[Senate Hearing 109-1007]
[From the U.S. Government Publishing Office]
S. Hrg. 109-1007
THE IMPACT OF CERTAIN GOVERNMENTAL
CONTRACTOR LIABILITY PROPOSALS ON
ENVIRONMENTAL LAWS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
SUPERFUND AND WASTE MANAGEMENT
of the
COMMITTEE ON
ENVIRONMENT AND PUBLIC WORKS
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
NOVEMBER 8, 2005
__________
Printed for the use of the Committee on Environment and Public Works
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COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
JAMES M. INHOFE, Oklahoma, Chairman
JOHN W. WARNER, Virginia JAMES M. JEFFORDS, Vermont
CHRISTOPHER S. BOND, Missouri MAX BAUCUS, Montana
GEORGE V. VOINOVICH, Ohio JOSEPH I. LIEBERMAN, Connecticut
LINCOLN CHAFEE, Rhode Island BARBARA BOXER, California
LISA MURKOWSKI, Alaska THOMAS R. CARPER, Delaware
JOHN THUNE, South Dakota HILLARY RODHAM CLINTON, New York
JIM DeMINT, South Carolina FRANK R. LAUTENBERG, New Jersey
JOHNNY ISAKSON, Georgia BARACK OBAMA, Illinois
DAVID VITTER, Louisiana
Andrew Wheeler, Majority Staff Director
Ken Connolly, Minority Staff Director
------
Subcommittee on Superfund and Waste Management
JOHN THUNE, South Dakota Chairman
JOHN W. WARNER, Virginia BARBARA BOXER, California
CHRISTOPHER S. BOND, Missouri MAX BAUCUS, Montana
JOHNNY ISAKSON, Georgia FRANK R. LAUTENBERG, New Jersey
C O N T E N T S
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Page
NOVEMBER 8, 2005
OPENING STATEMENTS
.................................................................
Boxer, Hon. Barbara, U.S. Senator from the State of California... 7
.................................................................
Clinton, Hon. Hillary Rodham, U.S. Senator from the State of New
York........................................................... 9
.................................................................
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma,
prepared statement............................................. 52
.................................................................
Jeffords, Hon. James M., U.S. Senator from the State of Vermont.. 3
.................................................................
Thune, Hon. John., U.S. Senator from the State of South Dakota... 1
.................................................................
Vitter, Hon. David, U.S. Senator from the State of Louisiana..... 5
WITNESSES
Becker, Paul, president, Willis North American Construction
Practice....................................................... 45
Prepared statement.......................................... 94
Responses to additional questions from:
Senator Jeffords......................................... 96
Feigin, Michael, executive vice president, Bovis Lend Lease
Holdings, Inc.................................................. 28
Prepared statement.......................................... 69
Responses to additional questions from:
Senator Boxer............................................ 71
Senator Jeffords......................................... 72
King, Craig S., Government contracts attorney.................... 40
Prepared statement.......................................... 78
Responses to additional questions from:
Senator Boxer............................................ 83
Senator Jeffords......................................... 84
Senator Thune............................................ 83
Perkins, Warren, vice president, Risk Management, BOH Brothers
Construction Company........................................... 20
Prepared statement.......................................... 64
Responses to additional questions from:
Senator Boxer............................................ 67
Senator Jeffords......................................... 69
Riley, Don T., Major General, Director of Civil Works, United
States Army Corps of Engineers................................. 12
Prepared statement.......................................... 52
Responses to additional questions from:
Senator Boxer............................................ 54
Senator Jeffords......................................... 54
Schooner, Steven L., co-director, government procurement law
program, George Washington University Law School............... 43
Prepared statement.......................................... 84
Responses to additional questions from:
Senator Jeffords......................................... 90
Senator Thune............................................ 91
Shufro, Joel, executive director, New York Committee for
Occupational Safety and Health................................. 30
Prepared statement.......................................... 72
Responses to additional questions from:
Senator Boxer............................................ 77
Senator Jeffords......................................... 75
Senator Thune............................................ 74
Wright, Beverly, Ph.D, director, Deep South Center for
Environmental Justice and co-chair, National Black
Environmental Justice Network.................................. 18
Prepared statement.......................................... 57
Responses to additional questions from:
Senator Boxer............................................ 63
Senator Jeffords......................................... 64
Senator Thune............................................ 64
Zelenka, Anthony, president, Bertucci Contracting Corporation.... 15
Prepared statement.......................................... 55
Response to additional question from:
Senator Boxer............................................ 56
Senator Jeffords......................................... 57
ADDITIONAL MATERIAL
Article, The Associated Press: Hundreds Sue Over Health Effects
of World Trade Center Clean-up................................. 99
Statements:
American Road and Transportation Builders Association........ 97
American Society of Civil Engineers.......................... 98
THE IMPACT OF CERTAIN GOVERNMENTAL CONTRACTOR LIABILITY PROPOSALS ON
ENVIRONMENTAL LAWS
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TUESDAY, NOVEMBER 8, 2005
U.S. Senate,
Committee on Environment and Public Works,
Subcommittee on Superfund and Waste Management,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:30 p.m. in
room 406, Senate Dirksen Building, Hon. John Thune (chairman of
the subcommittee) presiding.
Present: Senators Thune, Vitter, Jeffords, Boxer, Clinton.
Senator Thune. Today's hearing will come to order.
OPENING STATEMENT OF HON. JOHN THUNE, U.S. SENATOR FROM THE
STATE OF SOUTH DAKOTA
Senator Thune. We will allow the distinguished Senator from
Vermont to make his statement in just a minute, but I want to
say good afternoon and thank you to all of you for coming. We
are here this afternoon to hear testimony from the U.S. Army
Corps of Engineers and various other individuals regarding
disaster cleanup efforts that are currently underway in the
Gulf Coast region.
Because we have a full hearing today, I will keep my
opening remarks brief. As many of you know, roughly 4 weeks
following the tremendous destruction that Hurricane Katrina
caused the Gulf Coast region, I introduced legislation that
seeks to assist in the cleanup and recovery of the most
destructive natural disaster in our Nation's history.
Just as our Nation witnessed during the September 11th
terrorist attacks, private contractors have stepped forward in
the Gulf region to support the Federal Government in providing
the resources that are necessary to assist in the recovery of
both persons and property dislocated by Hurricane Katrina, to
demolish, remove, repair and reconstruct both structures and
utilities damaged by the hurricane and to cleanup property
polluted by that hurricane and to remove vast amounts of
debris, and finally, to de-water flooded areas.
However, because of the ongoing multi-billion dollar class
action cases filed against the contractors who assisted the
Government in the cleanup of the World Trade Center, I have
concerns that other major disaster cleanups, including
Hurricane Katrina, may be stymied due to the potential for
future lawsuits being brought against contractors who carry out
major disaster cleanups on behalf of the Government.
Just last week, New Orleans' Mayor Nagin testified before
the full committee about the destruction the storm had caused.
In his testimony, the Mayor noted: ``This storm forced hundreds
of thousands of people to flee, flooded thousands of homes and
decimated many lives. The damage to homes, schools, businesses,
hospitals, roads, water plants, communications facilities and
electrical power infrastructure was unprecedented. The economic
and social fabric of the area was damaged in its entirety.''
Because large-scale disaster recovery in the Gulf Coast
region doesn't occur in a vacuum, I strongly believe that
Congress should provide private contractors with a measurable
level of liability protections due to the nature of the work
they do and helping the Government restore the basic services
the public expects and deserves. Contrary to some claims, my
legislation, which is co-sponsored by eight Senators, including
Senator Vitter and Senator Lott, does not weaken existing
environmental protections; nor does it grant contractors
protection from Federal, State or local enforcement actions. It
does not limit any Agency's authority or discretion to take
whatever steps it may deem necessary to ensure full compliance
with its rules or regulations or to punish non-compliance. Nor
would the bill relax any duty or obligation that any employer
owes to its employees. The bill would leave contractors fully
accountable for any failure to protect the safety or health of
their employees.
Last but not least, the Gulf Coast Recovery Act would not
in any way limit any contractor's liability for recklessness or
willful misconduct. There would be no limits on any punitive,
non-economic or other damages otherwise recoverable for such
recklessness or misconduct. Simply put, my bill would provide
private disaster contractors a limited measure of protection
comparable to but less than the protection that Federal
officials enjoy when exercising their discretion.
[The prepared statement of Senator Thune follows:]
Statement Hon. John Thune, U.S. Senator from the State of South Dakota
Today's hearing will come to order. Good afternoon and thank you
all for coming. We are here this afternoon to hear testimony from the
U.S. Army Corps of Engineers and various other individuals regarding
disaster cleanup efforts that are currently underway in the Gulf Coast
Region. Because we have a full hearing today, I will keep my opening
remarks brief.
As many of you know, roughly 4 weeks following the tremendous
destruction that Hurricane Katrina caused the Gulf Coast Region,\1\ I
introduced legislation that seeks to assist in the cleanup and recovery
of the most destructive natural disaster in our Nation's history.
---------------------------------------------------------------------------
\1\The Corps of Engineers Estimates Katrina left 80 million cubic
yards of debris that could take over a year to cleanup. In comparison,
Hurricane Andrew left 17 million cubic yards of debris when it struck
in 1992.
---------------------------------------------------------------------------
Just as our Nation witnessed during the September 11th terrorist
attacks, private contractors have stepped forward in the Gulf Coast
Region to assist the Federal Government in providing the resources
necessary to assist in the recovery of both persons and property
dislocated by Hurricane Katrina, to demolish, remove, repair and
reconstruct both structures and utilities damaged by that hurricane, to
cleanup property polluted by that hurricane, to remove vast amounts of
debris, and to dewater flooded areas.
However, because of the on-going multi-billion dollar class action
cases filed against the contractors who assisted the Government in the
cleanup of the World Trade Center, I have concerns that other major
disaster cleanups (including Hurricane Katrina) may be stymied due to
the potential for future lawsuits being brought against contractors who
carry out major disaster cleanups on behalf of the Government.
Just last week, New Orleans Mayor Ray Nagin testified before the
full Committee about the destruction the storm caused. In his
testimony, the mayor noted:
``This storm forced hundreds of thousands of people to flee,
flooded thousands of homes and decimated many lives. The damage to
homes, schools, businesses, hospitals, roads, water plants,
communication facilities, and electrical power infrastructure was
unprecedented and the economic and social fabric of the area was
damaged in its entirety.''
Because large-scale disaster recovery in the Gulf Coast Region
doesn't occur in a vacuum, I strongly believe that Congress should
provide private contractors with a measurable level of liability
protections due to the nature of the work they do in helping the
Government restore the basic services the public expects and deserves.
Contrary to some claims, my legislation, which is cosponsored by
eight Senators (including Senator Vitter and Senator Lott), does not
weaken existing environmental protections, nor does it grant
contractors protection from Federal, State, or local enforcement
actions. It does not limit any Agency's authority or discretion to take
whatever steps it may deem necessary to ensure full compliance with its
rules or regulations, or to punish noncompliance. Nor would the bill
relax any duty or obligation that any employer owes to its employees.
The bill would leave contractors fully accountable for any failure to
protect the safety or health of their employees.
Last but not least, the Gulf Coast Recovery Act would not in any
way limit any contractor's liability for recklessness or willful
misconduct. There would be no limits on any punitive, non-economic or
other damages otherwise recoverable for such recklessness or
misconduct.
Simply put, my bill would provide private disaster contractors a
limited measure of protection--comparable to but less than the
protection that Federal officials enjoy when exercising their
discretion.
Before turning to our first panel, I would like to recognize
Senator Boxer, the ranking member of this subcommittee for her opening
statement.
Before turning to our first panel, I would like to
recognize Senator Jeffords for any statement he may have as the
Ranking Member of the full committee, then also I will turn to
my colleague, Senator Vitter. Senator Jeffords. Oh, I'm sorry,
Senator Boxer----
Senator Boxer. I am happy to wait.
Senator Thune. Well, let's go to Senator Jeffords as the
Ranking Member of the full committee, then we will come back.
Senator Boxer. Absolutely right. I will go after David.
OPENING STATEMENT OF HON. JAMES M. JEFFORDS, U.S. SENATOR FROM
THE STATE OF VERMONT
Senator Jeffords. Thank you for holding this oversight
hearing on Governmental Contractor Liability Proposals related
to Hurricane Katrina. I am greatly concerned for the people who
have been affected by our Nation's largest natural disaster. I
will do everything in my power to help them get back on their
feet.
As a Nation, our focus should be on rebuilding the Gulf
Coast so that residents can safely return to their homes and
get on with their lives. Last month, I joined the Democratic
members of this committee to introduce S. 1836, the Gulf Coast
Infrastructure Redevelopment and Recovery Act of 2005. This
legislation would ensure a more coordinated rebuilding effort
in the aftermath of Hurricane Katrina. The bill will set up a
Federal task force to coordinate Katrina response efforts among
the agencies. It establishes the National Preparedness Grants
and would work to fix the needless and catastrophic problems we
saw emerge in our Nation's emergency response plans.
Our bill also establishes the National Levee Safety Program
and requires EPA to develop a comprehensive sampling plan for
hazardous substances that may threaten human health or the
environment. Recent press reports indicate that the levees in
New Orleans may have failed because of faulty construction
practices by Government contractors. We must ensure that the
rebuilding of the levees in the Gulf Coast region is done by
competent contractors who adhere to the law.
Any legislation that would limit the liability of
contractors who assist Federal or State Governments with relief
and reconstruction efforts in this region is a bad idea. Now,
more than ever, our Government's role should be to ensure that
citizens are protected from faulty cleanup efforts.
With all that is going on in their lives, the people in the
Gulf Coast should not have to worry about contaminated drinking
water, hazardous waste exposure, destruction of property,
personal injury or even death. These citizens have already
suffered a tremendous loss that will take many years to get
over. To limit their legal remedies at a time like this is
unconscionable.
Simply put, we must not provide corporations with liability
shields and exempt them from environmental regulation at the
expense of Gulf Coast residents. The rush to cleanup from
Katrina is not a rationale for allowing contractor negligence.
Given the same Katrina contractors are greatly benefiting from
no-bid contracts, we should be extra vigilant to see that it is
done right. These contractors and corporations do not deserve
special treatment at the expense of those who have lost their
family members and homes and jobs.
Thank you, Mr. Chairman.
[The prepared statement of Senator Jeffords follows:]
Statement of Hon. James M. Jeffords, U.S. Senator from the
State of Vermont
Mr. Chairman, thank you for holding this oversight hearing on
Governmental Contractor Liability Proposals related to Hurricane
Katrina.
I am greatly concerned for the people who have been affected by our
Nation's largest natural disaster, and I will do everything in my power
to help them get back on their feet. As a Nation, our focus should be
on rebuilding the Gulf Coast so that residents can safely return to
their homes and get on with their lives.
Last month, I joined with Democratic members of this committee to
introduce S. 1836, the ``Gulf Coast Infrastructure Redevelopment and
Recovery Act of 2005.'' This legislation would ensure a more
coordinated rebuilding effort in the aftermath of Hurricane Katrina.
The bill sets up a Federal task force to coordinate Katrina response
efforts among agencies. It establishes National Preparedness Grants,
and would work to fix the needless and catastrophic problems we saw
emerge in our Nation's emergency response plans. Our bill also
establishes a National Levee Safety Program, and requires the EPA to
develop a comprehensive sampling plan for hazardous substances that may
threaten human health or the environment.
Recent press reports indicate that the levees in New Orleans may
have failed because of faulty construction practices by Government
contractors. We must ensure that the rebuilding of the levees, and the
Gulf Coast Region, is done by competent contractors who adhere to the
law. Any legislation that would limit the liability of contractors who
assist Federal or State Governments with relief and construction
efforts in this region is a bad idea. Now more than ever, our
Government's role should be to ensure that its citizens are protected
from faulty cleanup efforts. With all that is going on in their lives,
the people of the Gulf Coast should not have to worry about
contaminated drinking water, hazardous waste exposure, destruction of
property, personal injury or even death. These citizens have already
suffered a tremendous loss that will take many years to get over. To
limit their legal remedies at a time like this is unconscionable.
Simply put, we must not provide corporations with liability shields
and exemption from environmental regulation at the expense of the Gulf
Coast residents. The rush to cleanup from Katrina is not a rationale
for allowing contractor negligence. Given that some Katrina contractors
are greatly benefiting from no-bid contracts, we should be extra
vigilant to see that it is done right. These contractors and
corporations do not deserve special treatment at the expense of those
who have lost their family members, homes, and jobs.
Senator Thune. Thank you, Senator Jeffords.
Senator Vitter.
OPENING STATEMENT OF HON. DAVID VITTER, U.S. SENATOR FROM THE
STATE OF LOUISIANA
Senator Vitter. Thank you, Mr. Chairman. I will submit my
full opening remarks for the record. I will be very brief
summarizing them here.
First of all, thank you for this hearing, and thank you for
the legislation. As you noted, I am a co-sponsor and I strongly
support it. I strongly support it for a real simple reason. I
was on the ground virtually every day in the immediate
aftermath of Katrina. I saw a lot of folks, including these
contractors, at work. I realize that it was very much an
emergency situation. Extraordinary emergency measures were
being taken because people's lives and property were at risk of
further destruction. There was just a flurry of activity to
close the levee breaches at the 17th Street Canal, at the
Industrial Canal and other locations. That was very much
emergency activity.
We need to allow that to happen responsibly in true
emergency situations. I believe this bill does that.
It does not protect and shield when there are cases of
reckless or willful misconduct. So it clearly doesn't do that.
It does not apply to new construction activity. It only applies
to true emergency repair activities.
So for instance, in the case of levee work in the New
Orleans area, it would apply to that emergency activity,
plugging the breaches that I described. It would not apply to
new construction activity, for instances, to raise the system
to category 5 protection. It is not a pass on Government
regulations, environmental and other mandates. It does not
affect that in any way.
Finally, it is needed. This is not an academic discussion.
We know from true, recent experience after 9/11 that there
could well be a flurry of class action lawsuits to try to
profit from the emergency measures that needed to be taken, the
very quick decisions that needed to be made in a true emergency
situation. So this is not some theoretical discussion. We know
from a similar situation that it is a very real need.
So again, I thank you for the legislation. I very much
thank you for this hearing. I am proud to join you and many
others, including Senator Lott, again, from the disaster area,
in pushing forward the legislation. Thank you.
[The prepared statement of Senator Vitter follows:]
Statement of Hon. David Vitter, U.S. Senator from the State of
Louisiana
Good Afternoon. I would like to thank the subcommittee's chairman,
Senator Thune, for inviting me to this hearing and for his leadership
on this very important issue. I would also like to thank all of the
witnesses for agreeing to testify before the subcommittee, especially
those from Louisiana. I also look forward to hearing from Major General
Riley from the Army Corps of Engineers, and I hope that he is able to
assure me that the Corps is making a concerted effort to give
preference to local contractors.
In the past few months, the State of Louisiana has suffered record
devastation from two major hurricanes. Just over 2 months have passed
since Hurricane Katrina left an entire major metropolitan area
evacuated, flooded and completely closed for weeks. Only a few weeks
later, Louisiana was struck by another major storm, Hurricane Rita.
Contractors play a vital role in relief efforts following a natural
disaster. The Federal Government relies on contractors to quickly
address dangerous conditions that threaten life and property, to
restore basic public services, and to protect public safety and health.
The Army Corps of Engineers and FEMA have relied on contractors to pump
water out of New Orleans and repair the breached levees, many of which
began work without a contract. Without the help of the private
contractors, the City of New Orleans would still be under water.
However, many contractors need assurances that if they aid in
disaster recovery efforts they will not be subject to the same class
actions filed against those contractors who helped in the rescue,
recovery, and cleanup at the World Trade Center following the September
11, 2001 terrorist attacks. The Gulf Coast region desperately needs
contractors to restore the 90,000 square miles damaged by Hurricane
Katrina and Hurricane Rita. The Federal Government simply lacks the
resources and the expertise needed to cleanup and restore the Gulf
Coast region in an efficient and effective manner.
Shortly after Hurricane Katrina made landfall in Louisiana, Senator
Thune introduced S. 1761, The Gulf Coast Recovery Act, to limit the
liability that private contractors face as they aid in rescue,
recovery, cleanup, and reconstruction efforts in the devastated
regions. I am proud to say that I am an original co-sponsor of this
very important legislation. The Gulf Coast Recovery Act limits the tort
liability of those contractors who the Army Corps of Engineers deems
necessary for recovery efforts associated with Hurricane Katrina and
other major disasters. It does not apply to new construction. So, for
example, a contractor charged with plugging the breaches in the levees
in New Orleans would be covered by the bill, whereas, a contractor
charged with building the levees to a Category-5 level of protection
would not.
The Gulf Coast Recovery Act does not limit any public agency's
authority to take whatever steps it deems necessary to ensure full
compliance with its rules or regulations, or to punish noncompliance.
Thus, contrary to the assertions made by many of the bill's opponents,
the Gulf Coast Recovery Act does not relieve contractors from their
legal obligation to comply with environmental laws. If this bill is
enacted, the EPA and its state and local counterparts will retain their
full enforcement powers to bring an action against a contractor for
noncompliance with rules and regulations.
My interest in Government contracting post-Hurricane Katrina and
Hurricane Rita also goes to how the contracts are awarded. First, I am
concerned with the award of no-bid mega contracts. While I understand
that emergency situations sometimes call for faster action than the
Federal Acquisition Regulation's (FAR) full and open competition
process allows, I believe that it is in the best interests of the
parties involved, including the businesses and the people of the Gulf
Coast States, to use full and open competition for all but a very
limited number of contracts. Currently, the Federal Acquisition
Regulation requires full and open competition except in specific
instances. However, I believe that these exceptions should be narrowed
only for those activities related to relief and recovery from Hurricane
Katrina and Hurricane Rita. In an effort to address this concern, I
introduced ``The Hurricane Katrina and Hurricane Rita Fairness in
Contracting Act'', which limits the number of exceptions to the Federal
Acquisition Regulation's full and open competition requirement and it
requires advance notice to Congress of any non-competitive contracts.
Second, I am concerned that companies from Louisiana and other Gulf
Coast States are not being awarded recovery and reconstruction
contracts. Although the Stafford Act (42 U.S.C. 5150) contains local
preference language, it only requires that agencies give preference to
local contractors ``to the extent feasible and practicable''. I do not
believe that the Stafford Act's language is strong enough. Therefore, I
am working with the Senate Small Business Committee to draft stronger
local preference language. Since the need for emergency action has for
the most part subsided, I encourage Federal agencies to make more of an
effort to hire local contractors.
The Gulf Coast region cannot achieve full economic recovery unless
the businesses located within that region are given the chance to play
a leading role in the recovery and reconstruction effort, and Senator
Thune's common sense legislation is an important part of that process.
Once again, I would like to thank Chairman Thune for inviting me to
speak at this hearing and for taking a leading role on this very
important issue. I look forward to hearing what each of the witnesses
has to say.
Senator Thune. Thank you, Senator Vitter, and thank you for
your leadership for the people that you represent who have been
victimized by this great disaster, and thank you for your
direction and guidance in helping us as we shape responses that
are effective and that help get that area back on its feet.
Thank you for everything that you are doing.
Senator Boxer.
OPENING STATEMENT OF HON. BARBARA BOXER, U.S. SENATOR FROM THE
STATE OF CALIFORNIA
Senator Boxer. Thank you so much.
I just want to pick up on something Senator Vitter said,
that in an emergency we need to waive these liabilities. The
fact is this bill talks about way beyond emergencies. It talks
about repair, cleanup, alteration, remediation, construction
and the rest. So I do not agree with Senator Vitter's analysis
of it, but I am sure if this bill gets to markup we will have a
chance to talk about that.
Mr. Chairman, as your Ranking Member, I want to publicly
state that I support very strongly your right to hold any
hearing you want, and I know you would do that if I was in the
chair instead of the Ranking Member. I just want to make sure
that the record is clear: that as your Ranking Member this was
not a hearing that I supported. I personally would prefer us to
be looking at the ways to help the victims of Katrina. Even
though I think you believe that this does help them, I think at
the end of the day it hurts them. I am going to go through my
brief opening statement.
I think that this committee sometimes loses its charge.
This is the Environment Committee. A couple of weeks ago we had
a hearing on what I call the Oil Company Protection Act, which
was a way to give big oil the ability to get free land to build
refineries. Luckily, the committee stopped it in its tracks in
a bipartisan vote.
I have to say in all honesty, I think today we are looking
at what I call the Halliburton Protection Act, not that it just
applies to Halliburton, but it does apply to some of these big
contractors.
I think that for us, we should be on the side of the people
that get hurt directly, and that we shouldn't be in a situation
where we are trying to make it more difficult for them to
receive compensation. Government contractors should be held
responsible for what they do. It is as simple as that.
Otherwise, the burden falls on the victims, the injured
workers, or those who live in the disaster-affected region or
Federal taxpayers, for that matter.
I think it is wrong, from a moral standpoint, if we are
supposed to talk about community and responsibility, this bill
flies in the face of that by eliminating the rights of victims.
I think it sends a subtle message, or not so subtle, to the
contractors, well, do your best, because if you make a mistake,
if you burn toxics, if you do some other things, you know, you
won't be held responsible. I am glad the Senator from New York
came in here, because later I am going to show you a picture
from there, from the horrific experience we had before.
I would ask unanimous consent to place in the record an
article that appeared November 4th in the Los Angeles Times
talking about the Katrina cough, where we see that mold and
muck may be causing respiratory illnesses in people who have
returned home. If I might get that into the record?
Senator Thune. Without objection.
[The referenced information was not submitted at the time
of print.]
Senator Boxer. Thank you.
So I wish, as an Environment Committee, we were looking at
these victims and figuring out ways to help them and to work
with the contractors to help them do the best they can do and
to give them that sense of moral responsibility. I mean, what
if a contractor exposes children to contamination or sends
workers into water filled with waste and people get sick or
die? Under S. 1761, a bill, by the way, that is outside this
committee's jurisdiction as I understand it, this should fall
to Judiciary, the family is forced to bear not only the
emotional burden of the injury but also the financial costs of
caring for the injured.
It is not hypothetical, and as I say, I am glad that the
Senator from New York is here. Let's look at the workers who
have been cleaning up and rebuilding the World Trade Center
site. We have a photograph, here they are. Sixty percent of all
of them who participated in a health monitoring program had at
least one respiratory illness. Eighty-five percent of those
workers continue to have respiratory illness 4 years later.
Only 21 percent of them had appropriate respiratory protection
while working at Ground Zero. Only 21 percent of them.
Thank you. I think we remember those faces.
Now we have the Gulf Coast, and we have a bill that could
let Government contractors off the hook. The potential is
there. The areas hit by Hurricanes Katrina and Rita had 54
Superfund sites. Mr. Chairman, I know you and I have a lot of
work to do in making sure we do proper oversight over those
cleanups. As of the 1st of November, EPA had not yet completed
assessments at 38 sites in the hurricane region. EPA has
collected 680,000 household hazardous waste or orphaned
containers. Eight million gallons of oil was spilled.
Now, these facts are not the fault of the Government
contractors, not one bit. If they are going to decide that they
want to work and get paid for their work, they have to follow
the rules to protect people, once they get involved in a
cleanup. The people in New Orleans have suffered enough.
Virtually eliminating their right to get compensation from
negligent contractors only compounds their suffering. To me,
the most important thing is it sends a terrible signal to the
contractors: don't worry about it, because you know, you are
off the hook.''
One of the reasons we have the safest products in the
world, Mr. Chairman, and I can prove this, chapter and verse,
is because we don't let people off the hook when they endanger
lives. It isn't just the narrow meaning of reckless
endangerment and negligence. We are talking about the way you
approach a job, and I think higher of our contractors, I think
more of them than they should have this get out of jail free
pass.
It isn't right. It sends a wrong signal, and I am
disappointed that we are moving forward with this. Mr.
Chairman, again, it is your full right, and it is my full right
to disagree. At the end of the day, you have the votes, you get
a bill out, at the end of the day you don't, you don't get a
bill out.
I did want to say today that I have very strong feelings
against this bill. I don't think it is what we should be doing
in the Environment Committee. This isn't how it can be more
gentle to the contractors committee. It really isn't. It is how
we can help the victims, that is really what we need to do, how
we can help them and protect them from environmental damage.
Thank you very much.
Senator Thune. Thank you, Senator Boxer. Senator Clinton
has joined us as well. Senator Clinton, do you have an opening
statement?
OPENING STATEMENT OF HON. HILLARY RODHAM CLINTON, U.S. SENATOR
FROM THE STATE OF NEW YORK
Senator Clinton. Yes, thank you, Mr. Chairman. I appreciate
your raising this issue, because it is a vitally important
topic. I want to thank the witnesses for coming here today to
testify, particularly those who have come from the Gulf Coast,
given the circumstances that they are facing.
Mr. Zelenka and Mr. Perkins are from New Orleans,
representing companies that have been heavily involved in the
response and recovery efforts since Katrina hit. Dr. Wright is
also from New Orleans and working to ensure that the recovery
and rebuilding is done in a safe and fair manner for all
residents along the Gulf Coast. I really appreciate what you
are trying to do under very difficult circumstances.
As my colleague, Senator Boxer, said, we have some of the
same kinds of challenges after 9/11. We know that there are
many, many difficult issues that have to be sorted out. I
appreciate and welcome Joel Shufro of the New York Committee on
Occupational Safety and Health for being here. NYCOSH is an
outstanding and well-respected organization that I have worked
with closely on a number of 9/11 issues.
I also appreciate very much Michael Feigin from Bovis Lend
Lease Holdings being here. Bovis was one of the four
contractors that got the contracts for the cleanup on Ground
Zero. They each did a quadrant, they came in ahead of time and
below budget. They did a really superb job.
I think we all share common goals about how we face these
disasters, whether man-made in the case of New York or natural
in the case of the Gulf Coast. How we respond and how we
respond in an effective, cost-effective manner. When disaster
hits, we obviously turn to those who know how to do the job,
contractors and experienced employees.
We do expect that the contractors who are called upon will
comply with Environmental and Occupational Safety laws and take
precautions to protect their employees. We expect that
employees who are injured or who develop medical problems as a
result of their recovery work should receive the care and
compensation they deserve.
Now, these are familiar problems, and there are lessons
that can be learned from what happened on September 11th and in
the months following. Unfortunately, with all due respect, Mr.
Chairman, I think S. 1761 ignores and mis-applies the lessons
of September 11th.
When the World Trade Centers and the surrounding buildings
collapsed, it created an unprecedented demolition and cleanup
challenge. Literally, there were workers who were in mid-town
or uptown or Brooklyn who dropped what they were doing at the
construction sites they were working on and brought their
equipment and were there by that evening ready to help. We
really tried to set up a system that would be effective but
also fair to everyone involved.
I have been outspoken in my criticism of the Federal
Government response, particularly in the first days after
September 11th. We did have a lot of workers on the pile who
didn't have adequate equipment for personal protection.
We know from an EPA IG report that there was interference
from the highest levels of our Government, with EPA
communications about the pollution hazards in lower Manhattan.
That affected both the employers and the employees who were
there at Ground Zero. It obviously affected more directly the
people who were digging through the rubble and spending 16, 18
hour days on the pile. We now are living with the consequences
that we have a lot of people who have chronic illnesses.
Now, the Centers for Disease Control issued a study last
September that found that the 3 days following September 11th
when exposure was greatest and therefore the danger most acute,
only 21 percent of the study's participants reported using
respirators. For some, those were not available. For others,
they were so anxious to work that they just plunged ahead and
didn't want to have the discomfort, in their opinion. There was
a lot of confusion at the site about what kind of personal
protection should have been available to them.
The bottom line is that we have large numbers of
participants who were at Ground Zero with persistent
respiratory problems. The findings that we have is information
collected by the Mt. Sinai's World Trade Center Worker and
Volunteer Medical Screening Program. We have documented these
health problems and we know that we can learn from this.
The lesson is not that we need to provide unprecedented and
sweeping liability waivers. I understand why any contractor
faced with the challenge of responding to these disasters
obviously wants financial protection. There are other ways we
can try to provide that. We need to be sure that our Government
agencies do a better job advising contractors and workers about
the hazards they face.
We need to establish a system to track the health of first
responders, something Senator Voinovich and I have worked
closely on. We actually have a bill to provide Stafford Act
authority to do this in disaster areas, and to follow up on the
medical needs.
What we did in New York was to have a captive fund. As you
will hear in the testimony from Bovis, they couldn't get
insurance. Nobody would write a policy for them, because we
didn't know what the liabilities would be.
I think that we need to come up with a more comprehensive
solution, because otherwise, if we don't plan ahead, the
Government is going to pick up the cost, as we have found we
are trying to do with all of these injured workers. We are
going to have to continue to provide some kind of care and
compensation and we want to do it in a way that doesn't unduly
burden the contractors, but also doesn't throw out the window
everything we have learned.
So I think, Mr. Chairman, that your legislation in my view
is not the answer but the problem you have identified is a real
problem. So we need to figure out how we can address it
together.
[The prepared statement of Senator Clinton follows:]
Statement of Hon. Hillary Rodham Clinton, U.S. Senator from the
State of New York
Thank you, Mr. Chairman. This is a vitally important topic, and I
appreciate the opportunity to discuss it here today.
I want to thank all of our witnesses for coming to testify.
Many of you have come a long way. I particularly want to thank the
witnesses who came from the Gulf Coast.
Mr. Zelenka and Mr. Perkins are from New Orleans representing
companies that have been heavily involved in the response and recovery
efforts since Katrina hit. Dr. Wright is also from New Orleans, and is
working to ensure that recovery and rebuilding are done in a safe and
fair manner for all residents of the Gulf Coast regions.
I thank all of you for the work that you have done and are
continuing to do under extremely trying personal and professional
circumstances.
I also particularly want to welcome Joel Shufro of the New York
Committee on Occupational Safety and Health for being here to testify.
NYCOSH is an outstanding and well-respected organization that I have
worked with closely on a number of 9/11 issues.
I think that we all share common goals.
When disaster hits, we want our Government to respond.
Our Government's response has to rely on contractors and their
employees.
We also expect that in doing response work, contractors will comply
with environmental and occupational safety laws and will take
precautions to protect their employees.
We expect that employees who are injured or who develop medical
problems as a result of their recovery work should receive the care and
compensation that they deserve.
I think probably everyone here can agree on those goals.
These are familiar problems to me, as we encountered them in the
aftermath of September 11 in New York City.
There are lessons learned from September 11 that should be applied
in the Gulf.
Unfortunately, S. 1761 ignores and misapplies the lessons of
September 11.
When the World Trade Center collapsed, it created an unprecedented
demolition and cleanup challenge.
Contractors and their employees responded swiftly, and worked
tirelessly under difficult and dangerous conditions to remove debris
from Ground Zero.
Now, I have been outspoken in my criticism of the Government
response--particularly in the first days after September 11.
An August, 2003 EPA Inspector General Report concluded that the
White House interfered with EPA communications about air pollution
hazards in Lower Manhattan.
I said it then, and I will say it again now: that is unacceptable.
It is possible that the Government's missteps contributed to the
fact that proper precautions were not taken as much as they should have
been.
A Centers for Disease Control study issued last September found
that in the three days after September 11, when exposure was greatest,
only 21 percent of the study's participants reported using respirators.
The CDC study also found that half of the study's participants had
new and persistent respiratory problems and more than half had
persistent psychological symptoms.
These findings are reinforced by information collected by Mt.
Sinai's World Trade Center Worker and Volunteer Medical Screening
Program. Dr. Steven Levin, who is the co-director of that program, has
documented continuing health problems among first responders,
contractor employees, and others who worked in lower Manhattan.
There are lessons to be learned from all this.
The lesson is not that we need to provide unprecedented and
sweeping liability waivers for contractors.
Instead, there are other lessons from September 11 that we need to
apply.
We need to be sure that our Government agencies--EPA and OSHA--do a
better job advising contractors and workers about the hazards they
face.
We need to establish a system to track the health of first
responders and recovery workers--this is something Senator Voinovich
and I have worked closely together on since September 11. We have a
bill to provide Stafford Act authority to do this in disaster areas,
and we need to pass that legislation.
We need to attend to the medical needs of those who develop health
problems. I am fighting now to prevent the Administration from reneging
on their pledge to provide $125 million for workers compensation and
medical expenses of 9/11 first responders.
I am sympathetic to the challenges that contractors face in getting
liability insurance. That's something we went through in New York.
To the extent that contractors cannot obtain the liability
insurance that they need to do the work, then Congress should consider
stepping in.
As Mr. Neigin points out, this is what we did in New York when the
Ground Zero contractors were unable to purchase liability insurance in
New York City.
It's not clear to me from reviewing the testimony whether that type
of program is necessary for the Gulf Coast effort.
Along with better monitoring and help for workers, that's a
proposal that we ought to consider, rather than the approach in S.
1761.
Senator Thune. Thank you, Senator Clinton.
We have a vote going on right now, Senator Boxer went to
vote, and she will return. I think what we will try and do is
continue to move forward with the hearing. Our first witness
today is General Riley, with the Army Corps of Engineers.
General, it is good to have you, and we welcome your
participation today and look forward to an update about how the
contracting process is going down in the Gulf Region.
General Riley, please proceed with your testimony.
STATEMENT OF MAJOR GENERAL DON T. RILEY, DIRECTOR OF CIVIL
WORKS, UNITED STATES ARMY CORPS OF ENGINEERS
General Riley. Thank you, Mr. Chairman and members of the
subcommittee.
I am Major General Don Riley, Director of Civil Works, Army
Corps of Engineers. Thank you for inviting me to testify today.
Under the National Response Plan, the Corps has been
assigned Emergency Support Function 3, public works and
engineering. Under this ESF-3, the Corps assumes the lead in
the procurement of water and ice, provision of temporary power,
installation of temporary roofing and removal of debris. Prior
to emergencies, under the 6-year old advance contracting
initiative, or ACI program, we competitively award contracts
for future use. We used our ACI contracts to support our
response to the recent hurricanes.
During the emergency, the FAR allowed us to shorten the
standard time period of award. For example, we awarded the
contract to unwater New Orleans under the urgency exception to
the Competition in Contracting Act. In our other response
missions, the Corps considered and used the entire suite of
available contracting options authorized under the FAR,
including verbal and letter contracts.
Using these methods, the Corps found available local
contractors and procured such critical items as sand bags to be
used to stop the flow of water into New Orleans. Additionally,
we made use of an existing Naval facilities contract to assist
in the un-watering of the city. In addition, the Corps awarded
debris and roofing contracts in excess of those contracts pre-
placed under the ACI program.
Also, within 2 days of the storm, I directed our internal
review staff to team with the Defense Contracting Auditing
Agency and the Army's Criminal Investigation Division and
deploy to the area of operations. Their mission, which is still
ongoing, is to provide oversight of the operation, to include
looking for instances of fraud, waste and abuse and to review
contracts.
We are now working to return to standard procurement
operations. We are advertising our requirements for longer
periods than we did under the urgent situation. We are
attempting to give prospective contractors as much time as
possible to prepare their proposals, and we are using the non-
emergency provisions of the FAR to the maximum extent possible.
Additionally, the Corps has made extensive use of standard
authorities granted to us under the various small business set-
aside programs, especially 8(a) firms. We have also held and
will continue to hold 8(a) competitions.
When we have awarded contracts to large businesses, we
encourage the use of local business subcontractors. For these
contracts, we have instituted goals for small business
subcontracting and reporting. Contractors report their
subcontracting efforts to us weekly for the first 90 days and
monthly thereafter instead of every 6 months, which is the
typical reporting requirement.
To help disaster-stricken communities, we have also
inserted clauses citing our preference for use of local
subcontractors.
Mr. Chairman, thank you again for the opportunity to
testify and I would be happy to answer any questions.
Senator Thune. Thank you, General.
Let me just ask this question. From your testimony today,
would it be accurate to say that the Corps of Engineers would
be unable to address major disaster cleanups without assistance
from the private sector?
General Riley. Yes, Mr. Chairman, it sure would. We don't
do anything alone. We contract 99 percent of our construction
and over 50 percent of our architectural and engineering work
is contracted. So we see ourselves as just being a piece of
this partnership with the local community and private
contracting firms.
