[Senate Hearing 110-404]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-404
 
                 FEMA'S PROJECT WORKSHEETS: ADDRESSING
                      A PROMINENT OBSTACLE TO GULF
                            COAST REBUILDING

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

                                HEARING

                               before the

                AD HOC SUBCOMMITTEE ON DISASTER RECOVERY

                                 of the

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 10, 2007

                               __________

        Available via http://www.access.gpo.gov/congress/senate

       Printed for the use of the Committee on Homeland Security
                        and Governmental Affairs



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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TED STEVENS, Alaska
THOMAS R. CARPER, Delaware           GEORGE V. VOINOVICH, Ohio
MARK L. PRYOR, Arkansas              NORM COLEMAN, Minnesota
MARY L. LANDRIEU, Louisiana          TOM COBURN, Oklahoma
BARACK OBAMA, Illinois               PETE V. DOMENICI, New Mexico
CLAIRE McCASKILL, Missouri           JOHN WARNER, Virginia
JON TESTER, Montana                  JOHN E. SUNUNU, New Hampshire

                  Michael L. Alexander, Staff Director
     Brandon L. Milhorn, Minority Staff Director and Chief Counsel
                  Trina Driessnack Tyrer, Chief Clerk


                AD HOC SUBCOMMITTEE ON DISASTER RECOVERY

                 MARY L. LANDRIEU, Louisiana, Chairman
THOMAS R. CARPER, Delaware           TED STEVENS, Alaska
MARK L. PRYOR, Arkansas              PETE V. DOMENICI, New Mexico

                     Donny Williams, Staff Director
                Chip Abernathy, Minority Staff Director
                        Amanda Fox, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Landrieu.............................................     1
    Senator Stevens..............................................     3

                               WITNESSES
                         Tuesday, July 10, 2007

C. Ray Nagin, Mayor, City of New Orleans, Louisiana..............     4
Kevin Davis, President, St. Tammany Parish, Louisiana............     5
Henry ``Junior'' Rodriguez, President, St. Bernard Parish, 
  Louisiana......................................................     7
Colonel Perry ``Jeff'' Smith, Jr., Executive Director, Governor's 
  Office of Homeland Security and Emergency Preparedness, State 
  of Louisiana...................................................    17
Bryan McDonald, Executive Director, Office of Recovery and 
  Renewal, State of Mississippi..................................    19
Mark C. Merritt, Senior Vice President of Response and Recovery, 
  James Witt Associates..........................................    21
James Walke, Director, Public Assistance Division, Disaster 
  Assistance Directorate, Federal Emergency Management Agency, 
  U.S. Department of Homeland Security...........................    32

                     Alphabetical List of Witnesses

Davis, Kevin:
    Testimony....................................................     5
    Prepared statement...........................................    47
McDonald, Bryan:
    Testimony....................................................    19
    Prepared statement...........................................    66
Merritt, Mark C.:
    Testimony....................................................    21
    Prepared statement...........................................    71
Nagin, C. Ray:
    Testimony....................................................     4
    Prepared statement...........................................    39
Rodriguez, Henry ``Junior'':
    Testimony....................................................     7
    Prepared statement with an attachment........................    53
Smith, Colonel Perry ``Jeff'' Jr.:
    Testimony....................................................    17
    Prepared statement with an attachment........................    59
Walke, James:
    Testimony....................................................    32
    Prepared statement...........................................    75

                                APPENDIX

``FEMA, Public Assistance, Louisiana,'' June 22, 2007, Global 
  Report, submitted by Senator Landrieu..........................    81


  FEMA'S PROJECT WORKSHEETS: ADDRESSING A PROMINENT OBSTACLE TO GULF 
                            COAST REBUILDING

                              ----------                              


                         TUESDAY, JULY 10, 2007

                                     U.S. Senate,  
                 AD HOC Subcommittee on Disaster Recovery  
                      of the Committee on Homeland Security
                                        and Governmental Affairs,  
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:07 a.m., in 
Room 342, Dirksen Senate Office Building, Hon. Mary Landrieu, 
Chairman of the Subcommittee, presiding.
    Present: Senators Landrieu, Pryor, and Stevens.

