finish the 
job and the fact that they expect to finish by the end of May 
and the protest would last to 100 days, that they had no other 
choice but to withdraw the contract from Necaise that they had 
won. They had met all the criteria. They had been in the area. 
They were performing in the highest standard and the best value 
of those contracts.
    Now on a going forward basis, Mr. Chairman, I hope that the 
model, and as I see some in the audience from the Corps of 
Engineers, we can go to the Florida model, which is a complete 
State local. Or we can go to a Corps model where you continue 
what you did in Mississippi in doing geographic set-asides for 
pre-storm local-State contracts on a competitive basis. And I 
have always advocated even if it is a geographic preference 
that it should be done competitively. And I think that the 
evidence is very clear that the Mississippi companies and the 
competitive, even when it was limited, were a lower cost.
    Mr. Necaise, it was my understanding in your bid to do the 
work that you had a lower cost of what you were offering to do 
the work for in your contract. Is that correct?
    Mr. Necaise. That is correct.
    Mr. Pickering. So again the lowest cost and local is 
precluded and denied because of protests from an out of State 
company.
    Now the other question, Mr. Perkins, you had two options. 
You could have protested the geographic set-aside and you could 
have protested the award of the contract or you could have 
partnered with the Corps and with Mississippi companies in a 
transition. Is that correct?
    Mr. Perkins. I do not understand your question. What 
exactly are you asking?
    Mr. Pickering. If they made a decision to transition the 
prime from AshBritt to Necaise or any other Mississippi 
company, you could have with your resources continued to 
partner in a way that there would have been no disruptions to 
the work, the schedule and the cleanup; is that correct?
    Mr. Perkins. Had the Corps been able to award the contract 
to Necaise then we would have assisted with the transition.
    Mr. Pickering. But you were the reason they could not award 
by your protest.
    Mr. Perkins. If following Federal procurement rules and 
regulations and due process and my rights as an American 
citizen and businessman prevented that, then I guess I am 
guilty. Remember the bill that you sponsored part of that 
language tried to take the judicial appeal rights away from 
AshBritt and any other contractor in the country. And luckily 
there were some congressional members that realized how 
damaging that would be and pulled that from the bill. So as we 
sit here today I still have the rights of an American citizen.
    Mr. Pickering. Mr. Perkins, you do have those rights to 
protest and litigate and you also refused to come to this 
committee, did you not, voluntarily?
    Mr. Perkins. You subpoenaed me, that is correct.
    Mr. Pickering. Is there a reason you would not come after 
winning $500 million and making tens of millions of dollars of 
profit from taxpayer dollars that you would not come before a 
congressional committee to give testimony when asked?
    Mr. Perkins. Specifically as to you, Congressman Pickering, 
I do not have a problem being here. I am here. Obviously I was 
subpoenaed so I didn't have a choice. I do not have a problem 
with the question asked, is FEMA broke? No, FEMA is cracked. 
It's not broke. It can be fixed. These problems that we are 
talking about here today go back, it is not a party issue. It's 
been going on the last 10 years. They happen. The committees 
get together. Everybody talks about it. Are there any changes 
in the last 10 years? There hasn't been any changes.
    The problem here is I've been criticized for not hiring 
Mississippi companies is wrong. It's false. We spent hundreds 
of millions of dollars hiring Mississippi companies. We've 
created over 500 very high paying jobs in administrative, 
clerical, project management. The problem here, Congressman 
Pickering, is I didn't hire the right Mississippi companies. I 
didn't hire the four or five Mississippi companies who employed 
their lobbyists to badger me on a day-to-day basis, who 
employed your office to call me along with some other 
delegation members from your State to call me and demand that I 
do things that I'm not going to do. It's my contract. I'll 
administer it however I felt was best for my company in the 
recovery mission of the State of Mississippi.
    So this isn't about Mississippi companies. This is about a 
select handful of companies who wanted my contract and didn't 
get it. That's what this is about.
    Mr. Pickering. Mr. Perkins, if you would like I can have 
the Corps of Engineers release all information, any 
communication, any contact my office has ever had with them and 
they will clearly show that I never advocated for one single 
company. I have advocated for Mississippi companies and the 
GAO----
    Mr. Perkins. That is not true, sir.
    Mr. Pickering. It is very true.
    Mr. Perkins. I'm just telling you it's not true.
    Mr. Pickering. It is extremely true.
    Mr. Shays. Will both gentleman suspend? I felt that this 
has been an aggressive and informative hearing. I felt that the 
Member of Congress allowed you to make a very long statement of 
which you are pointing a real strong finger and I would like 
him to be able to make his comments.
    Mr. Perkins. OK. I'm sorry.
    Mr. Shays. That is all right. I realize you are a little 
bit under the gun. I think you have done a fine job. I think 
you all have. We will get to the bottom of this. You have the 
floor, Mr. Pickering.
    Mr. Pickering. Mr. Chairman, it is clear I have advocated 
for Mississippi companies, no specific. I have advocated for a 
competitive process. I have advocated for a form of the 
Stafford Act so we will have local geographic priority given. 