Senator Thune. Do your contracts, when you do a contract
with these private firms, do your contracts require that the
contractors who perform on those comply with environmental,
labor, safety laws, existing laws?
General Riley. Yes, sir. We comply with all the appropriate
laws and all permitting requirements, and require the
contractor to do that as well.
Senator Thune. What would be the risk of not expeditiously
addressing the aftermath of major disasters? If you were to
follow your normal procedures and the FAR and everything else,
when it comes to issuing contracts, would you sort of explain
why it is you do things the way you do?
General Riley. Mr. Chairman, there are emergency provisions
under the FAR which we used quite substantially in the early
days of this disaster, in addition to the ACI contract program.
The danger, of course, is it is an emergency and we need to get
contractors out there quickly. One contractor that you have on
the next panel, we made a phone call to and he moved on a
verbal order and then we followed that up with a letter
contract and then we continued to refine the specifications and
processes after that.
That is all allowable within the FAR, but that is both a
risk to the Government and to the contractor when you move in
an emergency situation like that.
Senator Thune. Based on your experience, was the situation
with Katrina different than other Federal procurement you have
undertaken, and if so, what were some of those differences?
General Riley. Mr. Chairman, I think that the major
difference was just simply in the magnitude of the problem. It
was an unprecedented disaster, huge destruction to personnel
and property from 100 miles from Grand Isle to the Gulf Coast.
So it was different in that sense, although we followed all the
appropriate laws and the emergency authorities that we have as
well as that the Government has.
For instance, in the case of NEPA, the National
Environmental Policy Act, there were authorities that reside
with the oversight of CEQ, the Council of Environmental Quality
in the White House, and they issued some emergency procedures
under NEPA. It was all allowable within the law.
Senator Thune. But this one, in terms of the magnitude,
obviously very different than any previous disaster you have
dealt with. In terms of the contracting process, fairly similar
in using and exercising these emergency powers that you have,
at which time you can go out and just, if you have to, find
somebody who can do the job, get them in there on the job
immediately. Not doing that, I assume, of course means that you
run great risk to the people who are involved.
General Riley. That is correct. The risk is, if you don't
act quickly there is a severe health and safety problem, if you
don't get the ice and water there quickly or if you don't get
the flood waters stopped quickly, or if you don't get a roof on
a house quickly, you dramatically increase the cost to FEMA in
the long run if you don't act quickly.
Senator Thune. Have you worked closely with the other
agencies in this particular disaster and FEMA and others, their
relationship and so forth as it has unfolded? I know there were
a lot of early criticisms. It appears now from a distance that
there is a unified front, so to speak.
General Riley. Yes, sir. We work essentially for FEMA in
disaster operations. We do have authorities of our own in flood
control and navigation, but all the other operations that I
described were under the mission taskings from FEMA.
Senator Thune. I think what we will do, I assume Senator
Boxer is going to have questions for you, General Riley. She
will return from voting in just a moment. Those are all the
questions I have for you. Since we don't have other members
here, I assume we are all over on the floor voting, we will
take a temporary recess until she returns. I am going to have
to go over and vote, too, or they are going to clank the gavel
down on me.
So we will recess for a moment, and as soon as Senator
Boxer returns, we will commence and she can pose her questions
of you.
[Recess.]
Senator Thune. This hearing will come back to order.
General, I think you lucked out. We are going to be able to
release you, but if you could stay with us for just a minute, I
talked to Senator Boxer on the floor, she does have at least
one question for you. So I might bring you back up.
I would like to bring up our second panel, if that's OK,
and then we will get them started with their testimony. Then
when Senator Boxer returns, if she does have a question for
you, I think she just had one question she wanted to pose. We
will let you go and ask the second panel to come up.
On the second panel, we have Mr. Tony Zelenka, who is
President of Bertucci Contracting Corporation from Jefferson,
LA; Dr. Beverly Wright, Deep South Center for Environmental
Justice; Warren Perkins, who is Vice President for Risk
Management at Boh Brothers Construction; Michael Feigin,
Executive Vice President and Chief Administrative Officer of
Bovis Lend Lease Holdings, Inc.; and finally, Dr. Joel Shufro,
New York Committee for Occupational Health and Safety.
I don't know if he is with us here or not. Perhaps not. But
we will just start, we will go from left to right, so Mr.
Zelenka, if you would proceed. If you could, we are probably
going to have another series of votes about an hour from now.
So we are going to try and adhere, if we can, to the 5-minute
rule when it comes to oral testimony. We will make sure that
all your written testimony is made a part of the record.
Thank you for being here.
STATEMENT OF ANTHONY ZELENKA, PRESIDENT, BERTUCCI CONTRACTING
CORPORATION
Mr. Zelenka. Thank you, Chairman Thune, Ranking Member
Boxer and the distinguished members of the subcommittee, for
this opportunity to testify on Louisiana's struggle to recover
from Hurricane Katrina and the great need for legislation along
the lines of the Gulf Coast Recovery Act, which I support and
urge Congress to enact.
I am Tony Zelenka, I am President of Bertucci Contracting
Corporation. My company is a small business that performs levee
and coastal restoration work across the Gulf Coast. I was born
and raised in New Orleans, and I have over 20 years of
experience in the construction industry.
My family's firm traces its history back to 1875, when my
great-great-grandfather founded the company in New Orleans. The
morning after the hurricane hit the Gulf Coast, I waded through
chest-deep water to reach the closest highway, carrying my
bicycle over my head so I could ride to my truck and then drive
to check on my family, which had evacuated to Jackson, MS. I
had stayed behind to make sure our home and businesses survived
the storm.
While with my family, I learned that the levees in New
Orleans had failed. I knew that the Army Corps of Engineers was
going to need contractors to stop the flooding, so I headed to
the Corps' emergency response center in Vicksburg, MS. After
meeting with Corps officials that first day, and with no more
than an oral agreement to execute a written contract, I went to
work hauling stone and rock to repair the breached levees that
had flooded New Orleans. I was one of the first contractors to
arrive on the scene.
In a situation like this, contractors like me focus on
protecting our employees and helping our communities as quickly
as possible. Under the direction of the appropriate
authorities, we help our Country recover from one disaster
after another. We are the first entities, the first responders
to arrive on the scene of a disaster with the goal of providing
whatever support we can.
In the case of Hurricane Katrina, we did everything we
could to stop the water from pouring into New Orleans, and for
the past 10 weeks, we have been working 7 days a week.
Personally, this disaster has touched many contractors in the
area. While my home, thankfully, was spared from the
devastation, many of my employees and their families' lives
have been ruined by this disaster. As we continue our efforts
to cleanup the city, I have also sought to help my employees
re-establish their lives and livelihoods.
The cleanup process in New Orleans continues to move
forward. Standing side by side with my employees, I have
personally done a lot of the work, and I have done it under
crisis conditions. From the beginning, we have worked with
personal protective equipment and done our best to protect
ourselves from the many hazards. Like it or not, we have had to
wade through the flood waters and deal with the spray that the
helicopters caused. We continue to deal with gas leaks, oil
spills, downed electrical lines and backed up and overflowing
sewer lines.
While all of you have been watching the devastation on
television, we have been living it. Many of my employees are
still homeless and have had their families displaced. My city
is uninhabitable. In fact, I am a little nervous about being
away from the job site for the first time since this terrible
tragedy first happened.
Construction contractors have a critical role in providing
disaster assistance to Federal, State and local officials. We
are essential in the rescue of both persons and property. Our
Country has never experienced a dislocation of the size and
scope of Hurricane Katrina. Contractors like me stopped the
flow of water into the city, and we will be busy for months on
the demolition, removal, repair and reconstruction of both
structures and utilities damaged by the hurricanes. We will
cleanup property polluted by the hurricane, remove vast amounts
of debris and de-water flooded areas. This is our city, and we
want to bring it back.
Unfortunately, there are people out there who want to
capitalize on this tragedy and others like it. Lawsuits have
been filed against contractors who have performed the types of
rescue and recovery work my firm has been doing in New Orleans.
Take a look at what happened in New York after the terrorists
on 9/11. Hundreds of lawsuits were filed against contractors
for the heroic work they did to cleanup Ground Zero in a short
amount of time at the express direction of the Federal, State
and local authorities. I have attached an AP story to this
testimony that reports on the litigation.
[The referenced AP Article can be found on page 99.]
The madness has already started in Louisiana, where a
contractor was named as a defendant in a class action only 3
weeks after the hurricane hit. The trial lawyer sued the
contractors for building a faulty levee which the contractor
did not build in the first case. The case was dismissed after a
few days, but it is a prime example of the hunger out there, no
matter how arbitrary the suit may be, to sue contractors.
I worry that I may be sued for property damages as part of
the cleanup. Recently I have been hired to work on the massive
debris removal contract in New Orleans, which may include the
demolition of private homes damaged by the hurricane. This is a
very emotional situation, even though all levels of Government
have determined that many of these homes are completely
uninhabitable and beyond repair or restoration. The Government
has decided that they must be torn down and completely rebuilt
due to the flooding, hurricane winds and mold.
I now fear legal risks for moving ahead and doing exactly
and only what the Government hired me to do. Why am I worried?
Because everyone has spent all this time looking for someone to
blame instead of looking for a solution. Meanwhile, contractors
are expected to continue the cleanup and do it as safely and
quickly as possible, despite an uncertain legal and logistical
environment.
Remember, unlike many public officials and their agencies,
contractors have no sovereign immunity. We look to the
Government at all levels for guidance on the best way to do
this work safely and efficiently. Ultimately, in emergency
situations, we have to put our assets on the line if we want to
help, which means I may be at risk of losing my company for
simply doing what I have been hired by the Federal Government
to do: trying to help save my city.
I believe passing the Gulf Coast Recovery is necessary to
ensure that contractors like me will be there to do the work in
the future without fear of reprisals. The bill offers limited
protection to Government contractors from any citizen suits
that might result from their performance on a disaster recovery
contracts, enabling them to focus on the work. This legislation
would give my firm a reasonable measure of protection, allowing
me to pass this fifth generation family business on to the
sixth.
Do not let the trial lawyers penalize the contractors like
me who report for duty. We are a critical link in the
restoration of our city. I ask you to pass this legislation.
I also ask you to do something else. Listen to the experts,
listen to the Army Corps of Engineers, listen to local levee
districts. Do not shortchange the rebuilding and flood
protection efforts underway.
I have been asking for increased funding for the Southeast
Louisiana Urban Flood Control project for years. Unfortunately,
my calls for increased funding to rebuild the wetlands and
coastlands and provide additional protection for New Orleans
have consistently fallen on deaf ears. Please tell your
colleagues to not only increase investment, but fully fund this
national priority.
Please approve the Gulf Coast Recovery Act, and please
commit to rebuilding my city. Thank you for this opportunity to
comment, and I look forward to working with the subcommittee,
and I am happy to answer any questions.
Senator Thune. Thank you, Mr. Zelenka.
Dr. Wright.
STATEMENT OF BEVERLY WRIGHT, PH.D, DIRECTOR, DEEP SOUTH CENTER
FOR ENVIRONMENTAL JUSTICE AND CO-CHAIR, NATIONAL BLACK
ENVIRONMENTAL JUSTICE NETWORK
Ms. Wright. Good afternoon, Mr. Chairman. I am Dr. Beverly
Wright, Director of the Deep South Center for Environmental
Justice at Dillard University, formerly at Xavier University.
Regrettably, both of these Historically Black Colleges are
underwater now and temporarily closed due to Hurricane Katrina.
I am also here today representing the National Black
Environmental Justice Network.
Thank you for the opportunity to testify before the
Subcommittee on critical issues of concern in the aftermath of
the hurricanes. My professional and personal experiences of
growing up, living and working in the city of New Orleans
greatly influenced my perspective and testimony. Just like
Tony, I can trace my ancestry back seven generations in the
city of New Orleans, extending from free coloreds in that city.
So I am very much vested in the city of New Orleans.
The Mississippi Gulf Coast region suffered severe
environmental damage during Katrina, the extent of which has
yet to be determined. Massive amounts of toxic chemicals were
used and stored along the Gulf Coast before the storm.
Literally thousands of sites in the storm's path used or stored
hazardous chemicals, from the local dry cleaner and auto repair
shops to Superfund sites and oil refineries in Chalmette and
Meraux, LA.
Katrina displaced just under 350,000 school children in the
Gulf Coast. An estimated 187,000 school children have been
displaced in Louisiana, 160,000 in Mississippi, and 3,118 in
Alabama. The powerful storm closed the entire New Orleans
public school system. More than 110,000 of New Orleans' 180,000
houses were flooded, including my own, and have set for days or
weeks in more than six feet of water. As many as 30,000 to
50,000 homes city-wide may have to be demolished, while many
others could be saved with extensive repairs.
Katrina affected over 2,000 black-owned businesses in
Mississippi. These firms generated over $126 million in sales
and receipts in 2004. More than 20,000 black-owned businesses
were affected in Louisiana. These firms generated sales and
receipts of $886 million a year. It is likely that many of
these businesses will not recover.
Katrina could hurt over 60,000 black-owned businesses in
the Gulf Coast region that generate $3.3 billion a year. Black-
owned businesses have met roadblocks and have been virtually
frozen out of the rebuilding of the Gulf Coast region.
Complaints about being shut out of the Gulf Coast
reconstruction are not limited to minority-owned firms. Many
white Gulf Coast workers and businesses also rail about being
left out, while they see out of State companies receiving the
lion's share of the contracts.
The annual payroll alone in the metropolitan area hardest
hit by Hurricane Katrina, those being New Orleans, Biloxi and
Mobile, exceeded $11.7 billion in 2002.
Short-term rebuilding objectives must not outweigh long-
term public health protections for all Americans and the
environment they depend upon. Some of the legislative proposals
now under consideration in the aftermath of Katrina do not
adhere to these principles. Congress must act now to protect
our most vulnerable populations and preserve our most unique
and irreplaceable resources.
It is ironic that the tragedy of Hurricane Katrina is being
used to justify sweeping waivers of public health, safety and
environmental laws. The Gulf Coast Recovery Act would leave
many citizens without a remedy against contractors that cause
irreparable harm to the air and water. The bill gives
unprecedented legal protection to contractors being paid for
work related to Katrina in areas of rescue, recovery, repair
and reconstruction.
The bill is far-reaching in that these protections do not
only apply to Katrina contractors. Under the bill, they will
also apply to contractors in all future disasters that result
in at least $15 billion of Federal assistance.
The Gulf Coast Recovery Act, while designed to help victims
of Katrina, could very well end up helping everyone but the
victims in the long run. S. 1761 is particularly egregious to
low income and minority communities in the Gulf Coast region.
All of the limitations apply only to actions brought by private
citizens. The Section 4 limitation on filing a lawsuit is
specifically limited to private parties and Section 5(e)
specifically provides that nothing in that section limits an
action that any Governmental entity may bring.
I thought that the Government's role was to protect the
citizenry. This bill seems designed to do just the opposite. By
eliminating the threat of liability for contractors, you in
effect remove an essential protection for the public. Where
there are no consequences there are higher risks and general
disregard for the public safety.
This bill seems not to be well thought out. The actions
taken by this bill, in my opinion, aptly depicts the moral of
the old adage of throwing out the baby with the bath water. We
should remember that in this case, it is not the contractors
who are the victims. Powerful corporations with huge Government
contracts will make millions in profit from the Katrina
tragedy. The payments will be made with our tax dollars.
This bill should be rejected by the Senate. In essence, it
will ultimately defeat the overall purpose of cleaning up the
Gulf Coast and setting the road for its recovery. If
contractors no longer fear legitimate legal liability, where is
the incentive to do good work? When the dust settles, with
possibly untold numbers of properties improperly cleaned up,
debris inadequately disposed of with personal injury due to
contractors' negligence, who will pay that bill?
The victims of Katrina have suffered immensely, first from
an inadequate response that cost the lives of many citizens,
the loss of property, family members and their communities. Now
the Government will hold harmless contractors who may further
injure the citizenry through neglect and irresponsibility
without liability.
These citizens of the United States and victims of the
worst natural disaster every in North American have been placed
in double jeopardy by this event. In each instance, the
Government has played a major role, first with the slow and
inadequate response to Katrina and now with the quick response
that fails to adequately protect citizens in the aftermath of
the storm.
I believe that the most important question to ask when the
Senate examines this bill is not who will this bill help, but
who will this bill hurt. What segment of our society will be
left unprotected and who will be denied a basic legal right in
this Country to sue a party that has caused irreparable harm to
your family and your property?
A major reason cited by the proponents of this bill for its
existence is that it is in the national interests to have
private contractors assist public officials in times of
disaster. What I disagree with is the statement that well-
founded fears of future litigation and liability under existing
law discourage contractors from assisting in times of
disasters. From where I sit, this statement is a complete
fabrication.
Senator Thune. Dr. Wright, if you could summarize.
Ms.Wright. I'm over time?
Senator Thune. Yes. You are considerably over.
Ms. Wright. In fact, for every contractor that you find who
is hesitant to accept billions of dollars in contractors, I can
find hundreds who will. In fact, there was nearly a riot at a
recent meeting in Baton Rouge with all of the large companies
who received no-bid contracts for work after Katrina by local
businessmen who have lost everything looking for work.
In closing, what I want to say is that there are many
contractors, particularly small businesses, minority
businesses, who are willing and ready to take the charge of
doing this work and they are also willing to take the
responsibility of liability.
Senator Thune. Thank you, Dr. Wright. We will include your
entire statement as part of the record, the parts you didn't
get to.
Mr. Perkins.
STATEMENT OF WARREN PERKINS, VICE PRESIDENT, RISK MANAGEMENT,
BOH BROTHERS CONSTRUCTION COMPANY
Mr. Perkins. Thank you, Mr. Chairman, thank you for the
opportunity to testify before the subcommittee.
My name is Warren Perkins, I am vice president, Risk
Management, for Boh Brothers Construction Company. I serve with
the responsibilities for risk management and controlling and
advising on being able to transfer risk in our company where we
can and protect our company. I am here today to express the
company's views on matters before this subcommittee.
My President, Mr. Robert Boh, intended to be here. He, like
Tony, was nervous to be away from operations. We have 100 plus
jobs that were pre-Katrina projects that we can't get back to.
He is meeting with agencies to try to get back to work, try to
get our people back to work. So he sent me. This is kind of
under my purview, and I am happy to have his confidence that I
will represent the company well.
Boh Brothers is a general construction contractor native to
Louisiana and based in New Orleans. It is a closely held, 96
year old company. We are a civil contractor, Union contractor
in Louisiana. We pursue and get work throughout the entire Gulf
Coast region. Basically, we are a civil contractor that does
bridge work, roads and sewer drainage, levee, flood protection
system type work.
Boh Brothers and its employees are among the many victims
of Hurricane Katrina. The company lost equipment and its work
was interrupted. The hurricane shut down all of its projects in
the greater New Orleans area, and even today, only a handful of
those projects have resumed. Many are in jeopardy of being
canceled.
Moreover, as the storm approached, all the employees in the
greater New Orleans area had to evacuate to other locations. I
had to move my family to an aunt's house in Montgomery and work
in an office that was set up for me in downtown Montgomery.
When I finally returned, I learned that my house was flooded
with a foot of water. I have been living in it and working on
my home ever since and commuting to Baton Rouge, where we had
to relocate our office, because we could not work out of our
office in New Orleans.
As soon as the storm passed, Boh Brothers started
scrambling to locate its people to ensure that they were safe,
to let them know that we were temporarily moving our
headquarters to Baton Rouge. It took a week for us to locate 50
percent of them. It also took us several days to assess the
condition of our main office, equipment yard and job sites and
the damage done to the city as a whole.
Before Katrina hit, Boh Brothers had over 180 piece of
equipment worth over $60 million strewn out through the greater
New Orleans area. It took us 2 weeks to recover some 50 percent
of them. Many pieces were damaged, destroyed or lost.
During that time, we also set up a command center where we
received emergency calls for recovery operations, including
emergency repairs to breached levees. We were asked to deploy
personnel and equipment to the downtown area and to stop the
flooding. By the end of the first week, we have received more
than 10 requests from Government agencies to fill breaches in
the levees, to pump water out of flooded areas, to move barges
out of blocking parts of the inland waterway and to repair
bridges over waterways that needed to be repaired because of
Katrina.
To get to the areas that needed our help, we had to find
access routes through flooded streets and around debris and
power lines, all at the risk of our employees. We also had to
do our very best to protect our people from environmental and
other hazards. We made sure to comply with all OSHA and
maritime regulations, but that was just the beginning.
As soon as we could, we hired two engineering companies to
do environmental testing of our work sites before we moved into
any work site areas. We hired industrial hygienists to give us
advice on what personal protection we should use. We had all of
our people vaccinated with hepatitis A and B and gave tetanus
and diphtheria shots. We even hired security guards to protect
our people from the sniper activity encountered at some job
sites in and around the areas where we worked.
In the early days, we were ready to start on little more
than a handshake. We did not demand the time we would normally
take to scrutinize contractual terms and conditions, nor did we
dwell on the risk of tort litigation. We knew that the trial
lawyers were out there, but we simply could not take the time
to imagine that someone would sue us for trying to save the
city. The only risk in our minds was the risk that New Orleans
would simply cease to exist.
Now, however, we wonder. Do we risk tort litigation over
the actions we have taken and continue to take? Will the trial
lawyers really sue us simply for trying to put our community
back together? Some people disagree with the contracting
regulatory agencies and believe that the agencies are not doing
enough. Would such people actually sue us simply for following
the Agency's instructions and relying on their conclusions?
We understand that the contracting agencies have to guide
and direct the recovery effort. If we fail to follow their
instructions, we expect to have a problem. We also have to
answer to the regulatory agencies if we fail to comply with
their standards. We expect them to take some kind of
enforcement action. The problem is that we cannot be sure that
the agencies are in charge, that the problem is in the future
tort litigation could rewrite the rules long after the fact.
Boh Brothers has simply responded to the many requests that
the Government agencies have made of our company. At their
request, and as they instructed, we have for example made
temporary repairs to New Orleans' flood protection system.
These temporary repairs are intended to protect the city only
for a short time.
As the Corps of Engineers and other Government agencies
develop and implement permanent solutions to the many problems
that Hurricane Katrina revealed, but we really do not know how
much time the agencies will require, the time could stretch on
into the 2006 hurricane season and beyond. If future hurricanes
breach any one of these temporary repair locations, will the
trial lawyers sue us, the Government Agency or both?
The exposure is real. Even if we are confident our work
meets all relevant standards, litigation takes an enormous toll
on a company, any company. The cost of litigation is enormous.
During the early stages of our recovery efforts, a lawsuit
has already been filed, a meritless class action lawsuit was
filed against us in the first few weeks of our recovery
efforts. We were sued on a project we did not even do. We were
sued allegedly for performing work on a bridge that was near
the breach of the 17th Street Canal. We were not the contractor
that did that. The attorney did not do his research, did not
attempt to do any research. He sued the wrong company that was
doing the work, wrong name, and he just assumed that Boh
Brothers had to be involved in the construction of that
contract, therefore he sued us in a class action suit.
We immediately wrote him a letter demanding that he dismiss
the lawsuit with consequences of defamation of character,
defamation of reputation, rather, and sanctions under the law
in Federal court and give an apology for going into the
newspaper and the press, television station, and announcing
that Boh Brothers was responsible and sued for the breach in
the 17th Street Canal when we were there fixing the breach and
fixing all the breaches and bringing the city back to recovery.
I am not here to bash plaintiff attorneys. My wife works
for plaintiff attorneys. We are still married, and I have been
married to her for 35 years. So I am not here to bash plaintiff
attorneys.
When asked to do the right thing for New Orleans and its
residents, Boh Brothers responded. Now it is time for Congress
to do the same. Now it is time for Congress to give the
contractors working hard to revive New Orleans and the
remainder of the Gulf Coast some reasonable measure of
protection from unlimited tort liability, simply for being
there to meet the need. Congress should quickly enact S. 1761.
Boh Brothers is a member of the Associated General
Contractors of America. I can assure you that responsible
contractors throughout the Country are paying close attention.
They are aware of what has happened to the contractors who
responded to the terrorists attacks in New York. They are aware
of the litigation that followed. They are responsible corporate
citizens, but they are deeply concerned.
In closing, let me just add that the greater New Orleans
area requires your particular attention. It heavily depends,
for its very survival, on the design and construction of the
flood protection system. For itself, its employees and its
community, Boh Brothers also urges you to quickly provide
enough funding to design and construct a flood protection
system that will protect the city from future hurricanes.
In our opinion, if proper funding is not quickly provided,
many of the city's residents will never return or rebuild, if
they do not have the confidence that this won't happen again.
Thank you for allowing me to provide Boh Brothers' opinion.
Senator Thune. Thank you, Mr. Perkins. I appreciate it. I
have been fairly lenient with the gavel, because I think all
your testimony is very pertinent and obviously deeply felt,
based on what many of you have experienced there.
I do want, if you can, your entire statements will be
included as part of the record. If you can keep them down to
the 5 or 6 minute level, it will be very helpful, because we
are going to run out of time for our last panel.
Senator Boxer has a commitment at 4 o'clock. So what I
would like to do at this point before I ask Mr. Feigin to offer
his testimony is, she has a question that she would like to
direct, one, I think to General Riley, and then perhaps to
those of you who have already testified on this panel. Then she
will have to duck in and out.
Senator Boxer. Mr. Chairman, thank you. It is such a tough
day and the panel has been so very respectful of our situation.
We are very respectful of yours, and we are just not in control
of the voting today.
I want to say that I heard just two witnesses here today
and I think they are both very eloquent. I missed the Army
Corps, and I did have a question, sir.
We have been in touch with you--staff to staff contacts
have been made--because when the Senator introduced this bill,
we said, is there a problem? Are you having problems getting
the contractors to sign up? Dr. Wright points out that, she
said there was a near riot for people trying to get these
contracts. Are we having a problem? Are contractors staying
away because they are so nervous about their liability issues,
in your opinion?
General Riley. Ma'am, that is sort of a mixed bag. If you
look at the history of our contracting during Katrina, early on
we went to contractors, like Mr. Zelenka who sits here, with a
call and a letter contract. We knew he was there and available,
then we also looked for a contractor to do un-watering. We
called four different large contractors that could do that
quickly. One was available and responded.
For the largest debris contractors, we advertised and we
got 22 respondents for those 4 contractors. However, just in
the last few weeks, we had a contract out for levee repair,
five different contracts; on one contract we had four bidders,
on another contract, we had two bidders, and on three of them,
we only had one bidder. I don't know the reasons, you would
have to ask the contractors. It could be their crews had homes
damaged or they just weren't available, they were too far away,
or they considered the risks. I just don't know. I think the
contractors would be better to answer that.
Senator Boxer. We talked to Colonel Doyle. Colonel Doyle
told us that he never, he didn't see any problem whatsoever. We
will have to work further with you, maybe get some more--I
mean, there are certain areas where you are looking for some
specific skill, I would assume, right away, your universe is
smaller.
Everything I hear is the opposite, that the contractors who
were displaced and, unlike Mr. Perkins, who worked in the area
of, and I am sure Mr. Zelenka, are you from the area as well,
sir?
Mr. Zelenka. Yes.
Senator Boxer. For many years, since the 1800's or
something. I mean, there are still a lot of folks that are
complaining that they are not getting the contracts.
So I will keep on evaluating this, we will get something in
writing. The question, Mr. Perkins, I think it is so funny that
you are married to someone who works for a trial lawyer.
Because you mentioned trial lawyers are at least five times.
You said trial lawyers are coming around and looking to sue.
The last I knew, trial lawyers represent injured parties.
That's OK, I mean, I didn't think they can come around unless
they have injured parties. But that's OK.
I am married to a lawyer, my son is a lawyer, my father was
a lawyer. I am not. So I could be wrong on that. I don't think
trial lawyers can get a case brought unless they have a party.
No. 1, did you ever see the movie Erin Brockovich?
Mr. Perkins. Yes, ma'am.
Senator Boxer. I think, from what I hear from you, you say
that some foolish attorney brought suit against the wrong
company, right?
Mr. Perkins. Right.
Senator Boxer. That's outrageous, and of course, that suit
isn't going forward against you, is it?
Mr. Perkins. Not after we made the demand that we were
going to come after him for sanctions and he realized that we
were not the contractor. The point is that it was a distraction
and a wrongly filed distraction. He didn't do his homework.
That's the kind of things we get faced with. We are doing
temporary repairs here. We are not hearing anything about what
the permanent repairs are going to be. How long those temporary
repairs are going to stay there. So we are exposed to
hurricanes.
Senator Boxer. Would you rather not--I mean, if you were
faced with this, suppose this committee decides, and the Senate
decides, that we are not changing the rules, that we really
think that having laws that are reasonable are a deterrent to
some of the bad actors? I am assuming those of you here are
good actors, you are good actors, you have been in the
community, the last thing you would ever want to do is hurt
anybody.
All you have to do is be alive through our history and see
what people do to other people. I'm saying, if you play by the
rules, somebody makes a mistake and comes after you, you have
every right to be upset about it. Why the heck would we change
the laws of this Country to let the bad actors off the hook?
Because you're going to be taken care of.
Mr. Perkins. Senator, with respect to the Corps of
Engineers, they have immunity. We are asking for some
protection ourselves.
In my opinion, there is just as much of a likelihood, and
perhaps more, that the Corps of Engineers and the design that
they provide and the supervision that they provide as well on
the job site is potentially the problem. Yet we get to be the
scapegoat and we get the suits, and we have to spend the costs
on attorneys and expert witnesses and all the things that----
Senator Boxer. Well, wait a minute. Who is suing you now?
Mr. Perkins. Nobody is suing me now. I am concerned that I
am doing temporary repairs and we are out there responding on a
handshake and a prayer. Those temporary repairs are not meant
to withstand hurricanes of the nature of Katrina or probably
well below Katrina.
If the temporary band-aid is not permanently fixed, who are
they going to sue? If the breach occurs at the temporary
location----
Senator Boxer. Well, I'm assuming--sir, I'm assuming,
because I've read all about this, that there is a clear
understanding with the Corps that we are doing these temporary
repairs. Everybody knows we are not doing permanent repairs,
sir. So I would assume that you would have a good lawyer who is
going to look over the contract and you are going to be just
fine. That's how the system works.
My understanding is that you were involved, your company,
in writing this legislation, is that correct?
Mr. Perkins. Our company?
Senator Boxer. Your organization, the trade association,
was involved in putting together, drafting this legislation?
Mr. Perkins. The AGC, yes.
Senator Boxer. Who was at the table? Was Dr. Wright at the
table to speak up for the victims who might have a problem in
the end?
Mr. Perkins. I don't----
Senator Boxer. Do you think your company would have a
problem meeting a negligence standard?
Mr. Feigin. Senator Boxer, may I say something?
Senator Boxer. Just a minute. I just want an answer. Do you
think that your company would have a problem meeting the
current negligence standard?
Mr. Perkins. The problem is that the work that was asked of
us had no specifications, had nothing to rely on, no design
specifications, no specifications whatsoever. We were called
out to respond and through our efforts, we recovered the city,
stopped the breaches. We did it in record time.
Senator Boxer. OK, well, you know, Mr. Chairman, maybe what
we should be doing is looking at the contracts the Corps get
for these temporary repairs and if we've got a problem with the
temporary repairs, and people are fearful they are going to be
sued for the temporary repairs, that is one set of
circumstances. I think everyone is willing to look at that.
But this legislation goes far, far, far beyond that, way,
way, way beyond that. It looks to me, you know, call me old-
fashioned, but I've been around here long enough to see that
when there is an excuse to change a law you don't like, you go
far beyond it. Not you personally, sir. We just keep seeing
this again and again. We have an issue, we have an issue with
oil prices. So now we're faced with, oh, well, let's give land
to the oil companies. The oil companies are making record
profits.
This is not the way to respond to Katrina. I just look at
this and I say, this goes far, far beyond any reasonable fear
that you may have as a solid company. I think the protections
that are granted in this go way beyond the circumstances you
are describing. If my chairman wants to talk about narrowing
the scope of this bill to these areas where you may well have a
legitimate point, I'm very open to that.
What I'm not open to is changing the law, not only for this
situation, but every other ``emergency'' situation where
there's $15 billion or more in Federal expenditure. This thing
is way beyond just protecting you from a band-aid type of
situation, which I agree with you, that's what we're begging
you to do and help us to do to give us a modicum of protection
now until we get our act together and figure out what's the
long-term solution.
So maybe there's something here, Mr. Chairman, where we can
focus on a legitimate issue without, you know, trial lawyers
this and trial lawyers that, and trial lawyers are working, you
know. Give me a break. You say you're not bashing trial
lawyers. Read back what you said. Because at the end of the
day, that's what this comes down to, another excuse to weaken
the laws, and as far as I'm concerned, it's wrong.
You want to do something narrow, but when a group of
contractors get together, help write a bill, and we don't have
anybody from the public--excuse me, the victims, the public
sector who care about environmental justice, who care about
victims, not at the table, seems to me you're presenting a one-
sided deal here. It's sad. Because if you had called Dr. Wright
or other people to the table or maybe the folks from New York
who went through this situation, maybe you'd have something
here that we could do together instead of always having to
battle it out.
Mr. Feigin. Senator Boxer, may I say something?
Senator Boxer. I think I've spoken long enough. I would be
delighted to hear from you, sir.
Mr. Feigin. You haven't heard my testimony, but I would
just like to respond quickly.
Senator Thune. Yes, hold on, just before you do that, I
want to take you up on that offer. If you want to provide some
protections for temporary repairs we would be happy to work on
that.
Senator Boxer. Yes, absolutely. I'm happy to look at that.
Senator Thune. I do, in fairness, too, the bill is narrow
in scope, it is narrowly drawn. I think it's unfair to
characterize--a lot of the people at this table are also
victims. These are people who I think care passionately about
their fellow Louisianans and Mississippians and others who were
victims of this disaster.
So I don't think characterizing them as somehow not
sympathetic to the needs of the people that they live with----
Senator Boxer. Well, let the record be clear here, OK? I
love everyone at this table, it's nothing about that. It's
about what we're doing when we write laws that are too broad.
Mr. Chairman, I have legal experts who have read this who tell
me that you are protecting people from negligence. It's not
your intent. You said that. But there's interpretations that
would go that way.
For example, if somebody came in to clean out, to haul away
a big bunch of barrels that are sitting out there and they
don't look at what's inside, they think one thing's inside but
they don't test. Turns out a barrel is punctured, some of the
most toxic liquid gets into the water supply, off the hook,
according to the legal people that I have talked to. So let's
try to find some common ground.
I'd love to hear from you, sir, if my chairman would allow
it, then I've got to--I'm like really behind, so I've got to--
--
Senator Thune. Mr. Feigin.
Mr. Feigin. I know you have to run, but I didn't want you
to leave without hearing a couple of things from the
contractors that have actually been through it.
Senator Boxer. Yes.
Mr. Feigin. Right now, currently pending against the
contractors who were down at the World Trade Center site, there
are 5,000 claims. The problem isn't that we don't believe that
we can sustain a standard of negligence. We believe that we've
done nothing wrong. We are actually very proud of our safety
record down at Ground Zero. Nobody got hurt while we were down
there, there were no deaths when we were down there in one of
the most difficult circumstances that anyone in the
construction industry has ever faced.
But we are facing 5,000 claimants. The legal fees alone to
defend----
Senator Boxer. Against how many companies?
Mr. Feigin. Against 140 companies.
Senator Boxer. These are individual suits?
Mr. Feigin. They are all individual suits. It has not been
certified as a class action.
Senator Boxer. OK, well, fine. I think Dr. Shufro has some
information on that. I'm aware of his testimony.
The point I want to make is 5,000 people have sued. It's
not a class action.
Mr. Feigin. It has not been certified as a class action.
Senator Boxer. Right. Well, I understand that.
Mr. Feigin. The legal fees alone in defending our position,
we feel we will be exonerated in the end, because we don't feel
we did anything wrong. The legal fees alone could put a company
like ours, as big as we might be, out of business. Then the
plaintiffs are left with nothing. There's nobody to sue,
there's no money to get anywhere.
So I'm not sure--I support this bill because I think it
provides some kind of relief for the contractors. I would just
like some acknowledgement that the contractors need some kind
of relief in situations like this, and all you are really
talking about are details.
Senator Thune. I think it was recognized in the aftermath
of 9/11 that there was a need for that, because a pool was
created to provide some help.
Mr. Feigin. Well, we tried to get the legislation that
Senator Boxer refers to, legislation that would help us, and we
couldn't get any legislation. So what we ended up with was a
billion dollars to start an insurance company. The experts say
now that maybe a billion dollars won't be enough. Then we will
be right back where we started right after 9/11.
Senator Thune. Well, let's--Senator Boxer had to leave us
for a while. But let's move on, Mr. Feigin, with your testimony
and Mr. Shufro, with your testimony. Then I have a couple of
questions I would like to ask as well.
STATEMENT OF MICHAEL FEIGIN, EXECUTIVE VICE PRESIDENT, BOVIS
LEND LEASE HOLDINGS, INC.
Mr. Feigin. If I have to keep it under 5 minutes, I am
going to read my testimony, but it might be a little repetitive
of what I just said.
Mr. Chairman, I would like to thank you, I would like to
thank Senator Boxer and the committee for inviting me to
participate on today's panel and allowing me to discuss my
company's experience after the terrorist attacks on 9/11.
The proposed legislation, S. 1761, addresses some of the
problems following Hurricane Katrina. I hope to use the
knowledge we gained through our 9/11 experience to draw
parallels to Katrina and future disasters and encourage the
committee to take into consideration the role private business
has played in helping Government with disaster relief.
At 1 o'clock p.m. on September 11, 2001, hours after the
first attack, Bovis received a call from the city of New York.
The city wanted Bovis to come to what was being called Ground
Zero to help manage the daunting task of making sense of the
chaos in an effort to save lives. Without a moment's
hesitation, Bovis went to help.
The initial Government estimates were that the recovery
efforts, debris removal and site stabilization would take 2
years and cost over a billion dollars. The work was actually
finished in 265 continuous days, working 24 hours a day at a
total cost of somewhere around $500 million. Bovis was
particularly proud that we had no fatalities and only 36
reportable accidents with over 3.2 million manhours worked.
No consideration was given by any of the contractors to
liability issues or potential claims or lawsuits before
beginning work after September 11th. When asked to perform work
on any other project, any one of these contractors would have
been given the time to properly analyze the situation, the
risks associated with the assignment and the methods to manage
those risks. The contractors also would have determined how to
insure whatever potential liability might arise.
There was no time to do this before starting work at Ground
Zero. It soon became apparent that the liability issues would
have to be addressed. However, given the dangerous conditions,
the retroactive nature and the unknown aspects of this
unprecedented effort, commercial insurance companies would not
provide the coverage needed, and ultimately only limited
liability coverage was obtained.
After many months of work we received a commitment from
Congress to fund a captive insurance program. This WTC captive
provides coverage for the city of New York as the named insured
and all the contractors, subcontractors, architects and
engineers working at Ground Zero as additional named insurers.
The policy currently has approximately 140 additional named
insurers.
The captive was funded at a billion dollars because this
was the quickest agreeable amount to get a program in place.
Some now claim that even the billion dollars may not be enough.
Today there are claims against the contractors from over
5,000 individual claimants. These lawsuits claim existing
respiratory and related injuries, or fear of such injuries in
the future arising from or related to the debris removal work.
The captive is vigorously defending these lawsuits.
Bovis did receive compensation for its work at Ground Zero.
For the WTC captive, however, expenses for lawyers and
consultants would have exceeded any fees made in a matter of
months. As a result of these ongoing expenses and potential
liabilities, we would probably lose our bonding lines, our
banking support and our current insurance coverages. In short,
absent the captive, responding to a disaster when called would
have taken a thriving business employing over 2,500 people in
20 States and Latin America and put us out of business. We put
our business, our livelihood and our families' prosperity on
the line to help people and do the right thing.
If asked again, we owe it to our company and our employees
to think very hard about what our response should be. While we
think existing law offers a shield in this area, the current
World Trade Center related litigation demonstrates the need for
additional clarity, not only to protect contractors from
liability, but also to eliminate or discourage the costly and
time consuming process of the litigation itself, except in
appropriate circumstances. Protection from liability needs to
be put in place to eliminate any question of response and to
avoid penalizing companies that come when called and do the
right thing.