             OPENING STATEMENT OF SENATOR LANDRIEU

    Senator Landrieu. Good morning and welcome to our 
Subcommittee hearing on Disaster Response and Recovery. If you 
all would like to come up and sit at the table, that would be 
fine, our first panel.
    I have a brief opening statement and then I would like to 
turn to my Ranking Member, Senator Stevens, and then we will 
begin as expeditiously as possible with our first panel.
    On April 12, this Subcommittee held its first hearing on 
our work monitoring the Gulf Coast rebuilding effort. I told 
Members of this Subcommittee that I wanted to use this 
Subcommittee to tell a story, an important story that needs to 
be told. I wanted to put together a narrative that would 
clearly illustrate the challenges of rebuilding the Gulf Coast, 
and in addition, rebuilding a stronger and better disaster 
response and recovery mechanism for our country.
    From the onset, it was clear that there were stories State 
and local officials were bursting at the seams to tell. At that 
first hearing, we heard from several State and local officials 
who had dramatic stories to tell, and nearly every witness 
named among the most pressing recovery obstacles FEMA's Project 
Worksheet process.
    Project Worksheets (PWs), as we have come to know them in 
Louisiana and Mississippi, are a series of maddening forms 
filled out by FEMA based on information submitted by 
applicants. At our first hearing, a witness from the Louisiana 
Recovery Authority testified, in some cases, 2,680 documents 
were required for a single project.
    The Mayor of Waveland, Mississippi, Tommy Longo, testified 
that his city submitted a PW for a sewer system in September 
2005 and that at the time of the hearing on April 12, 2007, 
only the first phase had been approved by FEMA. He went on to 
say that FEMA had a second phase in hand, but because of a 
continued rotation of personnel every 3 months or so, there was 
a slow exchange of information, variances, and decisions 
between old and new that resulted in delays of as much as 6 
months.
    I am sure, based on these panelists, we will hear other 
similar stories. Indeed, every witness on that panel told the 
story of how the PW process is a nightmare, slowing down 
recovery and making it almost impossible.
    I won't go into the details, but will instead submit the 
rest of this in my statement, but let me just continue on to 
say, in pursuit of an approach to solve this problem, I 
introduced an amendment to the Homeland Security appropriations 
that would give at least our school districts a chance to be 
reimbursed in a global fashion as opposed to project-by-
project, building-by-building, campus-by-campus, in order to 
help us get the thousands of children in Louisiana and 
Mississippi that want to come home to school and to be a part 
of the rebuilding process, but this particular work order 
process is stopping them, as it is stopping so much of our 
other endeavors. I hope that we can move quickly on this 
amendment, but that is not the purpose of this hearing.
    You will hear from our second panel today that some PWs are 
underestimated by a factor of four to five times compared to 
the actual cost. The Louisiana State Office of Facility 
Planning and Control, the Louisiana agency responsible for 
rebuilding all the State-owned facilities, has reported that 
the actual cost of completing projects averages four times the 
original PW estimate. Jefferson Parish has reported the costs 
were two-and-a-half times the estimates, and New Orleans has 
reported the costs over and above the estimates, as well. This 
puts the burden of proof on localities to pay for an 
independent architect and engineering firm at a time when they 
have precious little money to provide the higher cost 
estimates, which is based on actual contractor bids, and we are 
going to submit for the record evidence that we have received 
today to back up these claims.
    Additionally, I mentioned earlier in my statement using 
schools as an example, the program prohibits lump-sum global 
projects currently. We would like to see that changed.
    There are opportunities to be found in the wake of 
disasters. Recovery should be driven by free market and 
citizens, but government must do their part to stand up 
critical infrastructure and vital services and offer a minimum 
level of security to people seeking to rebuild. Our government 
has not met that standard, in my view, in the Southeast or 
Southwest of Louisiana or on the Gulf Coast, and hopefully our 
hearing today can lead us to a better process.
    You will hear today from FEMA that they have ``obligated'' 
funds for nearly 90 percent of the Hurricane Katrina projects 
and 61 percent for Louisiana, but this does not tell the whole 
story and obligated funds does not mean that they are readily 
available, ready to be used, and ready to rebuild the hundreds 
of libraries, schools, police stations, fire stations, and 
other infrastructure that is critical for these parishes to 
stand up from a catastrophic disaster. What you will understand 
after this hearing, I hope, is that obligated means that in 
terms of FEMA's view, Congress has appropriated the money and 
they have it on the ready. The problem is that they have 
estimated the cost of many of these projects to be two and 
three or four times lower than it will actually cost to 
rebuild.
    So I am looking forward to the witnesses today to build an 
argument and a case for a new approach, a better approach. We 
have gotten some very specific suggestions from these officials 
and I am looking forward to questioning them, as well as the 
FEMA officials, throughout the morning.
    Let me turn now to my Ranking Member, Senator Stevens, and 
thank him. As I said in earlier meetings, he has a lot of 
experience with disasters that have occurred in Alaska. He has 
been on the forefront of some change and reform and I hope that 
this hearing will give us all, and my colleague from Arkansas, 
an opportunity to make the system better. Senator Stevens.