It is with the broad mission and objective of recovering local 
economies.
    Again, 100 percent of the House and 100 percent of the 
Senate agree with that position and that policy. We have 
clarified the Stafford Act so that the Corps of Engineers could 
fight off protests that you filed so that geographic set-asides 
could go into effect.
    As we go into the next season we will need to do additional 
reform to make sure that the congressional intent, the Stafford 
Act objectives give preference to the recovery of local 
economies and that we move away from the most costly and 
inefficient models of recovery, and that is my sole objective 
here.
    Now, Mr. Perkins, did you have any conversations with your 
subcontractors concerning whether they should file protests as 
well?
    Mr. Perkins. Did I have any conversations with my 
subcontractors? There were three protests filed on this latest 
protest of award, ourselves, D and J, and Hempill/Uteah joint 
venture out of Mississippi. We talked about the protest 
procedures. They asked me because of my experience in the 
Federal contracting process how it works, what they need to do, 
etc. I gave them some advice.
    Mr. Pickering. Did you encourage them to do so?
    Mr. Perkins. Absolutely not to answer your question.
    Mr. Pickering. That is fine. Thank you, Mr. Perkins.
    Mr. Perkins. I have 3 minutes of a couple of things I would 
like to address if that's OK.
    Mr. Shays. Let me say this. I unfortunately have a need to 
make an airplane or I am stuck here for a while. I would like 
Mr. Taylor to make a point. I would like each of you to just 
have a minute or two to just summarize any point you want to 
make. And Mr. Perkins, this isn't your first time here, 
correct? I think you've been here before.
    Mr. Perkins. No, it's my first time. I'll come voluntarily 
next time.
    Mr. Shays. I know you will. There are people I know who say 
you are a fine gentleman and I think all of you have conducted 
yourself well, and I think everybody here has a point to make 
that is valid and it comes a little bit in conflict, frankly.
    Mr. Taylor.
    Mr. Taylor. Thank you, Mr. Chairman. Seated in the back of 
the room is Colonel, and I hope say it properly, Vesay of the 
Corps of Engineers, who has actually handled this contract on a 
day-to-day basis in south Mississippi. It has been a tough task 
and they have moved millions of cubic yards of material. And at 
this point things are looking a heck of a lot better than when 
they started and they deserve credit for that.
    I think everyone is concerned that we spent too much money. 
That is universal and we want to do better next time. I think 
there are a heck of a lot of south Mississippians of limited 
means who wish they had had a better shot of participating on 
these contracts. That is also fair to say. So with that in 
mind, Colonel, we are going to ask you to appear before this 
committee. I am not a member of the committee, the chairman has 
agreed to do so. We are going to ask you to appear before the 
committee and give us your recommendations of how do we reach 
those goals. And I sure as heck don't wish a hurricane on 
anyone, but the Navy is saying that we're in for 10 years of 
this and I am taking their word for it. So when the next storm 
hits how do we do a better job of giving the local average Joe 
a shot at it? How do we do a better job of through this 
competition getting the cost per cubic yard down for the 
taxpayer? And I would really, you are a smart guy, I would ask 
you to give us your personal thoughts as someone who has 
witnessed what has happened because I value your opinion. And I 
think all of us want to see us do a better job as a Nation next 
time.
    So we are giving you some notice and some time to think 
about it. I very much welcome the chairman's willingness to 
have you back, and I very much welcome your willingness to come 
back and speak to us.
    Mr. Shays. I thank the gentleman. Is there any comment? Let 
me start from my right going this way. Any comment that you 
wish that you had an opportunity to make a point of? From Mr. 
Necaise over. Is there any point that you wish to make that 
needs to be made before I adjourn this hearing.
    Mr. Necaise. I'll let Mr. Machado answer that.
    Mr. Machado. The biggest deficiencies that we see with the 
Corps is just there are inefficiencies in order to perform the 
work. As we stated earlier, we performed all the debris cleanup 
for the city of Long Beach and I think it was in February we 
made the last pass to clean up debris there. And as many other 
cities, Gulfport, Biloxi, there are numerous others that are 
already done. The Corps is the last one. They are the last one. 
There is just so many different things that slow down their 
progress. It is just unfortunate because it just affects the 
citizens there. And all the way around, it is the slowest. It 
is the most expensive. There's just numerous problems with it. 
So the biggest thing I think was touch on----
    Mr. Shays. Mr. Machado, that will be touched on. Mr. Fox. I 
don't mean to say we will take a look at it, we are going to 
take a look at it because we get it.
    Mr. Fox.
    Mr. Fox. I listened as a lot of good points were made 
during this hearing on keeping competition in the mix at all 
times, about ensuring local vendors are brought into this 
procurement process and kept in the procurement process as 
early as possible as well to avoid the need for large 
prepositioned contracts. That is all what FedBid can offer in 
the way of reform, a transformational process that is now 
available to Federal Government contracting. FEMA has reached 
out to FedBid seeing that and I applaud FEMA doing that. The 
young blood you saw here from FEMA and DHS, the people who 
unfortunately had to take the heat, they are the next 
generation and they are looking for new processes and they see 
FedBid as one of those new processes.