S. 1761 does this and should be supported by this
Committee. Mr. Chairman and members of the committee, thank you
for the opportunity to speak about our experiences down at
Ground Zero. You have our written testimony and I will answer
any questions you might have.
Senator Thune. Thank you, Mr. Feigin.
Dr. Shufro.
STATEMENT OF JOEL SHUFRO, EXECUTIVE DIRECTOR, NEW YORK
COMMITTEE FOR OCCUPATIONAL SAFETY AND HEALTH
Mr. Shufro. Thank you. My name is Joel Shufro. I am the
Executive Director of the New York Committee for Occupational
Safety and Health, NYCOSH, a non-profit educational
organization dedicated to every worker's right to a safe and
healthful workplace.
We have a 26 year history of providing quality safety and
health training and technical assistance to working people,
unions, employers, Government agencies and community based
organizations about how to recognize and eliminate workplace
health hazards. Since the attack on the World Trade Center,
NYCOSH has had extensive involvement with workers who
participated in the rescue, recovery and cleanup operations at
the World Trade Center site, workers in offices surrounding
Ground Zero, immigrant workers who cleaned offices and
residents, utility workers who restored essential services to
the area and residents living in or returning to contaminated
homes around Ground Zero.
To those involved in the rescue and recovery and cleanup,
working at the World Trade Center was more than a job. Those
who responded to the disaster did so for many reason:
patriotism, altruism and humanitarianism, among other motives.
They responded to the needs of their Country, many working 12
hours a day, 7 days a week for months. They assumed that if
they were harmed as a result of working at the site, their
medical needs would be taken care of and their families would
not be driven into poverty. They believed that they would not
be forced to give up their homes and that their children would
not have to drop out of college so medical bills could be paid.
Unfortunately, 4 years following the devastating attacks on
the World Trade Center, respiratory illness, psychological
distress and financial devastation have become a new way of
life for many of the responders, office workers and residents
in lower Manhattan. According to the Centers for Disease
Control, workers and volunteers who worked at the World Trade
Center site continue to experience high rates of respiratory
problems, sinusitis, laryngitis and higher rates of lower
respiratory problems, asthma, bronchitis, chest tightness,
coughing and wheezing.
Many of the workers are disabled by chronic pulmonary
problems. Some are unable to work. Many have also suffered
substantial economic disruption of their lives because of World
Trade Center related problems and do not have health insurance
and are unable to pay for treatment or needed medicine. As Dr.
Robin Herbert, co-director of the World Trade Center Worker and
Volunteer Medical Screening Program at Mt. Sinai, testified in
front of Congress, there are grave concerns about the potential
for workers developing slower starting diseases, such as
cancer, in the future.
For many coming through the screening program, the World
Trade Center screening program, the fears of future
catastrophic diseases like cancer, which can take as long as 20
to 30 years to show up, loom as large or larger than their
acute ailments. These concerns have been heightened by the
recent passing of two New York City emergency technicians whose
deaths have been related to illnesses resulting from exposure
to toxic substances at the World Trade Center.
Rather than make a stronger commitment to protect workers
and residents from environmental and occupational hazards in
future disasters, S. 1761 would free contractors from most
liability for personal injury claims when engaged in responding
to a major disaster, such as Katrina, as well as from citizen
suits under Federal environmental laws. We believe that such
legislation would undercut any incentives contractors have to
comply with safety and health environmental regulations.
Federal contractors who are paid by the taxpayer for the
work that they do should be held fully accountable to the
public if they behave carelessly or cause harm to people or the
environment. No public policy reason justifies a taxpayer
subsidy for negligence or illegal activity. What S. 1761 does
is to shift the costs of personal injuries and property damage
from the Government contractors to the workers and/or the
residents in the disaster areas.
It is imperative that workers know that if they come to the
aid of their Country, as the contractors, and are injured or
contract an illness in the process, their medical needs will be
taken care of and that their families will be secure. They need
the guarantee that contractors who do not act responsibly will
be held liable.
Responsible Government contractors should have no need of
the sweeping immunity this bill would provide. We urge you to
oppose the legislation which would provide a windfall to
irresponsible contractors at the expense of public health and
the environment.
Senator Thune. Thank you, Mr. Shufro.
Let me just ask a couple of questions, if I might. Just
incidentally, for the record, too, the legislation does not
exempt any contractor from labor, environmental or safety laws.
They have to apply to those. It is a narrowly drafted bill
which provides some protection so that we are able to get, as
the Corps mentioned, when they need on short notice someone to
come in and do the kind of work that assists in the recovery,
assists in the debris removal, and again, there are five
criteria here or five conditions under which this bill would
apply. It is narrow in scope.
Having said that, you raised some questions about people
who are injured, and I guess I would ask the question of some
of the contractors who are here, do you all carry workers comp
insurance for your employees?
Mr. Perkins. Absolutely. It is required by law.
Mr. Zelenka. We carry it, too. If I could, for a second, in
listening to Dr. Shufro's testimony, we are not trying to get
away from liability caused by our own negligence. In listening
to what he was saying, it appears that the terrorist acts of
attacking the World Trade Center and all of the respiratory
illnesses that it caused to everybody in Manhattan now should
become the contractors' liability. Because we are the only
person in there that can be sued. There is no Government Agency
to sue for that attack, so everybody who got exposed to
something now needs to be able to sue the contractor who was
working on the job site.
We shouldn't have to assume the liability of the terrorist
activity. We shouldn't have to assume the liability of what
happened with Katrina just because we are the only people or
the only entity involved in there that can be sued.
Mr. Shufro. I believe for the record that the city of New
York is also being sued.
Mr. Feigin. The city of New York has a cap on its liability
under the Airline Security Bill of $350 million.
Senator Thune. That is, I think, a fair question, and Dr.
Shufro, the implication that somehow the contractors caused the
9/11 contamination, I think you have to ask the fundamental
question of who caused it, the contractors or the terrorists. I
think most people know the answer to that.
Mr. Feigin. May I answer the question, Senator Thune? We
have workers compensation insurance as well, but we also spend
a lot of money on an annual basis providing additional medical
coverages for our employees so that they don't have to worry
about these things. So it is not an issue for us of being
negligent on the job site. The issue for us is really, like I
said before, trying to defend 5,000 different claims. The legal
fees alone would put a company under. It's not a matter of
worrying about being responsible or not.
Senator Thune. Mr. Perkins
Mr. Perkins. We're not afraid of negligence, either. The
point is, he's not afraid of it, we're not afraid of it, he's
not afraid of it, the point is the cost. He is talking about
the cost. We go to trial all the time and we protect ourselves
and we win cases on negligence. It's not about that. It's about
the fact that you have to go through this long, drawn-out
process before you are able to prove yourself not to be
negligent.
The fact that a Corps of Engineers job is designed,
supervised and accepted by the Corps you would think would
indicate that there is no negligence. If we get sued, we have
to go to court and prove it. We have to spend the money to
prove it, when we already have a stamp of approval by the Corps
of Engineers who accepted the job. That's the point.
Ms. Wright. May I speak?
Senator Thune. Dr. Wright.
Ms. Wright. I think that our concern is based on something
that we are already seeing in New Orleans, and that is that
contractors are hiring people and giving them a 20-minute class
in the proper gear to wear when they are doing the kind of
work, like debris removal and things of that sort. Twenty
minutes, and then telling them where they are going, they don't
need any equipment. So people are being exposed every day,
workers are being exposed every day.
As it relates to the hassle of dealing with the legal
system in this Country, I think that the average citizen would
tell you that it is a hassle for us, if you are trying to buy a
house, for example, is what happened to me, and someone with a
similar name ends up on your report. So when you go to closing,
you can't close, first you have to prove that it's not you. By
the time you finish all of that, the interest rates have gone
up. I mean, it's not just the companies that have hassles
dealing with our legal system.
I can't go and say credit bureaus need to be destroyed
because they actually caused me to lose a house that my family
wanted, because this is the way the system is. There are lots
of things that need to be fixed, and maybe there are some ways
that companies can be helped.
I'm really a bit disturbed by the fact that companies want
the Federal Government to give them some special leniencies or
special protections. The average citizen on a daily basis, all
of the people dealing with the insurance companies right now
and the things that we are having to go through to get the
insurance that we deserve for paying premiums for all of these
years, what should I say? Well, you know, insurance companies
shouldn't have a right to closely examine the damage that
occurred by Katrina, they should give me all the money that's
in my policy. Now I have to sit and wait and go through the
process.
My understanding is that companies generally pass on the
costs of whatever their legal fees are to the consumers. I
expect that will happen with these companies. I also believe
that if a company ends up going out of business because of 9/
11, they will very quickly open under a different name, at
least that's been my experience, startup shop, they already
have all of the relationships with the Army Corps, and that
business is up and running very quickly.
I don't think we should throw the baby out with the basket.
Try to fix the problem, but this law is wrong.
Senator Thune. Dr. Wright, are you aware, though, of any
Louisiana workers that aren't covered by workers comp?
Ms. Wright. I can't speak to that. I don't know. I believe
that some of these laborers that are just being picked up to do
debris work by these contractors are not covered. They have no
coverage at all.
They are also doing things like group hire, where the
person who has the crew to go in and do the work is in fact
paid a particular amount of money. We have undocumented workers
like you wouldn't believe in the city of New Orleans. You don't
see white or black workers. All we see are Mexican workers.
Many of them are undocumented.
This is not a slap in the face to the poor Mexican workers
who are also being extremely exploited. I am concerned about
their health, too. They are not wearing any kind of protective
gear doing the kind of debris removal that we see going on in
the city.
I invite you to come down and just observe what's happening
in the city as it relates to that.
Mr. Shufro. In New York City the workers who were cleaning
up the office buildings surrounding Ground Zero were for the
most part immigrant workers. My organization placed a screening
van about a block away from the Ground Zero. We saw 410
workers. Four hundred ten of them had respiratory problems.
Four hundred ten of them, if they were lucky, got a paper mask,
which was not sufficient to protect their health. Most of these
were, all of them were immigrant workers. While they are
eligible for workers compensation in New York State, because
most of them are what are called medical only cases, there is
no wage loss in many of these cases, they can't get legal
representation, and going through the system is virtually
impossible without a lawyer.
We have examples of people in New York City who are today,
years after filing their case, still haven't received a dime
from workers compensation. The cases are contested, fought
through, and people who worked on the pile are being denied
their compensation. I can go through people who have lost their
houses, kids who have dropped out of college because their
parents can't--their father or mother, actually, have not been
able to pay medical bills.
The system hasn't worked, and all the workers are asking,
the same thing that the contractors are asking here, but in
reverse. They want to know that if they go out and cleanup and
come to the aid of their Country in a disaster situation that
they are going to be taken care of. That's what this bill will
not allow.
Senator Thune. One final question, and I guess it relates
to the complaint that's leveled that this legislation would
eliminate any incentive for contractors to do good work. How do
you respond to that?
Mr. Feigin. Can I answer that? This is no insult to the
plaintiffs bar, and I am an attorney. We don't sit in our
offices worrying about lawsuits being brought by the plaintiffs
bar against us, because we are doing our work. We don't worry
about the nuisance of being in court all the time, and we
successfully defend those lawsuits.
This is a unique situation, unprecedented in the history of
America, that required some unprecedented results. From my
perspective, our company doesn't think about any--we go beyond
what OSHA requires us to do to keep our contractors safe on our
job sites. We do that because we are in the business of keeping
people safe.
So we are not going to sit here and say that because
somebody passed a bill that may apply twice a decade to a job
that's so big and so unprecedented that it requires that kind
of--we hope we never have to ask for the help that this bill
gives us. Having gone through this, something like this really
is necessary. It may not be this, maybe it's something else.
Some kind of relief is necessary to make sure that
contractors respond, qualified contractors who are interested
in their workers' safety, who have the kind of high standards
for worker safety that companies like ours and Boh Brothers and
the subcontractors who are here today have. We want to make
sure those are the companies that go to ground zero and go to
these disasters, but if these companies are out of business,
the companies that are going to be going are the ones that may
not care so much about this.
From our perspective, safety is our No. 1 concern. It is a
core value of our company. We actually go beyond many OSHA
requirements for the safety of our people on job sites.
Mr. Zelenka. As a small business, we don't have much
ability to fight claims. It wouldn't take much to put us in an
uninsurable position, in that insurance costs could get so high
that it wouldn't be feasible for us, we could not maintain our
business.
But you don't work to different levels as you go to
different jobs. We perform at the best level we absolutely can
perform at on every job, not just on the quality of the work we
do, but also the way we approach safety. Our employees are the
single biggest asset we have. I assign a senior, a junior and a
third check. We are a family business. We have been involved
for generations, our employees have been involved for
generations. We are not going to do anything to put anybody at
risk just because we may perceive the law is more lax.
Everything is going to be done to the same level.
Senator Thune. I'll tell you what. Senator Boxer has a
question she wants to ask. I have more than used my time under
this round. Hopefully I will have a chance to----
Senator Boxer. Maybe we can hear the next panel before we
vote.
Senator Thune. If we could ask the third panel to come up,
what we may do, if you all could hang here for just a minute,
is we will get a chance to ask questions.
Senator Boxer. Then the third panel can jump in and we can
hear you before we run to the floor for a series of votes.
Let me just say, because I have a lot of questions, I am
not going to ask them now because of the timeframe, but I would
like to submit them if that's OK with you, Mr. Chairman.
Senator Thune. Without objection.
Senator Boxer. For me, the issue is, what is the problem?
We need to document what is the problem. That means looking at
the whole picture. At the end of the day, what's the best thing
to do for the community, for the people of the community, and
what's the fair thing to do.
Now, my understanding of life is that if you do the right
thing, we have a court system that at the end of the day is
fair. It is true that when you are sued, it's an awful
experience, it's awful for every party, because they all put
money on the line, they may never recover it. Depending on your
point of view. If you are a big company and you keep a full-
time legal staff, it's a heck of a lot cheaper than if you're a
plaintiff's lawyer who is representing a bunch of poor people
and they may never get their case certified.
So don't try to pull the wool over anybody's eyes. We know
there's frivolous lawsuits. There are laws against that to get
the suit thrown out. Then there are the cases, and I go back to
Erin Brockovich, who I happen to know, where chromium 6 got
into the water, no one did anything about it, and people died.
Children died, people died.
Finally, these people were held to account and thank God
for that. In a lot of these cases, people don't act. They are
not good actors. They are bad actors. They are bad actors,
whether, you can go back to the Edsel car, you can just do a
lot of things where people knew. It wasn't the Edsel. What was
the car that had the--the Pinto, where they knew that, they
wrote into the cost of doing business, as Dr. Wright said--X
number of lawsuits a year. Because they made so much money. It
came out at discovery.
You can shake your head all you want. You're a good actor.
Hopefully you would never do that.
Mr. Feigin. That's not the point, Senator. It's not the
point.
Senator Boxer. I'm not asking you a question. I'm talking.
The fact is, there are bad actors. You have to be very sure
when you write legislation like this, and you said it's only
for big disasters, $15 billion, I don't want to say anything,
is in my State not a big disaster. It happens, sad to say, very
often. Earthquakes, floods, fires, drought, and all of a
sudden, you want to do a narrow bill, and all of a sudden you
are finding out you're changing the law for certain people and
not for other people?
How is that equal protection under the law? How is a person
who is victimized by a bad actor in the case of Katrina, none
of you at this table, some bad actor who comes in and
victimizes people, and how does that victim feel? Are they
getting equal protection where they may get cancer or some
awful thing because some contractor didn't do the proper
testing that was required? At the end of the day, that's not
right.
So if there's a problem, Mr. Chairman, let's narrow it
down.
I have one question for Dr. Shufro. I just want you to tell
me in human terms, if you can, in your experience, because we
have to say, although this was a natural disaster compared to a
terrorist attack, do you, could you describe the kinds of
injuries that you have seen and what might have been prevented
if the contractors had done the right thing there? Can you give
us a couple of examples?
Mr. Shufro. The most prevalent disease seen by the Mt.
Sinai Worker and Volunteer Screening Program is respiratory
problems. This could be prevented through respiratory
protection.
On a good day, and you can correct me if I am wrong,
according to OSHA statistics, workers on the site at Ground
Zero, it was never more than 50 percent, never more than 50
percent. That meant at least 50 percent of the workers were
working among toxic substances unknown, and a lot know, but
also unknown, without appropriate protection.
Mr. Feigin. May I correct you now?
Mr. Shufro. Let me finish.
So all of that could have been protected, and on----
Senator Boxer. Are you saying on a good day half the people
working on the site were not properly protected? Is that what
you're saying?
Mr. Shufro. That's what I'm saying. Fifty percent were not
wearing respiratory protection at any given time. There were
days that it was below that, very few above that. At a
different site, at the landfill, you had 85 percent respiratory
protection. So you have clearly a management problem, it seems
to me. If you are able to enforce 85 percent at one site and 50
percent at another, there is something that's going on at these
two sites that's different.
Had you had workers who were wearing their protection, we
would not have seen the high rates, and we're talking about
thousands of workers who are sick today as a result of
exposure.
Senator Boxer. I think Mr. Feigin wanted to say something.
Mr. Feigin. Yes, if you don't mind.
It is interesting, were you down at the site ever?
Mr. Shufro. Yes, I was down at the site.
Mr. Feigin. Then you know that on the site there was a
perimeter set up by OSHA on the site. Nobody was allowed inside
that perimeter without the appropriate respiratory protection,
and there was appropriate training and fitting and baseline
testing of everybody who went within that protected area.
So everybody had the appropriate respiratory protection.
Also, there were not just construction workers on that site,
but there were many police, fire workers on that site over whom
the contractors really had no control. So it would be
interesting to kind of look at the detail of what that 50
percent number is, whether they had it and simply refused to
wear it, or whether they didn't have it at all.
The other thing, too, over at Freshkills, which is where we
brought the debris, I think if you look at percentages, it is
interesting, but you've got to look at what the total number of
people were, because you had 1,000, you may have had 1,000
workers at Ground Zero, you may have had 30 people over there.
So it's not a lack of supervision or management, it's a lot
easier to manage 80 people and require them to do something
than have 1,000 people and require them to do something.
Senator Boxer. Dr. Shufro, did you want to respond?
Mr. Shufro. You know, it well may be that people were
provided with protection and weren't wearing it. That is a
management problem. If people are doing the job improperly and
not wearing their protection, then there is something the
matter with the management of that site.
Senator Boxer. Mr. Chairman, others may like to comment on
this.
Mr. Perkins. I just wanted to comment on a couple of
examples related to Erin Brockovich and the other example you
used. I don't think this bill protects us from that type of----
Senator Boxer. I know. We have a disagreement. My lawyers
tell me it's broad, sweeping. The Chairman says it's not. It's
very narrow.
Mr. Perkins. Those two examples were reckless----
Senator Boxer. So we need to talk. We need to sit down.
Mr. Perkins [continuing]. willful misconduct types of
situations.
Senator Boxer. We need to talk, because we read it
differently. I think it was written by the industry. I mean,
let me put it this way. I'll restate that. I think it was
written with the advice and counsel of the industry, and I
don't think anyone from the other side sat at the table.
So you can have an argument, you know, the best legislation
I've ever written calls in everybody from all sides. I just let
them sit there and argue with one another, well, we meant this,
well, we didn't mean that, we meant that, we meant this. At the
end of the day you come out, you get a bill that you can pass.
I don't think a bill that could pass if it doesn't have
everybody's advice and counsel.
Ms. Wright. I just wanted to say that what I keep hearing,
and I may be wrong, but I keep hearing all of these worries
about companies going out of business, insurance costs being so
high. I just want to say that the same thing is true for the
average citizen when it comes to insurance, for example. If you
get two claims with your regular insurance company, by the
third claim, you can't get insured any more.
So what is being put in place is another insurance pool, in
Louisiana, where if you can't get insured because you have had
insurance claims, whether it is by natural disaster, or just a
pipe breaking, the insurance companies will not insure you.
There is a Louisiana plain. That's where you go.
So I'm saying, why not the same answer that you've given
for regular citizens then be given for companies under these
extreme circumstances, not this kind of sweeping bill? So it
seems to me that as Senator Boxer was saying, let's just figure
out what the problem is and try to put some protections in. In
that way, that protects everybody, and not just this sweeping
bill that I think ultimately hurts the citizenry.
Mr. Zelenka. There is no pool in there for insurance. As a
small business, I sit here and listen to this, and I listen to
you say, the courts will protect you and you will fight all
your claims.
But I go back to once again, I won't survive as a small
business if I have to continue to defend myself against claims
that don't have anything to do with my negligence or my
company's negligence, just the fact that I am the only easily
suable entity in the loop here. I'm in there trying to do the
right thing and be a good actor, and I'm the only guy that can
be sued, so I have to defend myself from all these suits. Small
business is going to suffer. All these businesses, as you
talked about, wanting to get in line, they are going to suffer.
Going out of business, declaring bankruptcy and popping up
under another name isn't a very good way to do business. We
wouldn't be around for over 100 years if we----
Senator Boxer. Well, Mr. Zelenka, for me as a U.S. Senator,
from a State that has so many natural disasters, I don't even
want to talk to you about it. I mean, it's just, every other
day, we have so many happening. I work closely with my business
community, with my unions, with non-union workers, with the
immigrant community and everything else.
I want to help people who are caught in a situation where
they are a good actor. I do not want to help people and send
the wrong message that you can get a Government contract and
then be sloppy, don't live up to the highest standard and all
the rest.
Mr. Zelenka. I agree with you.
Senator Boxer. If we could agree on that, it seems to me
that we have some common ground. Nobody wants to see a good
actor, a good business, a good citizen be driven out of
business.
Mr. Zelenka. That's where I'm headed.
Senator Boxer. Dr. Wright said, I think what she said was
making an overture. She said maybe we need a fund where for
these circumstances, where there is no blame, that we can have
an insurer of last resort, kind of like the terrorism concept.
I mean, there are ways that we can reach to help the good
businesses.
Not to use this as an excuse to give some broad liability
waiver to people who are not good actors and to people who are
clearly negligent. Again, this isn't the chairman's
interpretation, and I respect that. But we have a disagreement.
My lawyers have looked at it, his lawyers have looked at
it. I think it's broad, it's sweeping, it will apply too often.
It's a gift to some potentially bad actor. It's an incentive
for them not to do right by their workers, by the community,
what do they care at the end of the day?
You know, these big oil companies now that were crying so
much, oh, oh, it's a terrible thing, Katrina, we can't get the
supply, it's awful, it's awful, it's awful, at the end of the
day, they not only made more money than they ever made before,
but they took bonuses that are so outrageous that the
Republican Senate is having a hearing tomorrow where we are
just going to come down on these folks.
So I think the American people are fair people. If you are
good citizens, if you want to do the right thing, we don't want
you to be hurt. That would be a terrible thing. At the same
time, if you write legislation that you say is going to protect
the good but takes away incentives for corporations to be good
actors, you have done damage to the American family who is just
trying to get up in the morning and not die of a heart attack
or get cancer that's going to give them 20 years or have to
wheeze their way through the day, as we have here.
I agree with Mr. Shufro, you give a worker equipment to
protect himself or herself and they don't use it, you need to
give a warning and then give a second warning and they're out.
I have a rule in my office, no smoking. If anyone does it, you
get a warning, then they're gone. They can go somewhere else
that has a different policy, that's fine.
In any event, I've spoken too long. I just want to say, Mr.
Chairman, to you, because we are friends and we work together,
that if you want to take another crack at something that I
think is addressing a real problem, I'm there. But if you
don't, we're going to have a big, big debate over this. I think
it's not going to lead to anything much, because I think you
take Senator Clinton, Senator Shumer, who have gone through
this stuff, and it's not like you're coming at this where
there's no experience.
So anyway, I thank you very much for your allowing me to
discuss this matter. I thank the panel, it's terrific.
Senator Thune. I would expect you to disagree with me,
frankly. I will say that part of this is based upon the
experience we have been through in New York. I think lessons
learned and trying to do something that is instructive that
would apply to future, and again, bear in mind, these are $15
billion, which in California may not be as much money as it is
other places, but that's still a pretty high threshold.
It is very narrowly drawn. The people who we are talking
about here are people who are being asked by their Government
to do this work. It's not like they are out there trying to
profiteer from sweeping in on this disaster.
Senator Boxer. They're being invited.
Senator Thune. A lot of these folks----
Senator Boxer. They're being invited. They don't have to do
a thing they don't want to.
Senator Thune [continuing]. Are from Louisiana, too.
Senator Boxer. They don't have to do it if they don't think
it's going to be worthwhile. This is a capitalistic system.
We're not telling people, you have to do the work. We're
saying, here is a contract, if you are interested, please let
us know.
Senator Thune. I think the concerns being expressed by the
people who are doing that work is they may not do that work in
the future if they don't have some protection from what now has
turned out to be literally thousands of claims in the case of
New York. I suspect we will see a considerable amount of that
with respect to Katrina.
With respect to them being, just allowing them to be
sloppy, this is all Federal oversight. If it's sloppy, it's
because the Federal agencies that are overseeing this work are
allowing it to be done in a sloppy way.
Just one final point on the question of jurisdiction. This
Subcommittee does have jurisdiction on waste and disposal. I
think it is important for us to be able to have a discussion
about this subject, whether or not ultimately this bill is
marked up in the Judiciary Committee or not.
I think we will release this panel. We have a vote on. How
much time is left? How many votes, is it a series? Two votes.
Senator Boxer. Mr. Chairman, I just want to say, I got this
from the Dolan Media News Wire. It says,
``according to the Louisiana Contractors Licensing Board, the
number of applications for a contractor's license nearly doubled in
September to 224 from a normal 120. In the first week of October, the
number of applications increased an additional 300 percent.''
I would like to put that into the record.
Senator Thune. Without objection, that will be entered into
the record.
Senator Boxer. Thank you.
Senator Thune. We will take a brief recess to go and vote,
and then, with the indulgence of our last panel, if their
stomachs aren't growling too much, we will come back, I will
get the testimony going and we will try and ask some questions
of that panel as well.
So we will release this panel. Thank you very much for your
testimony. Thanks for your responses to questions.
[Recess.]
Senator Thune. Is everyone still awake out there?
We have returned. I want to ask the final panel to present
their testimony. We will have a few questions. I don't think we
are going to see Senator Boxer return from the floor. There
will be another series of votes here before long.
In any event, I am very pleased and thankful for your
patience, but very pleased to welcome Craig King, who is a
Government contracts attorney; Professor Steve Schooner, from
George Washington University Law School; and Paul Becker, who
is President of Willis' Construction Practice to the hearing
today. Mr. King, please proceed and thank you again for being
here, and thank you for taking time and thank you for your
patience.
STATEMENT OF CRAIG S. KING, GOVERNMENT
CONTRACTS ATTORNEY
Mr. King. Thank you very much, Mr. Chairman, and thank you
for the invitation to provide testimony regarding Government
contractor liability provisions of S. 1761.
There is a strong Federal interest in establishing
appropriate standards for liability for Government contractors
for actions taken in the exigencies of a disaster situation.
Now, if you read the written testimony, it is clear that
Professor Schooner and I diverge to some degree on this bill.
So for purposes of my oral remarks, what I would like to do is
really focus on those areas, those key areas where we do have
some differences of opinion, and do so with all respect and
admiration for the good professor.
At the core of the bill is the Government contractor
defense. The defense was established by the Supreme Court and
is part of the Federal common law of the United States. It
provides that if certain requirements are met, a contractor
stands in the same legal position as the Government, meaning
that it bears no liability to third parties if the contractor
does what the Government tells it to do in the contract.
Under Supreme Court standards, the Government contractor
defense would apply to disaster relief efforts without S. 1761.
Applying the Government contractor defense, however, would
involve costly and unnecessary litigation, and what the bill
does is add protections that will limit that type of wasteful
legal process.
Go back with me if you will to 1988. In that year the
Supreme Court decided a seminal case setting forth the
Government contractor defense, Boyle v. United Technologies. In
that case, the Supreme Court considered the effect on
contractors of third party suits. It observed that if such
suits are allowed, then the contractors have only two
economically viable alternatives. No. 1, to not do the work, or
No. 2, to raise the price to compensate for the legal risks.
Either way, the Supreme Court said, the interests of the United
States are adversely affected.
In his written testimony, Professor Schooner laments that
he has seen no empirical evidence that contractors are refusing
to do the work. The Supreme Court has the answer. There are
only two economically rational options. If the contractors are
doing the work, then the Government is under pressure to pay a
higher price to cover the risks of those lawsuits.
But there are some complicating factors. We have heard
about them today. First of all, there is the selfless desire of
contractors to help, to do what's right. There is also the
desire not to profiteer or be perceived as profiteering. Also
in the Federal Acquisition Regulations, there are limits on
price that keep, or at least put restrictions on the ability to
act in an economically rational manner.
Consequently, the contractors are in a vise, and what's
left for them to do is come to Congress and say, can you
relieve the pressure, can you help us out of this situation.
Now, the Government contractor defense is rooted in the
Government's sovereign immunity. Congress waived sovereign
immunity of the United States when it enacted the Federal Tort
Claims Act. It enabled private parties to sue the Government in
certain situations.
In so doing, it exempted from this consent to sue the
Government any situation where there is what the Supreme Court
calls a discretionary function exercised by a Government
official. So Professor Schooner has really two criticisms here.
First he says if the parties can't sue the Government, well,
they ought to be able to sue the contractors. His complaint is
not really about S. 1761. His complaint is that he thinks the
Federal Tort Claims Act is too narrow.
He says the liability should be allocated to the superior
risk bearer, and that is clearly the Government. The Government
has the agencies that can really know about how to respond to a
natural disaster, but then he reasons that the Government is
immune from suit, so let's let the private parties go after the
contractors.
The essence of the Supreme Court's Government contractor
defense is that private litigants simply cannot get indirectly
from the contractors that which Federal law prohibits them from
getting directly from the Government.
Now, the second criticism of Professor Schooner is that the
discretionary decisions in disaster recovery situations are
made by contractors, not by Government officials. So he says
the Government contractor defense should not apply.
To the contrary, the Supreme Court has found explicitly
that the Government contractor defense applies in remediation
situations, because in a contract for remediation efforts, for
example, the EPA making decision regarding the cleanup of
contaminated sites, these are discretionary Government
decisions.
Really, the point is being missed. The key point is that
the bill provides expressly that protections of the Government
contractor defense will apply only where a Government official
does indeed exercise a discretionary function regarding the
work. The bill specifically provides a process for the
Government official to review the scope of work in the contract
and certify that that particular work is necessary to the
disaster recovery effort. The Government official must
determine that the work fits into any of five specific types of
recovery work and that discretionary function requirement then
is fulfilled by the certification process.
The bill provides then that with a properly certified
contract, the elements of the Government contractor defense are
deemed satisfied. What this means is that for contracts that
are so certified, and that's a narrow group of contracts, for
contracts that are so certified, there is no need to litigate
regarding the elements of the defense.
Let me be specific about what that means. In Boyle, that is
the Supreme Court case, the Court said that there are three
elements necessary to apply the defense. No. 1, the first
element is that the Government must approve a reasonably
precise scope of work. That is fulfilled by the certification
requirement. There is no need for cost of litigation about
that.
No. 2, it says the contractor must perform in accord with
that scope of work. There is nothing in the bill that provides
any protection for a contractor when that contractor's conduct
is outside the scope of work of the contract.
Third, the contractor has an obligation to warn the
Government when the contractor knows about dangers that the
Government is not aware of. The bill does not reduce in any way
the contractor's obligation to warn the Government when the
contractor has actual knowledge.
What the bill does is it enables contractors and the
Government to get on with business and to go about the cleanup
and recovery efforts where the risks are unknown and
unknowable. Inherent in the nature of disaster recovery is that
many of the risks are indeed unknown and unknowable.
By deeming the Boyle elements to have been satisfied, a
contractor can proceed with the disaster recovery efforts, can
do what's directed by the Government, can do so in good faith,
and that is the reasonable way to proceed in a disaster
recovery situation.
Mr. Chairman, just to end, the bill is reasonable. It
implements the requirements already set forth by the Supreme
Court. There is a Federal interest in having the best
Government contractors respond in these types of situations
without reservation. A certification by a cognizant Government
official does meet the requirement of a discretionary function
and should not be second-guessed by third party litigation.
Therefore, State tort laws where third parties are enabled
to sue contractors just because they were there should be
displaced in the absence of contractor fraud, recklessness,
willful misconduct. Contractors don't escape from their acts.
They simply are protected in the way the Government is where
they do what is right. The bill should be enacted.
Thank you.
Senator Thune. Thank you very much, Mr. King.
Mr. Schooner, now you have a chance to rebut or refute Mr.
King's testimony. Please proceed.
STATEMENT OF STEVEN L. SCHOONER, CO-DIRECTOR, GOVERNMENT
PROCUREMENT LAW PROGRAM, GEORGE WASHINGTON UNIVERSITY LAW
SCHOOL
Mr. Schooner. Chairman Thune and members of the committee,
I appreciate this opportunity to discuss these Government
contractor liability proposals.
S. 1761, the Gulf Coast Recovery Act, is simply
unnecessary. It would discourage responsible contractor
behavior, and it would expose the public to unnecessary risk
and harm. The bill asserts that the fear of future litigation
and liability discourages contractors from assisting in times
of disaster. At best, that's hyperbole. At worst, it's false.
We routinely hear apocalyptic tales of monumental barriers
to entry that deter firms from seeking the Government's
business. What we do not see is empirical data supporting the
assertion. The absence of this support is palpable. Nothing
suggests that any significant population of contractors refused
to seek their share of the Government's $300 billion annual
procurement budget. To the contrary, the best contractors,
small and large, domestic and foreign, aggressively vie for
this work every day.
Insulating contractors from liability improperly allocates
risk of harm between the public, the contractors, and the
Government. A better solution, and Mr. King mentioned it, is to
allocate risk to the superior risk bearer, the party best
positioned to appraise the likelihood that harm will occur,
avoid the occurrence of the risk, insure against the risk, or
bear the cost of the risk. What this bill does is allocate the
risk of loss to the individual, the party least able to
anticipate, assess, or avoid the risk, let alone insure against
it or bear its costs.
Thus, the Government neither assumes responsibility for its
contractors nor would it permit the public to hold the
contractors accountable. In a responsible Government,
protection of the public from harm, rather than the protection
of the economic interests of contractors, must come first.
Now, the bill creates a rebuttable presumption that all
elements of the Government contractor defense are satisfied.
This turns the Government contractor defense on its head.
Historically, the Government contractor defense insulated
supply contractors that explicitly followed Government
direction to their detriment. The defense does not protect
contractors that exercise significant amounts of discretion.
Mr. King ignores the fact that when the Government rushes
to identify contractors, hastily drafts contracts, and loosely
manages those contractors, the Government abdicates, nay,
delegates its exercise of discretion. Thus, in removing debris,
a contractor faces significant economic choices. For example,
drivers with spotless safety records probably demand higher
wages. Newer, better maintained trucks likely cost more to
lease. Minimally acceptable environmental standards cost less
than potentially cleaner or safer technologies. Truck drivers
could save time and money by transporting hazardous waste
through, rather than avoiding, residential communities.
It makes no sense to insulate contractors from the fiscal
ramifications of these discretionary decisions.
Now, this differs dramatically from the SAFETY Act, which
assumes that without liability protection, contractors might
not let the Government deploy qualified anti-terrorism
technologies to combat terrorism. This bill involves common
tasks: demolition, repair, debris removal, de-watering flooded
property, where the existing standards of care are reasonable.
Moreover, Mr. King ignores the fact that the rather
mechanical certification assigned to the Chief of Engineers is
a far cry from the highly judgmental and discretionary SAFETY
Act certification. Now, consistent with what Mr. King says, in
a fraction of the Government's contracts that involve nuclear
materials or highly volatile missile fuel, work is
extraordinarily complex and dangerous. In extraordinary
circumstances, we have unique rules that insulate and indemnify
contractors from liability.
Do not confuse the extraordinary with the ordinary. For
basic public services, extraordinary measures are not
appropriate. This bill also continues a trend that exploits
Katrina to pursue otherwise untenable public policies. Look,
Congress hastily raised the micro-purchase threshold, in
effect, the charge card purchase cap, to $250,000, even though
the Government's management of the charge card program has been
abysmal. Fortunately, the Administration stopped that.
Subsequently, the same can be said for the suspension, and
later repeal of the suspension, of the Davis-Bacon Act for
totally disingenuous purposes.
Now, hopefully reason will prevail here. Knowledgeable
procurement executives understand that the current procurement
regime contains sufficient flexibility for the Government to
meet its purchasing requirements in times of crisis, and I
believe that's what the Corps told you today and what their
written testimony says. They are not having trouble getting
contractors to do the work.
Finally, elsewhere Congress has called for more auditors
and inspector generals to scrutinize Katrina-related
contracting. Don't forget that an ounce of prevention is worth
a pound of cure. The 1990's witnessed dramatic acquisition
workforce cuts, and since
9/11, procurement spending has increased by more than 50
percent. More auditors and inspector generals will not help
avoid the scandals or improve the performance of the
procurement system. Conversely, an investment in the number and
skills of purchasing officials would reap huge dividends.
Thank you again for this opportunity, and of course, I
would be pleased to answer any questions.
Senator Thune. Thank you, Professor Schooner.
Mr. Becker.
STATEMENT OF PAUL BECKER, PRESIDENT, WILLIS NORTH AMERICAN
CONSTRUCTION PRACTICE
Mr. Becker. Thank you, Senator Thune, good afternoon.
My name is Paul Becker. I work at Willis, a global
insurance broker, as a North American Construction Practice
group leader. I am proud to lead this practice, as my
colleagues and I represent over 3,500 contractors in North
America. We work to structure and secure effective risk
management programs that can address safety issues, contractual
liabilities and surety bonds.
I have been in the insurance business for 27 years, and the
vast majority of this has been in the construction sector. It
is my pleasure and honor to appear before you today to testify
to the importance of insurance in the cleanup of New Orleans
and the Gulf Coast in the wake of Hurricane Katrina;
specifically, the need to limit the liability of the
contractors engaged in this work.
As insurance brokers, we work with our clients around the
world and across all industries, helping them assess, quantify,
mitigate and transfer these risks, thereby allowing them to
focus on achieving their business goals. Doing so affords them
the comfort and the confidence that their assets, property,
people, intellectual capital and equipment are more than
adequately and properly protected against a broad range of
risks.
We are not an insurance company. That is, we do not
underwrite the risks. We are an intermediary, bringing the two
parties together, working to fashion the very best customized
coverage we can secure for our clients. As part of this client
advocacy, we work and have developed strong relationships with
insurance carriers around the world, such that we know their
risk appetite, how they consider certain risks and the various
factors that weigh in their underwriting decisions.
Given our experiences, we have a working knowledge as to
how they think and how they approach various risks.
Essentially, whether or not to underwrite a risk, how to price
a policy and how to set the terms and conditions of a policy
which amounts to a contract.
In the aftermath of the events of September 11, Willis
secured the insurance coverages for the contractors who cleaned
up the World Trade Center site. As was spoken earlier today,
those insurances were somewhat limited to workers compensation
and a narrow scope of liability. Quite thankfully, and for
obvious reasons, the characteristics of this site were unlike
any we or anyone else in either the construction or insurance
industry had ever seen. Normally, before the cleanup of a
disaster site starts, environmental and engineering firms
conduct studies, run assessments and issue reports as to the
nature of the site and the specifics involved.
Due to the outstanding circumstances of the events of 9/11,
there was not time for such exercises, and contractors got to
work without a full understanding of what was ahead: how stable
was the ground, what were the asbestos levels, what other
hazardous materials could have a long-term impact on the health
of the workers and the general public. Today, over 4 years
since 9/11, the number of suits, as was heard earlier today,
being filed continues to grow. Only in time will we determine
the balance between the insurance purchase versus the claims
now being filed in New York.
But one thing is certain. Litigation upon litigation upon
litigation has created a great deal of uncertainty and serious
concern among the contractors involved. While the scope of the
New Orleans effort is multiples larger than the World Trade
Center site, the same concerns are on hand today as were on
hand on 9/11. The fundamental problem in securing the necessary
coverage is a reflection of four component actions I mentioned
a few moments ago. Insurance is about assessing, quantifying,
mitigating and transferring risks. Models predict likely
scenarios, calculate possible losses and then intelligent plans
determine how to avoid such problems and spread the risk among
various parties at appropriate price.