              OPENING STATEMENT OF SENATOR STEVENS

    Senator Stevens. Thank you very much. I am particularly 
interested in the Project Worksheet process. These worksheets 
are apparently the key to the reconstruction process and I am 
hopeful that we are going to have some time to ask some 
meaningful questions about what has happened to this Project 
Worksheet process.
    Other than that, I thank you for the hearing and look 
forward to witnesses. Thank you very much.
    Senator Landrieu. Thank you. Senator Pryor.
    Senator Pryor. I don't have an opening statement, Madam 
Chairman, but thank you again for keeping our focus and 
attention on this very important issue.
    Senator Landrieu. Thank you.
    Then let us begin with our first panel. Let me introduce 
them briefly and then I will ask them to speak in the order 
that they are introduced, and I thank them for being available, 
taking time from their busy schedules and tasks of rebuilding 
their parishes and their regions.
    First, Mayor Ray Nagin from the City of New Orleans. He has 
worked for many years to resolve some of the city's most 
persistent problems. Prior to becoming Mayor, Mr. Nagin served 
as General Manager of Cox Communication in Southeast Louisiana. 
He has had to fight to get assistance to the people of New 
Orleans and he continues that fight today.
    Our second witness will be Kevin Davis, President of St. 
Tammany Parish, also one of the hardest-hit parishes. Mr. Davis 
was elected in January 2000. His efforts to streamline the St. 
Tammany Parish Government are well respected and well known and 
he has made major contributions to the improvement of the 
parish.
    President Henry Rodriguez, Junior Rodriguez as we know him, 
from St. Bernard Parish has served in local governments since 
1976. He was first elected to the Police Jury, where he 
remained for 16 years. He has battled to basically lead the 
effort of a parish that was virtually completely destroyed, 
67,000 people that are anxious to return and build homes 
stronger and better, so I look forward to your testimony, 
Junior, as well.
    Let us begin with Mayor Nagin, and please understand, your 
testimony has been received and recorded, if you would like to 
summarize it or read it. I would ask each of you to limit your 
opening remarks to 5 minutes. Thank you.
    Mayor Nagin, please begin.

   TESTIMONY OF C. RAY NAGIN,\1\ MAYOR, CITY OF NEW ORLEANS, 
                           LOUISIANA

    Mr. Nagin. Good morning to this Subcommittee. I am C. Ray 
Nagin, Mayor of the City of New Orleans and I am honored to be 
here this morning to testify to Chairman Landrieu, Ranking 
Member Stevens, Senator Pryor, distinguished Members, and 
guests of the U.S. Senate Ad Hoc Subcommittee on Disaster 
Recovery of the Committee of Homeland Security and Governmental 
Affairs. Thank you for calling and inviting us today to talk 
about this very important aspect of any recovery, and that is 
FEMA Project Worksheets. We have had a persistent area--this 
has been a persistent area of difficulty and challenge for all 
of us, and all of my colleagues in the disaster areas.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Nagin appears in the Appendix on 
page 39.
---------------------------------------------------------------------------
    As I begin my testimony, I would like to thank you in 
Congress for your tremendous support for our region over the 
past 22 months. You have ensured that attention remains focused 
on New Orleans and the entire region so drastically affected by 
the hurricanes of 2005. I would also like to once again thank 
the American people and people all over the world for their 
generosity and support.
    As I begin my testimony, while the Federal Government has 
appropriated significant resources for our recovery, as I have 
mentioned many times, these dollars have been very slow to 
reach local governments and the citizens who need them. As has 
been the topic of much discussion in the past, we have found 
ourselves locked in a cycle of futility in certain respects and 
the need of needing money to undertake projects so that we can 
seek reimbursements for work that has been undertaken.
    To ensure that we have done everything to help ourselves, 
right after the disaster, we changed some laws to permit the 
city to borrow more than $30 million from other departments and 
other projects to begin critical projects related to public 
safety. We focused our efforts on public safety because those 
were our most critical needs at the moment, such as police, 
fire stations, and we were able to bring back our criminal 
court buildings at Tulane and Broad in June 2006, less than a 
year after the flooding.
    Today, we continue to maintain a very cautious balance of 
very limited general fund dollars as we continue to stand up 
our economy. My finance team has worked with national advisors, 
and recently we came up with a 5-year plan, a budget plan, that 
keeps costs in line with spending and assuring responsible 
management of our Community Disaster Loans (CDLs). Wall Street 
has acknowledged this, our prudent use of our limited dollars, 
and recently upgraded our investment grade bonds from ``junk'' 
status to ``stable'' status.
    Perhaps more importantly, our residents, ladies and 
gentlemen, are definitely coming home. After the floods, I set 
an aggressive goal for New Orleans to return to 75 percent of 
our pre-Hurricane Katrina populations. We now sit at about 64 
percent and gaining, meaning that our population is somewhere 
around 300,000 people compared to the 455,000 pre-Hurricane 
Katrina.
    Despite the hard work and creativity of our dedicated 
staff, we have run into many difficulties, and the biggest 
problem that we have is the Robert T. Stafford Act. The Act 
functions as a reimbursement program where a community like 
mine that has been totally devastated does not have the 
resources to adequately start projects and do them well.
    Now, recently, we have had some very positive movement in 
our relationship with FEMA and I would like to congratulate the 
recent staff and Gil Jamison for his hard work. But we are 
asking that as you consider changes in the Stafford Act, that 
there be a new category for catastrophic events that would 
allow a government to be in a position to have funds advanced 
to them so that they can start the meaningful work that they 
are needing.
    And another point I will make as my time expires is that 
there is a national standard called RSMeans, which basically 
sets estimates, reasonable estimates for what it would cost to 
reimburse a particular community for a disaster such as ours, 
and those calculations were not done accurately on the outset. 
So we had many Project Worksheets that were under-valued, and 
we continue to fight the under-valuing, and until we get the 
dollars appropriated at reasonable levels, we cannot start the 
work.
    So I thank this Subcommittee, and my time is up, and I will 
be more than happy to answer any questions that they have.
    Senator Landrieu. Thank you, Mr. Mayor. President Davis.