    Mr. Shays. The bottom line message is that things are 
pretty archaic and need to be updated.
    Mr. Fox. That's true. In 26 years I spent on the Federal 
procurement process not a lot changed unfortunately. We have 
new processes, we have new capabilities that companies like 
FedBid have to offer.
    Mr. Shays. Mr. Schnug, any comment?
    Mr. Schnug. I have basically two comments that we are here 
for. No. 1, we didn't have a contract. We basically treated 
this like it was walk in off the street business would do with 
any of our warehouses. Our point that we're trying to make is 
that what made us unique was the fact that we could give the 
government total asset visibility so if it was at one of our 
warehouses or someone else's warehouse, we actually used a 
couple of other warehouses that were not ours to store the 
material. But that's something you got to have. You have to 
have some way of knowing I've got a pile of ice here, it's got 
to go here. That was our point of we're just general business 
guys.
    We also did the same thing with transportation. We used 200 
different transportation carriers. Anybody who qualified with 
us, DOT license, secure, insured, etc., we were basically 
putting requests for transportation out on a bid board. You do 
that at a very low margin business. Load A has to go from this 
facility to that facility. And those were another thing that we 
brought to the committee was you can generally do these things, 
things that go on in daily commerce every day. We do 220,000 
dispatches a year. We don't have a fleet. We use all different 
type of carriers. ConAgra, for example, stores with us in 40 
different locations, always knows where the materials are. So 
that was what we had brought to the committee was the concept 
that you don't need a long term contract. You don't need major 
funding for supersystems. Those systems and supply chain 
management exist today and that is our speciality. Thank you.
    Mr. Shays. Thank you very much. Mr. Perkins.
    Mr. Perkins. A couple of things. Congress Pickering had 
noted the Florida model. And he's right on that. We hold more 
preposition contracts in the State of Florida than any other 
company in the State of Florida. It works. It also works 
because the State of Florida, the local governments, have much 
more money for planning and training. Those are some of the 
things that need to be looked at. States like Mississippi, they 
don't have the tax base, the tourism base. If you don't give 
them the money to preplan you cannot expect them to be prepared 
to evacuate and handle their own--especially with situations 
like Katrina. Their problems are much broader and you can't 
figure them out sitting here at a table.
    As far as, 30 seconds, the Mississippi Department of 
Transportation put out bids that went 100 percent to 
Mississippi DOT contractors. Those prices in a competitive bid 
situation were two and a half to three times higher than the 
rate the Corps of Engineers paid us for almost identical 
services. Also, 85 percent of the work performed by those six 
big MDOT contractors went to companies from out of State. Fact.
    Mr. Shays. You get me concerned that you may get people 
wanting to jump in, and I do have to get a plane. How about 
more general comments? Your point about Florida, any other 
comment that you would like to make?
    Mr. Perkins. I just want to set the record straight on one 
thing and the question that Congressman Pickering asked me 
about his perceived--I need to set it straight because I need 
to finish it.
    Mr. Shays. Then I'm going to allow Mr. Pickering to 
respond. So if you want to speak in general terms you may.
    Mr. Perkins. I will speak in direct terms because I have 
to. The question was asked to me, did I influence or try to 
strong arm any other contractors into protesting. The 
contractor he is referring to is Hempill/Uteah. They were a 
partner of ours. They continue to be a partner of ours on the 
job. We sat down as partners because we're working together to 
talk about strategy and why we should continue to work and what 
we could do about it. Ultimately, they had a debriefing of the 
U.S. Army Corps of Engineers and felt that they should have 
been awarded the contract and their decision to protest was 
solely based on that debriefing.
    Mr. Shays. My final word is I would understand if you won a 
contract why you would want to keep it and I could understand 
if I was a Member of Congress why I would want the people I 
know the best and most to have it. Both sides are very 
explainable to me.
    I appreciate all of you being here. The pledge that we're 
making at this hearing is either the full committee will do it 
or my subcommittee or a combination of both, but we're going to 
get into more details. We will have some panelists who will be 
very keen on those particular issues.
    We thank you for being here. We know a lot is at stake and 
appreciate your patience. Thank you very much.
    Mr. Pickering. Mr. Chairman, I want to thank the committee 
for letting me participate and I want to thank all the members 
who have worked with us from the select committee. I hope that 
we can find the reforms. I never said ``strong arm influence.'' 
I said did you encourage, and your testimony was absolutely 
not. Is that still your testimony?
    Mr. Perkins. I think I corrected it. Strong arming, storm 
chaser----
    Mr. Shays. The bottom line is when you look at it from the 
outside I think we know where both of you are coming from. We 
totally understand it honestly. With that I would say the 
record remains open for 7 days and we will get to the bottom of 
this, and God bless America. This hearing is adjourned.
    [Whereupon, at 3:55 p.m., the committee was adjourned.]
    [The prepared statements of Hon. Dennis J. Kucinich and 
Hon. Charles W. Dent and additional information submitted for 
the hearing record follow:]

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