In these unique situations, there can be a tendency to
focus on the financing of the risks so the work can get
underway. Without the assessment, how does a carrier know what
the possible losses are? If the risks are unknown, there can be
significant unforeseen liabilities. One, how can contracting
firms adopt preventive measures to avoid problems which can
give rise to future claims? How can carriers determine the
right price for the coverage?
Over the last several weeks, we have engaged in
conversation with carriers around the world on this matter, and
they are expressing to us the various concerns that I am
sharing with you today. Uncertain site conditions, unusual and
known health hazards, what chemicals are being released into
the air during the cleanup, the limited nature of the tools
available to assess the number and types of environmental
factors in play, the varying standards between local, State and
Federal authorities, the fast-track nature of the work to be
done, and the lack of certainty on contracting provisions and
legal environments.
All of these factors substantiate the traditional methods
of risk identification, control and underwriting have been
significantly altered and make it difficult to estimate or even
guess what the full extent of the long-term liabilities arising
from the cleanup will be. Make no mistake: these are long-term
liabilities. It leads us to question whether the insurance
industry has the ability to fully underwrite the risks inherent
in the work.
If this bears out, contractors will be left fending for
themselves without adequate insurance protection. This is not
to say that contractors will not be able to procure insurance
in some form for their activities in the Gulf. Rather, without
addressing the unique factors in this situation, the coverage
they will be able to obtain will in most cases not adequately
protect them over time from the exposures they will be facing.
This is not a question of if, but when, and based on our
experience, these matters will manifest themselves over a 5- to
10-year timeframe. There is talk already of a Katrina cough.
This is very similar to the World Trade Center.
I might add that without protection, contractors cannot
properly account for their risks and endanger the long-term
viability of their companies. Accordingly, these issues could
prevent quality contractors from participating in the cleanaup
and recovery efforts.
This is important legislation. Reasonable and responsible
contractors tend not to get involved in projects of any
magnitude unless they have insurance against what are normally
quantifiable risks, and carriers as well tend not to write
policies if they are not able to make the necessary judgments.
In the case of New Orleans, as it was at the Trade Center,
neither can establish the proper control procedures to protect
their interests.
Limiting the liability of construction companies engaged in
the cleanup such that they can gain the cover they need is
critical. It has been my distinct honor to share my experiences
with you this afternoon. Mr. Chairman, I conclude this section
of my report and will submit the rest into the record.
Thank you.
Senator Thune. Thank you, Mr. Becker.
Let me ask you a question. In your experience, how many
Federal responses have exceeded $15 billion? Do you know the
answer to that question?
Mr. Becker. According to the Insurance Institute, there
have been four distinctive disasters that have been assessed at
more than $15 billion.
Senator Thune. So it is very narrow, based on at least
historical experience?
Mr. Becker. With insurance catastrophic modeling, that is
correct. Those are not all inflation adjusted, but those would
be Hurricane Andrew, the World Trade Center, certainly Katrina
and probably Northridge Earthquake.
Senator Thune. What do you think is the risk if Congress
does nothing to address the liability issue?
Mr. Becker. As it stands right now, the insurance companies
are telling us that they are having a very difficult time
coming up with insurance products that will extend over the
long term and appropriately cover the long-term risks. Most of
what we saw at the Trade Center, as you can see, are continuing
to evolve, long-term chronic injuries or health issues that are
just now becoming apparent in a big way. We believe that that
long-term nature of it is the most difficult part for the
insurance companies to address.
So right now they are not responding to many of our
contractors with the type of coverage that we believe is
appropriate.
Senator Thune. I have to say, I guess it is probably
indicative of this entire discussion, but the profound
difference of opinion between Mr. King and Mr. Schooner is if
nothing else very interesting to listen to. Let me ask a
question for Mr. King, and this sort of ties back into your
testimony.
Do you believe, from a legal perspective, that it is fair
for private contractors, which act as an extension of the
Federal Government during disaster situations, to be subject to
tort claims when all applicable Federal rules and regulations
are adhered to?
Mr. King. Let me address it this way. Senator Boxer said
something earlier that I agree with, which is, when you have a
problem like this, what you want to do is sit down, look at the
interests of all parties and say, what's the right thing to do.
In this instance, the right thing is probably two stages. The
first stage is to not penalize contractors for showing up to
help. Professor Schooner says, listen, we ought to focus on who
is the most appropriate to bear the liability as between a
company and an individual. That's the wrong question.
As between everybody out there, the contractor should not
be penalized for showing up. So the first step is to provide
this limited liability so that the contractor is in the same
shoes as the Government with regard to third party suits.
Having done that, we have done the first step of the right
thing. The second step is to then sit back and say, who is it
that should pay the money and how should it be paid for
individuals who are affected adversely by Hurricane Katrina,
previously the terrorist activities up at the World Trade
Center, who should pay the price. It is not intuitively obvious
that the contractor, just because they are the only ones on the
scene who have any money, ought to pay the price.
So it is appropriate for Congress to answer that question.
Now, clearly, if we look at the question of who is the superior
risk bearer it's the Government. But the Government really has
to decide what's the appropriate compensation mechanism. As
your question implies, the answer is, it's not the contractors
who showed up to help you through the problem.
Senator Thune. Mr. Schooner.
Mr. Schooner. I actually think that until he closed, what
Mr. King was offering was an attractive oversimplification, but
in the end he hit the nail on the head. Faced with a situation
like this, and this is not unprecedented in terms of
experiences the Government has had, we have experience with the
nuclear industry. We have experience dealing with volatile
missile fuel where the potential for disaster exceeds anything
that the insurance industry has ever been capable or willing to
absorb.
So you get a simple calculus, as he pointed out. The
Government can require the contractor to purchase insurance and
reimburse those costs of insurance, which is what happens in
Government contracts every single day. So we allocate the risks
to the contractor and the Government reimburses the contractor
for its costs.
When we reach the point where insurance becomes so
expensive that the Government doesn't want to pay it or that
the contractor truly cannot get insurance, historically the
Government has indemnified the contractor and in effect become
a self-insurer. The main point I am trying to make here is, Mr.
King is right that if the Government is willing to assume the
responsibility for injured individuals, none of this is
relevant, because the Government is a far superior risk-bearer.
It is irresponsible and ultimately unacceptable to say, as
a matter of policy, that when a contractor injures someone, we
have decided that the superior risk-bearer is an individual
that cannot anticipate, cannot avoid, cannot insure against,
and cannot bear the costs. It is not what a responsible
Government would do.
Mr. King. May I respond to that just briefly?
Senator Thune. I'm sure you will.
[Laughter.]
Mr. King. Professor Schooner posed two very interesting
questions. One of them is, and just to put it in jargon in
which he and I deal, it is the insurance liability clause of
the Federal Acquisition Regulations, 52228-7, I believe it is,
to throw the numbers out there. What it says is that in
particular instances, the Government can require a certain
amount of insurance and reimburse the contractor for that. Then
any liability over and above that, the Government would
reimburse the contractor.
What he forgot to tell you is that the Government as a
policy decision has made it so that that cause is inapplicable
to construction contractors and engineering contractors. What
he has also forgotten to tell you is you only get paid if you
go through the full litigation, come back, seek reimbursement,
having gone through all this disruption, and then there is the
question of whether you get your litigation costs paid. It is
not an adequate response in this type of a situation.
The second one that he points out is what's called Public
Law 85-804, incorporated by Part 50 of the FAR. In that
instance, the Government does say if we have these
extraordinary nuclear sorts of issues, then the Government may
bear the risk. There is a process you go through to do that. It
is quite burdensome, probably doesn't fit the Hurricane Katrina
type situation.
What he doesn't tell you is that is limited to national
security situations. There is nothing in the Stafford Act that
allows that to happen.
So what you have is, in the case of anti-terrorism, you had
a war on terrorism declared so the White House could then issue
an executive order that brought that entire rubric under the
national security interests of that sort of indemnification.
That doesn't apply in these types of situations. Again, it is
not as good or effective as the bill that we've got pending
here that limits liability, doesn't make you go through all of
those hoops for extraordinary contractual relief.
Mr. Schooner. First, Mr. King's points are perfectly valid,
but what he's ultimately advocating is first, you could fix or
modify a clause or you could expand or modify Public Law 85-
804, both of which would be perfectly reasonable solutions.
But as a matter of policy, for the Government to stake out
as statute that the least able risk-bearer should be the one to
bear the loss is totally irresponsible. It is just unthinkable
that our Government could do such a thing.
Senator Thune. And least able risk-bearer being?
Mr. Schooner. Individual members of the public that can't
anticipate the risk, can't insure against it, and can't bear
the costs.
Senator Thune. What would the Federal Government's legal
exposure be if it carried disaster cleanups without private
sector firms today?
Mr. King. I think the contractors that preceded us
indicated they simply couldn't do the job. I guess the General
is the one who said, we couldn't do it without contractors. So
you have a situation where I believe the General said, 99
percent of this work has to be done by contractors. The
Government directs the work, the Government is immune. Somehow,
because the contractors show up, they are supposed to be
liable. That just doesn't make sense.
Senator Thune. That immunity that applies in these types of
situations, though, the Federal Government's ``sovereign
immunity,'' has that ever, in a situation like that, have we,
the Federal Government, ever waived that? We did in New York to
some degree.
Mr. Schooner. You mean like creating a fund.
Senator Thune. Right, which we did in New York.
Mr. Schooner. We do that.
Senator Thune. That was sort of an exceptional
circumstance, although now it sounds like the claims are well
in excess of what was allowed.
Mr. Schooner. There's a number of good models, where the
Government has stepped into the fray and solved a failure of
the marketplace. I think for example the vaccine fund is a
perfectly reasonable situation. Bottom line is, vaccine
manufacturers pay into a fund. People who are injured by the
vaccines have, in effect, an automatic suit to the United
States Court of Federal Claims, and the only real issue is
damages.
So the point there is that you can either prospectively
have contractors pay into a pool if you like that approach, or
you could have the Government indemnify. The only point that I
return to time and time again is: why would you assign or
allocate the risk to the least able risk-bearer when there is a
harm there?
I agree with everyone who has testified today. The goal
here is not to make contractors responsible for injuries to the
public by terrorists. The question is: when the contractor
comes in to perform their work, why shouldn't they, when faced
with a choice, exercise standards of care to the extent that
the insurance industry would normally cover them? It just seems
reasonable.
Senator Thune. Mr. King.
Mr. King. The issue very much is models. There are models
to do all sorts of things. What Professor Schooner has tried to
sidestep is the model of the Safety Act. He says it doesn't
apply, we shouldn't consider it. There is no doubt on earth
this statute is patterned after the Safety Act.
Now, let's talk about what the Safety Act is for just a
moment. In the wake of 9/11, Congress enacted a statute that
said exactly what this statute said, but applies it to anti-
terrorism technologies. Congress invited companies to have
their technologies certified by the Government as desirable for
use against terrorism, then in the event of lawsuits, the
Government contractor defense would apply.
Basically all the same types of protections that we are
talking about here would be there. There would be a
certification process, the whole sort of thing.
Now, what Professor Schooner says is, that is not like
disaster recovery efforts for hurricane relief. That is
absolutely wrong, because what he is focusing on is the
technology, not the risk. If you focus on the risk, the risk of
the extraordinary cleanup going on down in New Orleans is very
much comparable to the risk of those anti-terrorism
technologies.
When you focus on the risk, what you look at is the types
of risk to the company, and I will tell you, if you go look at
the applications for Safety Act certification, it is companies
taking the normal work that they do and saying, we would like
to have this sort of Government contractor defense apply for
it, it is doing their normal work in an environment of
extraordinary risk, which is exactly what our contractors told
us is going on down in New Orleans. They are taking their
normal work and they are going into an environment of
extraordinary risk, and they are saying, it is not the typical
situation, we need to have this sort of relief.
So this is exactly the same sort of thing that we did with
regard to anti-terrorism technologies under the Safety Act. The
decisions by the Government are the same types of decisions.
The risks are comparable, and a Safety Act type model applies,
not those other models that the professor was talking about.
Senator Thune. I do have to go vote again. This is
fascinating, and we could go on for a long time.
I will say, and I think that, I am aware of at least one
example where, it was not while I was in the Congress, but when
the anthrax incident hit, actually I think I was in the House
at the time, I wasn't in the Senate, but it was in the Senate
buildings, Dirksen and Hart Buildings, the contractor that came
in to do the work on that, the Government did indemnify them.
Mr. King. That was Public Law 85-804, under the Executive
Order.
Senator Thune. Right.
Mr. Schooner. So it works.
[Laughter.]
Senator Thune. Well, that debate will rage on.
I thank you very much for your testimony and for your
responses to the questions. I do want to include, without
objection, I will include Chairman Inhofe's statement for the
record, which we will insert.
Senator Thune. Also, I have a couple of letters of support
for this legislation. One from the American Road and
Transportation Builders Association.
[The reference letter can be found on page 97.]
Then also the Transportation Construction Coalition, which
is a coalition of not only engineering and construction but
also some labor unions as well.
[The referenced material was not submitted at the time of
print.]
Senator Thune. With that, thank you so much for being here.
We will leave the record open for a week. I suspect Senator
Boxer will have some questions for you that she will submit in
writing. Regrettably, she could not get here for the balance of
this.
Thanks so much. The hearing is adjourned.
[Whereupon, at 5:47 p.m., the subcommittee was adjourned.]
Statement of Hon. James M. Inhofe, U.S. Senator from the
State of Oklahoma
Senator Thune, I would like to start off by thanking you for
holding this important hearing. As Chairman of the Superfund and Waste
Management Subcommittee, you have and continue to show great leadership
and consideration over new and evolving issues.
The devastation from the recent hurricanes has been well covered in
the media, but the rebuilding efforts--the positive aspects of the
story have not been given the same level of attention. I hope that
changes soon.
Today's hearing on your bill, the Gulf Coast Recovery Act focuses
on another issue that has escaped the public eye--looming litigation
and liability costs from trial lawyers against well-intentioned private
contractors could have a significant chilling effect on disaster
response and cleanup.
When the state, local or the Federal Government asks for help to
rebuild our cities, the public expects the private sector to heed that
call, and to work with the authorities. The public certainly does not
anticipate that those well intending companies should be penalized
simply for meeting their civic and patriotic duties.
We should promote policies that encourage good deeds, not restrict
them. Senator Thune's bill does just that, and I am proud to be a co-
sponsor.
I look forward to hearing from the witnesses, some of whom will
explain the problems that they have encountered on the ground and the
fear of unknown but likely litigation and liability costs makes them
think twice before doing the right thing.
Penalizing Good Samaritans is bad public policy and bad moral
policy. We cannot let that happen.
______
Statement of Major General Don T. Riley, Director of Civil Works,
United States Army Corps of Engineers
INTRODUCTION
Mr. Chairman and members of the committee, I am Major General Don
T. Riley and I am the Director of Civil Works for the U.S. Army Corps
of Engineers. Thank you for the opportunity to testify before you today
concerning the Corps' disaster-relief contracting procedures. Under the
leadership of the Chief of Engineers, LTG Carl A. Strock, we practice a
concept of openness. We strive to maintain transparency in our
contracting activities and welcome oversight of our activities. From a
contracting perspective, this visibility and transparency is best
demonstrated by the publishing of our contract listing on our web site
where we give specific contract information, to include the contractor,
dollar value, and purpose of the contracts for all to see.
My statement is divided into four parts, pre-disaster planning,
contracting during the ``emergency'' situation, ``a return to
normalc'', and I will finish with comments on small and local business
utilization.
PRE-DISASTER PLANNING
In our pre-disaster planning, the Corps has been assigned Emergency
Support Function No. 3 (ESF 3) under the National Response Plan. This
is one of fifteen assigned functions to various elements of the Federal
Government. Under ESF 3, Public Works and Engineering, the Corps
assumes the lead in the areas of water, ice, power, temporary roofing
and debris removal. Having this responsibility, the Corps has created a
program called the Advanced Contracting Initiative, or ACI. Under the
ACI program, we competitively award contracts for future use in the
areas of water, ice, power, temporary roofing, and debris removal.
Having these contracts in place allows the Corps to rapidly respond to
emergency situations. We did in fact use our ACI contracts to not only
support the Katrina recovery, but those areas impacted by Hurricanes
Rita, Wilma and Ophelia as well. We also used the contracts to support
recovery efforts in the Southeast after several hurricanes of last
year's hurricane season. The ACI program has been in place for about
six years.
EMERGENCY
Using contractors to provide services that are not governmental in
nature is typical of Government operations under normal circumstances.
That is even more necessary in a disaster or emergency. Emergency
situations typically require the application of significant resources
beyond those that Federal organizations, the Corps included, need for
use during normal operations. For example, it would be prohibitively
expensive to maintain a full time, properly trained and equipped
workforce sufficiently large and sufficiently diverse to react to needs
arising from any kind of disaster response scenario. Instead, we
maintain sufficient resources to oversee a quick ramp-up of
contractors, enabling us to tailor our response to the specific needs
of the emergency. This avoids having resources that would be
underutilized the majority of the year, but enables us to react
quickly.
Turning to the emergency situation, the Federal Acquisition
Regulation, (FAR), is based upon the principle of full and open
competition. Drafters of the FAR, however, realized that emergency
situations sometimes require emergency actions. As a general rule, the
FAR mandates a 15-day advertisement period. The FAR also requires a 30
day proposal period in most cases. What does this mean? Simply stated,
if we were to follow the rules for full and open competition, we would
not have awarded a contract to get the flood waters out of the city of
New Orleans until the end of October. Clearly the people of New Orleans
could not wait. In fact, the FAR allowed us to considerably shorten the
time period of the award, under the urgency exception to the
Competition in Contracting Act. The Corps contracting officer contacted
four companies on September 1, 2005. Of those four companies, only Shaw
Environmental, Inc, of Baton Rouge, Louisiana, could respond in a
timely manner to begin the un-watering effort. Contract award was made
on September 2, 2005.
In our other efforts to support relief efforts in response to this
emergency situation, the Corps considered and used the entire suite of
available contracting options authorized under the FAR, including
verbal and letter contracts. Using these methods, the Corps procured
such critical items as sand bags to be used to stop the flow of water
into New Orleans. You probably saw pictures of helicopters dropping
these huge sand bags into the various levee breaches. It was an urgent
situation, which required expedited procurement. Additionally, we made
use of a Naval Facilities contract to assist in the un-watering of the
city.
Due to the magnitude of Katrina and the wide-spread devastation,
the Corps needed to award debris and roofing contracts in excess of
those contracts pre-placed under the ACI program. Based on the large
scale of the work that needed to be performed, we awarded four debris
removal contracts following the emergency. Each contract is valued at
$500 million with a $500 million option. This requirement was open to
any company, under a shortened advertisement and proposal period. The
Corps received 22 proposals in response to the advertisement. The
contracting officer awarded the contracts on a best value to the
Government basis. The Army Audit Agency is reviewing the award and
administration of these four contracts.
Oversight of Corps contracts, especially in an emergency situation,
is important to the Corps. Within just a few days of the storm hitting
the Gulf coast, our internal review staff teamed with the Defense
Contract Audit Agency and the Army's Criminal Investigation Division
and deployed to the area of operations. Their mission, which is still
ongoing, is to provide oversight of the operation, to include looking
for instances of fraud, waste and abuse. This includes reviewing
contracts.
RETURN TO NORMALCY
In our efforts to assist in the recovery of areas affected by
Hurricane Katrina, we concluded that it is not yet prudent to follow
the full waiting periods that apply in normal circumstances, before
awarding contracts. It is our goal, however, to return to standard
procurement operations as soon as possible. The Corps is currently
moving in that direction. We are currently advertising our requirements
for longer periods than we did under the urgent situation, we are
attempting to give prospective contractors as much time as possible to
prepare their proposals, and we are using Federal Acquisition
Regulations principles and competitive awards to the maximum extent
possible.
UTILIZATION OF SMALL AND LOCAL BUSINESSES
The Corps has made extensive use of standard authorities granted to
us under the various small business set aside programs, especially in
the area of 8(a) firms. Section 8(a) is a Small Business Administration
business development authority to benefit minority owned, socially and
economically disadvantaged firms. The program helps aspiring
entrepreneurs build their businesses by helping them obtain Government
contracts. Participants can receive non-competitive awards up to $3
million during a 9-year developmental program. Many of these small
companies are local and therefore are already in the area and available
quickly to participate in recovery efforts. We have also held, and will
continue to do so, 8(a) competitions in which only Small Business
Administration registered 8(a) firms from designated areas can compete.
In those areas where we have awarded contracts to large businesses, our
debris contracts mainly, we encourage use of local business
subcontractors. We have instituted high goals for small business
subcontracting and a reporting requirement that keeps them focused on
achieving results in these areas. These contractors report their sub-
contracting efforts to us weekly for the first 90 days, and monthly
thereafter instead of every six months, the typical reporting
requirement. We have also inserted clauses citing the preference for
use of local subcontractors.
We are in the process of developing our acquisition strategy for a
newly assigned mission from FEMA, demolition, where the Corps will raze
structures determined to be uninhabitable. We will include
opportunities at the prime level for local disadvantaged companies and
a geographic set aside for the unrestricted portion of the strategy. We
are considering limiting competition to Mississippi companies for the
Mississippi aspect of the mission and to Louisiana companies for the
Louisiana aspect of the mission. Our estimates at this time are that
the costs in Mississippi will be $500 million and $600 million in
Louisiana. Award is planned for late December.
SUMMARY
To close, I would like to thank you once again, Mr. Chairman, for
allowing the Corps of Engineers the opportunity to appear before this
committee to discuss contracting procedures during times of
emergencies. I would be happy to answer any questions Members of the
committee may have.
Thank you.
______
Responses by Major General Riley to Additional Questions from
Senator Boxer
Question 1. Major General Riley, you indicate in your testimony
that the Army Corps relied on the Advance Contracting Initiative. Did
the Initiative allow you to rapidly respond to emergency situations
after Hurricanes Katrina and Rita?
Response. Yes, the Advance Contracting Initiative allowed us to
rapidly respond to emergency situations after Hurricanes Katrina and
Rita. We were fortunate to have contracts already in place for debris,
ice, power, and water, which we used extensively in responding to the
hurricanes.
Question 2. Major General Riley, what is the number and value of
contracts that the Army Corps has entered into that address the cleanup
and rebuilding process following Hurricanes Katrina and Rita?
Responses. We have awarded a total of 106 contracts (87 for
Hurricane Katrina and 19 for Hurricane Rita) to date for the two
storms. In addition, we have awarded 248 task orders (216 for Hurricane
Katrina and 32 for Hurricane Rita) to date for the storms not including
modifications to task orders. A total of approximately $2 billion has
been obligated as of 13 December 2005.
Question 3. Major General Riley, you indicate in your testimony
that the Army Corps awarded four $500 million Katrina-related debris
removal contracts, and that each had an additional $500 million option.
You also indicated that the Army Corps got two dozen proposals for the
work. Are you dissatisfied with the quantity of the contractors you
selected for these contracts?
Response. No, we are not dissatisfied with the quantity of the
contractors selected for these contracts. In fact, we are very pleased
with the 22 proposals we received for this emergency acquisition. Given
the magnitude of the work and the geographic scope covered by the work,
we felt that four contractors were adequate to respond to the debris
removal action.
______
Responses by Major General Riley to Additional Questions from
Senator Jeffords
Question 1. Major General Riley, on November 3, 2005, the
Washington Post published an article, entitled ``Levee Construction
Faulted in New Orleans Flood Inquiry.'' The article discussed an
inquiry of New Orleans levee construction by independent investigators
and how faulty construction practices by contractors may have played a
role in failure of the levees. I have three questions regarding the
contracting practices of the U.S. Army Corps of Engineers. First, how
does the Corps screen potential contractors that it employs?
Response. The Corps generally uses sealed bidding or competitive
negotiations. In sealed bidding competitions, the contracts are awarded
to the contractor that submits the bid containing the lowest price.
Competitive acquisitions represent the best value for the Government
and are awarded based on an examination of the offeror's past
performance, technical capabilities, management plan and price as
presented in the bid package.
Question 2. Second, does your screening include a review of
complaints and lawsuits filed by private parties against contractors?
Response. The General Services Administration maintains a
Government-wide listing of all firms that have been debarred or
suspended from contracting with the Federal Government. The Contracting
Officer's Representative screens this listing prior to making a final
contract award decision.
Question 3. Third, regarding S. 1761, if contractors are shielded
from liability by private parties, how will this impact the Corps in
awarding contracts for relief efforts related to Hurricane Katrina and
future natural disasters?
Response. We do not know what impact this proposed legislation
would potentially have on competition
______
Statement of Anthony Zelenka, president, Bertucci Contracting
Corporation
Thank you Chairman Thune, Ranking Member Boxer and the
distinguished members of the Subcommittee for this opportunity to
testify on Louisiana's struggle to recover from Hurricane Katrina, and
the great need for legislation along the lines of the Gulf Coast
Recovery Act of 2005 (S. 1761), which I support and urge Congress to
enact.
I am Tony Zelenka, the President of Bertucci Contracting
Corporation. My company is a small business that performs levee and
coastal restoration work across the Gulf Coast. I was born and raised
in New Orleans, and I have over 20 years of experience in the
construction industry. My family's firm traces its history back to
1875, when my great-great grandfather founded the company in New
Orleans.
The morning after Hurricane Katrina hit the Gulf Coast, I waded
through chest-deep water to reach the closest highway. As I did, I
carried my bicycle over my head, so I could ride to my truck and then
drive to my family, who had evacuated to Jackson, Mississippi. I had
stayed behind to make sure our home and business survived the storm.
While with my family, I learned that the levees in New Orleans had
failed. I knew that the Army Corps of Engineers was going to need
contractors to stop the flooding, so I headed for the Corps' emergency
response center in Vicksburg, MS. After meeting with Corps officials
that first day, and with no more than an oral agreement to execute a
written contract, I went to work hauling stone and rock to repair the
breached levees that had flooded New Orleans. I was one of the first
contractors to arrive on the scene.
In a situation like this, contractors like me focus on protecting
our employees and helping our communities as quickly as possible. Under
the direction of the appropriate authorities, we help our country
recover from one disaster after another. We are the first entities, the
first responders, to arrive on the scene of a disaster with the goal of
providing whatever support we can. In the case of Hurricane Katrina, we
did everything we could to stop the water from pouring into New
Orleans. For the past 10 weeks, we have been working seven days a week.
Personally, this disaster has touched many contractors in the area.
While my home, thankfully, was spared from the devastation, many of my
employees and their families' lives have been ruined by this disaster.
As we continue our efforts to cleanup the city, I have also sought to
help my employees re-establish their lives and livelihoods.
The cleanup process in New Orleans continues to move forward.
Standing side-by-side with my employees, I have personally done a lot
of the work, and I have done it under crisis conditions. From the
beginning, we have worn personal protective equipment, and done our
best to protect ourselves from the many hazards, but like it or not, we
have had to wade through the flood waters, and deal with the spray that
the helicopters caused. We continue to deal with gas leaks, oil spills,
downed electrical lines, and backed up and overflowing sewer lines.
While you all have been watching the devastation on television, we
have been living it. Many of my employees are still homeless and have
had their families displaced, and my city is uninhabitable. In fact, I
am a little nervous about being away from the job site in the daylight
for the first time since this terrible tragedy first happened.
Construction contractors have a critical role in providing disaster
assistance to Federal, State and local officials. We are essential in
the rescue of both persons and property. Our country has never
experienced a dislocation of the size and scope of Hurricane Katrina.
Contractors like me stopped the flow of water into the city and we will
be busy for months on the demolition, removal, repair and
reconstruction of both structures and utilities damaged by the
hurricane. We will cleanup property polluted by the hurricane, remove
vast amounts of debris, and dewater flooded areas. This is our city and
we want to bring it back.
Unfortunately, there are people out there who want to capitalize on
this tragedy and others like it. Lawsuits have been filed against
contractors who have performed the types of rescue and recovery work my
firm has been doing in New Orleans. Take a look at what happened in New
York after the terrorist attacks on 9/11. Hundreds of lawsuits were
filed against contractors for the heroic work they did to cleanup
Ground Zero in a short amount of time at the express direction of the
Federal, State and local authorities. I have attached an AP story to
this testimony that reports on the litigation.
The madness has already started in Louisiana, where a contractor
was named as a defendant in a class-action only three weeks after the
Hurricane hit. The trial lawyers sued the contractor for building a
faulty levee which the contractor did not build in the first place. The
case was dismissed after a few days, but it is a prime example of the
hunger out there no matter how arbitrary the suit may be - to sue
contractors.
I worry that I may be sued for property damage as part of the
clean-up. Recently, I have been hired to begin work on the massive
debris removal contract in New Orleans, which may include the
demolition of private homes damaged by the hurricane. This is a very
emotional situation even though all levels of Government have
determined that many of these homes are completely uninhabitable and
beyond repair or restoration. The Government has decided that they must
be torn down and completely rebuilt, due to the flooding, hurricane
winds and mold. But I now fear legal risk for moving ahead, and doing
exactly and only what the Government hired me to do. Why am I worried?
Because everyone has spent all this time looking for someone to blame,
instead of looking for a solution. Meanwhile, contractors are expected
to continue the cleanup, and do it as safely and quickly as possible,
despite an uncertain legal and logistical environment.
Remember, unlike many public officials and their agencies,
contractors have no sovereign immunity. We look to the Government at
all levels for guidance on the best way to do this work safely and
efficiently. Ultimately, in emergency situations we have to put our
assets on the line if we want to help, which means I may be at risk of
losing my company for simply doing what I have been hired by the
Federal Government to do trying to help save my city.
I believe passing The Gulf Coast Recovery Act (S. 1761) is
necessary to ensure that contractors like me will be there to do the
work in the future, without fear of reprisal. The bill offers limited
protection to Government contractors from any citizen suits that might
result from their performance of disaster recovery contracts, enabling
them to focus on the work. This legislation would give my firm a
reasonable measure of protection, allowing me to pass this fifth-
generation family business on to the sixth generation.
Do not let the trial lawyers penalize the contractors like me who
report for duty. We are a critical link in the restoration of our city.
I ask you to pass this legislation. I also ask you to do something else
listen to the experts. Listen to the Army Corps of Engineers. Listen to
the local levee districts. Do not shortchange the rebuilding and flood
protection efforts underway.
I have been asking for increased funding for the Southeast
Louisiana Urban Flood Control Project (SELA) for years, but
unfortunately, my calls for increased funding to rebuild the wetlands
and coastline and provide additional protection for New Orleans have
consistently fallen on deaf ears. Please tell your colleagues to not
only increase investment, but fully fund this national priority.
Please approve the Gulf Coast Recovery Act and please commit to
rebuilding my city.
Thank you for this opportunity to comment. I look forward to
working with the Subcommittee and would be happy to answer any
questions.
______
Response by Anthony Zelenka to an Additional Question from Senator
Boxer
Question 1. Mr. Zelenka, do you believe that negligent contractors
should be shielded from liability to private parties in cases of a
declared disaster of the scope described in S. 1761?
Response. I do not believe that contractors should be shielded from
liability to private parties in cases of a declared disaster of the
scope described in S. 1761 to the extent that the damage is caused by
the contractors negligence.
______
Response by Anthony Zelenka to an Additional Question from
Senator Jeffords
Question 1. Mr. Zelenka, in your testimony, you referenced lawsuits
filed against contractors performing rescue and recovery work in New
Orleans. Are any of these suits for damages related to environmental
pollution or adverse health effects from pollution?
Response. I do not know of any lawsuits for damages related to
environmental pollution or adverse health effects from pollution.
______
Statement of Beverly Wright, Ph.D, Director, Deep South Center for
Environmental Justice and Co-Chair, National Black Environmental
Justice Network
INTRODUCTION
Good morning Mr. Chairman. I am Dr. Beverly Wright, Director of the
Deep South Center for Environmental Justice at Dillard University,
formerly at Xavier University. Regrettably, both of these Historically
Black Colleges are underwater now and temporarily closed due to
Hurricane Katrina. I am also here today representing the National Black
Environmental Justice Network (NBEJN).
Thank you for the opportunity to testify before the Subcommittee on
critical issues of concern in the aftermath of the hurricanes. My
professional and personal experiences of growing up, living and working
in the City of New Orleans greatly influence my perspective and
testimony.
Who We Are
The Deep South Center for Environmental Justice (DSCEJ), at Dillard
University in New Orleans, formerly at Xavier University of Louisiana,
is now temporarily relocated in Baton Rouge, Louisiana.
The Deep South Center was launched in 1992 in collaboration with
community environmental groups and other universities within the
southern region to address environmental justice issues. DSCEJ provides
opportunities for communities, scientific researchers, and decision
makers to collaborate on programs and projects that promote the rights
of all people to be free from environmental harm as it impacts health,
jobs, housing, education, and general quality of life. A major goal of
the Center is development of minority leadership in the areas of
environmental, social, and economic justice along the Mississippi River
Chemical Corridor. The Deep South Center for Environmental Justice is a
powerful resource for environmental justice education and training.
DSCEJ has developed and embraces a model for community partnership
that is called ``communiversity.'' The essence of this approach is an
acknowledgement that for effective research and policy-making, valuable
community life experiences regarding environmental impacts must be
integrated with the theoretical knowledge of academic educators and
researchers. The Deep South Center for Environmental Justice has three
components in terms of reaching our objectives: (1) research and policy
studies, (2) community outreach assistance and education; and (3)
primary, secondary, and university education.
The National Black Environmental Justice Network was founded in New
Orleans, LA in December 1999. NBEJN members founded the organization in
New Orleans because we felt then, as now, that Louisiana and the
Chemical Corridor between the City and Baton Rouge are under siege from
and epitomize environmental and economic assaults. These assaults are
costing Black people their very lives. NBEJN believes in the sacred
value of every human life regardless of race, ethnicity, religion or
socioeconomic status. We see in the tragedy of Hurricane Katrina,
Hurricane Rita and the aftermath a unique opportunity to shape the
conversation and dialogue about rebuilding of New Orleans and the Gulf
Coast region with the goals of environmental and economic justice for
everyone.
Target Area and Population Served
DSCEJ is national in scope with emphasis on the Mississippi River
Chemical Corridor and Gulf Coast Region and global emphasis on
communities impacted by the petrochemical industry. The major
populations served include people of color with special concentration
on African Americans and the African Diaspora, students and faculty at
Historically Black Colleges And Universities/Minority Serving
Institutions (HBCU/MSI) and public school teachers in urban areas.
DSCEJ has forged collaborations with other major research institutions
and Governmental agencies that can assist in the development and
implementation of the center's work.
Center Objectives
DSCEJ principal objectives include: (1) development of minority
leadership in the field of environmental justice; (2) development of
culturally sensitive training models for minority residents in at-risk
communities; (3) development and distribution of culturally sensitive
environmental justice education materials and training modules; (4)
increasing environmental justice literacy among college students at
HBCU/MSI's; (5) development of a pipeline creating a new generation of
environmental justice leaders at HBCU/MSI's; (6) development and
implementation of a K-12 teacher training program in environmental
justice; (7) conducting research to determine the impact and extent of
toxic exposure for minority communities as it affects health and the
environment; (8) investigating means of addressing these problems
(i.e., brownfields redevelopment, toxics use reduction, climate change,
clean production and green chemistry, and economic development; and (9)
creating linkages between impacted communities, scientific researchers,
and Government officials to address environmental justice issues as
they impact health, jobs, housing, and overall quality of life.
The Katrina Aftermath
As the floodwaters recede in New Orleans and the Gulf Coast region,
it is clear that the lethargic and inept emergency response immediately
following this devastating storm was the real disaster that nearly
overshadowed the actual storm. We were all left nearly paralyzed in
front of our television sets completely unable to continue with our
daily lives watching the unbelievable events unfold right before our
eyes. Americans were shocked beyond belief that this could happen in
America, to Americans. It also raised lingering questions and doubts
about our overall security. Is Government equipped to plan for,
militate against, respond to, and recover from natural and manmade
disasters? Can the public trust Government's response to be fair? Does
race matter?
Examination of historical data reveals that emergency response
reflects the pre-existing socioeconomic and political structures of a
disaster area and is based on race and class differentials. Generally
communities of color receive less priority in response time than do
their white counterparts where emergency response is required. We can
assume that this differential response will occur in all areas relative
to the resolution of the aftermath of Hurricane Katrina.
Environmental Damage
New Orleans and outlying areas suffered severe environmental damage
during Katrina, the extent to which has yet to be determined. The post-
Katrina New Orleans has been described as a ``cesspool'' of toxic
chemicals, human waste, decomposing flesh and surprises that remain to
be uncovered in the sediments. Massive amounts of toxic chemicals were
used and stored along the Gulf Coast before the storm. Literally
thousands of sites in the storms path used or stored hazardous
chemicals, from the local dry cleaner and auto repair shops to
Superfund sites and oil refineries in Chalmette and Meraux, La, where
there are enormous stores of ultra-hazardous hydrofluoric acid. In the
aftermath of the storm some sites were damaged and leaked. Residents
across the Gulf Coast and the media reported, ``oil spills, obvious
leaks from plants, storage tankards turned on end and massive fumes.''
Short-term rebuilding objectives must not outweigh long-term public
health protection for all Americans and the environment they depend
upon. Some of the legislative proposals now under consideration in the
aftermath of Katrina do not adhere to this principle. Congress must act
now to protect our most vulnerable populations and preserve our most
unique and irreplaceable resources. It is imperative that Congress
responds quickly and effectively to the devastating aftermath of
Hurricanes Katrina and Rita. It is also important, to temper our haste
to rebuild with a strong commitment to public health and the
environment. Moreover, the public has a right to clean air and water
and it must be protected. No law should ever move forward that would in
any way sacrifice these principles.
Have we learned anything over the last 40 years, since Hurricane
Betsy struck, that should guide our decisions after Hurricanes Katrina
and Rita? Much of the proposed legislation concerning rebuilding the
Gulf Coast region strongly suggests that we have not. In fact, it seems
that some are using the crisis of Hurricane Katrina to advance their
political and policy agenda, including weakening, waiving and rolling
back public health, environmental justice and environmental laws and
regulations.
It is ironic that the tragedy of Hurricane Katrina is being used to
justify sweeping waivers of public health, safety and environmental
laws. The Gulf Coast Recovery Act (S. 1761) would leave many citizens
without a remedy against contractors that cause irreparable harm to the
air and water. The bill gives unprecedented legal protection to
contractors being paid for work related to Katrina in areas of rescue,
recovery, repair and reconstruction. The bill is far reaching in that
these protections do not only apply to Katrina contractors; under the
bill, they will also apply to contractors in all future disasters that
result in at least $15 billion dollars of Federal assistance.
The Gulf Coast Recovery Act, while designed to help victims of
Katrina, could very well end up helping everyone but the victims in the
long run. S. 1761 is particularly egregious to low income and minority
communities in the Gulf Coast Region. All of the limitations apply only
to actions brought by private citizens. The section 4 limitation on
filing a lawsuit is specifically limited to ``private parties'' and
section 5(e) specifically provides that nothing in that section limits
an action that any Governmental entity may bring. I thought that the
Government's role was to protect the citizenry. This bill (S. 1761)
seems designed to do just the opposite.
By eliminating the threat of liability for contractors you in
effect remove an essential protection for the public. Where there are
no consequences there are high risk and general disregard for the
public's safety.
This bill seems to not be so well thought out. The actions taken by
this bill in my opinion, aptly depicts the moral of the old adage of
``throwing out the baby with the bathwater.'' We should remember that,
in this case, it is not the contractors who are the victims. Powerful
corporations with huge Government contracts will make millions in
profit from the Katrina tragedy. The payments will be made with our tax
dollars. This bill S. 1761 should be rejected by the Senate. In essence
it will ultimately defeat the overall purpose of cleaning up the Gulf
Coast and setting the road for its recovery. If contractors no longer
fear legitimate legal liability, where is the incentive to do good
work? And, when the dust settles with possibly untold numbers of
properties improperly cleaned up, debris inadequately disposed of with
personal injury due to contractor's negligence, who will then pay the
bill?