  TESTIMONY OF KEVIN DAVIS,\1\ PRESIDENT, ST. TAMMANY PARISH, 
                           LOUISIANA

    Mr. Davis. Good morning. Thank you, Chairman Landrieu, 
Ranking Member Stevens, and Senator Pryor. First, thank you for 
the Federal aid to help the Gulf Coast region recover from the 
worst natural disaster in American history. I also want to 
thank you for the opportunity to be here before you today.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Davis appears in the Appendix on 
page 47.
---------------------------------------------------------------------------
    It has been almost 2 years since Hurricane Katrina's storm 
surge and winds brought massive damage to our community. I hope 
my testimony will be constructive and assist in future recovery 
efforts.
    I wanted to quickly give you the background for the issues 
I would like to address. St. Tammany Parish is north and east 
of Orleans Parish. My parish is about 850 square miles of which 
57 miles are coastline. The northern half is rural and the 
southern half is a mix of urban and suburban. Drainage is 
provided by our rivers, streams, and bayous. The eye of 
Hurricane Katrina passed over eastern St. Tammany Parish. The 
storm surge was 20 feet high at its peak.
    It extended for over 50 miles and came inland for over 
seven. Over 48,000 homes were damaged. Every roadway was 
blocked. Our natural drainage system was clogged by downed 
trees. All utilities were destroyed. All bridges into St. 
Tammany from the south shore were incapacitated immediately 
after the storm. Seven square miles of marshland was pushed 
into towns and subdivisions south of I-12. Hurricane Katrina 
created 6.8 million cubic yards of debris, over 90 percent of 
which were trees.
    This was our situation when we began working with FEMA and 
the Public Assistance process. The primary problems we faced 
related to a lack of trained and qualified representatives from 
FEMA on the ground, as well as the inability of local FEMA 
representatives to make decisions regarding Project Worksheets. 
The disaster specialists fiscal year assigned to the parish 
have, for the most part, been inexperienced and not 
knowledgeable regarding the laws, memorandums and rules, and 
other policies of FEMA regarding Hurricanes Katrina and Rita. 
Inconsistent rulings finally forced me to sue FEMA in Federal 
Court. We did not want to take this step but were forced to do 
so to protect our citizens.
    The eye of Hurricane Katrina stripped dozens of acres of 
marshland from the lake and deposited the mud and grass into 
homes, roads, canals, especially in the Coin Du Lestin area. 
Homeowners cleaned and scrubbed their homes and possessions. 
The parish contractor hauled away debris in the roads, but to 
this day, parts of the bayous are so full of debris that you 
can almost walk across the water.
    FEMA dictated that we could only remove specific debris out 
of the canals. One was a car. The second was a part of a house, 
and another was a boat. FEMA officials arbitrarily decided what 
could and could not get done to clean this area. In no way were 
we able to dredge. That was a forbidden word. We bid the 
project three times, at FEMA's request, without succeeding in 
cleaning these canals. FEMA wanted to manage a response, as 
well as audit the results.
    I believe that to improve emergency assistance in our 
country, we must resolve this conflict within FEMA's own 
mission. FEMA has roles that are not compatible. FEMA primarily 
operates as a regulatory bureaucracy. During crisis, FEMA 
changes to an action organization, and then within days it 
reverts back to a regulatory agency. By its very nature, it 
cannot manage a chaotic situation. In a crisis, flexibility and 
the need to think quickly and creatively are essential.
    We recommend FEMA be defined as a regulatory bureaucracy. 
Give the responder's job to an agency such as the National 
Guard. While the National Guard is a large agency, it is built 
for action. FEMA is a bureaucracy built for regulation. FEMA's 
role, I would argue, is to provide regulatory oversight without 
managing the situation. FEMA does an excellent job of auditing 
its grantees. Why not ask FEMA to do what it does best, the 
oversight of FEMA-supported programs.
    FEMA and local governments need more training than is now 
given. Almost every conflict that we had can be traced back to 
a lack of basic training in the law and its roles and 
regulations. Rule interpretation varies significantly from one 
jurisdiction to another. This is evident in a lawsuit we filed 
to clean Coin Du Lestin area. St. Tammany Parish cannot even 
use the word ``dredge,'' but Biloxi Bay is being dredged. The 
action of dredging is approved in one area while the word alone 
is forbidden in another. This is a result of the lack of 
training. Many good and hard-working people have come to St. 
Tammany Parish as FEMA employees. Sadly, in many cases, they 
were not given the training or the tools to do their jobs well.
    FEMA should, like other Federal agencies, have well-trained 
FEMA personnel stationed permanently in those States that are 
at risk for disasters. This would enable FEMA to be part of a 
planning prior to any disaster. This would enable the same 
personnel to train State and local officials on the programs, 
policies, procedures, and management issues related to disaster 
response and funding. Both FEMA and local government would be 
operating with the same set of operational protocols with the 
trust built by working together during good times as well as 
bad.
    Well-trained FEMA personnel on the ground should have more 
authority to make significant decisions. If that is not 
possible, those at the regional and national level need to 
expedite their efforts during and following major disasters.
    I want to thank you for the opportunity to speak with you 
today and for the help you have given my community. I also want 
to commend the many men and women who have come to St. Tammany 
as part of the FEMA bureaucracy and did their best to help us. 
I hope that my recommendations will assist you in your efforts 
to improve emergency response in our Nation. Thank you.
    Senator Landrieu. Thank you, President Davis. President 
Rodriguez.

  TESTIMONY OF HENRY ``JUNIOR'' RODRIGUEZ,\1\ PRESIDENT, ST. 
                   BERNARD PARISH, LOUISIANA

    Mr. Rodriguez. Thank you, Senator Landrieu, Senator Pryor, 
and Senator Stevens. It is an opportunity and a privilege to be 
here today and I would hope that you would take into 
consideration our frustrations because this is frustrating. 
After 2 years, gentlemen, we are still in the same shape that 
we were prior to.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Rodriguez with an attachment 
appears in the Appendix on page 53.
---------------------------------------------------------------------------
    Obviously, St. Bernard Parish is the only parish that was 
entirely destroyed. There were not five homes out of 26,500 
residences that you could live in. There were no services, but 
you could stay in them. Sixty-seven-thousand-five-hundred 
people were displaced overnight, displaced without a home and 
without a job, without an opportunity to make a living. Our tax 
base went down to zero. Our infrastructure was totally 
destroyed. We are coming back relatively slowly.
    FEMA has been a problem. One of the issues that I always 
say is that we got by Hurricanes Katrina and Rita. I don't know 
if we are going to get through FEMA. This is one hell of a 
catastrophe. I don't know if this country can continue to 
afford FEMA. There are some major decisions that have to be 
made.
    But one of the big issues is lack of experienced personnel. 
People don't seem to have the expertise they need to make the 
decisions that they have and that would be beneficial to the 
parishes. I thought that we had to help, not hinder. Incorrect 
information--FEMA's representatives would provide different--
once you have a representative and you talk to that 
representative and he gives you some--he makes a decision, and 
in one case, I will just give you a particular instance. We are 
talking about sewer plants that everything was in it. We had 
consolidation in mind of our sewer plants prior to, and what 
happened is the hurricane came, so when FEMA came in, we said 
it was cheaper, less cost to consolidate the program.
    Well, the first gentleman that came in, the first 
representative, he said that sounded like a good idea and it 
could be done. This is a PW, gentlemen. This is the first one 
our parish worked on. FEMA writes these PWs. Now, this PW, the 
next gentleman that came in, he said, no, we are not going to 
do it as an improved project. We are going to do it as a least-
cost alternative. This is down the drain. You have to rewrite 
it.
    Now, the cost involved in this situation actually is 50 
percent less than the cost that our engineers told them it 
would cost to put these plants back in operation. We figure at 
the St. Bernard Parish we have about $564 million that FEMA has 
said, this is what the cost is going to be. They have 
underestimated so bad that we figure it is going to be over $1 
billion. This project alone here took up to 14 months, and then 
for somebody to come in and tell you that is not where you 
should go. You have to rewrite a version for this. Versions 
take up to 8 months. That is 12 months.
    We are in a situation where we should be setting an example 
for people. Infrastructure is what local governments need to 
get back, and Senator Landrieu, you made a statement with 
regard to school districts being a priority. I understand that, 
and I am thankful and I appreciate that. But it does no good to 
put the priority on the schools if we can't get the sewer for 
the schools, if we can't provide access to and from the 
schools. The local government needs to be able to put these 
infrastructures and these facilities back in order, and as of 
today, I mean, we haven't--we are still working out of 
trailers.
    We are in no better shape now than we were 2 years ago, and 
unfortunately, that is not acceptable. How can we as a 
government tell our people that they need to board their 
houses, they need to gut their homes, they need to clean their 
yards, when we as a government don't set an example? We should 
be setting an example. People don't want to hear that it is 
FEMA. They look at the local officials and local government. 
Thank you.
    Senator Landrieu. Thank you very much.
    I have just a couple of questions to each of you, and if 
you don't have them, if you could submit them to the record. 
But I think it would be helpful to know what percentage of your 
homes have access to clean drinking water to date and 