The victims of Katrina have suffered immensely from first an
inadequate response that caused the lives of many citizens, the loss of
property, family members and their communities. Now, the Government
will hold harmless contractors who may further injure the citizenry
through neglect and irresponsibility.
These citizens of the United States and victims of the worst
natural disaster ever in North America have been placed in double
Jeopardy by this event. And in each instance the Government has played
a major role. First, with the slow and inadequate response to Katrina
and now with a quick response that fails to adequately protect citizens
in the aftermath of the storm.
I would like to put into context exactly what has happened here,
and who it has happened to, in an attempt to explain why S. 1761 is so
objectionable.
BEFORE HURRICANE KATRINA PREEXISTING VULNERABILITIES
Katrina struck a region that is disproportionately African American
and poor. For example, African Americans make up twelve percent of the
United States population. New Orleans is nearly 68 percent black. The
African American population in the Coastal Mississippi counties where
Katrina struck ranged from 25 percent to 87 percent black. Some 28
percent of New Orleans residents live below the poverty level and more
than 80 percent of those are black. Fifty percent of all New Orleans
children live in poverty. The poverty rate was 17.7 percent in
Gulfport, Ms. and 21.2 percent in Mobile, AL. in 2000. Nationally, 11.3
percent of Americans and 22.1 percent of African Americans live below
the poverty line in 2000.
New Orleans is prototypical of environmental justice issues in the
Gulf Coast region. Before Katrina, the City of New Orleans was
struggling with a wide range of environmental justice issues and
concerns. Its location along the Mississippi River Chemical Corridor
increased its vulnerability to environmental threats. The City had an
extremely high childhood environmental lead poisoning problem. There
were ongoing air quality impacts and resulting high asthma and
respiratory disease rates and frequent visits to emergency rooms for
treatment by both children and adults. Environmental health problems
and issues related to environmental exposure was a grave issue of
concern for New Orleans residents.
The African American community in New Orleans was already grappling
with the nationally identified health disparities for minorities
reported by the National Institutes of Health (NIH). These conditions
were exacerbated by environmental conditions triggering asthma and
exposing children to lead. High blood pressure, diabetes and cancer
were also prevalent in the African American community.
DISPLACEMENT POST KATRINA
Residents in the Gulf Coast region fled the hurricane zone. More
than a million Louisiana residents fled Hurricane Katrina. An estimated
100,000 to 300,000 Louisiana residents alone could end up permanently
displaced. Nearly 100,000 Katrina evacuees are in 1,042 shelters
scattered in 26 States and the District of Columbia. Katrina has left
environmental contamination in Gulf Coast neighborhoods that will have
to be cleaned up before residents can move back. An estimated 150,000
houses may be lost as a result of standing in water from Katrina. We
are still grappling with understanding the full impacts of both
Hurricanes Katrina and Rita.
Thousands of hurricane survivors along the Gulf Coast must now cope
with the loss of relatives and friends, homes, and businesses and, what
we term, loss of community. Katrina displaced just under 350,000 school
children in the Gulf Coast. An estimated 187,000 school children have
been displaced in Louisiana, 160,000 in Mississippi and 3,118 in
Alabama. Katrina closed the entire New Orleans school system
indefinitely. One hundred and twenty-five thousand New Orleans children
alone are attending schools elsewhere. Over 93 percent of New Orleans
schools students are African American. Evacuees' children are being
enrolled in schools from Arizona to Pennsylvania, including almost
19,000 who will be attending schools in Texas.
For the survivors who lost everything, it involves coping with the
stress of starting all over. Two weeks after Katrina struck, more than
2,500 children were still separated from their families. One can only
imagine the mental anguish these families are going through. On the
heels of this disaster, Hurricane Rita struck the coastal areas again.
There is much speculation about what the new New Orleans will look
like: whether the Mississippi Gulf Coast should now consider land-based
Casinos versus riverboats; the social economic and political structure
of ``New'' New Orleans; rebuilding a green and sustainable Gulf Coast
region that embraces innovative green building technologies and
principles; construction of a levee system that will protect New
Orleans; and development of environmentally and economically
sustainable communities must all be explored simultaneously. None of
these concepts are relevant unless the cleanup in the region is
properly conducted and completed. This conclusion is not based on
speculation. The community of Agriculture Street Landfill in the City
of New Orleans has lived the nightmare of discovering that their homes
were built on top of a landfill that was reopened to dispose of the
tons of debris resulting from Hurricane Betsy.
HURRICANE BETSY--NEW ORLEANS, LA
Hurricane Betsy struck the State of Louisiana and the City of New
Orleans in 1965. Betsy was then the ``most destructive hurricane on
record to strike the Louisiana coast.''\1\ The damage and flooding
throughout the State covered 4,800 square miles, killed 81 persons,
caused the evacuation of 250,000 persons, and disrupted transportation,
communication, and utilities services throughout the eastern coastal
area of Louisiana for weeks. Betsy hit the mostly Black and poor New
Orleans Lower Ninth Ward especially hard. This is the same neighborhood
that was inundated by floodwaters from Katrina and then suffered the
indignity of a second flooding by Rita. Over 98 percent of the Lower
Ninth Ward residents are Black and a third live below the poverty
level.
---------------------------------------------------------------------------
\1\Craig E. Colten and John Welch. ``Hurricane Betsy and Its
Effects on the Architecture Integrity of the Bywater Neighborhood:
Summary.'' May 2003.
---------------------------------------------------------------------------
Many Black New Orleans residents still believe that white officials
intentionally broke the levee and flooded the Lower Ninth Ward to save
mostly white neighborhoods and white business districts. In 1965, a
disproportionately large share of Lower Ninth Ward residents did not
receive adequate post-disaster financial assistance in the form of
loans and other support to revitalize the area. Betsy accelerated the
decline of the neighborhood and out-migration of many of its longtime
residents. Debris from Betsy was buried in the Agricultural Street
Landfill located in a predominately Black New Orleans neighborhood.
Over 390 homes were built on the northern portion of the site from
1976-1986. The Agricultural Street Landfill neighborhood was added to
the National Priorities List as a Superfund site in 1994.\2\
---------------------------------------------------------------------------
\2\See Agency for Toxic Substances and Disease Registry, Public
Health Assessment-Agriculture Street Landfill, New Orleans, Orleans
Parish, Louisiana, Atlanta, GA: ATSDR (June, 1999); Alicia Lyttle,
Agriculture Street Landfill Environmental Justice Case Study,
University of Michigan School of Natural Resources, Ann Arbor, MI
(January 2003)
---------------------------------------------------------------------------
New Orleans Agriculture Street Landfill Community
Dozens of toxic time bombs along Louisiana's Mississippi River
petrochemical corridor, the 85-mile stretch from Baton Rouge to New
Orleans, make the region a major environmental justice battleground.
The corridor is commonly referred to as Cancer Alley. Black communities
all along the corridor have been fighting against environmental racism
and demanding relocation to areas away from polluting facilities.\3\
---------------------------------------------------------------------------
\3\Robert D. Bullard, The Quest For Environmental Justice: Human
Rights and the Politics of Pollution (San Francisco: Sierra Club Books,
2005).
---------------------------------------------------------------------------
Two largely Black New Orleans subdivisions, Gordon Plaza and Press
Park, have special significance in terms of environmental justice and
emergency response. Both subdivisions are built on a portion of land
that was used as a municipal landfill for more than 50 years. The
Agriculture Street Landfill, covering approximately 190 acres, was used
as a city dump as early as 1910. Municipal records indicate that after
1950, the landfill was mostly used to discard large solid objects,
including trees and lumber, and it was a major source for dumping
debris from the very destructive 1965 Hurricane Betsy. It is important
to note that the landfill was classified as a solid waste site and not
a hazardous waste site.
In 1969, the Federal Government created a home ownership program to
encourage lower income families to purchase their first home. Press
Park was the first subsidized housing project of this program in New
Orleans. The Federal program allowed tenants to apply 30 percent of
their monthly rental payments toward the purchase of a family home. In
1987, seventeen years later, the first sale was completed. In 1977,
construction began on a second subdivision, Gordon Plaza. This
development was planned, controlled, and constructed by the U.S.
Department of Housing and Urban Development (HUD) and the Housing
Authority of New Orleans (HANO). Gordon Plaza consists of approximately
67 single-family homes.
In 1983, a portion of the Agriculture Street Landfill site was
purchased by the Orleans Parish School Board as a site for a school.
The fact that this site had previously been used as a municipal dump
prompted concerns about the suitability of the site for a school. The
school board contracted engineering firms to survey the site and assess
it for contamination and hazardous materials. Heavy metals and organics
were detected.
Despite the warnings, Moton Elementary School, an $8 million state-
of-the-art public school opened with 421 students in 1989. In May 1986,
EPA performed a site inspection (SI) in the Agriculture Street Landfill
community. Although lead, zinc, mercury, cadmium, and arsenic were
found at the site, based on the Hazard Ranking System (HRS) model used
at that time, the score of three was not high enough to place them on
the National Priority List (NPL).
On December 14, 1990, EPA published a revised HRS model in response
to the Superfund Amendments and Reauthorization Act (SARA) of 1986. At
the request of community leaders, in September 1993, an Expanded Site
Inspection (ESI) was conducted. On December 16, 1994, the Agriculture
Street Landfill community was placed on the NPL with a new score of 50.
The Agriculture Street Landfill community was home to approximately
900 African American residents. The average family income is $25,000
and the educational level is high school graduate and above. The
community pushed for a buy-out of their property and to be relocated.
However, this was not the resolution of choice by EPA. A cleanup was
ordered at a cost of $20 million, the community buy-out would have cost
only $14 million. The actual cleanup began in 1998 and was completed in
2001.\4\
---------------------------------------------------------------------------
\4\Alcia Lyttle, ``Agricultural Street Landfill Environmnetal
Justice Case Study,'' University of Michigan School of Natural Resource
and Environment found at http//www.umich.edu. snre492/Jones/
agstreet.htm. (Accessed on October 6, 2004).
---------------------------------------------------------------------------
The Concerned Citizens of Agriculture Street Landfill filed a class
action suit against the City of New Orleans for damages and relocation
costs. It took 9 years to bring this case to court.\5\ The case was
still pending before Katrina struck. It is ironic that the
environmental damage wrought by Katrina may force the cleanup and
relocation of the Agriculture Street Landfill community. But nothing
can give them back their health and well being, or replace the family
members and friends who might still be with them were it not for the
health effects of living on a landfill.
---------------------------------------------------------------------------
\5\Robert D. Bullard, The Quest For Environmental Justice: Human
Rights and the Politics of Pollution.
---------------------------------------------------------------------------
The Most Vulnerable
The majority of households and businesses in the 12 Hurricane
Katrina affected counties in Alabama, Mississippi, and Louisiana do not
have flood coverage. FEMA estimates that 12.7 percent of the households
in Alabama, 15 percent in Mississippi, and 46 percent in Louisiana have
flood insurance. Similarly, on 8 percent of the businesses in
hurricane-affected counties in Alabama, 15 percent in Mississippi, and
30 percent in Louisiana have flood coverage.
Generally, people of color have higher levels of physical damage
than whites largely due to segregated housing in older, poorly built
homes. Black households are less likely to have insurance to cover
storm losses and temporary living expenses. Because of racism and
racial redlining, blacks are more likely than whites to receive
insufficient insurance settlement amounts. Blacks are less likely than
whites to have insurance with major companies as a result of decades of
insurance redlining.
Because of the legacy of ``Jim Crow'' segregation, many African
American consumers in the Louisiana, Mississippi, and Alabama Gulf
Coast region may be concentrated in the secondary insurance market--
smaller and less well-known insurance firms. This could prove
problematic for Katrina victims. Nearly a dozen small insurance
companies collapsed after Hurricane Andrew, which cost the industry
about $23 billion in today's dollars. Andrew was the most expensive
single hurricane until Katrina. The same thing could happen after
Katrina. Many, if not most, Katrina low and moderate-income victims may
not have resources to hire lawyers to fight the insurance companies.
CLEAN-UP STANDARDS AND PROTECTION OF PUBLIC HEALTH
Hurricane Katrina has left environmental contamination in Gulf
Coast communities that will have to be cleaned up. In the New Orleans
area alone an estimated 22 million tons of debris must be cleaned up
and 145,000 cars ruined by hurricane floodwater will have to be
disposed of. How, when, and at what level (methods of clean-up and
clean-up standards) contaminated neighborhoods get cleaned up is a
major environmental justice concern for African American communities.
Where the hurricane debris and waste end up is another issue that
causes concern because of pre-existing power arrangements and the
historical legacy of unequal protection and differential treatment
provided to communities of color. It is important that Government
officials not repeat the mistakes made in 1965 with debris from
Hurricane Betsy disposed in an African American area--later to become
the Agricultural Street Landfill Superfund site community. Black
communities in the South, as documented in Dumping in Dixie: Race,
Class, and Environmental Quality, are dotted with landfills, toxic
waste dumps, and hazardous waste disposal sites.
Katrina toppled offshore oil platforms and refineries sending shock
waves throughout the economy with the most noticeable effects felt at
the gas pump. Katrina and Rita temporarily closed all oil operations
and most natural gas operations in the Gulf region that supplies 29
percent of U.S.-produced oil and 19 percent of U.S.-sourced natural
gas.
Katrina caused an unprecedented environmental and health crisis.
The powerful storm caused 11 oil spills releasing 7.4 million gallons
of oil. It also hit 60 underground storage tanks, five Superfund sites,
and numerous hazardous waste facilities. More than 1,000 drinking-water
systems were disabled and lead and ecoli in the floodwaters have far
exceeded the EPA's safety levels.
Tests from the U.S. EPA and independent sampling conducted by the
Louisiana Environmental Action Network (LEAN) in several New Orleans
areas exceed Federal standards for residential communities. LEAN
sampling found high levels of polynuclear aromatic hydrocarbons (PAHs)
exceeding residential standards. Many PAHs are known or suspected of
causing cancer. The testers found 12 PAHs in sediments the Lower 9th
Ward. One, benzo (a) pyrene, was at 195 parts per billion, three times
greater than the EPA residential standard of 62 parts per billion.
Arsenic, another known cancer-causing agent, was found at concentration
75 times higher than residential standards. Tests revealed elevated
levels of heavy metals and volatile organic chemical associated with
petroleum products. Ten PAHs were found on Agricultural Street,
designated a Superfund site, with benzo (a) pyrene at concentration 2.7
times higher than EPA residential standards. The arsenic level in the
Morrison Road area was 13.3 times higher than EPA residential
standards.
______
Responses by Beverly Wright to Additional Questions from
Senator Boxer
Question 1. Dr. Wright, according to the Louisiana Contractor's
Licensing Board, the number of applications for a contractor's licenses
nearly doubled in September, from 120 to 224. In the first week of
October, the number of applications increased an additional 300
percent. Do you believe it is necessary to limit contractor liability
for injuries to ensure enough contractors are interested in the
billions of dollars of post-Katrina contractor work?
Response. No. According to Charles G. Marceaux, the executive
director of the Louisiana's Contractor Licensing Board, for the 8
months ended August 31, 2005, application volume averaged 183 per
month. For the period September 1st through October 14th, 2005,
applications surged to 540 per month. Thus, there is no reason to limit
contractor liability for injuries to ensure enough contractors are
interested in the post-Katrina contractor work due to the fact that the
LA Contractor Licensing Board has seen such an overwhelming demand for
contractor licenses!
Question 2. Dr. Wright, I believe that you have experience with
worker protection issues. In your experience, is preventing injuries so
impossible that contractors must be relieved of responsibility for
negligence to ensure cleanup work gets done? Also, is work more likely
to be done properly or do we risk further damage if negligence is
considered acceptable in Government contracts?
Response. No. S. 1761 would immunize contractors from liability for
personal injuries or property damage in most cases. This would be
unfair to the victims of contractor wrongdoing and would burden the
Federal Government with the cost of any personal injuries and damages
caused by contractors. In addition, we'd risk further damage to worker
health and safety and the environment if there was no negligence
standard in Government contracts. The bill would immunize contractors
by improperly expanding the Government Contractor Defense far beyond
its traditional purpose, turning it into a blanket immunity provision
for most cases. Government Contractor Defense is appropriate only if in
fact it was the Government's negligence that caused the injury. The
defense generally applies only if the Government provides ``precise
specifications to which the contractor must adhere''--such as
specifications for manufacturing military airplanes. The Government
instructions must be very specific, mandatory, and nondiscretionary.
Section 5(d) of this bill would create a presumption that all
elements of the Government Contractor Defense are satisfied by nothing
more than a finding that the Army Corps' Chief of Engineers certified
the contract as necessary for disaster recovery (or the contract is a
subcontract to a certified contract and not expected to exceed $10
million). That presumption can only be overcome by evidence that the
contractor acted fraudulently or with willful misconduct in submitting
information to the Chief of Engineers at the time of the contract. In
other words, the defense will almost always apply to disaster
contractors.
Question 3. Dr. Wright, S. 1761 eliminates the right of private
parties to bring claims under the environmental laws. Such claims could
include situations where contamination ruins drinking water supplies.
What does this exemption mean to the people in the New Orleans
community where you are from? What do you think these changes in the
law will mean to the future reconstruction of New Orleans?
Response. S. 1761 ignores this basic reality and principles of
fairness; instead, the bill proposes to exempt contractors from citizen
suits brought under Federal environmental laws. Specifically, the bill
would bar any citizen suit against a contractor under the Clean Water
Act, the Oil Pollution Act, the Resource Conservation and Recovery Act,
Superfund and numerous other Federal laws. This means that citizens
could not hold contractors responsible if they illegally discharge
polluted wastewater or oil into rivers or wetlands, illegally dumping
hazardous waste or burning toxic materials. Even where the contractor's
actions constituted negligence or recklessness, citizen suits under
these statutes would be barred.
People of color and low income communities in New Orleans are
disproportionately exposed to toxic sites. The Mississippi River
Chemical Corridor, between Baton Rouge and New Orleans, contains about
140 petrochemical plants, six oil refineries and numerous state and
national Superfund sites.
If this bill is enacted, the citizens of New Orleans will be
slammed with yet another man-made another disaster. This disaster will
appear insidiously after citizens would have spent more of their
limited assets trying to rebuild New Orleans only to find that the
construction was shoddy and dangerous due to whole sale waiver of
contractor's liabilities.
______
Responses by Beverly Wright to Additional Questions from
Senator Jeffords
Question 1. Dr. Wright, how would S. 1761 impact low income and
minority communities in the Gulf Coast Region?
Response. Under the pretext of aiding the recovery of hurricane-
ravaged areas in the Gulf Coast, S. 1761 would put the public at
greater risk by removing important deterrents against irresponsible
conduct that harms public health or environmental safety. These
deterrents, in of themselves, are not usually adequate to protect the
public from environmental injustices. With the existing deterrents,
environmental injustices have continued to plague the New Orleans and
Gulf Coast region for decades. For example, the 85-mile stretch of the
Mississippi River between Baton Rouge and New Orleans--the ``Louisiana
Petrochemical Corridor''--is home to more than 140 oil refineries and
chemical plants, accounting for one-fourth of the nation's
petrochemical production. These factories have for decades spewed a
toxic brew of pollutants into local communities. Just in the state of
Louisiana, more than 50 percent of all residents who live within 3
miles of a refinery are African American. Routine operations at these
plants and risky past and present waste disposal practices are what
provided the ingredients to contaminate the toxic mud that now fills
New Orleans' streets. With S. 1761's proposed waiver of contractor's
liabilities around Katrina activities, those who are most at risk, low
income communities of color, will only face further environmental
hazards as there will be less incentives by contractors to protect
public health and environmental safety. During times of natural
disaster are when disproportionately impacted communities need public
health and environmental protections the most.
Question 2. Dr. Wright, how will S. 1761 impede rebuilding efforts
in the Gulf Coast Region?
Response. See answer to question No. 3 from Senator Boxer.
______
Response by Beverly Wright to Additional Question from
Senator Thune
Question 1. In your opinion, are there any instances where special
procedures will need to be used for emergency environmental cleanup?
Response. Yes. Of particular concern are toxic ``hot spot'' sites
that were impacted by Katrina. Big industrial facilities, Superfund
sites, and other toxic hotspots should be far more carefully
investigated, with comprehensive sampling and on-site analysis. During
cleanup, special attention and priority should be devoted to dangerous
releases from these sites should be contained immediately, and longer-
term cleanup planned, initiated, and budgeted.
Specifically, as you know, the flood waters that inundated these
regions carried a mixture of soil, sewage, and industrial contaminants.
The flood waters left behind a layer of sediment--in some places
several feet thick--that still covers vast areas, including many
neighborhoods in which family's have already returned to live.
Authorities must immediately remove surface sedimentation from
public and private areas in the affected flood areas, as well as from
hotspot contamination sites such as the Agriculture Street Landfill,
and the areas surrounding the former Thompson-Hayward pesticide
facility. In doing so, FEMA should utilize EPA's screening levels for
soil quality, adjusted to take into account all likely routes of
exposure in light of ongoing construction, demolition, and cleanup
activities which will unquestionably create more of an inhalation risk
than is covered by EPA's standards. In addition, we urge use of the
most recent and scientifically sound cancer risk estimates for arsenic
ingestion from the National Academy of Sciences' 2001 report, available
at www.nap.edu/books/0309076293/html.
Finally, a uniform Federal standard must be employed by EPA in
gauging environmental health risks in areas affected by Hurricane
Katrina and Rita. EPA's current reliance on differing state standards
is at odds with EPA's oversight responsibility under the currently
activated National Contingency Plan within the Hurricanes Katrina and
Rita Federal disaster areas. This is most apparent when the EPA
utilizes, without any opportunity for public comment or input,
environmental health criteria far less stringent than Federal
safeguards.
______
Statement of Warren Perkins, Vice President, Risk Management, Boh
Brothers Construction Company
Thank you, Mr. Chairman, for the opportunity to address you and the
other members of this Subcommittee. My name is Warren Perkins, and I am
a Vice President of Boh Bros. Construction Company (hereinafter ``Boh
Bros.''). I serve as the company's Risk Manager.
I am here today to express the company's views on the matters
before this Subcommittee, but as I begin, let me just say a few words
for and on behalf of the Mr. Robert S. Boh, who serves as the company's
President. Mr. Boh wanted to be here today, to personally represent the
company, and he deeply regrets that he cannot. He asks you to
appreciate that he simply cannot leave the scene of the great
devastation that Hurricane Katrina has wrought on the Gulf Coast and
New Orleans, in particular. There is simply too much to do.
Boh Bros. is a general construction contractor native to Louisiana
and based in New Orleans. It is closely held, 96 years old, and
currently in its third generation. It is a union contractor that works
under collective bargaining agreements in Louisiana. It is, however,
large enough to perform civil work throughout Gulf Coast, building
bridges, paving roads, constructing underground drain and sewer
systems, driving pile, and erecting levees and other and flood
protection systems.
Boh Bros. and its employees are among the many victims of Hurricane
Katrina. The company lost equipment and its work was interrupted. The
hurricane shut down all of its projects in the Greater New Orleans
area, and even today, only a handful of those projects have resumed.
Many are in jeopardy of being canceled.
Moreover, as the storm approached, all of the employees in the
Greater New Orleans area had to evacuate to other locations. I had to
move my family to an Aunt's house in Montgomery, AL, and for three
weeks, I had to work out of an office setup for me in downtown
Montgomery. When I finally returned to New Orleans, I learned that a
foot of water had flooded my home. I have been living in and working on
my home ever since, and commuting to Baton Rouge daily.
As soon as the storm passed, Boh Bros. started scrambling to locate
its people, to ensure that they were safe, and to let them know that we
were temporarily moving our headquarters to our small office in Baton
Rouge. We posted an emergency notice on our company web site; we set up
temporary e-mail addresses for our office people; and we began calling
people on their cell phones, trying to locate as many as possible.
It took a week for us to locate just 50 percent of them. It also
took several days and several helicopter rides over New Orleans to
assess the condition of out main office, equipment yard and job sites,
and the damage done to the city as a whole. Before Katrina hit, Boh
Bros. had over 180 pieces of equipment worth over $60 million in the
Greater New Orleans Area, and it took us two weeks to recover just 50
percent of that equipment. Many pieces were damaged, destroyed or lost.
During that time, we also set up a ``command center'' where we
received emergency calls for recovery operations, including emergency
repairs to the breached levees. Each morning at 7:00 a.m., our
President met with our field department leaders and project
superintendents to plan the coming day's activities and share
information on any new developments. While we were cramped into our
Baton Rouge quarters, and lacked our computer and other basic systems,
we were determined to get the job done. We worked 15 to 20 hours per
day, and 7 days a week, for an entire month. We knew we were one of the
few companies capable of providing emergency service to our community.
We were also committed to getting our employees paid, and to keeping
them secure.
Some of the first phone calls came from the Louisiana Department of
Transportation and the U.S. Army Corps of Engineers. We were asked to
deploy personnel and equipment to the downtown area, and to stop the
flooding. By the end of the first week, we had received more than ten
requests from Government agencies to fill breaches in the levees, to
pump water out of the flooded areas, to move barges blocking parts of
the inland waterway system, and to repair bridges over those waterways.
We trusted the people calling us, and so we immediately went to work.
We did what we had to do.
In the following month, we received many more calls from Government
agencies. We also bid for and were awarded a contract to repair of the
I-10 Twin Span bridge over Lake Pontchartrain, which runs between New
Orleans and Slidell, and which the storm surge had severely damaged. We
were told we had 45 days to get two-way traffic moving on one span, and
I am extremely proud to tell you that we did it in 29 days.
For the first few days, our temporary headquarters was chaotic,
with 200 employees working in an office that normally housed only 40
employees. But we persevered. We were often acting on oral
instructions, but determined to be faithful to those instructions,
because we knew that the Government agencies could not do it on their
own. It was all about taking orders and then following them, to the
letter.
To get to the areas that needed our help, we had to find access
routes through flooded streets and around both debris and power lines.
We had to set up supply lines outside the area capable of providing our
people with literally everything they needed, from water to food to
fuel.
We also had to do our very best to protect our people from
environmental and other hazards. We made sure to comply with all OSHA
and maritime regulations, but that was just the beginning. As soon as
we could, we hired two engineering companies to do environmental
testing of our worksites before we moved our people into them. We
talked to industrial hygienists about the personal protective equipment
we should use. We had all of our people vaccinated for Hepatitis A & B
and gave them Tetanus and Diphtheria shots. We even hired security
guards to protect our people from the sniper activity encountered in
and around the areas where they had to work. All of our guards were
former members of specialized forces in the military.
In the early days, we were ready to start working on little more
than a handshake. We did not demand the time we would normally take to
scrutinize contractual terms and conditions. We were ready to go. We
knew that we were incurring great expenses, and that we would have to
meet our payroll, but we expected the Government agencies eventually to
sign the contracts, and we trusted them to pay us fairly. The U.S. Army
Corps of Engineers had come to the Shaw Group, another Louisiana firm,
and Boh Bros., the most qualified and capable construction contractors
in the area, asking for our immediate help, and we were not going to
let the country down.
Nor did we dwell on the risk of tort litigation. We knew that the
trial lawyers were out there, but we simply could not take the time to
imagine that someone would sue us for trying to save the city. The only
risk on our minds was the risk that New Orleans would simply cease to
exist.
Now, however, we wonder. Do we risk tort litigation over the
actions that we have taken, and continue to take? Would the trial
lawyers really sue us simply for trying to put our community back
together? Some people disagree with the contracting and regulatory
agencies, and believe that the agencies are not doing enough. Would
such people actually sue us simply for following the agencies'
instructions, or relying on their conclusions?
We understand that the contracting agencies have to guide and
direct the recovery effort. If we fail to follow their instructions, we
expect to have a problem. We also have to answer to the Environmental
Protection Agency, the Occupational Safety and Health Administration,
and other regulatory agencies. If we fail to comply with their
standards, we expect them to take to take some kind of enforcement
action. We also expect and intend to provide financial support for any
employees injured during the course of their employment, and to pay
their medical bills. As required, we carry and continue to pay the
premiums for workers compensation insurance, and we know that those
premiums will climb if we fail to take the steps necessary to safeguard
our workers.
The problem is that we cannot be sure that the agencies are in
charge. The problem is the future tort litigation could rewrite the
rules, long after the fact.
Boh Bros. has simply responded to the many requests that the U.S.
Army Corps of Engineers and other Government agencies have made of our
company. At their request, and as they instructed, we have, for
example, made temporary repairs to New Orleans' flood protection
system. These temporary repairs are intended to protect the city only
for a short time, as the Corps and other Government agencies develop
and implement permanent solutions to the many problems that Hurricane
Katrina revealed. But we really do not know how much time the agencies
will require. The time could stretch into the 2006 hurricane season and
beyond. If a future hurricane breached any one or more of these
temporary repairs, would the trial lawyers sue the Government agencies
or Boh Brothers?
The exposure is real, even if, as we are confident, our work meets
all relevant standards. Litigation takes an enormous toll on any
company. The costs of litigation are enormous. They include both legal
and expert witness fees, and a host of indirect expenses. Time is lost.
Employees are distracted. Insurance carriers may hesitate to provide
future coverage. And all too often, a company's reputation is both
wrongly and irreparably damaged.
Since the hurricane hit New Orleans, the trial lawyers have already
filed one meritless class action against Boh Bros. While based on
events that preceded the hurricane, it is highly instructive. It
demonstrates that the trial lawyers are already hoping to profit on the
disaster, and it reveals some of the potentially great costs involved
in simply being sued. The complaint alleged that Boh Bros. had
defectively constructed a bridge that is very close to the area where
the 17th Street Canal floodwall failed, and that we were therefore
responsible for the flooding of an entire neighborhood. The potential
liability was enormous. In fact, our company did not even work on the
bridge. The plaintiffs' attorney did no research to determine the
facts. He simply assumed that Boh Bros. must have been involved. The
complaint was quickly dismissed. But not until the plaintiffs' lawyer
had gone on the evening news to make his sensational allegations and
cause lingering damage to our good name and reputation.
When asked to do the right thing, for New Orleans and its
residents, Boh Bros. responded. Now, it is time for Congress to do the
same. Now it is time for Congress to give the contractors working hard
to revive New Orleans and the remainder of the Gulf Coast with some
reasonable measure of protection from unlimited tort liability simply
for being there to meet the need. Congress should quickly enact S.
1761.
Boh Bros. is a member of the Associated General Contractors of
America, and I can assure you that responsible contractors throughout
the country are playing close attention. They are aware of what has
happened to the contractors who responded to the terrorist attacks on
New York City. They are aware of the litigation that followed. They are
responsible corporate citizens, but they are deeply concerned. If they
cannot rely on the instructions that contracting agencies give them, or
the guidance that regulatory agencies provide, they may find it hard to
respond to the next natural or other disaster.
In closing, let me just add that the Greater New Orleans Area
requires your particular attention, as it heavily depends, for its very
survival, on the design and construction of a new flood protection
system. For itself, its employees, and its community, Boh Bros. also
urges you quickly to provide enough funding to design and construct a
flood protection system that will protect the city from future
hurricanes. In our opinion, if proper funding is not quickly provided,
many of the city's residents will neither return nor rebuild.
Thank you again for providing Boh Bros. with an opportunity to
testify. I would be glad to answer any questions you may have.
______
Responses by Warren Perkins to Additional Questions from Senator Boxer
Question 1. Mr. Perkins, the Washington Post reported on September
20th, that a contractor's trade group, the Association of General
Contractors of America, was drafting legislation to shield contractors
from claims by workers. I believe that you company is a member of this
trade association and the President of Boh Brothers was quoted in the
article in support of this legislation.
Did Boh Brothers or the General Contractors of America participate
in the drafting of S. 1761 under discussion? If so, please specifically
describe how?
Response. I believe that you are referring to the Associated
General Contractors of America, the oldest and largest of the
nationwide trade associations in the construction industry, commonly
known, throughout the country, as ``AGC.''
As a threshold matter, I would certainly hope and expect that any
member of Congress contemplating legislation on or relating to the
construction industry to solicit AGC's views on such legislation. A
nonprofit corporation founded in 1918 at the express request of
President Woodrow Wilson, AGC now represents more than 32,000 firms in
more than 98 chapters throughout the United States. AGC members include
more than 7,000 of the nation's leading general contractors, 11,000
specialty contractors and 13,000 material suppliers and service
providers to the construction industry. AGC members construct
commercial buildings, shopping centers, factories, warehouses,
highways, bridges, tunnels, airports, waterworks facilities and multi-
family housing units; and they prepare sites and install the utilities
necessary for housing development. Among AGC's members are literally
thousands of both union and open shop contractors. While it represents
and serves the nation's largest construction contractors, the vast
majority of its members are small businesses. I simply cannot think of
a better place for any member of Congress to go for a fair and balanced
view of how Federal legislation would be likely to affect the
construction industry as a whole.
I am pleased to confirm that Boh Bros. has long been an active
member of both AGC and its Louisiana chapter, that my company has
encouraged AGC to support S. 1761, and that AGC has expressed such
support. I am, however, confused by your reference to legislation that
would ``shield contractors from claims by workers.'' I am not aware of
any such legislation.
In its article, the Washington Post referred to something that
would ``limit [contractors'] liability from lawsuits,'' but of course,
the workers compensation statutes in all 50 states and the District of
Columbia already substitute a no-fault compensation system for the
litigation that might otherwise arise out of any injuries or illnesses
that construction workers suffered in the course of their employment,
and S. 1761 expressly provides that it does not apply to ``any claim
for loss under any workers compensation statute.'' Some workers
compensation laws do permit employees to sue their employers under
extenuating circumstances, but S. 1761 also provides that it shall not
``affect[] the liability of any person or entity for recklessness or
willful misconduct.''
In sum, it is one thing to limit contractor's liability from
lawsuits and quite another to shield them from workers claims. It is
one thing to support S. 1761 and quite another to diminish workers'
rights. Boh Brothers supports S. 1761 on the understanding that it does
not diminish workers rights, and in a press release announcing its
support for the bill, AGC expressed the same understanding that ``[a]ll
environmental, safety and health, labor and ethics laws would continue
to apply.''
Boh Bros. did not participate in the drafting of S. 1761, either
directly or through AGC. I would assume that AGC communicated its
support for such legislation to Senator Thune, but I was not involved
in any meetings or other communications with the Senator, and I cannot
say whether or to what extent he relied on any information that AGC did
provide.
Question 2. Mr. Perkins, you indicated in your testimony that you
did your best efforts to protect people from environmental and other
hazards in your New Orleans cleanup efforts. The bill, S. 1761, would
relieve your company of its liability if it is negligent and injures
people or property.
Are you concerned that Boh Brothers' best efforts are no better
than negligent performance, and do you now believe that Boh Brothers
must be shielded as a result?
Response. In my testimony I referred to protecting ``our people
from environmental and other hazards''. I was referring to protecting
our employees. As stated above, Bill S. 1761 has nothing to do with
relieving our company of its liability and responsibility to our
employees. In the testimony Senator Boxer has referenced, I was simply
painting a picture of the hazards Boh Bros. faced in order to respond
to the emergency calls for help to seal the levee breaches, to restore
the pump system, to dewater flooded areas, etc.
S. 1761 would limit Boh Brother's risk of liability to private
third parties only for work that the Government requested, directed and
controlled, and expressly found necessary for the Gulf Coast's recovery
from Hurricane Katrina and future such catastrophes. The bill would not
apply to any or all of my company's activities, even in New Orleans,
nor would it apply to any or all activities of other recovery
contractors on the Gulf Coast.
Nor would it excuse any failure to meet the Government's
expectations. Quite to the contrary, my company would still have to
satisfy all terms and conditions of all Government contracts, and to
comply with all Federal, State and local regulations that apply to the
work, including but not limited to all environmental, safety and health
regulations, and all employment laws. The Government would retain tight
control.
The problem is that meeting all of the Government's expectations
will not be enough to protect my company from tort liability, much less
litigation. As things stand today, my company can fully perform all
Government contracts for the recovery of the disaster zone, and it can
do so to the Government's express satisfaction, and in full compliance
with all regulatory requirements--and still incur liability for
``negligence.'' As we heard at the hearing on November 8, 2005, over
5,000 lawsuits have been brought against the contactors that responded
to the attacks on the World Trade Center, and yet, to the best of my
knowledge, not one of the contracting or regulatory agencies has found
fault with their practices. The tort system has left juries free to set
different standards, or to reinterpret existing standards, or to
second-guess what these contractors ``should have known,'' long after
the horror of the 9/11 disaster has passed, and memories have faded. In
New York, the Occupational Safety and Health Administration obviously
thought that it was enough for every contractor to provide a respirator
to every worker. At the hearing, it was seriously suggested that the
contractors should have gone further, and indeed, that they should have
physically forced not only employees but also third parties who refused
to wear their respirators off of the site.
By all accounts, Hurricane Katrina was an unprecedented event. It
was unlike anything that this country had ever seen. Just how was a
``reasonable person'' supposed to respond to the facts on the ground?
Just what was it that such a person ``should have known''? Moving
construction workers and heavy equipment into New Orleans was and is a
far cry from driving a car down a highway. The rules of the road to New
Orleans recovery were are far from clear.
Yes, I am concerned that someone far removed from the actual
disaster might decide at some point in the future that my company's
best efforts were not enough. At the leisurely pace of a jury trial,
with the benefit of hindsight, comfortable in the knowledge that my
company's assets are the only thing at stake, and with an
understandable sympathy for someone who has suffered a loss, a jury
might decide that my company should have know something that it did not
know, or to use your pejorative phrase, that even my company's best
efforts were ``no better than negligent performance.''
I am even more concerned that the cost of defending my company
against allegations that it was ``negligent.'' It would cost tens if
not hundreds of thousands of dollars to defend my company against such
allegations. Even if, as I believe, my company did everything that
anyone can expect of a ``reasonable person,'' the cost of making that
point could be enough to drive my company out of business, not to
mentions the thousands of small and minority-own businesses in the Gulf
Coast.
______
Response by Warren Perkins to an Additional Question from
Senator Jeffords
Question 1. Mr. Perkins, in your testimony, on page 5, you state
that: ``The problem is that we cannot be sure that the agencies are in
charge. The problem is that future tort litigation could rewrite the
rules, long after the fact.'' Please clarify what you mean by these
statements.
Response. The tort system is entirely independent of the
contracting and regulatory agencies responsible for directing and
overseeing the response to a major disaster, and the tort system is
therefore free to second-guess any direction or guidance that the
contracting and regulatory agencies give to the contractors actually on
the ground, undertaking search and rescue, repairing public
infrastructure, remediating polluted areas or removing debris. It
follows that the recovery contractors cannot take the agencies'
direction, or rely on their guidance, without risking tort litigation
and perhaps liability. Whatever the agencies say today, a jury might
later say that the contractors should have done something differently.
As explained to Senator Boxer, a construction contractor can fully
perform all Government contracts for the recovery of a disaster zone,
and it can do so to the Government's express satisfaction, and in full
compliance with all regulatory requirements--and still incur liability
for ``negligence.'' As we heard at the hearing on November 8, 2005,
over 5,000 lawsuits have been brought against the contractors that
responded to the attacks on the World Trade Center, and yet, to the
best of my knowledge, not one of the contracting or regulatory agencies
has found fault with their practices. The tort system has left juries
free to set different standards, or to reinterpret existing standards,
or to second-guess what these contractors ``should have known,'' long
after the horror of the 9/11 disaster has passed, and memories have
faded. In New York, the Occupational Safety and Health Administration
obviously thought that it was enough for every contractor to provide a
respirator to every worker. At the hearing, it was seriously suggested
that the contractors should have gone further, and indeed, that they
should have physically forced not only employees but also third parties
who refused to wear their respirators off of the site.
Under these circumstances, contractors have to hesitate. The have
to pause and reflect on the direction and guidance that Government
agencies are giving them, and to decide, case-by-case whether to do
what they are told. What FEMA or the Corp of Engineers now finds
critical to do, a jury could later find to be ``negligent.'' And what
the agencies lose is their power to control an emergency situation.
______
Statement of Michael Feigin, Executive Vice President, Bovis Lend Lease
Mr. Chairman, I would like to thank you, Senator Boxer and the
committee for inviting me to participate in today's panel, allowing me
to discuss my company's experience after the terrorist attacks on the
World Trade Center on 9/11. My testimony today will outline our
company's response to the immense tragedy that occurred and offer
perspective on the pitfalls and hazards with recovery and cleanup
efforts following both terrorist and natural disasters.
Natural disasters are impossible to prevent but proper planning is
the essential element in coping and rebuilding following their
occurrence. The proposed legislation we are discussing today, S. 1761,
the Gulf Coast Recovery Act, addresses some of the problems following
hurricane Katrina. I hope to draw upon the knowledge we gained through
our 9/11 experience to draw parallels to Katrina and future natural
disasters and encourage this committee to take into consideration the
role private businesses play in helping Government with disaster
relief.
Supporting the needs of communities, Governments, commerce and
industry on a local, national and multinational level, Bovis Lend Lease
ranks among the world's leading project and construction management
companies. In the United States of America, Bovis Lend Lease is the
nation's second largest construction manager with coverage emanating
from its 20 United States offices and in Latin America.
I begin with a quote from our CEO at Bovis Lend Lease, Peter
Marchetto ``At ``Ground Zero'', we saw ``all the worst that you could
imagine and all the best you could ever see.''
At 1 p.m. on September 11, 2001, approximately 5 hours after the
first attack, Pete received a call from the department of Design and
Construction of the City of New York (DDC). They wanted Pete, together
with a few others from Bovis Lend Lease (BLL), to come to what was
being called Ground Zero to help DDC manage the daunting task of making
sense of the chaos in an effort to save lives. Without a moment's
hesitation, Pete and other members of BLL went to help.
That afternoon, BLL employees were working hand in hand with, and
under the oversight of, the NYC DDC and the Office of Emergency
Management. BLL and subcontractors retained by BLL on behalf of the
City of New York, supplied labor, materials and equipment at ``ground
zero'' for 9 months.
Shortly after September 11, in addition to its work at Ground Zero,
BLL answered the call for help from the city's Economic Development
Corporation by completing the Family Center at Pier 94 (this facility
houses the Red Cross, NYPD, Medical Examiner and many others), a
Command Center at Pier 92 and ferry slips at Pier 11. All of this work
was done in three days or less and completed on Sunday, September 16.
Our debris removal work in the World Trade Center area included, at
different times, search and rescue efforts, removal of debris,
demolition work, construction of temporary structures and netting and
scaffolding. BLL and the three other contractors asked to work at
Ground Zero--Turner Construction, AMEC Construction and Tully
Construction--each worked in a quadrant of Ground Zero. BLL began
working in an area in the South West quadrant of ``ground zero'' that
included the South WTC Tower and the Marriott Hotel.
By January of 2002, DDC decided to assign a larger role in the
management of demolition and construction operations at Ground Zero to
an alliance between BLL and AMEC Construction, and to abandon the
quadrant system. Tully Construction stayed on as a subcontractor to BLL
and AMEC, and Turner left the site.
The initial estimates by DDC and the Federal Government were that
the recovery efforts, debris removal and site stabilization would take
2 years and cost over $1 billion. The Contractors and others finished
the work in 265 continuous days, 24 hours per day. The Labor force
peaked at 2,300 (including uniform services), and was stable at 1,700
for much of the period, which included about 250 Bovis personnel. BLL
was particularly proud that we had no fatalities and only 36 reportable
accidents with over 3.2 million man-hours worked.
No consideration was given by the Contractors to liability issues
or potential claims or lawsuits before beginning work on September 11.
When asked to perform work on any other project, any one of these
contractors would have been given the time to properly analyze the
situation, the risks associated with the assignment, and the methods to
manage those risks. The Contractors also would have determined how to
insure whatever potential liability might arise. There was no time to
do this before starting work at Ground Zero. Immediate response was
necessary.
It soon became apparent that these liability issues would have to
be addressed. However, given the dangerous conditions, the retroactive
nature and the unknown aspects of this unprecedented effort, commercial
insurance companies would not provide the coverage needed and
ultimately only limited coverage was obtained.
After many months of work, discussions with many members of
Congress from the New York delegation and our two New York Senate
members, we received a commitment from Congress to fund a Captive
Insurance Program for a broad range of third party liability claims
including general liability, environmental liability, professional
liability and marine liability. The Captive was funded with a one time
paid in premium of $1 billion. After many months working with FEMA to
establish the details of the program, the WTC Captive was formed. This
WTC Captive Policy provides coverage for the City of New York as the
Named Insured, and all of the contractors, subcontractors, architects
and engineers working at Ground Zero as Additional Named Insurers. The
policy currently has approximately 140 Additional Named Insures.
The Captive was funded at $1 billion because this was the quickest
agreeable amount to get a program in place. Some now claim that even
the $1 billion might not be enough. A significant number of claims have
been filed against the Contractors. Today, there are claims from over
5000 individual claimants. These lawsuits claim injuries arising from
or related to debris removal work at the WTC site following the
collapse of the buildings on September 11, 2001. The cases
predominately involve allegations of respiratory and related injuries
including asthma, chronic cough, chronic obstructive lung disease,
pulmonary fibrosis, and fear of cancer. As provided for in the Captive
policy documents, the Captive has retained lead defense counsel for the
City and the Contractors and is vigorously defending these lawsuits.
It is essential that the United States be prepared to respond
immediately in cases of national emergency, whether it is natural or
man made disaster. The sad events of 9/11 and the recent events in
Louisiana make this painfully clear. What we have learned from our
experiences at Ground Zero is that the response to these disasters
cannot wait until the disaster occurs. Resources must be put in place
long before a disaster for response to be swift and adequate. A
disaster response infrastructure must be put in place with experienced,
qualified oversight and the ability to call upon local resources as
required. An essential element of such preparedness is a plan to
protect those who respond from liability.
BLL did receive compensation for its work at Ground Zero. But for
the WTC Captive, expenses for lawyers and consultants would have
exceeded any fees made in a matter of months. As a result of these
ongoing expenses and potential liabilities, we would probably lose our
bonding lines, our banking support and our insurance coverages. In
short, responding to a disaster when called would have taken a thriving
business employing over 2,500 people in 20 States and Latin Americas
and put us out of business. Every company responding to a disaster
without some kind of protection faces the same choice.
We cannot say in hindsight that we would not respond if called upon
again in a similar situation. When people's lives are at stake, we will
do our duty. What we can say is that we will not voluntarily go into
such a situation again. We will not extend ourselves, but we will
respond if asked. With our experience at Ground Zero, and the potential
liability we now face, we would be foolish to do otherwise. We have put
our business, our livelihood, and our families' prosperity on the line
to help people and do the right thing. While we think existing law
offers a shield in this area, the current World Trade Center related
litigation demonstrates the need for additional clarity not only to
protect the Contractors from liability, but also to eliminate or
discourage the costly and time consuming process of the litigation
itself except in extreme cases. Protection from liability needs to be
put in place to eliminate any question of response, and avoid
penalizing companies that come when called. S. 1761 bill does this and
requires the support of this committee.
Mr. Chairman and members of the committee, thank you for the
opportunity to speak with you today about Bovis Lend Lease experience
and I submit my written testimony for the record and look forward to
any questions you may have.
______
Responses by Michael Feigin to Additional Questions from Senator Boxer
Question 1. Mr. Feigin, did Bovis conduct its own environmental
testing at the World Trade Center? Did you conclude that any special
worker protections were warranted?
Response. Bovis worked closely with the City of New York, State and
Federal agencies and other entities throughout the course of Bovis'
work at the WTC site and/or related locations as environmental data was
collected, reviewed and used to make decisions and recommendations
regarding worker safety issues--including the types of personal
protective equipment to be used by workers. For example, Bovis worked
closely with numerous City, state and Federal agencies and others
regarding an Environmental Safety & Health plan for the WTC site and/or
related locations and regarding an OSHA Partnership Agreement--as
applied by the city, State and Federal agencies and other entities,
these plans identified the nature and types of worker protections to be
used at the WTC site and/or related locations.
Question 2. Mr. Feigin, do you believe that performance no better
than negligence is the standard most appropriately applied to cleanup
contractors?
Respones. There are various standards of behavior or action that
potentially may be applicable to contractors performing different types
of tasks in different environments. There are standards or regulations
applied by local, State and Federal law regarding workplace safety,
environmental hazards, construction, demolition, and a host of other
activities that could be involved in a ``cleanup'' situation. In
addition, the emergent nature of the situation and/or the activities
involved and the environment in which those activities are to be
performed also could affect the standards which a governing body or
court may find were or were not applicable or relevant in a particular
situation or context. Assuming that the question is directed to the
standard typically applied by a court of law in determining liability
for a person or company's actions and understanding that the factors
just discussed may affect a court's determinations in this regard, it
is correct that the tort theory of negligence typically is used. Which
approach is appropriate in an extreme ``cleanup'' situation, as was
faced in the aftermath of Hurricane Katrina or the WTC disaster, cannot
be determined without a complete analysis of the specific situation and
the applicable law and/or standards.
Question 3. Mr. Feigin, do you believe that workers who can prove
that they were injured due to a company's negligence should not be able
to get compensated for their injury in connection with a declared
disaster as described in S. 1761?
Response. I do not understand that S. 1761's purpose is to prohibit
workers injured as a result of a company's negligence from getting
compensation for their injuries. Rather, I understand that S. 1761's
purpose is to provide protections to contractors who answer the
Government's call for help and provide immediate assistance in times of
catastrophic emergency. A private contractor's rapid involvement in
responding to an emergency often comes at the request of a Governmental
entity because the Government is unable on its own to accomplish tasks
such as debris removal and/or cleanup or other efforts related to the
public health and safety. Legislation (such as S. 1761) is needed that
provides further protection to Government contractors from the risk of
liability from such emergency response and that eliminates the costly
and time consuming process of litigation over that statutory
protection.
Question 4. You indicated in your testimony that there were a total
of 36 reportable injuries in connection with the Ground Zero site.
Please describe the nature and extent of all accidents and injuries and
how you determined if an injury was reportable. Please also provide
copies of all accident and injury reports in connection with or related
to work at Ground Zero in New York.
Response. In my prior testimony, I indicated that there were ``only
36 reportable accidents with over 3.2 million man-hours worked--'' This
information was obtained from an OSHA Trade News Release dated April
12, 2002 and entitled ``Injury and Illness Rate at World Trade Center
Site Nearly Half National Average for Similar Sites'' which reflects
that there were only 35 workers at the World Trade Center Site that
suffered injuries resulting in lost workdays. My earlier reference to
36 such accidents apparently was the result of a typographical error. I
understand that the parameters regarding what is to be classified as a
``reportable'' injury for OSHA purposes is set forth in OSHA
regulations and guidelines.
______
Responses by Michael Feigin to Additional Questions to Senator Jeffords
Question 1. Mr. Feigin, have any of the lawsuits filed against your
company related to cleanup of the World Trade Center involved claims by
private parties for damages resulting from environmental pollution or
adverse health effects from pollution?
Response. Bovis is not aware of any lawsuits against it relating to
its work at the World Trade Center Site and/or related locations which
involve claims by private parties for damages (either property damage
or personal injury) resulting from alleged environmental pollution. The
lawsuits filed against Bovis and others regarding the debris removal
and cleanup operations at the World Trade Center Site and/or related
locations include allegations by individuals of personal injuries
allegedly resulting from inhalation and/or exposure to airborne and/or
surface contaminants present at those locations. As such, those
personal injury cases do not appear to allege adverse health effects
from environmental pollution.
______
Statement of Joel Shufro, Executive Director, New York Committee for
Occupational Safety and Health
My name is Joel Shufro and I am the executive director of the New
York Committee for Occupational Safety and Health (NYCOSH), a non
profit educational organization dedicated to every workers' right to a
safe and healthful workplace. We have a 26 year history of providing
quality safety and health training and technical assistance to working
people, unions, employers, Government agencies, and community-based
organizations about how to recognize and eliminate workplace health
hazards. Since the attack on the World Trade Center, NYCOSH has worked
with these constituencies to evaluate the environmental and
occupational health consequences resulting from the release of dust and
fumes which contaminated Lower Manhattan. We have had extensive
involvement with workers who participated in rescue, recovery and
cleanup operations at the World Trade Center site, workers in offices
surrounding Ground Zero, immigrant workers who cleaned offices and
residences, utility workers who restored essential services to the
area, and residents living in or returning to contaminated homes around
Ground Zero.
We are here to oppose S. 1761, which exempts contractors from
citizens' suits brought under Federal environmental law and immunizes
contractors from liability for personal injuries or property damage in
response to disasters. Our position is informed as a result the
thousands of workers who have developed physical and mental illnesses
in the aftermath of the tragedy at the World Trade Center, September
11, 2001.
To those involved in the rescue, recovery and cleanup, working at
the World Trade Center site was more than a job. Those who responded to
the disaster did so for many reasons: patriotism, altruism, and
humanitarianism, among other motives. They responded to the needs of
their country; many working 12 hours a day, 7 days a week for months.
But they, like all workers, expected that those who employed them would
provide them with safe and healthful working conditions and comply with
Federal, State and city regulations. They assumed that if they were
harmed as a result of working at the site, their medical needs would be
taken care of and they and their families would not be driven into
poverty. They believed that they would not be forced to give up their
homes, and that their children would not have to drop out of college so
medical bills could be paid.
Unfortunately, four years following the devastating attacks on the
World Trade Center, respiratory illness, psychological distress and
financial devastation have become a new way of life for many of the
responders, office workers and residents in Lower Manhattan. According
to statistics released by the Centers for Disease Control, workers and
volunteers continue to experience high rates of upper respiratory
illnesses high rates of upper respiratory problems, sinusitis
laryngitis and higher rates of lower respiratory problems-asthma,
bronchitis, chest tightness, coughing and wheezing. In fact, the
persistent cough is so unique it has been named the World Trade Center
Cough. It is essential that you understand that these health problems
were incurred not only by exposure to toxic substances in the dust
cloud released at the time of the collapse of the twin towers. Rather
it is likely that the majority of cases of adverse health effects were
caused or exacerbated by exposure to toxic chemicals by workers and
residents engaged in recovery and cleanup operations in the 10 or so
months following 9/11. Many of these workers were either employed by
Federal or private contractors.
Nor is the appearance of illness among workers who worked in the
area following the September 11th tragedy and residents abating.
According to Dr. Steven Levin, co-director of the World Trade Center
Worker and Volunteer Medical Screening Program at Mt. Sinai, symptoms
continue to appear among workers four years after exposure. Other
workers, whose symptoms abated after initial onset, are experiencing
re-current symptoms related to their initial exposure. Additionally, as
Dr. Robin Herbert, also co-director of the WTC Worker and Volunteer
Medical Screening Program at Mt. Sinai, points out there are, ``grave
concerns about their potential for developing slower-starting diseases
such as cancer in the future. For many coming through our program, the
fears of future catastrophic diseases like cancer, which can take as
long as twenty to thirty years to show up, loom as large or larger than
their acute ailments.'' These concerns have been heightened by the
recent passing of two New York City Emergency Medical Technicians (EMT)
whose deaths have been related to illness resulting from exposure to
toxic substances at the World Trade Center.
Many of the workers are disabled by chronic pulmonary problems.
Some are unable to work. In many cases, workers' lives have been
significantly altered by breathing difficulties and the psychological
consequences of their response efforts. Many have also suffered
substantial economic disruption because of WTC-related health problems,
do not have health insurance and are unable to pay for treatment or
needed medicine. According to the doctors at WTC Screening Program at
Mt. Sinai, who have seen the most diseased workers resulting from 9/11,
many workers are without medicine, medical treatment and wage
replacement.
What happened during recovery and cleanup operations at the World
Trade Center was a preventable public health disaster. There is no
doubt that the World Trade clean up was one of the most dangerous and
complex construction sites in the history of the country. But, those
who had management responsibility failed to provide workers with
working conditions that protected their safety and health. They failed
to provide workers with a ``safe and healthful workplace, free of
recognized hazards'' as required by law. Rather than make a stronger
commitment to protect workers and residents from environmental and
occupational hazards in future disasters, the contractors are lobbying
to pass S. 1761, which would free them from most liability for personal
injury claims when engaged in responding to a major disaster such as
Katrina, as well as from citizen suits brought under Federal
environmental laws. We believe that such legislation would undercut any
incentives contractors have to comply with safety and health and
environmental regulations.
Federal contractors, who are paid by the taxpayers for the work
that they do, should be held fully accountable to the public if they
behave carelessly and cause harm to people or the environment. No
public policy reason justifies a taxpayer subsidy for negligence or
illegal activity. What S. 1761 does is to shift the cost of personal
injuries and property damage from Government contractors to the workers
and/or residents in the disaster areas.
It is imperative that workers know that, if they come to the aid of
their country in disaster situations, contractors employed by the
Government will be held to high standards which protect both the
workers and the members of the community in which they are working.
They need to know if they should be injured or contract an illness in
the process, their medical needs will be taken care of and that their
families will be secure. They need the guarantee that contractors who
do not act responsibly will be held liable.
Responsible Government contractors should have no need of the
sweeping immunity this bill would provide. We urge you to oppose this
legislation, which would provide a windfall to irresponsible
contractors at the expense of public health and the environment.
______
Response by Joel Shufro to an Additional Question from Senator Thune
Question 1. It is my understanding that all fifty states, including
New York, require employers to carry workers compensation insurance for
their employees, and that, by law, such insurance must pay for any
medical treatment that employees may need, as a result of any injuries
or illness they suffer in the course of their employment. It seems that
these workers compensation laws also require at least some wage
replacement for people who cannot work. Is that essentially correct?
And if so, how is it that the people who worked at Ground Zero cannot
get medical treatment or wage replacement?
Response. Workers compensation is inadequate to provide workers and
community residents with a remedy for the types of damages from which
contractors are asking for relief in the proposed legislation (S.
1761).
First, workers compensation applies only to workers who are in an
employer/employee relationship. By definition, workers who are not
employed by the contractor who caused the harm, as well as residents
and volunteers, would be excluded from receiving medical treatment or
wage replacement for injuries or illnesses incurred as a result of the
negligent actions of a contractor responding to a disaster situation.
Second, it is not true that workers compensation is mandatory in
all jurisdictions. For example, coverage is optional in Texas.
Third, workers compensation systems do not allow workers to recover
for a wide array of damages such as those which may occur as a result
of work around disaster response, recovery and cleanup. For example,
adverse reproductive health outcomes caused by exposure to toxic
substances are not compensable under workers compensation; nor is an
injured worker able to recover for pain or mental anguish or loss of
companionship.
Fourth, medical coverage varies from State to State. This is
particularly the case with occupational illnesses and diseases with
long latency periods. Definitions of what constitutes an ``occupational
disease'' also vary and may preclude workers from filing claims for job
related illnesses. Diseases covered in one state may not be covered in
another. In addition, what medical treatment and/or procedures are
provided through workers compensation also varies dramatically State to
State.
Fifth, wage replacement benefits also vary widely from State to
State. Since disasters, such as Hurricane Katrina, often affect workers
in more than one State, relying solely on workers compensation, results
in significant inequities in the wage replacement workers receive. For
example, the maximum weekly benefit is $400 in New York, $666 in New
Jersey, $716 in Pennsylvania and $931 in Connecticut.
Sixth, many States have a cap on the length of time a worker can
collect wage replacement for an injury no matter how long the
disability lasts or how severe the injury is. Consequently, a worker
who is permanently totally or permanently partially disabled and unable
to work may, after a defined period, face poverty and/or financial ruin
and be forced onto welfare or social security disability.
Many workers who responded to the tragic collapse of the World
Trade Center and who worked at or around Ground Zero were exposed to
highly caustic dust and a plethora of toxic fumes. Many of these
workers have developed respiratory illnesses.
These workers have had great difficulty in accessing medical and
wage replacement benefits through the workers compensation system.
Unlike workers who suffer traumatic job-related injuries, whose cases
are relatively straight-forward, workers who contract occupational
diseases routinely have their cases controverted by insurance carriers.
While their cases are being litigated, carriers will not provide either
medical treatment through the workers compensation system or wage
replacement payments. Furthermore, even if a worker has employer-paid
or private health insurance, many health insurers will deny claims if
workers indicate that their condition is work-related. Therefore, until
their case is established, workers who file for workers compensation
are denied needed medical treatment and wage replacement payments.
In New York State, as in many other jurisdictions, it can take
years for contested occupational disease cases to be resolved. For
example, a study at conducted at the Irving J. Selikoff Occupational
and Environmental Medicine Cline at Mt. Sinai Medical Center of workers
who filed claims as a result of musculo-skeletal repetitive stress
injuries found that it took, on average, approximately 2 years from the
time a worker filed a claim with the New York State Workers
Compensation Board to the time that the case was established. For some
cases, it took over four years after the claim was filed for it to be
established. he consequence of such delays for injured workers are
traumatic; claimants often are forced back to work resulting in further
injury and/or experience other adverse health outcomes. Other workers,
who have no financial reserves are forced into poverty. There are cases
in which workers are forced to sell their homes or their children are
required to drop out of college to help support the family.
Recent research has demonstrated that most workers who contract an
occupational illness do not receive medical or wage replacement
benefits through workers compensation. According to one study, workers
receive compensation for less than 1 percent of all occupational
disease claims. Rather, than receiving wage replacement from workers
compensation, injured workers are forced to rely on state run welfare
programs or social security disability, which are financed through
general tax revenues, for sustenance and on programs like Medicaid for
medical treatment. There are additional impediments which workers face
when they apply for Workers Compensation which prevent many workers
whose health has been impaired by work-related causes from receiving
medical treatment. In New York State, as in many states, the workers
compensation system is difficult to navigate without legal
representation. However, there are certain classes of cases for which
there are there are strong financial disincentives for attorneys to
take cases which are not deemed profitable. These include more
difficult cases such as occupational disease claims where causation is
difficult to prove and cases where it is difficult to prove who the
employer was or if the employer was uninsured (discussed above).
A significant number of workers who require medical treatment as a
result of illnesses arising out of employment at the World Trade Center
are still working. These workers will not be able to find legal
representation because there no legal fees paid to lawyers in cases
where there is no wage loss--cases known as ``medical only.'' Without
the help of an attorney, workers will not get the benefits to which
they are entitled. Despite the need for medical treatment, these
workers, many of whom are immigrants, many of these workers, who have
legitimate claims will drop their cases out of frustration,
discouragement, ignorance or fear of dealing with a litigious process
which they neither understand and perceive as hostile.
By eliminating the ability of workers and residents to bring suits
against contractors who are negligent in the performance of their
contracts, the S. 1761 would prevent those injured by the negligent
actions of contractors from holding them accountable, allowing them to
cut corners and operate in a fashion which could endanger members of
the public and residents. Since workers compensation is an exclusive
remedy and prevents workers from suing their employer, workers would be
unable to hold liable other contractors who may be operating on the
same site who created hazards. It would also penalize those employers
who comply with health, safety and environmental regulations. In
complex response to disasters this would place workers at a serious
disadvantage and undercut any incentive for employers to adhere to
safety standards and protocol
______
Response by Joel Shufro to an Additional Question from Senator Jeffords
Question 1. How did the managers of the contracting firms providing
cleanup and recovery efforts at the World Trace Center fail to provide
workers with working conditions that protected their safety and health?
Response. The attack on the World Trade Center on September 11,
2001 and the subsequent magnitude of the destruction and loss of life
at the World Trade Center created an emergency response, rescue and
recovery effort of enormous proportions. According to the head of OSHA,
the World Trade Center site was ``potentially the most dangerous
workplace in America.'' Although there were no fatalities on the job,
there were a large number of serious injuries as well as thousands of
workers who developed respiratory illnesses, some so severe as to
prevent workers from ever working again and surely not as construction
workers.
As noted by John Moran and Don Elisburg, leading construction
safety and health experts, who issued a report for the National
Institute for Environmental Health Sciences (NIEHS) entitled ``Worker
Education and Training Program Response to the World Trade Center
Disaster: Initial WETP Grantee Response and Preliminary Assessment of
Training Needs''
The situation created a very complex safety and health setting
in which there was confusion as to which occupational safety
and health standards were applicable, whether enforcement
agencies indeed had enforcement jurisdiction, and at what point
in time the WTC Disaster Site Safety and Health Plan would
become effective and operative.''
The report based on observations from September 22-27, 2002 found:
What emerged in this massive disaster and the protracted and
complex response is the fact that rescue, recovery, and other
activities have occurred in a scenario never anticipated by the
safety and health legislation or the subsequent standards/
regulations. The injury and illness reports for the initial
weeks of the search and rescue activity were at unacceptable
levels. Mover, the exposure data, as well as the potential for
serious exposure to toxic materials (including asbestos) among
the construction response workers, raises significant
concerns.\1\
---------------------------------------------------------------------------
\1\National Institute of Environmental Health Science (NIEHS),
(Worker Education and Training Program (WETP) Response to the World
Trade Center (WTC) Disaster: Initial WETP Grantee Response and
Preliminary Assessment of Training Needs.
---------------------------------------------------------------------------
However, from the outset, worker safety and health took a back seat
to production. While the pressure for such production was politically
motivated, contractors did not provide working conditions which were
protective of the safety and health of the workers they employed.
First, safety and health training of workers was woefully
inadequate. From the outset, it was clear that workers would be exposed
to a wide range of hazards. According to Moran and Elisburg, workers
needed to be trained in, at least, the following areas:
Asbestos
Lead
Confined Spaces
General Construction Safety/OSHA-10
Personal Protective Equipment
Respirator Protection (and remaining requirements of
1910.134)
Fall Protection
HAZCOM
Ergonomics\2\
---------------------------------------------------------------------------
\2\Ibid.
---------------------------------------------------------------------------
Unfortunately, training of workers did not commence until 78 days
after September 11th, in mid-to late November. However, the training
was an abbreviated version of what was required by OSHA standards. In
our opinion, the training was not sufficient to prepare workers to
protect themselves for the wide range of hazards to which they would be
exposed while working on the pile.
Second, despite the presence of a wide range of toxic substances,
including dusts and fumes, fit- testing to wear respirators was not
widely offered on the site until 36 days after September 11th.
According to Bruce E. Lippy, CIH, CSP, the Director of Research and
Special Projects for the Operating Engineers National Hazmat Program,
who was on the site working with heavy equipment operators,
``Compliance with respiratory protection was generally poor at Ground
Zero, less than one-half, and sometimes less than one-third, of the
heavy equipment operators were wearing their respirators while working
on the pile.''\3\ Even after fit testing was offered, at no time were
contractors in compliance with OSHA's respiratory protection standard.
For months into the disaster workers were allowed to wear respirators
if they had beards.
---------------------------------------------------------------------------
\3\Bruce E. Lippy, CIH, CSP, ``Safety and Health of Heavy Equipment
Operators at Ground Zero,'' American Journal of Industrial Medicine,
(2002) 42:539-542
---------------------------------------------------------------------------
The situation was complicated by several factors. First, lines of
authority were complex and unclear. According to Bruce Lippy,
``Participants at the December 2001, National Institute of Occupational
Safety and Health (NIOSH) conference on worker safety at the WTC noted
the lack of a clear command structure at the World Trade Center (site)
thwarted efforts to enforce PPE (personnel protective equipment) and
risk-reduction behaviors'.\4\
---------------------------------------------------------------------------
\4\Ibid
---------------------------------------------------------------------------
Since the Occupational Safety and Health Administration (OSHA) saw
its role during this period as that of a consultant to the Federal
Emergency Management Agency (FEMA), rather than as an enforcement
Agency, contractors did not have an incentive to require workers to
comply with OSHA's protective standards. The consequence was that
wearing a respirator was voluntary and contractors took little, if any,
responsibility for ensuring that workers wore appropriate personal
protective equipment.
Second, contractors created working conditions which guaranteed
that workers would suffer workplace injuries and illnesses. It is
difficult for any worker to wear a respirator for a full 8 hour shift
while doing heavy labor, let alone to work for 12 consecutive hours as
did the workers at the World Trade Center site. Contractors should have
developed a programs which included administrative controls, limiting
work to a reasonable period of time, giving workers time to rest and
recover. Moran and Elisburg noted that by the end of three and a half
weeks ``The intensity of effort, long hours, continual work seven days
a week has resulted in severe stress and fatigue, and a high rate of
injury and illness among those workers.''\5\ Work continued at this
pace for over 9 months with the consequence that thousands of workers
have been diagnosed with mental illness from the stress experienced
working at the World Trade Center site. Also, contractors did not take
into account that OSHA standards were written based on 8-hour
exposures. Levels of exposure to which a worker may be exposed over 8
hours which are deemed acceptable, may not be the same as those
appropriate for a 12-hour shift.
---------------------------------------------------------------------------
\5\Op.cit.
---------------------------------------------------------------------------
Third, the contractors did not issue a site safety and health plan
until 48 days after September 11th. By failing to develop safety,
detailing lines of authority and the responsibilities of each party
while work was proceeding, the contractors sent a message about the low
priority they gave to safety on the job.
IMMIGRANT WORKERS
While construction workers, firefighters, police, volunteers and
others were performing the rescue and recovery operations at Ground
Zero, day laborers were hired by private contractors to shovel the
thick dust and debris from the buildings near the World Trade Center
site. Their job was to make the inhabitable offices and residences in
lower Manhattan livable. An estimated 1,800 to 2,000 day laborers
worked immediately following the disaster and for many months
thereafter. These are primarily immigrant workers from Latin America,
Poland and parts of Africa. Most of them do not speak fluent English.
For the most part, contractors and their sub-contractors provided
these workers with no personal protection, special equipment or safety
training. Indeed, at the outset, many of the contractors were not
paying workers and it was only after the intervention of the New York
State Attorney General who intervened to force contractors to live up
to their contractual obligations.
Because of the contractors failure to provide training and
protective equipment, ,any of the workers have developed health
problems as a result of their work at the World Trade Center site. In
January of 2002, the Center for the Biology of Natural Systems, New
York Committee for Occupational Safety and Health and the Latin
American Workers Project provided medical screening to 410 workers
engaged in the cleanup of Lower Manhattan. Of the workers who
participated in the medical screening, nearly 100 percent had developed
respiratory illness requiring medical attention as a result of dust
exposure.
______
Responses by Joel Shufro to Additional Questions from Senator Boxer
Question 1. Do you think S. 1761 sends workers a signal that their
health may be sacrificed without recourse against a negligent
contractor? If so, do you think it creates a disincentive for the best
workers to join in cleanup efforts?
Also, could such a negative signal actually undermine cleanup
efforts rather than aid those efforts as contracting companies suggest?
Response. The legislation, if enacted, sends a clear message to
workers and volunteers: if you respond to a disaster situation, you are
doing so at your own risk. Worse, it allows contractors to operate
outside the legal framework which protects workers and residents from
negligent behavior of a contractor which adversely affects the health,
safety and property of workers, volunteers and community residents.
Workers responded to the catastrophe on 9/11/2001 out of many
different motivations: some did so out patriotism, others out of
humanitarianism, some out of altruism and others for economic reasons.
No matter what the reason that impelled workers to respond during a
time of emergency, they expected that they, and their families, would
be taken care if they are injured or made ill as a result of a
negligent contractor. Although it is hard to predict an individual's
behavior in the future, I think that the knowledge that participating
in a rescue or recovery operation would may not only endanger your own
health, but threaten the well-being of your families, would provide a
disincentive for participation.
Given the levels of unemployment among the immigrants, there will
always be a labor pool who will work-even under the most dangerous of
conditions. At the World Trade Center and in the Gulf Coast,
contractors have taken advantage of the vulnerability of workers,
particularly immigrants, to avoid Government safety and health and
environmental regulations. In both situations, the consequence has been
that thousands of workers have contracted occupational illnesses and
have suffered significant loss of income, family life and their own
health.
During the hearing on this legislation, contractors explicitly
stated and implicitly implied that if they were not able to escape
liability for their actions, they would be reluctant in the future to
respond in emergency situations. What this legislation does is to shift
the costs from the contractors to workers and holds them harmless for
violations of the country's environmental and labor laws.
This form of cost shifting is unacceptable and unproductive.
______
Statement of Craig S. King, Government Contracts Attorney
Mr. Chairman, I appreciate the invitation to provide testimony
regarding the impact of certain Government contractor liability
provisions--in particular, Senate bill 1761 (hereinafter ``S. 1761'' or
the ``bill'')--on environmental laws.
There is an important Federal interest in having the best, most
responsible private contractors respond promptly and without
reservation in the event of a disaster. In recent disasters, many
private contractors have responded selflessly, even heroically, to
provide the immediate response necessary to preserve life and property
and, in subsequent months, to help remediate and restore normalcy to
devastated communities.
However, disaster recovery efforts--even when performed responsibly
by these companies and in accordance with contracts awarded by Federal,
State and local Government authorities--expose private contractors to
potentially costly litigation and even liability. The risks of
litigation and potential liability that arise from contractors'
responsible, good faith performance in response to disasters threaten
to undermine future responses. The best, most responsible companies
must think twice before becoming involved in future disaster recovery
efforts, and may opt to stay away altogether. Equally important, the
price tag for disaster recovery efforts necessarily includes
compensation to contractors for the risks associated with the work--
which means significant increases in the Government's costs to the
extent contractors face lawsuits and potential liability for doing the
work directed by the Government.
Thus, the Federal Government (``Government'') has a strong interest
in establishing appropriate standards for liability of Government
contractors for actions taken under the exigencies of a disaster
response. Of course, any limitations on contractor liability must be
narrowly tailored to the needs of the disaster response, and must
complement, not undercut, the enforcement of environmental laws, labor
laws, safety laws and similar laws that promote additional Federal
interests. Also, any limitations on contractor liability must not
absolve private contractors from liability if they behave recklessly or
commit willful bad acts. Contractors must remain accountable for
improper conduct, as well as for proper performance of their contract
obligations. Even in the exigencies of a disaster response, there can
be no excuse for recklessness or willful misconduct.
The bill provides a reasonable approach to achieving the foregoing
objectives. Key provisions of S. 1761 that bear on Government
contractor liability are discussed below.
A. THE GOVERNMENT CONTRACTOR DEFENSE
Section 5(d) of S. 1761 provides that, if certain requirements are
fulfilled, a contractor can avail itself of the Government contractor
defense in the event of third-party litigation arising out of disaster
recovery efforts. As discussed more fully below, the essence of the
Government contractor defense is that a contractor stands in the same
legal position as the Government, and thus bears no liability to third
parties, if it does what the Government tells it to do in the contract
(provided, of course, that certain requirements are fulfilled).
The Government contractor defense is well established in the
Federal common law. The principles underlying the defense reach back as
far as 1940, when the U.S. Supreme Court determined that a contractor
that performed a Federal contract to build dikes to improve navigation
of the Missouri river was not subject to liability in a suit by a
landowner for erosion caused by the work. Yearsley v. W.A. Ross
Construction Co., 309 U.S. 18 (1940). In Yearsley, the Court found that
where there is a valid Federal contract, ``there is no liability on the
part of the contractor for executing [the Government's] will.''
In 1988, the U.S. Supreme Court set forth more fully the parameters
of, and rationale for, the Government contractor defense. In Boyle v.
United Technologies Corporation, 487 U.S. 500 (1988), the Court found
that a Federal interest exists in Government procurement contracts--
stating:
The imposition of liability on Government contractors will
directly affect the terms of Government contracts; either the
contractor will decline to manufacture the design specified by
the Government, or it will raise its price. Either way, the
interests of the United States will be directly affected.
Boyle, at 507.
The Court explained that the Government contractor defense is
rooted in the Government's sovereign immunity. The Court observed that
when Congress waived the Government's sovereign immunity in the Federal
Tort Claims Act to enable suits against the Government arising out of
acts of Government employees, Congress exempted from this consent to
suit any claim ``based upon the exercise or performance or the failure
to exercise or perform a discretionary function or duty on the part of
a Federal Agency or an employee of the Government, whether or not the
discretion involved be abused.'' Boyle, at 511. The Boyle Court
concluded that contractors should be subject to the same limits on
liability as the Government officials who direct the contractor's
actions. The Court stated: ``It makes little sense to insulate the
Government against financial liability for the judgment that a
particular feature of military equipment is necessary when the
Government produces the equipment itself, but not when it contracts for
the production.''
The Court reasoned as follows: the selection of the appropriate
design for military equipment is a discretionary function which should
not be second-guessed in tort litigation; the financial burden of tort
judgments against contractors will predictably raise their prices to
cover, or insure against, such contingent liabilities; and state law
which holds Government contractors liable for design defects does in
some circumstances present a ``significant conflict'' with Federal
interests and must be displaced. The Boyle Court embraced a standard
that liability for design defects in military equipment cannot be
imposed, pursuant to state law, when (i) the Government approved
reasonably precise specifications; (ii) the equipment conformed to
those specifications; and (iii) the contractor warned the Government
about the dangers in use of the equipment that were known to the
contractor but not to the Government.
1. The Government Contractor Defense Applies to Contractors that Enter
Government Contracts to Respond to Disasters
The Supreme Court's reasoning in Boyle and Yearsley applies equally
today in the case of contractors that enter Government contracts to
respond to disasters:
There is a Federal interest in having the best, most
responsible private contractors respond promptly and without
reservation in the event of a disaster.
Determinations as to the work that should be done to
respond to a disaster are a discretionary function of cognizant
Government officials--and should not be second-guessed in tort
litigation under State law.
The financial burden of tort judgments against contractors
will predictably raise the prices to cover, or insure against, such
contingent liabilities--or may lead the best, most responsible
contractors to decline to participate in disaster recover efforts.
Here, as in Boyle, it makes little sense to insulate the
Government against financial liability for the judgment as to work to
be performed in response to a disaster if the Government performs the
work itself, but not when it contracts for performance of the work.
It follows that state tort laws that would make Government
contractors liable for work performed in response to a disaster present
a ``significant conflict'' with Federal interests and must be
displaced. Applying the standards announced in Boyle, it is already
clear that liability for work done under Government contracts to
respond to disasters cannot be imposed, pursuant to state law, when:
(i) the Government approved a reasonably precise scope of work; (ii)
the work performed was in accordance with the scope of work; and (iii)
the contractor warned the Government about any dangers in performing
the work that were known to the contractor but not to the Government.
As set forth below, the effect of the bill is to avoid costly
litigation about the applicability of the Boyle standards in the case
of contracts undertaken pursuant to the exigencies of disaster
recovery.
2. The Effect and Limited Scope of the Applicability of the Government
Contractor Defense Under S. 1761
S. 1761 affirms that the Government contractor defense is
applicable to certain contracts entered for the purpose of disaster
recovery, and provides certainty and uniformity of approach to the
application of the defense by providing, among other things, a process
by which a cognizant Government official reviews the scope of work of a
contract and certifies that the contract is necessary to the disaster
recovery effort. More specifically, the Bill provides that the elements
of the Government contractor defense shall be deemed satisfied without
further proof in Court if the following conditions are satisfied:
i. A competent Government authority (i.e., the Corps of Engineers)
certifies in accordance with the Bill that it has reviewed the scope of
work set forth in the contract and the work is necessary for the
recovery of the disaster zone\1\ from a disaster. In order to so
certify, the Government authority must determine that a majority of the
scope of work set forth in the contract is for one or more of the
following five activities:
\1\A disaster zone is any region of the United States in which
major disasters relating to Hurricane Katrina were declared by the
President on August 29, 2005 under the Stafford Disaster Relief and
Emergency Assistance Act (42 U.S.C. 5170), or were so declared
thereafter if the disaster requires Federal assistance in an amount
that exceeds $15 billion.
---------------------------------------------------------------------------
a. The search, rescue, or recovery of individuals or property
dislocated by the disaster;
b. The demolition, removal, repair, or reconstruction of structures
or utilities damaged by the disaster;
c. The clean-up or remediation of property polluted by the
disaster;
d. The removal of debris deposited by the disaster (including
dredging); or
e. The de-watering of property flooded by the disaster.
ii. The contractor did not act fraudulently or with willful
misconduct in submitting information to the Government to obtain the
certification (Section 5(d)(3)), and did not act with recklessness or
willful misconduct in performing the work (Section 5(e)(3)).
The bill is subject to appropriately narrow limitations as to
geographic scope (i.e., the bill applies only to Government contracts
necessary for the recovery from Hurricane Katrina or a similarly
declared disaster that requires at least $15 billion in Federal
assistance--and does not apply to any other situation). In addition,
the Bill applies only to contracts involving the five specified types
of contracts.