electricity and sewer. I don't know, Mayor, if you want to 
start, a percentage. If you could give even a rough estimate, 
is it 80 percent? One hundred percent of the city? And then, I 
think, President Davis and then also President Rodriguez.
    Mr. Nagin. As far as what percent of the homes have access 
to----
    Senator Landrieu. Electricity, water, and sewer.
    Mr. Nagin. For the most part, just about the entire 
footprint of the City of New Orleans, the utilities have been 
restored. But Senator, I must tell you that we have patched the 
systems up. There have been very few permanent repairs made to 
our systems, so we have challenges.
    For example, on the sewer side, we have made, I want to say 
65 or 66 pumping stations related to sewer. Just about every 
one of those pumping stations have temporary diesel-generated 
power to them, and it is very tenuous. It is very fragile.
    And the water system is the same way, and I will give you 
another quick example on the water system. We have three intake 
pump stations where we take water from the Mississippi and 
convert it into drinking water. Two of those stations broke and 
we were down to one. The only thing that saved us is that the 
river was at such a height that we had another dormant station 
that we activated until we got the second one fixed. So because 
the Project Worksheets have not been done adequately and 
appropriately we are at a very tenuous situation.
    Senator Landrieu. President Davis.
    Mr. Davis. Senator, yes. Pretty much it would be the same 
scenario in St. Tammany. We do have availability of all 
utilities at this point. Several of our sewer facilities, 
though, are operating but they are not operating what they 
should be as they were prior to Hurricane Katrina and they 
still need additional work.
    Senator Landrieu. President Rodriguez.
    Mr. Rodriguez. Our water situation, we have 100 percent of 
our parish back with our water, but, of course, the parish took 
care of their own water issue. We could not wait for FEMA. We 
used the little reserve funds that we had and we got our water 
system back.
    The sewer system is still a major issue. At the present 
time, we have one of the stations back, which is a very small 
one. We have an oxidation pond that is working, but the rest in 
Monster and Drabo, those two plants are only back to 25 
percent. We have 92 lift stations. Of those 92 lift stations, 
there still hasn't been any work done on those because of the 
PW process.
    However, we have been able to put some pumps, we rented 
some pumps to put in those lift stations to get the water to 
the processing plants. However, we still are dependent upon 
vacuum trucks. Now, gentlemen, these vacuum trucks, that is 
what I don't understand. That is the situation that kind of 
disturbs me and how we waste money. We have spent so far, we 
are going to spend $60 million on vacuum trucks and suck the 
sewer out of these manholes and bring it to the Riverbend 
oxidation pond. That $60 million, had you taken care of 
business with this, could have been spent on redoing our 
processing plants. There is something wrong with this process 
that we are going through, gentlemen. It is the tail wagging 
the dog. It is just not correct. Something is wrong.
    Senator Landrieu. And I want to just clarify for the 
record, and then I have one more question and then we will pass 
it to our Ranking Member, that to date in St. Bernard Parish, 
FEMA is reimbursing the parish for vacuuming out the sewage and 
transporting it by truck, which is what is being testified 
today to, rather than providing that much money or less to redo 
a sewer system because of bureaucratic inadequacies, 
inefficiencies, and downright stupidity, in my opinion. So the 
taxpayers are going to pay maybe double, maybe triple 
eventually. So this hearing isn't about spending more money, it 
is spending less money and spending it smarter.
    Could one of you, any of you--and if not, submit it to the 
record--talk about the error made in this RSMeans estimate. 
Does anybody know what RS stands for? I know I could ask this 
question of FEMA. But there is some mathematical calculation 
that was made for all of you initially that was then deemed to 
be wrong and those calculations had to be redone. Do any of you 
want to testify to that?
    Mr. Nagin. Yes. It is my understanding that RSMeans is a 
company that does estimates for different localities as to what 
it would cost to either rebuild a home or commercial structure 