S. 1761's provision for deeming the elements of the Government
contractor defense to have been satisfied is important to reduce risks
and costs, and to provide for uniformity of application of the defense.
In cases in which the Government contractor defense has been invoked,
there often has been protracted litigation over the application of the
Boyle standards. After considerable legal wrangling, it has by now
become reasonably well settled that, for example, Boyle applies in non-
military as well as the military contexts and applies to virtually all
types of Government contracts, and Government decisions with respect to
remediation efforts (e.g., EPA decisions regarding clean-up of
contaminated sites) are ``discretionary functions''. Nonetheless, there
has been considerable litigation to reach these conclusions, and legal
wrangling continues in particular cases to meet plaintiff's challenges,
for example, as to whether the Government's work specifications in that
particular case are sufficiently specific to support the Government
contractor defense.
The bill's process for the Government to provide a certification
that the scope of work of a contract fulfills one of the five purposes
of disaster recovery is a reasonable approach that will provide
certainty in the application of the Government contracts defense to
contracts for disaster recovery. The ``discretionary function''
requirement of Boyle is fulfilled by the certification. A cognizant
Government official will have reviewed the scope of work and determined
that the work is necessary for the recovery of the disaster zone from a
disaster. The limitation to a specified geographic region and to the
five specified types of activities keeps the application of the Bill
appropriately narrow. The exigencies of a disaster response warrant
providing the assurance that, for contracts within the five specified
disaster response activities, the Government's exercise of discretion
as to the work that will be performed will not be second-guessed in a
tort litigation.
Certainty and uniformity of approach are enhanced in a reasonable
manner by S. 1761's provisions for: (i) a Federal cause of action for
claims arising out of performance of a contract that is certified by a
Government official; and (ii) original and exclusive Federal
jurisdiction over lawsuits for loss of property, personal injury, or
death arising out of the performance of such a contract. Consistent
with U.S. Supreme Court's findings in Boyle and Yearsley, S. 1761
amounts to a Congressional declaration that: there is Federal interest
in having the best, most responsible private contractors respond
promptly and without reservation in the event of a disaster; a
certification by a cognizant Government official under the Act that
certain work is necessary for the recovery of the disaster zone is
``discretionary'' and should not be second-guessed under State tort
laws; and therefore state tort laws must be displaced absent evidence
of contractor fraud, recklessness or willful misconduct. As the Court
stated in Boyle, these are matters of Federal common law that involve
Federal preemption to displace state tort laws. It is appropriate that
such be resolved in the Federal courts. Indeed, one would be hard
pressed to think of issues more suited to be resolved in Federal,
rather than State, court.
Of course, this does not complete the analysis. Under the Act, the
Government contractor defense would apply only if the contractor did
not act fraudulently or with willful misconduct in submitting
information to the Government to obtain the certification, and did not
act with recklessness or willful misconduct in performing the work.
These seem to be reasonable parameters for proscribing wrongful conduct
of contractors vis-`-vis third parties--especially in view of the
exigencies associated with a disaster response. The ultimate effect is
that contractors are held accountable under the contract to perform the
work set forth therein--but they are not liable to third parties for
the Government's decisions as to what work should be done or for their
non-reckless performance of that work. Absent recklessness of willful
misconduct, third parties must look to the Government for any available
relief--if not through tort litigation against the Government, then in
some other manner. But where a private suit against the Government is
barred by sovereign immunity (i.e., is not available under the Federal
Tort Claims Act), there is no alternate route under the law to sue a
contractor that performed the job the Government asked it to do.
Private litigants simply cannot recover indirectly from contractors
that which Federal law bars them from recovering directly from the
Government. This is the essence of the U.S. Supreme Court's holdings
relative to the Government contractor defense. The bill recognizes what
is embodied in Federal common law, and provides assurances of certainty
and uniformity of approach in the application of the Government
contractor defense for contracts entered to respond to disasters.
What S. 1761 means as a practical matter is that, for contracts
certified as necessary for disaster relief, there will be no litigation
as to the application of the Boyle standards. The first Boyle standard
(i.e., Government approval of a reasonably precise scope for the work)
is satisfied by the certification process, and thus is appropriately
deemed fulfilled under the bill. The second Boyle standard (i.e., the
work was performed in accordance with the scope of work), is deemed
fulfilled subject to a showing that the contractor was reckless or
committed willful misconduct. The Bill does not provide protection for
contractor conduct that is not covered by the second Boyle standard--
i.e., activities that are outside of the scope of work.
Finally, the deeming of the third Boyle standard (the contractor's
obligation to warn the Government of dangers about which the contractor
is aware but not the Government) means that contractors may proceed
with disaster recovery work directed by the Government even though many
risks are unknown and unknowable. The bill eliminates costly litigation
over what the contractor knew or did not know in undertaking work in a
disaster relief situation. It is inherent in the nature of disaster
relief work that many risks are unknown and unknowable. Government
officials and contractors make good faith efforts to act in a prudent
manner, but cannot fully assess the risks. By deeming the Boyle
elements to have been satisfied, a contractor can proceed immediately
with disaster recovery work as directed by the Government without the
type of risk assessments that may be expected in normal construction
and remediation efforts but that cannot reasonably be done in a
disaster relief situation.
3. Potential Amendments to S. 1761
As discussed below, the subcommittee may wish to consider an
alteration to the provisions of S. 1761 that designate the Army Corps
of Engineers (``Chief of Engineers'') as exclusively responsible for
the review and certification of Government contracts under the Bill.
Government contracts certified under the Bill might be awarded by
the Army, FEMA or other Federal agencies. In addition, state and local
Governments may enter contracts for work in the five areas identified
in the Act, and then request that FEMA reimburse them with Federal
funds. As I understand it, if FEMA were to deny reimbursement for a
contract awarded by a state or local Government, the Bill nonetheless
would apply and such a State or local contract could qualify for
certification.
S. 1761 contemplates that, in order for the certification
provisions to apply, the Chief of Engineers will review the scope of
work and provide the requisite certification for all disaster recovery
contracts--whether issued by a Federal Agency or a state or local
Government. This imposes a burden on the Chief of Engineers that may be
undue and unnecessary. It also divorces the certification process from
the contract award process (and from the decision whether to provide
Federal funds to reimburse a state or local Government contracts)--and
this has been shown in another context not to be a particularly
effective approach.
The certification process described in S. 1761 is similar to the
process for certifying antiterrorism technologies under the SAFETY Act.
In the SAFETY Act, Congress invited companies to apply to have their
technologies certified by the Government as desirable for use against
terrorism. In the event of lawsuits arising out of the use of a
certified technology, the Government contractor defense applies and, as
under the Bill at issue here, the elements of the Government contractor
defense are deemed to have been satisfied through the certification.
The Department of Homeland Defense was given exclusive responsibility
for certifying antiterrorism technologies under the SAFETY Act. The
certification process was divorced from the procurement process. The
result has been that few certifications have been granted, and the
certification process has not been very effective in meeting the needs
of the companies or Government procurement officials.
The subcommittee may, instead, want to consider having the
certifications done by: (i) in the instance of a contract awarded by a
Federal Agency, the Government contracting officer who awards the
Federal contract; and (ii) in the instance of a contract awarded by a
state or local Government, by the Federal official who determines
whether to reimburse the contract with Federal funds. As to the first
of these, the Government contracting officer would be well suited to
review the scope of work and make the appropriate determinations, and
could do so as part of the contract award process. Nobody is in a
materially better position to make the type of determinations required
by the Act--and having the contracting officer provide the
certification likely would result in little or no delay due to the need
for a certification. As to the second point, the Federal official who
reviews the scope of work for reimbursement would be well positioned to
make the certification. For State and local contracts that are not
submitted for Federal reimbursement, an alternate mechanism for
providing the certification may need to be developed--or the committee
might choose to exclude such contracts from the coverage of the Act.
B. WHAT THE BILL DOES NOT DO
As a conclusion, it may be appropriate to emphasize what the bill
does not do. The bill does not abrogate the applicability of any other
laws or regulations. All environmental laws would continue to apply.
Federal State and local Government enforcement officials would continue
to be able to take whatever steps they deem necessary to enforce full
compliance with the environmental laws, and to punish noncompliance. As
I understand it, the bill would limit certain private rights of action,
but would do nothing to impair the ability of cognizant Federal, State
and local officials to fully enforce these laws.
Similarly, all Federal, State and local labor and employment laws
would continue to apply. The rights of cognizant Government officials,
individual applicants and employees to enforce these laws in court are
unaffected by the bill.
The same holds true for health and safety laws. The enforcement
authorities of the U.S. Occupational Safety and Health Administration
are not affected by the bill.
Perhaps most important, as discussed above, the bill does not limit
the liability of Government contractors for recklessness or willful
misconduct, nor does it limit the ability of the Government to require
proper performance of contract obligations. The bill does not allow
contractors to escape liability for bad acts.
C. CONCLUSION
The thrust of S. 1761 is merely to put contractors that perform
Government contracts on the same legal footing as the Government
personnel who award them those contracts. It provides for cognizant
Government personnel to review the scope of work for such contracts,
and determine that the work is necessary to the disaster recovery
effort. With such deliberation and exercise of discretion on the
Government's part, it is fair and reasonable for Contractors to proceed
with the work promptly and without fear of legal liability so long as
they are not reckless and commit wrongful misconduct. In view of the
exigencies of disaster response, and the Federal interest in having the
best, most responsible contractors available for recovery efforts, the
bill seems a measured and appropriate approach.
Thank you.
______
Response by Craig King to an Additional Question from Senator Thune
Question 1. Because Section 4 of S. 1761 waives an individual right
of action for contractors who carry out a Government disaster contract,
can you explain whether or not this provision waives a contractors
obligation to follow existing Federal environmental laws?
Response. The waiver of an individual right of action that is
contained in S. 1761 would not diminish contractors' obligations to
follow existing Federal environmental laws. All Federal environmental
laws would continue to apply. Federal, State and local enforcement
officials would continue to enforce compliance with those laws. There
is nothing in S. 1761 that would abrogate the applicability of any
other laws or regulations, or impair the enforcement of the
environmental laws by Government officials.
______
Response by Craig King to an Additional Question from Senator Boxer
Question 1. Mr. King, if a contractor is negligent in its
performance of a contract and injures or kills an innocent citizen in a
declared disaster as described in S. 1761, will the contractor receive
liability protection and the victim lose their claim unless the victim
can show that a Government contractor acted fraudulently or with
willful misconduct in merely submitting information to the Chief of
Engineers for the Army Corps? More specifically, this information is
the material that the Chief of Engineers uses to determine whether the
work is necessary for the recovery of a disaster zone from a disaster,
including a review of the scope of work that the Government contract
does or will require and that the work includes cleanup, debris
removal, reconstruction, de-watering and other such tasks.
Response. The thrust of S. 1761 is that a contractor who is doing
what the Government directed it to do will not be second-guessed in
tort litigation unless it can be shown that the contractor acted with
``recklessness or willful misconduct.'' The liability protection
derives from the Government contractor defense--which is well
recognized in the common law and provides that a contractor stands in
the same legal position as the Government, and thus bears no liability
to third parties, if it does what the Government tells it to do in a
contract. Sovereign immunity shields Government officials from third-
party suits when these officials make the type of discretionary
decisions that are necessary in disaster relief efforts. The courts
have made clear that in instances where the decisions of Government
officials are insulated from liability, it makes little sense to not
similarly insulate contractors who implement such Government decisions.
It would not be appropriate for this protection to apply to
contractors who fail to implement dutifully the Government decisions
and instead commit wrongful acts that cause injury. Thus, S. 1761
specifically provides that a contractor would be subject to full
liability to third parties arising from the contractor's reckless acts
or willful misconduct. More specifically, S. 1761 provides that the
liability protections shall not affect ``the liability of any person or
entity for recklessness or willful misconduct.''
The question suggests that the Senator may believe that, in holding
contractors accountable for any wrongful acts, it is more appropriate
to use a standard of ``negligence'' rather than ``recklessness or
willful misconduct.'' This is certainly a debatable proposition. Under
a negligence standard, any person adversely affected in a disaster
could sue so long as they could come up with a plausible theory as to
why the Government's decision, or the contractor's implementation of
it, was not ``reasonable''. This seems too loose a standard for
application in the exigencies of a disaster response. Disaster
situations often require prompt, decisive action by the Government and
its contractors with little time for the type of engineering, planning
and risk assessments that would be normal in other circumstances. Under
a negligence standard, a contractor could perform precisely and
dutifully in accordance with the Government's direction and still face
suits for ``negligence'' based on third-party arguments that the
Government's decisions were not reasonable. Under the exigent
circumstances of disaster recovery, such after-the-fact second-guessing
of the actions of the Government and its contractors, absent evidence
of recklessness or willful wrongdoing, seems highly likely to be
unfair--and to create unwise legal impediments to contractors pitching
in when needed in future disaster recovery situations. By not using a
``negligence'' standard, S. 1761 provides a measure of deference in
disaster recovery situations to Government decision makers and the
contractors who implement the Government's decisions. That deference
seems warranted under the exigencies of disaster recovery efforts.
That does not end the issue. It may well be appropriate to provide
compensation to those who suffer injuries in disaster recovery
situations even if the contractor was not reckless or willful. It does
not necessarily follow, however, that contractors must be, in effect,
the default source of such compensation. During the hearing, the panel
participants discussed several potential approaches for providing
compensation to parties injured in disaster recovery situations through
no recklessness or willfulness of a contractor. Congress should
seriously consider enacting one or more of these approaches, or some
other appropriate measure, to ensure that individuals injured in
disaster recovery situations receive due compensation.
Finally, the question refers to the provision in S. 1761 that
allows for defeating the presumption that the elements of the
Government contractor defense have been satisfied. The presumption can
be defeated based upon a ``showing that a person or entity awarded a
Government contract acted fraudulently or with willful misconduct in
submitting information'' to the Chief of the Corps of Engineers. The
reference in the question seems to be based on an incomplete
understanding of S. 1761. Certainly, the presumption that the
Government contractor defense applies can be defeated by showing fraud
or willful misconduct in submitting the information to the Government.
However, the more relevant provision for purposes of the question is
the very last clause of S. 1761, which was discussed above. That
provision makes the liability protections completely inapplicable--and
thus enables suits by injured parties--where a contractor acts
recklessly or with willful misconduct in performing disaster recovery
activities.
______
Response by Craig King to an Additional Question from Senator Jeffords
Question 1. Mr. King, in your testimony, on page 3, you discuss the
Government contractor liability defense and relevant case law on this
defense. You have interpreted this case law to provide that private
litigants cannot recover indirectly from contractors when they are
barred under Federal law from recovering directly from the Government.
How does the bill's bar against private parties filing claims against
contractors for Federal environmental laws affect a citizen's ability
to sue a negligent contractor whose negligence results in harm to human
health and the environment?
Response. The bar in S. 1761 against private parties filing claims
for violations of the Federal environmental laws does not bar private
party claims that do not arise under the Federal environmental laws.
While enforcement of the environmental laws is reserved for Government
enforcement authorities, a party injured by a contractor's actions in a
disaster recovery effort could bring suit against the contractor on
other appropriate grounds. As discussed above, there is room for honest
debate as to those other appropriate grounds--i.e., whether the
appropriate legal standard for such suits by injured parties is
``negligence'' or ``recklessness or willful misconduct.'' S. 1761
embraces the notion that under the exigencies of a disaster recovery
there should be a measure of deference to Government decision makers
and contractors who implement the Government's decisions--and that
therefore it is appropriate that a contractor doing the Government's
bidding be immune from suits unless the contractor is reckless or
commits willful misconduct.
______
Statement of Steven L. Schooner, Co-Director, Government Procurement
Law Program, George Washington University Law School
Chairman Thune, Ranking Member Boxer, and members of the committee,
I appreciate the opportunity to appear before you today to discuss the
impact of certain Government contractor liability proposals on
environmental laws. My discussion of S. 1761, the Gulf Coast Recovery
Act, and its treatment of Government contractor liability, derives from
my experience in Federal procurement policy, practice, and law. This
committee's focus upon, and interest in improving, the procurement
process is an important and valuable public service.
From a public procurement perspective, this legislation is entirely
unnecessary. The bill would expose the public, specifically
individuals, to unnecessary risk and harm. Moreover, the bill would
discourage responsible contractor behavior and, instead, encourage
behavior that is harmful to the public. Further, this bill reflects a
disconcerting trend of seemingly opportunistic post-crisis behavior.
Specifically, the bill seeks to capitalize upon hurricane Katrina's
devastation to obtain, for the contractor community, long-sought after,
and long-denied, insulation from liability. This type of opportunistic
behavior is not only ill-conceived, but it is harmful to the
credibility of the Federal Government's procurement process.
THIS LEGISLATION IS ENTIRELY UNNECESSARY
The bill's findings assert that ``well-founded fears of future
litigation and liability under existing law discourage contractors from
assisting in times of disaster.'' Experience suggests that this
assertion, the premise underlying S. 1761, is, at best, hyperbole and,
at worst, simply false. I have seen nothing that suggests that a
significant number of the nation's (or the world's) best contractors
have been discouraged from seeking the United States Government's
business.
This tactic is not new. Throughout my career (in the private
sector, in the Government, and in academia), I have heard apocalyptic
tales of monumental barriers to entry, erected by the Government, that
frighten firms away from seeking, or continuing to seek, the
Government's business. (As a procurement policy official, I most often
confront these assertions in the context of efforts to eliminate the
qui tam provisions in the False Claims Act.)\1\ What I have not seen--
and what is again absent here--is empirical data or concrete
information supporting the assertion. This absence of support is
palpable.\2\
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\1\U.S.C. 3730.
\2\Here, history is instructive. At similar hearings 20 years ago,
Senator Grassley asked the Aerospace Industries Association [AIA]
whether any members of its association ``no longer bid on Government
contracts because of the fear of liability suits?'' AIA asserted that
it lacked sufficient information to respond at the hearing and, in a
subsequent written response, was no more convincing. Even responding
``on a non-attribution basis[,]'' AIA failed to identify a single firm.
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Q: Has any AIA member company declined to bid for or accept the
award of a Government contract because that company could not
be indemnified by the Government for catastrophic risk?
A: The consequences of unusually hazardous or nuclear risks
arising under Government contract, generally, do influence the
business decision process.
Letter from Lloyd R. Kuhn to the Honorable Charles E. Grassley,
June 28, 1985, S. Hrg. 99-321, Hearing before the committee on the
Judiciary on S. 1254, U.S. Senate, 99th Congress, 1st Session (Serial
No. J-99-32, June 11, 1985) at 96-97.
Every day, the best contractors, small and large, domestic and
foreign, aggressively vie for a share of the Government's $300 billion
procurement budget. At one end of the spectrum, firms compete for the
lion's share of the Government's contracts, which might be described as
garden-variety or commercially available work, providing, for example,
office supplies, custodial services, construction, or information
technology support. At the other end of the spectrum, a far smaller
population of firms compete to design and build unique systems
involving the most advanced, cutting edge technology imaginable. In a
fraction of contracts found in the latter group, where the work can be
extraordinarily complex and dangerous, unique rules have evolved to
insulate contractors from certain liabilities. But a stark, deep chasm
distinguishes these extraordinary contractual actions from the
ordinary. S. 1761 does not appear to cover extraordinary work; rather
the bill specifically describes seemingly ordinary tasks such as debris
removal, logistics, reconstruction, and basic public services.
Accordingly, extraordinary measures are neither necessary nor
appropriate.
ALTERING THE EXISTING RISK ALLOCATION REGIME SENDS THE WRONG MESSAGE
S. 1761 intends to insulate certain contractors from liability,
even when the contractor is at fault. If that is the case, the bill's
mechanism is flawed, particularly in its allocation of risk of harm
between the public, contractors, and the Government.\3\ As a matter of
policy, we should prefer a solution that allocates risk to the superior
risk bearer. Here, it seems reasonable to conclude that the superior
risk bearer is the party best positioned to, among other things, (1)
appraise, in advance, the likelihood that harm will occur; (2) avoid
the occurrence of the risk; (3) insure against the risk; or (4) bear
the cost of the risk. This bill appears to do the exact opposite. S.
1761 allocates the risk of loss to the individual, the party with the
least opportunity to anticipate, assess, or avoid the risk, insure
against it, or bear its costs. Ultimately, however, what is
particularly troubling is that the bill dilutes contractors' incentives
to assume responsibility for their work and adopt prudent risk
avoidance strategies.\4\
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\3\Generally, the Government expects contractors to purchase
insurance and, accordingly, the Government willingly pays contractors
to obtain that insurance. Prospective indemnification is employed only
in extraordinary circumstances (for example, in the nuclear industry)
where contractors either cannot obtain insurance for a certain risk or
the cost of insurance would be prohibitive. See, e.g., 48 C.F.R.
50.403 (indemnification for unusually hazardous or nuclear risks);
Public Law No. 85-804. Thus, indemnification--through which the
Government, in effect, self-insures rather than reimbursing the
contractor for its insurance costs--derives from a failure of the
marketplace, specifically the insurance industry. See, generally, Ralph
C. Nash & John Cibinic, Risk of Catastrophic Loss: How to Cope, 7 NASH
& CIBINIC REP. 44 (July 1988). But bear in mind that the
indemnification debate focuses upon prospective allocation of risk
between the Government and its contractors--it does not suggest that
members of the public, if injured, should have no remedy.
\4\As the Defense Department explained twenty years ago:
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. . .Indemnification creates a difficult balance. In the
commercial world, risks of third party liability are covered by
insurance or are assumed by the manufacturer. . . We are
concerned that blanket indemnification may reduce the
contractors' incentive to assume responsibility for the
performance of their products. . . We prefer to contract in an
environment similar to the commercial marketplace where
companies must take all the steps that would be required of a
prudent businessman in order to ensure the safety of the
company's product.
Statement of Mary Ann Gilleece, Deputy Under Secretary of Defense
for Acquisition Management, S. Hrg. 99-321, Hearing before the
committee on the Judiciary on S. 1254, U.S. Senate, 99th Congress, 1st
Session (Serial No. J-99-32, June 11, 1985) at 30.
Again, under S. 1761, the Government neither will take
responsibility for its contractors' actions, nor will the Government
permit the public to hold those contractors accountable. The bill
appears to determine, in advance, that neither the Government nor its
contractors would be held responsible if contractors injured (or
killed) people or damaged (or destroyed) personal or commercial
property.\5\
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\5\This seems troubling from a behavioral standpoint.
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The immediate effect of the [Government contractor] defense is to
place the full cost of mishaps on injured parties who, but for
Government involvement, would be able to shift that cost to the
contractors. Conversely, assimilating contractor liability to normal
tort rules might advance traditional objectives of compensating injured
parties, spreading losses, or implementing generalized notions of
fairness.
Ronald A. Cass & Clayton P. Gillette, The Government Contractor
Defense: Contractual Allocation of Public Risk, 77 Va. L. Rev. 257, 260
(1991) (emphasis added, footnotes omitted).
Protection of the public from harm--rather than protection of the
economic interests of contractors--must come first.\6\ In contrast,
this legislation appears to mandate that: (1) the party at greatest
risk should be the individual, a member of the public, who is harmed;
(2) neither the Government nor the Government's contractors should bear
responsibility for harm inflicted upon the public; and (3) this outcome
should prevail even if the insurance market could better allocate, in
advance, the risk of harm. Again, these issue of contractor liability
is not new.\7\ But the solution--that the public should bear the risk
of loss, rather than the Government or its contractors--is as novel as
it is unappealing.
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\6\Consider the 1963 report on catastrophic accidents in Government
programs prepared by the Legislative Drafting Research Fund of Columbia
University on behalf of the National Security Industrial Association.
Albert J. Rosenthal, Harold L. Korn & Stanley B. Lubman, Catastrophic
Accidents in Government Programs, 72-76 (1963). The report staked out
the immensely reasonable conclusion that: ``The most important
objective--is the assurance of prompt and adequate compensation of the
public.'' Id., Summary at 12.
\7\The Department of Justice (DOJ) objected to a 1985 bill to,
among other things, reduce liability of contractors, because it did not
``believe that Government indemnification of contractor losses is the
appropriate way to solve the problems faced by Government contractors
because of changing tort liability--'' S. Hrg. 99-321, Hearing before
the committee on the Judiciary on S. 1254, U.S. Senate, 99th Congress,
1st Session (Serial No. J-99-32, June 11, 1985). ``In the past few
years, the efforts of Government contractors to transfer their product
liability exposure to the Government has increased dramatically.'' Id.
at 22. Although DOJ acknowledged ``that the changes in the tort system
have created problems for contractors, [it] did not believe that
indemnification is an appropriate response, and certainly it does not
correct the underlying reasons for these problems.''
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MISUSE OF THE GOVERNMENT CONTRACTOR DEFENSE
Unfortunately, the bill attempts to apply, quite broadly, the
``Government contractor defense'' to disaster relief. In so doing, the
bill turns the Government contractor defense on its head. S. 1761 would
create a ``rebuttable presumption that--all elements of the Government
contractor defense are satisfied; and--the Government contractor
defense applies in the lawsuit.'' This would be a dramatic (and
inappropriate) application of the Government contractor defense.
The Government contractor defense, as it has been interpreted,
seeks to insulate (historically, supply) contractors that explicitly
follow Government direction to their detriment.\8\ To the extent that
contractors exercise significant amounts of discretion in the
performance of their contracts, however, the defense has not protected
them.\9\ This point is particularly important. When the Government
rushes to identify contractors, hastily drafts its contracts (or merely
relies upon open-ended, vague statements of work), and loosely manages
contract performance, the Government necessarily delegates the exercise
of discretion to contractors in performing their contracts.
Specifically, contractors must weigh, among other things, haste versus
caution, or, to some extent, profits versus care.\10\ It is troubling
enough that the Government would cede such important decisions to
contractors; but it seems strange that the Government, prospectively,
would insulate its contractors from the fiscal ramifications of those
decisions.
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\8\See, e.g., Boyle v. United Technologies Corp., 487 U.S. 500
(1988).
\9\The Boyle decision seems to be providing the logical framework--
to decide whether the Government contractor defense will protect
contractors from tort liability--[T]he Supreme Court has given a set of
straightforward requirements--the most important of which is the
Government approval requirement.--[W]here the Government Agency is a
full participant in the design process, the defense can be predicted to
be a winner. In contrast, if the Government has not participated in
design the contractor will find it very hard to use the defense. If the
plaintiff can prove that the defect occurred in the manufacturing
process, the defense will be of little or no value to the contractor.
Ralph C. Nash & John Cibinic, Postscript: The Circuit Court View of the
Government Contractor Defense, 8 Nash & Cibinic Rep. 52 (August
1990).
\10\In removing debris, for example, a contractor faces significant
economic choices with regard to, among other things, (1) the experience
of its personnel (e.g., drivers with spotless safety records might
demand higher wages); (2) the quality and maintenance of its equipment
(newer, better maintained trucks likely cost more to purchase or
lease); (3) the means of performance (the minimally acceptable
environmental standards likely cost less than more current, potentially
cleaner and/or safer technologies); or (4) time management (truck
drivers might save time and money by transporting hazardous waste
through, rather than avoiding, residential communities).
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This scenario is dramatically different from, for example, the
types of contracts intended to be covered by the Support Anti-Terrorism
by Fostering Effective Technologies Act of 2002 (SAFETY Act).\11\ The
SAFETY Act sought to encourage the development, and protect the use of,
new or evolving (and, implicitly, unproven) technologies. The
underlying assumption of the SAFETY Act is that, without insulation
from liability, contractors might not otherwise permit the Government
to deploy these technologies, known as qualified anti-terrorism
technologies (QATTS), to combat terrorism. In other words, the
contracts involve unusual work or technologies (or unusual use of
technologies) that is perceived as extraordinarily risky.\12\
---------------------------------------------------------------------------
\11\Pub. L. 107-296, 861. See, generally, Homeland Security
SAFETY Act page at https://www.safetyact.gov/DHS/SActHome.nsf/
Main?OpenFrameset&6HYKFL;Alison M. Levin, Note: The SAFETY Act of 2003:
Implications for the Government Contractor Defense, 34 Pub. Cont. L.J.
175 (2004).
\12\This point cannot be over-emphasized. For a good articulation
of this principle, see, e.g., Patrick E. Tolan, Jr., Environmental
Liability Under Public Law 85-804: Keeping the Ordinary Out of
Extraordinary Contractual Relief, 32 Pub. Cont. L.J. 215 (2003)
(emphasizing the unique (or, specifically, extraordinary) nature of the
contractual requirements, particularly in research and development,
that proved uninsurable because they involved, for example, nuclear
power or highly volatile missile fuels).
---------------------------------------------------------------------------
Here, the statute would apply to far more common, if not mundane,
tasks. Although clearly important, by and large, the contracts that
this bill would cover involve routine tasks such as search and rescue;
demolition and repair; debris removal; and de-watering of flooded
property. In all such cases, the existing standard of care seems
reasonable. Moreover, the rather mechanical certification
responsibility assigned to the Chief of Engineers is a far cry from the
highly judgmental and discretionary decision required of the Homeland
Security Department Under Secretary pursuant to the SAFETY Act.
Specifically, the SAFETY Act employs a number of criteria,\13\ most, if
not all, of which are absent here. For example, it is difficult to
create a scenario in which there would be a ``substantial likelihood
that the technology [involved in, e.g., debris removal] will not be
deployed unless the [Gulf Coast Recovery Act] protections are
extended.''
---------------------------------------------------------------------------
\13\The seven criteria include: prior United States Government use
or demonstrated substantial utility and effectiveness; availability of
the technology for immediate deployment in public and private settings;
existence of extraordinarily large or unquantifiable potential third
party liability risk exposure to seller (or another provider of the
technology); substantial likelihood that the technology will not be
deployed unless Safety Act protections are extended; magnitude of risk
exposure to the public if the technology is not deployed; evaluation of
all scientific studies that can be feasibly conducted to assess the
capability of the technology to substantially reduce risks of harm; and
whether the technology would be effective in facilitating the defense
against acts of terrorism. See, e.g., Homeland Security SAFETY Act page
at https://www.safetyact.gov/DHS/SActHome.nsf/Main?OpenFrameset&6HYKFL.
---------------------------------------------------------------------------
OPPORTUNISTIC POST-CRISIS LEGISLATION HARMS THE PROCUREMENT PROCESS
As discussed above, this legislation may be good for contractors,
but it does not appear to be in the best interests of the nation.
Frankly, it is difficult to understand why Congress would rush to
protect, prospectively, those contractors that, in performing post-
Katrina construction work, unnecessarily fail to take precautions,
inadequately supervise employees, or employ unduly risky processes or
substandard materials or equipment that place the public's health,
safety, and property at risk. Unfortunately, this bill seems to further
the trend, since hurricane Katrina, to utilize the disaster to pursue
public policies that otherwise might prove untenable.
For example, in its $51.8 billion post-Katrina emergency
supplemental appropriation, Congress hastily raised the ``micro-
purchase threshold'' (which, in effect, serves as the charge card
purchase cap) to $250,000 for purchases relating to relief and recovery
from Hurricane Katrina.\14\ That's a 100 percent increase on the
typical $2,500 limit and a completely different animal from the $15,000
limit previously imposed during contingencies and emergencies.
Fortunately, the administration soon thereafter chose to bar further
use of this authority.\15\ That this authority became law is
breathtaking.\16\ At the time, more than 300,000 Government purchase
cards were in circulation. A mountain of Inspector General reports,
Government Accountability Office studies, and Congressional hearings
have demonstrated that the Government's management of its charge cards
has been abysmal. In August, the White House issued long overdue
guidance mandating fundamental training and risk management
policies.\17\ Moreover, the effect upon small businesses would have
been devastating.
---------------------------------------------------------------------------
\14\Public Law 109-62, 101(2).
\15\Memorandum from Clay Johnson III, Deputy Director for
Management, Limitation on Use of Special Micro-purchase Threshold
Authority for Hurricane Katrina Rescue and Relief Operations (October
3, 2005).
\16\Steven L. Schooner, Fiscal Waste: Priceless, L.A. Times
(September 14, 2005).
\17\Appendix B to Revised OMB Circular A-123, ``Improving the
Management of Government Charge Card Programs.''
---------------------------------------------------------------------------
The same can be said for the administration's suspension--and
subsequent repeal of the suspension--of the Davis-Bacon Act.\18\ The
suspension of this law, which requires that workers on Federal
construction contracts be paid prevailing wage rates, would have
ensured that contractors could profit from the massive reconstruction
effort without permitting minimum wage workers to receiving prevailing
wages that might permit them to rise into the lower middle class. The
administration's putative explanation--that without suspension of the
Davis-Bacon Act, insufficient labor would be available--was simply
disingenuous.
---------------------------------------------------------------------------
\18\Proclamation by the President: Revoking Proclamation 7924
(November 3, 2005), http://www.whitehouse.gov/news/releases/2005/11/
20051103-9.html.
---------------------------------------------------------------------------
In both of these examples, the rush to change procurement policies
subsequently was overcome by reason. Hopefully, reason will prevail
here as well. Bear in mind that knowledgeable Federal procurement
executives--both with regard to Iraq and post-Katrina relief understand
that the current procurement regime contains sufficient flexibility for
the Government to meet its purchasing requirements in times of
crisis.\19\
---------------------------------------------------------------------------
\19\``Iraq--taught us that many of the flexibilities contained in
the Federal Acquisition Regulation--are poorly understood by many in
Congress and the media--These flexibilities include limited as opposed
to full and open competition, higher levels under which purchases can
be made instantly, and more. Capitalizing on these flexibilities
enables us to meet the demands for speed and agility integral to any
recovery effort.'' Stan Soloway, Baghdad's Lessons for Orleans, GOV.
EXEC. (Oct. 1, 2005), http://www.govexec.com/features/1005-01/1005-
01advp2.htm. Last year, the Defense Department created the Joint Rapid
Acquisition Cell (JRAC), because: ``Some combatant commanders, as well
as acquisition experts, don't realize that many legal requirements that
tend to bog down military contracts don't apply during wartime--'' See,
e.g., http://www.defenselink.mil/news/Nov2004/n11242004--
2004112405.html.
---------------------------------------------------------------------------
THIS LEGISLATION IGNORES THE GOVERNMENT'S MOST CRITICAL PROCUREMENT
PROBLEM
I would be remiss if I failed to take this opportunity to address a
pressing matter that cries out for Congressional attention and
intervention.\20\ The Federal Government must devote more resources to
the acquisition function. This investment is urgent given the
combination of the 1990's Congressionally-mandated acquisition
workforce reductions, the administration's pressure to outsource,\21\
and the dramatic increase in procurement spending since the September
11, 2001 attacks and, now, hurricane Katrina.\22\
---------------------------------------------------------------------------
\20\See also, Steven Kelman & Steven L. Schooner, Scandal or
Solution?, GOVEXEC.COM
http://www.govexec.com/dailyfed/1105/110705ol.htm (November 7, 2005).
\21\Outsourcing, or its more palatable pseudonym, ``competitive
sourcing,'' has been one of five Government-wide initiatives in the
Bush management agenda. See, e.g., Executive Office of the President,
Office of Management and Budget, The President's Management Agenda,
Fiscal Year 2002, www.whitehouse.gov/omb/budget/fy2002/mgmt.pdf.
``President Bush is a major advocate of--hiring private firms to do the
Government's work--'' Dru Stevenson, Privatization of Welfare Services:
Delegation by Commercial Contract, 45 Ariz. L. Rev. 83 (2003), citing,
David J. Kennedy, Due Process in a Privatized Welfare System, 64 Brook.
L. Rev. 231, 232 (1998) (referencing ``Governor Bush's effort to
privatize most of Texas' welfare system--in his attempt to make a name
for himself--that could carry him to national office.'' See also,
Matthew Diller, Form and Substance in the Privatization of Property
Programs, 49 UCLA L. Rev. 1739, 1763, n. 94 (2002) (``Governor Bush
sought to hand the administration of the state's welfare system over
to--Lockheed Martin--and Electronic Data Systems--'').
\22\See, generally, Steven L. Schooner, Feature Comment--Empty
Promise for the Acquisition Workforce, 47 The Government Contractor
203 (May 4, 2005), available at http://ssrn.com/abstract=719685; Griff
Witte & Robert O'Harrow, Jr, Short-Staffed FEMA Farms Out Procurement,
Washington Post D01 (September 17, 2005).
---------------------------------------------------------------------------
Congress has been quick to call for more auditors and inspectors
general to scrutinize Katrina-related contracting. That's a responsible
gesture. But there has been no corresponding call for more contracting
experts to perform the many functions that are necessary for the
procurement system to work well. In order to serve the taxpaying public
and meet the needs of Agency customers, acquisition professionals must
promptly and accurately describe what the Government wants to buy,
identify and select quality suppliers, ensure fair prices, structure
contracts with proper monetary incentives for good performance, and
manage and evaluate contractor performance.\23\
---------------------------------------------------------------------------
\23\A simple Iraq ``lesson learned'' was that, if the Government
relies heavily upon contractors, the Government must maintain, invest
in, and apply appropriate acquisition professional resources to select,
direct, and manage those contractors. Unfortunately, insufficient
contract management resources were applied. See, generally, Steven L.
Schooner, Contractor Atrocities at Abu Ghraib: Compromised
Accountability in a Streamlined, Outsourced Government, 16 Stanford Law
& Policy Review 549 (2005). For example, General Fay poignantly
articulated: ``[T]here was no credible exercise of appropriate
oversight of contract performance at Abu Ghraib.'' MG George R. Fay,
Investigating Officer, AR 15-6 Investigation of the Abu Ghraib
Detention Facility and 205th Military Intelligence Brigade, at 52 (
``the Fay Report''). This problem exists Government-wide: ``[T]he
administration of contracts[,] once they have been signed[,] has been
the neglected stepchild of [procurement system reform] effort.'' Steven
Kelman, Strategic Contracting Management, in Market Based Governance:
Supply Side, Demand Side, Upside, and Downside at 89-90, 93 (John D.
Donahue & Joseph S. Nye Jr. eds., 2002).
---------------------------------------------------------------------------
Sadly, the contracting workforce desperately requires a dramatic
recapitalization.\24\ A bipartisan, post-Cold War, 1990's initiative
severely reduced the contracting workforce, leaving the Government
unprepared for a post-9/11 spending binge. In the last four years,
contracting dollars have increased by half, without a corresponding
increase in the workforce. For fifteen years, the Government skimped on
training, while contracting officers faced increasing workloads and
confronted increasingly complex contractual challenges. Scarce
resources, when they become available, were allocated to oversight,
rather than supplementing, supporting, or training contracting people.
Senior procurement officials increasingly bemoan that no young person
in his or her right mind would enter Government contracting as a
career.
---------------------------------------------------------------------------
\24\See, generally, Federal Procurement: Spending and Workforce
Trends, GAO-03-443 (April 2003); Steven L. Schooner, Fear of Oversight:
The Fundamental Failure of Businesslike Government, 50 AM. U.L. REV.
627 (2001); Office of the Inspector General, Department of Defense, DoD
Acquisition Workforce Reduction Trends and Impacts, Report D-2000-088
(February 29, 2000).
---------------------------------------------------------------------------
The old adage--an ounce of prevention is worth a pound of cure--
rings true. More auditors and inspectors general will guarantee a
steady stream of scandals, but they'll neither help avoid the scandals
nor improve the procurement system. Conversely, a prospective
investment in upgrading the number, skills, and morale of Government
purchasing officials would reap huge dividends for the taxpayers.
CONCLUSION
That concludes my statement. Thank you for the opportunity to share
these thoughts with you. I would be pleased to answer any questions.
______
Response by Steven L. Schooner to an Additional Question from
Senator Jeffords
Question 1. Please discuss how the Government contractor defense
would work under S. 1761.
Response. Frankly, the Government contractor defense simply would
not work--in terms of serving its original purpose--under S. 1761. My
perception is that the process would entail the following:
1. A request would be submitted to the Corps of Engineers for a
certificate. This request could be prospective or retrospective. It
also appears that such a request could be submitted either by the
Government, a contractor, or another entity such as an insurance
company.