or build one new, and that is part of the calculations that 
FEMA uses to estimate what it would cost to repair a public 
facility. Well, it is our understanding that there were some 
errors made in those formulas and it caused FEMA to have to--I 
guess about a couple of months ago--go back and recalculate 
thousands of PWs because of this error. It is also my 
understanding that RSMeans as a company had to come in and do a 
seminar to go over that with some FEMA representatives to get 
that straightened out.
    Senator Landrieu. OK. We will get more information from 
FEMA to you. President Davis, can you describe why FEMA 
continues to tell you that dredging the bayous in your parish, 
which run pretty much throughout the whole parish, why is it 
not in their jurisdiction to get them dredged to pull up any 
debris, etc., meanwhile dredging, you said, the Biloxi Bay, 
which is in a different jurisdiction of FEMA?
    Mr. Davis. Right. Senator, I am embarrassed to tell you I 
really don't know why. We have been, as I stated earlier, we 
actually with FEMA's guidance bid this particular project under 
the PWs three times. The last time was to remove the marsh 
grass. What is interesting is they have written a PW to remove 
marsh grass off of personal property. They have written a PW to 
remove marsh grass off of our roadways, which we have done. But 
they won't write a PW for marsh grass in these drainage canals. 
That is why I was forced to file a Federal suit in New Orleans 
to ask them to hopefully rule on our side to have it dredged.
    You made mention of Biloxi Bay. I read with great interest 
that they announced they were dredging that area under FEMA's 
rules that they could dredge it. So that is the reason for the 
suit.
    Senator Landrieu. OK. Thank you.
    Mr. Nagin. Senator, if I could illuminate one point, it 
seems as though there were certain members of FEMA's 
organization that would get into great debates with us as local 
municipalities about what was preexisting conditions, and there 
were many arguments about whether a rusted pipe in the sewer 
system was there before Hurricane Katrina. We have made case 
after case to prove to them that the system was working prior 
to Hurricane Katrina. Hurricane Katrina hit us and then 
something happened that caused it not to work. The same thing 
with streets. Tons and tons of pounds of water were on our 
streets for many weeks, and it is not until recently that FEMA 
acknowledged that Hurricane Katrina had something to do with 
that and now we are writing PWs.
    Senator Landrieu. Thank you. Senator Stevens.
    Senator Stevens. I am fairly concerned about the continued 
conflict between the local authorities and FEMA and the process 
of litigation, which takes years, to try and solve those 
problems. Have you tried to set up an arbitration system 
between the Federal agencies and the agencies involved in 
Hurricane Katrina reconstruction?
    Mr. Davis. Yes, sir, Senator Stevens. The problem is that 
we did file an appeal. We followed the rules, the Federal 
guideline rules. We filed an appeal, but that may take 6 to 9 
months, or 12 months, they tell me, to get through that 
process. I needed an answer faster than that because we are in 
hurricane season, so I filed a Federal suit.
    Senator Stevens. But you really need arbitration somehow. 
Have you sought to get these things arbitrated rather than go 
through lawsuits?
    Mr. Davis. Yes, sir. We filed the documents to appeal their 
decision, but that will take 9 months to a year to get that 
appeal, or that arbitration.
    Senator Landrieu. And it is my understanding, Senator, that 
there is no official arbitration process. In other words, they 
can appeal to FEMA, but FEMA monitors their own appeals, and 
after you have an appeal, there is no ultimate objective, 
independent entity. It is basically up to FEMA, is my 
understanding.
    Mr. Davis. Yes, that is right.
    Senator Landrieu. So it is a never-ending appeals process 
with no justification, I guess, or no fairness on the part of 
the local governments who may have disagreements about cost, 
etc., is my understanding.
    Mr. Davis. That is correct.
    Mr. Rodriguez. And actually, Senator, the person that you 
appeal to--are the same people that turned you down. So that 
really needs to be adjusted.
    Senator Stevens. Is the argument primarily over money?
    Mr. Rodriguez. As far as I am concerned, the argument is, 
Senator, why do I have to prove to anybody that I was totally 