2. The Chief of Engineers would be required to issue a
``certificate of need.''
if the work would take place in the disaster zone. (It is
unclear whether the Chief of Engineers actually would need to determine
whether the work ``was or will be necessary for the recovery of a
disaster zone from disaster. . . .''); and
if at least 50 percent of the work fell into any of the
identified (albeit broad) categories (including construction, clean-up,
debris removal, etc.); and
regardless of how much discretion the contractor enjoyed
in performing the work; and
regardless of whether the request applied to a Federal,
State, or local Government contract.
3. Contractors (and subcontractors) could raise the Government
contractor defense to defeat claims brought by a damaged party (e.g., a
member of the public or a contractor employee). Specifically, they
would be entitled to a rebuttable presumption that all of the elements
of the Government contractor defense were satisfied and that the
Government contractor defense applied to the lawsuit.
``Moreover, a damaged party could not overcome the above
presumption without producing evidence that the contractor acted
fraudulently or with willful misconduct'' in relation to the
certificate process. Accordingly, this usage of the phrase ``rebuttable
presumption'' seems inapt. Typically, one rebuts a presumption by
producing evidence to the contrary. Here, however, even the production
of specific, unequivocal evidence that demonstrated that it was
inappropriate to apply the Government contractor defense would be to no
avail.
4. Ultimately, then, the bill turns the Government contractor
defense on its head. As I explained in my written statement:\1\
---------------------------------------------------------------------------
\1\ In these excerpts, the numbering of the footnotes has changed
from the original.
---------------------------------------------------------------------------
The Government contractor defense, as it has been interpreted,
seeks to insulate (historically, supply) contractors that explicitly
follow Government direction to their detriment.\2\ To the extent that
contractors exercise significant amounts of discretion in the
performance of their contracts, however, the defense has not protected
them.\3\ This point is particularly important. When the Government
rushes to identify contractors, hastily drafts its contracts (or merely
relies upon open-ended, vague statements of work), and loosely manages
contract performance, the Government necessarily delegates the exercise
of discretion to contractors in performing their contracts.
Specifically, contractors must weigh, among other things, haste versus
caution, or, to some extent, profits versus care.\4\ It is troubling
enough that the Government would cede such important decisions to
contractors; but it seems strange that the Government, prospectively,
would insulate its contractors from the fiscal ramifications of those
decisions.
---------------------------------------------------------------------------
\2\ See, e.g., Boyle v. United Technologies Corp., 487 U.S. 500
(1988).
\3\ The Boyle decision seems to be providing the logical framework
. . . to decide whether the Government contractor defense will protect
contractors from tort liability--[T]he Supreme Court has given a set of
straightforward requirements, the most important of which is the
Government approval requirement. [W]here the Government Agency is a
full participant in the design process, the defense can be predicted to
be a winner. In contrast, if the Government has not participated in
design the contractor will find it very hard to use the defense. If the
plaintiff can prove that the defect occurred in the manufacturing
process, the defense will be of little or no value to the contractor.
Ralph C. Nash & John Cibinic, Postscript: The Circuit Court View of the
Government Contractor Defense, 8 Nash & Cibinic Rep. 52 (August 1990).
\4\ In removing debris, for example, a contractor faces significant
economic choices with regard to, among other things, (1) the experience
of its personnel (e.g., drivers with spotless safety records might
demand higher wages); (2) the quality and maintenance of its equipment
(newer, better maintained trucks likely cost more to purchase or
lease); (3) the means of performance (the minimally acceptable
environmental standards likely cost less than more current, potentially
cleaner and/or safer technologies); or (4) time management (truck
drivers might save time and money by transporting hazardous waste
through, rather than avoiding, residential communities).
---------------------------------------------------------------------------
______
Reponses by Steven L. Schooner to an Additional Questions from
Senator Thune
Question 1. In your testimony, you expressed great dismay at what
you call a ``disconcerting trend of seemingly opportunistic post-crisis
behavior.'' I am not sure what you mean by that, so let me ask what it
is that you heard during our subcommittee hearing (from Mr. Zelenka,
Mr. Perkins, or Mr. Feigin) that you would consider opportunistic? Are
these gentlemen among the people you have in mind?
Response. My oral testimony was an effort to condense my prepared
statement, which addressed this issue at great length under the
heading: ``Opportunistic Post-Crisis Legislation Harms the Procurement
Process.'' Please consider the following excerpt:
. . . Unfortunately, this bill seems to further the trend,
since hurricane Katrina, to utilize the disaster to pursue
public policies that otherwise might prove untenable.
For example, in its $51.8 billion post-Katrina emergency
supplemental appropriation, Congress hastily raised the
``micro-purchase threshold'' (which, in effect, serves as the
charge card purchase cap) to $250,000 for purchases relating to
relief and recovery from Hurricane Katrina.\5\ That's a 100
fold increase on the typical $2,500 limit and a completely
different animal from the $15,000 limit previously imposed
during contingencies and emergencies. Fortunately, the
administration soon thereafter chose to bar further use of this
authority.\6\ That this authority became law is
breathtaking.\7\ At the time, more than 300,000 Government
purchase cards were in circulation. A mountain of Inspector
General reports, Government Accountability Office studies, and
Congressional hearings have demonstrated that the Government's
management of its charge cards has been abysmal. In August, the
White House issued long overdue guidance mandating fundamental
training and risk management policies.\8\ Moreover, the effect
upon small businesses would have been devastating.
---------------------------------------------------------------------------
\5\ Public Law 109-62, 101(2).
\6\ Memorandum from Clay Johnson III, Deputy Director for
Management, Limitation on use of Special Micro-purchase Threshold
Authority for Hurricane Katrina Rescue and Relief Operations (October
3, 2005).
\7\ Steven L. Schooner, Fiscal Waste: Priceless, L.A. Times
(September 14, 2005).
\8\ Appendix B to Revised OMB Circular A-123, ``Improving the
Management of Government Charge Card Programs.''
---------------------------------------------------------------------------
The same can be said for the administration's suspension--and
subsequent repeal of the suspension--of the Davis-Bacon Act.\9\
The suspension of this law, which requires that workers on
Federal construction contracts be paid prevailing wage rates,
would have ensured that contractors could profit from the
massive reconstruction effort without permitting minimum wage
workers to receiving prevailing wages that might permit them to
rise into the lower middle class. The administration's putative
explanation-that without suspension of the Davis-Bacon Act,
insufficient labor would be available--was simply disingenuous.
---------------------------------------------------------------------------
\9\ Proclamation by the President: Revoking Proclamation 7924
(November 3, 2005), http://www.whitehouse.gov/news/releases/2005/11/
20051103-9.html.
---------------------------------------------------------------------------
In both of these examples, the rush to change procurement
policies subsequently was overcome by reason. Hopefully, reason
will prevail here as well. Bear in mind that knowledgeable
Federal procurement executives--both with regard to Iraq and
post-Katrina relief--understand that the current procurement
regime contains sufficient flexibility for the Government to
meet its purchasing requirements in times of crisis.\10\
---------------------------------------------------------------------------
\10\ ``Iraq . . . taught us that many of the flexibilities
contained in the Federal Acquisition Regulation . . . are poorly
understood by many in Congress and the media. . . These flexibilities
include limited as opposed to full and open competition, higher levels
under which purchases can be made instantly, and more. Capitalizing on
these flexibilities enables us to meet the demands for speed and
agility integral to any recovery effort.'' Stan Soloway, Baghdad's
Lessons for Orleans, Gov. Exec. (Oct. 1, 2005), http://www.govexec.com/
features/1005-01/1005-01advp2.htm. Last year, the Defense Department
created the Joint Rapid Acquisition Cell (JRAC), because: ``Some
combatant commanders, as well as acquisition experts, don't realize
that many legal requirements that tend to bog down military contracts
don't apply during wartime. . . .'' See, e.g., http://
www.defenselink.mil/news/Nov2004/n11242004--2004112405.html.
Following this section, my written statement attempted to contrast
this opportunistic behavior with what, instead, would prove a more
productive focus of legislative energy in a section titled: ``This
Legislation Ignores The Government's Most Critical Procurement
---------------------------------------------------------------------------
Problem.''
I would be remiss if I failed to take this opportunity to
address a pressing matter that cries out for Congressional
attention and intervention.\11\ The Federal Government must
devote more resources to the acquisition function. This
investment is urgent given the combination of the 1990's
Congressionally mandated acquisition workforce reductions, the
administration's pressure to outsource,\12\ and the dramatic
increase in procurement spending since the September 11, 2001
attacks and, now, hurricane Katrina.\13\
---------------------------------------------------------------------------
\11\ See also, Steven Kelman & Steven L. Schooner, Scandal or
Solution?, GOVEXEC.COM http://www.govexec.com/dailyfed/1105/
110705ol.htm (November 7, 2005).
\12\ Outsourcing, or its more palatable pseudonym, ``competitive
sourcing,'' has been one of five Government-wide initiatives in the
Bush management agenda. See, e.g., Executive Office of the President,
Office of Management and Budget, The President's Management Agenda,
Fiscal Year 2002, www.whitehouse.gov/omb/budget/fy2002/mgmt.pdf.
``President Bush is a major advocate of. . . hiring private firms to
do the Government's work. . .'' Dru Stevenson, Privatization of Welfare
Services: Delegation by Commercial Contract, 45 Ariz. L. Rev. 83
(2003), citing, David J. Kennedy, Due Process in a Privatized Welfare
System, 64 Brook. L. Rev. 231, 232 (1998) (referencing ``Governor
Bush's effort to privatize most of Texas' welfare system. . . in his
attempt to make a name for himself. . . that could carry him to
national office.'' See also, Matthew Diller, Form and Substance in the
Privatization of Property Programs, 49 UCLA L. Rev. 1739, 1763, n. 94
(2002) (``Governor Bush sought to hand the administration of the
State's welfare system over to. . . Lockheed Martin. . . and
Electronic Data Systems. . . .'').
\13\ See, generally, Steven L. Schooner, Feature Comment--Empty
Promise for the Acquisition Workforce, 47 The Government Contractor 203
(May 4, 2005), available at http://ssrn.com/abstract=719685; Griff
Witte & Robert O'Harrow, Jr, Short-Staffed FEMA Farms Out Procurement,
Washington Post D01 (September 17, 2005).
---------------------------------------------------------------------------
Congress has been quick to call for more auditors and
inspectors general to scrutinize Katrina-related contracting.
That's a responsible gesture. But there has been no
corresponding call for more contracting experts to perform the
many functions that are necessary for the procurement system to
work well. In order to serve the taxpaying public and meet the
needs of Agency customers, acquisition professionals must
promptly and accurately describe what the Government wants to
buy, identify and select quality suppliers, ensure fair prices,
structure contracts with proper monetary incentives for good
performance, and manage and evaluate contractor
performance.\14\
---------------------------------------------------------------------------
\14\ A simple Iraq ``lesson learned'' was that, if the Government
relies heavily upon contractors, the Government must maintain, invest
in, and apply appropriate acquisition professional resources to select,
direct, and manage those contractors. Unfortunately, insufficient
contract management resources were applied. See, generally, Steven L.
Schooner, Contractor Atrocities at Abu Ghraib: Compromised
Accountability in a Streamlined, Outsourced Government, 16 Stanford Law
& Policy Review 549 (2005). For example, General Fay poignantly
articulated: ``[T]here was no credible exercise of appropriate
oversight of contract performance at Abu Ghraib.'' MG George R. Fay,
Investigating Officer, AR 15-6 Investigation of the Abu Ghraib
Detention Facility and 205th Military Intelligence Brigade, at 52 (
``the Fay Report''). This problem exists Government-wide: ``[T]he
administration of contracts[,] once they have been signed[,] has been
the neglected stepchild of [procurement system reform] effort.'' Steven
Kelman, Strategic Contracting Management, in Market Based Governance:
Supply Side, Demand Side, Upside, and Downside at 89-90, 93 (John D.
Donahue & Joseph S. Nye Jr. eds., 2002).
---------------------------------------------------------------------------
Sadly, the contracting workforce desperately requires a
dramatic recapitalization.\15\ A bipartisan, post-Cold War,
1990's initiative severely reduced the contracting workforce,
leaving the Government unprepared for a post-9/11 spending
binge. In the last four years, contracting dollars have
increased by half, without a corresponding increase in the
workforce. For fifteen years, the Government skimped on
training, while contracting officers faced increasing workloads
and confronted increasingly complex contractual challenges.
Scarce resources, when they become available, were allocated to
oversight, rather than supplementing, supporting, or training
contracting people. Senior procurement officials increasingly
bemoan that no young person in his or her right mind would
enter Government contracting as a career.
---------------------------------------------------------------------------
\15\ See, generally, Federal Procurement: Spending and Workforce
Trends, GAO-03-443 (April 2003); Steven L. Schooner, Fear of Oversight:
The Fundamental Failure of Businesslike Government, 50 Am. U.L. Rev.
627 (2001); Office of the Inspector General, Department of Defense, DoD
Acquisition Workforce Reduction Trends and Impacts, Report D-2000-088
(February 29, 2000).
---------------------------------------------------------------------------
The old adage--an ounce of prevention is worth a pound of
cure--rings true. More auditors and inspectors general will
guarantee a steady stream of scandals, but they'll neither help
avoid the scandals nor improve the procurement system.
Conversely, a prospective investment in upgrading the number,
skills, and morale of Government purchasing officials would
reap huge dividends for the taxpayers.
Moreover, just to be clear, no, my testimony was not written with
Messrs. Zelenka, Perkins, or Feigin in mind.
Question 2. How would you characterize the work being done in New
Orleans? Are these ``seemingly ordinary tasks''? Are they mundane? Are
these ordinary working conditions? Is there nothing unique about the
situation? I ask this question because earlier this month, the mayor of
New Orleans testified before the full EPW Committee and described the
destruction as being ``unprecedented'' in nature.
Response. On a contract-by-contract basis, the lion's share of the
work that would be covered by S. 1761, consistent with the work being
done in New Orleans, can fairly be described--from a public procurement
perspective--as ordinary or mundane. I do not dispute that the scope of
the destruction is unprecedented. Nor do I mean to suggest that the
affected work is in any way unimportant. Rather, this characterization
merely reflects the nature of the work, rather than the working
conditions, the situation, or the scope of the combined tasks.
To be clear, I use these terms to describe tasks such as search and
rescue; demolition and repair; debris removal; and de-watering of
flooded property in contrast to work for which (a) an extremely small
number of contractors (or a limited pool of individuals) are capable of
performing, or (b) unique facilities are required to perform, the work.
To put this in context, the ordinary nature of the work is reflected in
the fact that the private sector, in the United States and abroad,
offers a nearly unlimited capacity to perform these tasks. Contrast
this, for example, with the extremely limited private sector capacity
available to design, manufacture, or repair a nuclear submarine.
As indicated above, my oral testimony was an effort to condense my
prepared statement, which addressed this issue at great length under
the heading: ``Misuse of the Government Contractor Defense.'' Consider
the following excerpt:
This scenario is dramatically different from, for example, the
types of contracts intended to be covered by the Support Anti-
Terrorism by Fostering Effective Technologies Act of 2002
(SAFETY Act).\16\ The SAFETY Act sought to encourage the
development, and protect the use of, new or evolving (and,
implicitly, unproven) technologies. The underlying assumption
of the SAFETY Act is that, without insulation from liability,
contractors might not otherwise permit the Government to deploy
these technologies, known as qualified antiterrorism
technologies (QATTS), to combat terrorism. In other words, the
contracts involve unusual work or technologies (or unusual use
of technologies) that is perceived as extraordinarily
risky.\17\
---------------------------------------------------------------------------
\16\ Pub. L. 107-296, 861. See, generally, Homeland Security
SAFETY Act page at https://www.safetyact.gov/DHS/SActHome.nsf/
Main?OpenFrameset&6HYKFL;Alison M. Levin, Note: The SAFETY Act of 2003:
Implications for the Government Contractor Defense, 34 Pub. Cont. L.J.
175 (2004).
\17\ This point cannot be over-emphasized. For a good articulation
of this principle, see, e.g., Patrick E. Tolan, Jr., Environmental
Liability Under Public Law 85-804: Keeping the Ordinary Out of
Extraordinary Contractual Relief, 32 Pub. Cont. L.J. 215 (2003)
(emphasizing the unique (or, specifically, extraordinary) nature of the
contractual requirements, particularly in research and development,
that proved uninsurable because they involved, for example, nuclear
power or highly volatile missile fuels).
---------------------------------------------------------------------------
Here, the statute would apply to far more common, if not
mundane, tasks. Although clearly important, by and large, the
contracts that this bill would cover involve routine tasks such
as search and rescue; demolition and repair; debris removal;
and de-watering of flooded property. In all such cases, the
existing standard of care seems reasonable. Moreover, the
rather mechanical certification responsibility assigned to the
Chief of Engineers is a far cry from the highly judgmental and
discretionary decision required of the Homeland Security
Department Under Secretary pursuant to the SAFETY Act.
Specifically, the SAFETY Act employs a number of criteria,\18\
most, if not all, of which are absent here. For example, it is
difficult to create a scenario in which there would be a
``substantial likelihood that the technology [involved in,
e.g., debris removal] will not be deployed unless the [Gulf
Coast Recovery Act] protections are extended.''
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\18\ The seven criteria include: prior United States Government use
or demonstrated substantial utility and effectiveness; availability of
the technology for immediate deployment in public and private settings;
existence of extraordinarily large or unquantifiable potential third
party liability risk exposure to seller (or another provider of the
technology); substantial likelihood that the technology will not be
deployed unless SAFETY Act protections are extended; magnitude of risk
exposure to the public if the technology is not deployed; evaluation of
all scientific studies that can be feasibly conducted to assess the
capability of the technology to substantially reduce risks of harm; and
whether the technology would be effective in facilitating the defense
against acts of terrorism. See, e.g., Homeland Security SAFETY Act page
at https://www.safetyact.gov/DHS/SActHome.nsf/Main?OpenFrameset&6HYKFL.
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______
Statement of Paul Becker, President, Willis North American
Construction Practice
Good afternoon. My name is Paul Becker; I work at Willis, a global
insurance broker, as the North American Construction Practice Group
Leader. I am proud to lead this practice, as my colleagues and I
represent more than 3,500 construction related clients in North
America. We work to structure and secure effective risk management
programs that can address safety issues, contractual liabilities,
surety bonds and more. I have been in the insurance business for 27
years--the vast majority of which has been in the construction sector--
and it is my pleasure and honor to appear before you today testifying
as to the importance of insurance in the cleanup of New Orleans in the
wake of Hurricane Katrina--specifically the need to limit the liability
of contractors engaged in this important work.
As insurance brokers, we work with our clients around the world and
across all industries helping them assess, quantify, mitigate and
transfer their risks thereby allowing them to focus on achieving their
business goals. Doing so affords them the comfort and confidence that
their assets--property, people, intellectual capital, equipment--are
more than adequately and properly protected against a broad range of
risks. We are not an insurance company--that is, we do not underwrite
the risks. We are an intermediary bringing the two parties together
working to fashion the very best, customized coverage we can secure for
our clients. As part of this client advocacy, we work with and have
developed strong relationships with insurance carriers around the world
such that we know their risk appetite, how they consider certain risks
and the various factors they weigh in their underwriting decisions.
Given our experiences, we have a working knowledge as to how they think
and how they approach various risks--essentially whether or not to
underwrite a risk, how to price a policy and how to set the terms and
conditions of a policy--which amounts to a contract.
EXPERIENCE WITH EXTRAORDINARY ``JOB SITES''
In the aftermath of the events of September 11, 2001, Willis
secured the insurance coverages for the contractors who cleaned up the
World Trade Center site. Quite thankfully--for obvious reasons--the
characteristics of this site were unlike any we or anyone else in
either construction or insurance had previously seen. Normally, before
the clean-up of a disaster site starts, environmental and engineering
firms conduct studies, run assessments and issue reports as to the
nature of the site and the specifics involved. Due to the outstanding
circumstances of the events of 9/11, there was not time for such
exercises and contractors got to work without a full understanding of
what was ahead. How stable was the ground? What were the asbestos
levels? What other hazardous materials could have a long-term impact on
health of the workers and general public? Today, over four years since
9/11, the number of law suits being filed continues to grow. Only in
time will we determine the balance between the insurance purchased vs.
claims now being filed in New York. But one thing is certain,
litigation, upon litigation, upon litigation has created a great deal
of uncertainty and serious concern among the contractors involved.
While the scope of the New Orleans effort is multiples larger than
the World Trade Center site, these same concerns are at hand today as
they were in September 2001. The fundamental problem in securing the
necessary coverage is a reflection of the four component actions I
mentioned a few moments ago--insurance is about assessing, quantifying,
mitigating and transferring risk. Models predict likely scenarios,
calculate possible losses and then intelligent plans determine how to
avoid such problems and spread the risk among various parties at an
appropriate price. In these unique situations, there may be a tendency
to focus on the financing of the risk so the work can get underway.
Without the assessment, how does a carrier know what the possible
losses are? And if the risks are unknown such that there could be
significant unforeseen liabilities, 1) how can contracting firms adopt
preventative measures to avoid problems which will give rise to future
claims? and 2) how can carriers determine the right price for the
coverage?
Over the last several weeks, we have been engaged in conversations
with carriers around the world on this matter and they are expressing
to us the very concerns that I am sharing with you today:
Uncertain site conditions;
Unusual and unknown health hazards;
What chemicals are being released into the air during the
cleanup?;
The limited nature of the tools available to assess the
number and types of environmental factors in play;
Varying standards between local, state and Federal
authorities;
The fast track nature of the work to be done; and,
The lack of certainty on contracting provisions and legal
environments.
All these factors substantiate that the traditional methods of risk
identification, control and underwriting have been significantly
altered and make it difficult to estimate--or even guess--what the full
extent of the long-term liabilities arising from the cleanup will be.
It leads us to question whether the insurance industry has the ability
to fully underwrite the risks inherent in this work. If this bears out,
contractors will be left fending for themselves without adequate
insurance protection. That is not to say that contractors will not be
able to purchase insurance in some form for their activities in the
Gulf; rather, without addressing the unique factors in this situation,
the coverage they will be able to obtain will in most cases not
adequately protect them over time from the exposures they will be
facing. And this is not a question of if but when and based on our
experience, these matters will manifest themselves over a 5- to 10-year
timeframe--though there is already talk of the ``Katrina Cough.''
I might add that without adequate protection, contractors cannot
properly account for their risks and endanger the long-term viability
of their companies. Accordingly these issues could prevent quality
contractors from participating in the clean-up and recovery efforts.
This is important legislation. While many first-rate contractors
are already on the ground participating in this important effort, many
others are hesitant to get involved in projects of this magnitude
unless they have insurance against what are normally quantifiable
risks. And carriers as well tend not to write policies if they are not
able to make the necessary judgments. In the case of New Orleans, as it
was with the World Trade Center, it will be almost impossible to
establish the proper control procedures to protect their interests.
Limiting the liability of construction companies engaged in the clean-
up of New Orleans such that they can gain the cover they need is
critical and it has been my distinct honor to share my experiences with
you this afternoon.
Mr. Chairman, I've concluded the section of my prepared remarks
that I would like to share with you today and am happy to enter the
remainder--which addresses some general issues of insurance you may
wish to consider--into the record. And I would be happy to answer any
questions you might have.
SOME ADDITIONAL BACKGROUND ON INSURANCE
Insurance is meant to have the premiums of many similarly insured
parties pay for the losses of the few which actually have claims. By
financing risks in such a way, insurance serves as a vital tool
supporting commercial activity. It brings the assurance of capital when
the unforeseen and unfortunate event occurs. Insurance enables
construction firms to undertake work knowing that they have a financial
partner ready to provide capital that may be necessary to assure that
the contractor remains viable and can complete the work as promised.
Both the insurance carriers and their insured construction
contractors have a great interest in working together to identify risks
and to develop effective protocols and procedures to avoid or control
those risks. Clearly identifying and managing risks to avoid losses is
the most cost-effective approach for both parties. This critical part
of the insurance process, that of identifying and trying to measure
risks, is often not understood by non-insurance professionals, but it
is completely integrated into the process of agreeing to insure certain
risks and how much such insurance costs. Simply put, if insurance
companies do not or can not understand the risks they are being asked
to insure, they have a very difficult time providing the risk financing
which allows companies to operate.
Insurance policies by their nature are specific to different types
of risks and exposures, and contractors often purchase a number of
different types of coverage each year to address different operational
risks. The most relevant to today's hearing are the coverages which
come into play for liability protection when claims are brought by
third parties. They include:
General Liability Insurance, which addresses the
liabilities contractors have to third parties for operations and for
damages or injuries which occur once those operations are completed.
This coverage applies to many obvious types of situations including
injuries to third parties, and damage to property while performing
operations and once the work is completed. These policies do not
normally extend to environmental liabilities which arise out of the
work. Those types of risks are usually insured by Pollution Liability
policies.
Contractors Pollution Liability, which addresses
liabilities that arise out of hazardous materials which contractors
encounter on job sites. In the case of the clean-up and reconstruction
activities it is expected that this will be a critical coverage. It is
important to note that this policy differs from insurance company to
insurance company and as a result has significant differences in scope
of coverage and limits of liability which can be obtained.
Umbrella and Excess Liability, which is used as a method
to obtain higher limits of coverage excess of the General Liability
insurance limits. It does not act to increase the pollution liability
limits.
To understand the complex limitations of such insurance, it is
important to note:
Each insurance company offers different coverages for each
policy depending on their underwriting philosophy and financial goals.
Policies are underwritten based on the underwriters'
understanding of the risks and typically narrowed to cover those risks
which are known or can be anticipated.
These policies all have a defined limit of insurance which
once exhausted, cause the policies to no longer respond.
The policies respond to the liability of the specific
contractor so it is often the case that a claim will cause several
insurance carriers to respond to several contractors. This can cause
significant delays in addressing claims as liability is sorted out by
the legal process and each carrier defends each insured separately.
Coverages vary as noted from carrier to carrier and from
contractor to contractor based on the individual contractors'
understanding of its risks, its expertise in obtaining coverage and the
amount of premium involved.
Insurance is a risk financing business which uses historical data
to predict future costs and establish premiums. The limitations noted
above create a situation where, in the case of a broad based
catastrophe such as Katrina, claims will be unknown at the outset,
difficult to predict or measure, and subject to uncertainty of how
insurance coverage will respond. This contrasts with normal
construction activities where underwriters have significant experience
and data which shows a path to pricing the risk and taking on the
exposure in the form of insurance policies.
______
Response by Paul Becker to an Additional Question from Senator Jeffords
Question 1. Mr. Becker, In your testimony, you stated that
insurance is about assessing, quantifying, mitigating and transferring
risk and you wonder if the insurance industry has the ability to fully
underwrite the risks related to a tragedy like Hurricane Katrina.
The exceptionally broad liability shield for contractors in S. 1761
passes the risk of loss from the insurer and contractor to the citizens
of the Gulf Coast. How does the bill's treatment of private citizen
correlate to the insurance industry's usual practice of spreading the
risk among parties?
Responce. Senator Jeffords, thank you for your question on how the
Gulf Coast Recovery Act's (S. 1761) treatment of private citizens
correlates to the insurance industry's usual practice of spreading risk
among parties.
In evaluating risks, the insurance industry typically evaluates the
exposures and the spread of the risk among parties. In the case of the
damages from Hurricane Katrina, the insurances community needs to first
determine the risks and exposures that will be associated from the
recovery efforts. Without this information, insurance carriers will be
unable to provide accurate coverages and establish reasonable premiums.
As a result, contractors will be assuming risk which will be difficult
to predict (or in many cases will be impossible to identify) and will
be faced with essentially rolling the dice on longer terms risks versus
available insurance.
Absent of a large disaster like Hurricane Katrina, the typical
spread of risk by insurance carriers remains a difficult job. Given the
broad affects of claims that arise out of construction general
liability insurance coverages, the insurance industry must consider the
various contractual relationships of their insured contractors. In the
evaluation to exposures and the adjustment of losses, the insurance
industry also takes into consideration Federal and local jurisdictional
statutes that may alter the liability of their insured. In many local
jurisdictions (for example-- Georgia and Florida), contractors are
afforded liability caps in situations where all project specifications
of a State's Department of Transportation Contracts were adhered to.
Thus, in cases of lawsuits against roadway contractors alleging a
design defect in the roadway (possibly causing an automobile accident--
for example), these statutes provide equal protection to contractors
who built or re-designed a roadway to the exact specifications and
codes stated by the local Department of Transportation.
In the end, S. 1761 would provide insurance carriers greater
information on potential risks from the recovery efforts. The bill's
effects on the evaluation of exposures and spreading of risk by the
insurance industry would be similar to their typical assessment of
other Federal and local statutes that alters liability in loss
situations among parties.
______
Statement of The American Road and Transportation Builders Association
Chairman Thune and other members of the subcommittee, thank you for
providing the American Road and Transportation Builders Association
(ARTBA) an
opportunity to submit testimony on Government contractor liability
issues arising from major disaster situations. ARTBA is the only
national organization representing the collective interests of the
transportation construction industry before the Federal Government.
ARTBA's membership includes public agencies and private firms and
organizations that own, plan, design, supply and construct
transportation projects throughout the country. Our industry generates
more than $200 billion annually in the United States economic activity
and sustains more than 2.2 million American jobs.
Mr. Chairman, there are two common themes to every national
disaster situation:
they occur with little to no advance warning; and a herculean response
and recovery effort is required by those in and outside the affected
area. Major disasters hit hard and fast. Those responding to these
events must be allowed to react with the same vigor. The widespread
damage accompanying national catastrophes frequently call for a
comprehensive response from a host of partners, including the
construction industry.
Federal, State and local Governments need the assistance of the
construction industry in these situations. ARTBA member firms
routinely--and voluntarily--step up when emergencies arise.
Construction and engineering companies are often the first responders
in declared disasters, providing critical knowledge, know-how, and
skills--as well as equipment and materials--to rescue and recovery
efforts. Working at the direction of public agencies and officials,
these firms lead efforts to demolish, remove, and repair and
reconstruction damaged utilities, structures and facilities.
Our industry, for example, played a major role in the rescue and
recovery efforts following the September 11 terrorist attacks on the
World Trade Center and Pentagon. Employees of Tully Construction of
Flushing, New York, were among the first to arrive at the Ground Zero
site. Tully was completing work on the Westside Highway in Lower
Manhattan when the attacks occurred, which enabled the firm to have
equipment and manpower in place to begin assisting with rescue,
recovery and debris removal efforts immediately.
Once the magnitude of the devastation and the complexity of the
clean-up necessary were fully understood, the industry's role at the
site increased, and these firms and individuals remained on the job
until it was completed. Tully was named as one of the four prime
contractors responsible for debris removal, demolition work, and
construction of temporary structures at the site. ARTBA's New York City
chapter--the General Contractor's Association of New York--provided
critical leadership to the efforts by assisting Federal, State and
local officials in the coordination of operations. Numerous engineering
firms provided technical expertise and project managementexperience to
carry out the complex recovery effort. Finally, equipment manufacture's
worked to locate and deliver the construction machinery necessary to
carry out the clean-up.
Many of these activities were carried out before contracts for the
work could be drafted and signed. Rescue and recovery could not wait
for contracts, and these firms did not hesitate to assist Federal,
State and local officials in the efforts.
The transportation construction industry also routinely provides
Federal, State and local officials assistance in recovery, repair and
rebuilding efforts following natural disasters. After Hurricane Katrina
devastated the Gulf Coast, ARTBA member firms joined in efforts to
clear debris and reopen airport, roadway, rail, transit and other
transportation infrastructure facilities damaged during the hurricanes.
In assisting Federal, State and local Governments respond to
disasters, these contractors are often times exposed to liability and
litigation for doing the right thing and responding in time of national
tragedy. Unlike public officials and the agencies firms are assisting,
private contractors are not protected by the principle of sovereign
immunity.
The firms responding to the September 11 terrorist attacks were
subject to substantial litigation costs. With approximately 3,000
actions filed to date against the contractors involved in the Ground
Zero site clean-up, litigation cost are expected to grow. In fact,
several of these companies were threatened with the loss of insurance
coverage for the potentially open-ended liability they incurred by
doing the right thing.
As such, the threat of class action lawsuits and lack of liability
protections could dampen private firms' response to emergency
situations. Contractors do not carry the insurance necessary to cover
all of the many potential risks involved in taking necessary action
during times of crisis. Companies are risking crippling financial
impacts on their firm for responding to emergency situations for which
they do not have liability coverage. The lack of limited liability
protections for construction and engineering firms providing important
public service during emergency situations could undermine response,
and ARTBA urges congressional action to ensure that the threat of open-
ended lawsuits does not slow or block future disaster recovery efforts.
To this end, ARTBA fully supports, the ``Gulf Coast Recovery Act,''
S. 1761. This measure would better prepare our nation for disaster
response by ensuring that construction and engineering firms that
respond to major natural disasters, terrorist incidents or other
emergencies are not putting themselves at risk for unwarranted
liability claims and litigation tied to rescue and cleanup efforts.
This common-sense proposal would provide contractors assisting in
rescue, recovery, repair, and reconstruction work a limited measure of
liability protection. In doing so, the bill would also limit potential
legal actions that slow recovery efforts and reduce legal expenses that
lead to increase recovery costs.
Specifically, S. 1761 would provide the construction firms working
on Hurricane Katrina and major future disasters the same liability
protections Congress provided security technology companies from
lawsuits that arose out of the September 11 terrorist attacks. It would
also make critically important legal procedural improvements to ensure
that firms and contractors receive the protections necessary to allow
them to focus rescue, recovery and rebuilding efforts without having to
worry about being subjected to unwarranted and costly lawsuits.
While S. 1761 provides limited liability protection to contractors,
it would not undermine Federal safety, health, ethics, environmental or
labor laws. Contractors would remain liable for any reckless or willful
acts, and would remain subject to punishment for noncompliance with any
Federal rule or regulation. S. 1761 would not limit the command of the
Federal agencies charged with rescue, recovery, and rebuilding efforts.
As was demonstrated in New York City, the ability of transportation
construction industry firms to respond quickly during times of crisis,
delicately move large amounts of debris and manage complex projects
under demanding conditions are invaluable skills when responding to any
emergency. Without reasonable protections, however, our industry's
ability to respond to future acts of terrorism, natural disasters or
other emergencies would be constrained.
S. 1761 would provide reasonable level of liability protections for
construction and engineering firms involved in the clean-up efforts in
the Gulf Coast region and future major disasters, without undermining
Federal laws or requirements. This legislation will also help ensure
that construction and engineering firms continue to serve as first
responders in future emergency situations. Thank you again for the
opportunity to submit testimony on this important topic. We look
forward to continuing to work with the subcommittee and its members to
address this situation.
Statement of the American Society of Civil Engineers
Mr. Chairman and Members of the Subcommittee. The American Society
of Civil Engineers (ASCE)\1\ is pleased to offer this statement for the
record in support of S. 1761, the Gulf Coast Recovery Act of 2005, a
bill that would clarify the liability of Government contractors
assisting in rescue, recovery, repair, and reconstruction work in the
Gulf Coast region of the United States affected by Hurricane Katrina or
other major disasters.
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\1\ ASCE, founded in 1852, is the country's oldest national civil
engineering organization. It represents more than 139,000 civil
engineers in private practice, Government, industry, and academia who
are dedicated to the advancement of the science and profession of civil
engineering. ASCE carried out Building Performance Assessments of the
World Trade Center, the Pentagon, and the Murrah Federal Building, and
technical assessments following earthquakes, hurricanes, and other
natural disasters. ASCE is a 501(c) (3) non-profit educational and
professional society.
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We believe the bill is a good start toward enacting a broad-based
Federal ``Good Samaritan'' law to protect professionals who engage in
disaster recovery efforts at great potential cost to themselves. As of
now, 21 states have Good Samaritan legislation to cover those who
respond to natural disasters and other emergencies. Louisiana,
Mississippi, Alabama, and New York do not have Good Samaritan
legislation at all. We are not aware of any state laws that protect
those who would aid in the recovery from terrorist attacks or the
aftermath of such attacks. When professional design and construction
expertise is needed, there should be no legal impediment to our
members' responding to provide help and possibly saving lives.
ASCE encourages its members, as individuals, to provide pro bono
expertise and professional services to charitable causes and those in
emergency situations. Members who provide professional services pro
bono for ASCE-endorsed programs are covered by the Society's liability
insurance.
But pro bono services provided by an individual in emergency
situations or to charitable institutions outside of ASCE's endorsed
programs are not covered by the ASCE liability policy. The engineer, in
emergency situations, may be called upon to make decisions with little
or no opportunity for study, evaluation, or even identification of
alternatives and should not be held to the same standard of care that
would be used in evaluating her actions under normal circumstances.
Legislation is needed to protect the engineer under these
circumstances.
Engineers have the technical ability to assist in emergency
situations. Protection as proposed in S. 1761 rightly would not relieve
the engineer of responsibility to act in accordance with the ASCE Code
of Ethics. The engineer must continue to act within his appropriate
level of expertise, with due recognition of the limitations of that
expertise.
Finally, the United States legal system has evolved to a point
where excessive litigation, including frivolous lawsuits, often occurs.
Moreover, findings of liability increasingly bear no relationship to
the proportion of fault in a case, and astronomical damage awards for
unquantifiable claims are frequently granted.
The enormous growth in litigation against businesses and
professionals, coupled with excessive and unreasonable jury awards, has
led to dramatic increases in insurance premiums, reduced policy
coverage, and even outright cancellations of professional liability
insurance coverage.
A growing number of professional engineers, including those with
little or no history of litigation ever brought against them, have
found that professional liability insurance is a substantial cost of
doing business. In addition, efforts to advance innovation, new
products and designs are inhibited by the current legal climate.
ASCE is very concerned about the adverse economic impact of the
nation's litigation crisis and escalating liability insurance costs on
the civil engineering profession. These adverse economic impacts affect
the availability and affordability of professional liability insurance
needed for the orderly and responsible conduct of business, including
engineering services, in the United States.
Mr. Chairman, ASCE thanks you for your efforts. Please do not
hesitate to call on us for assistance with this important legislation.
______
The Associated Press Article
HUNDREDS SUE OVER HEALTH EFFECTS OF WORLD
TRADE CENTER CLEAN-UP
NEW YORK--Hundreds of people who worked on the World Trade Center
clean-up have filed a class-action lawsuit against the leaseholder of
the towers and those who supervised the job, alleging they did little
to protect workers from dust, asbestos and other toxins in the air.
The lawsuit, filed in Federal court on Friday and made public
Monday, was brought against Silverstein Properties and the four
construction companies hired to oversee the removal of the 1.5 million
tons of debris.
David Worby, a lawyer for the plaintiffs, said he will seek
billions of dollars in compensation for victims. The lawsuit also asks
for the establishment of a system to track for the next 20 years all
those who were exposed.
The lawsuit alleges that many workers did not have access to
protective gear, and those who did were not taught how to wear it
properly.
While some of the plaintiffs suffer from afflictions ranging from
tumors to heartburn, many say they show no symptoms from their work at
the site, but have joined the suit because they fear they risk
developing cancer in the future.
``The tragic reality is that so many of the brave heroes who worked
so tirelessly and unselfishly are becoming a second wave of casualties
of this horrific attack, and we're only seeing the tip of the
iceberg,'' Worby said.
The defendants said they had not seen the complaint and had no
immediate comment.
The class-action case, with about 800 plaintiffs, was filed the
last day before a Federal 3-year statute of limitations expired for
lawsuits related to the terrorist attack.
The Government is already funding six health screening programs to
monitor ground zero workers, but none are funded beyond 2009.
Last week, the Centers for Disease Control and Prevention released
a study showing that many recovery workers suffered from respiratory
problems long after the clean-up concluded, and that some still battle
ailments. Problems include asthma, sinusitis, constant coughing and
stuffy nose, facial pains, chest tightness, wheezing and shortness of
breath.
Proper respiratory gear would have allowed the workers to block out
smoke, dust, diesel exhaust, pulverized cement, glass fibers, asbestos
and other chemicals and prevent throat and lung diseases, according to
the CDC study. It found that only about one in five of the workers wore
respirators while they worked at the site.
The four companies that led the clean-up were Turner Construction,
AMEC Construction, Tully Construction and Bovis Lend Lease. According
to AMEC's Web site, the company stationed safety experts on site during
the clean-up and provided respirators, hard hats and safety goggles to
workers.