devastated? Why? I thought FEMA was there to help us, not hurt 
us.
    Senator Stevens. Is it money?
    Mr. Rodriguez. Yes, sir. Money is the bottom issue.
    Senator Stevens. Are there arguments over money?
    Mr. Rodriguez. Yes, sir. Money is the primary issue. If we 
had the money, we wouldn't be here talking to you. We wouldn't 
be asking FEMA for anything. We go on about it and take care of 
our own business. But as the parish is totally devastated, tax 
structure down to zero--we were at zero. From $50 million 
budget a year, we are down to $20 million. Yes, sir, it is all 
about money. If we had the money, we wouldn't be sitting here. 
But what we don't understand and what we are frustrated about 
is we continue to have to prove that we were devastated, that 
we were hurt, that we were damaged.
    Senator Stevens. Mr. Davis, how about you? Is the argument 
about money?
    Mr. Davis. Yes, sir, certainly, it would be. This 
particular project that you are asking about, the last bid to 
remove the marsh was $14 million. Local government doesn't have 
those funds.
    Senator Landrieu. I think what the Senator is asking, are 
the discrepancies, the arguments on the Project Worksheets, 
about an argument over what the projects will cost more or 
less, and I understand from the documents that there might be 
as much as a 40 to 50 percent discrepancy between FEMA's 
estimates----
    Mr. Rodriguez. Yes.
    Senator Landrieu [continuing]. Of what it would cost to do 
the job and their estimates.
    Mr. Davis. Senator Landrieu, if I could real quick, they 
wrote a PW on this project for 130 cubic yards. We believe that 
there could be as much as a half-a-million cubic yards, and 
they agreed and we actually bid that project, which came in at 
$14 million. They called me and said, ``Don't do that.'' We 
rebid it and we are doing it for $24,000--the FEMA person is on 
the ground with us and we can only remove certain items that 
they tell us while we are on the ground.
    Senator Stevens. Well, it seems to me that what you need is 
an arbitration process. We had one during the earthquake 
recovery in 1964 and it was a Presidential appointee, as a 
matter of fact, that came in and just resolved the differences, 
and the Federal Government, the State governments, and local 
governments had to live with the decision. I think you need 
some arbitration. I don't know whether you need one arbiter for 
the whole situation, but it does seem to me that there ought to 
be an arbitration process. The judicial process is not meant to 
solve differences in money between estimators----
    Mr. Davis. I agree, Senator.
    Senator Stevens [continuing]. And it has to be an 
arbitration process.
    Senator Landrieu. I think that is an excellent suggestion. 
Any additional questions?
    Senator Stevens. No. Thank you.
    Mr. Rodriguez. I would hope that it would be a 
Congressional arbitration process.
    Senator Landrieu. Well, since Congress is appropriating the 
money for this recovery, that is exactly the direction we may 
have to go in that direction.
    Mr. Rodriguez. You need to see how your money is being 
spent.
    Senator Landrieu. Senator Pryor.
    Senator Pryor. Thank you, Madam Chairman.
    I have a question for each of you. I will start with you, 
Mayor. It is good to see you again. Thank you for being here.
    Mr. Nagin. Good to see you.
    Senator Pryor. I hate to ask it this way, but how much face 
time do the three of you get with senior FEMA and DHS people? 
Do you deal with them or with lower-level folks that are 
assigned to New Orleans and Louisiana? Are they there full-
time? I would like to get a feel for how much time you spend 
with them.
    Mr. Nagin. Well, it is a multi-layered organization, so it 
depends upon what is your definition of senior FEMA people are. 
The most senior person that I deal with on at least a monthly 
basis is Gil Jamison, who is a fairly high-ranking person. But 
to be honest with you, my perception of dealing with him is 
that he has difficulties with his own organization, trying to 
make sure that arrangements and agreements that we make and the 
direction that we set is filtered through and carried out at 
the lower levels of FEMA. So there is some disconnect there.
    Senator Pryor. Is it your impression, Mayor, that is a 
bureaucratic problem, or is it a resistance within FEMA that 
they just don't want to be helpful, or is it a money issue, or 
what is that?
    Mr. Nagin. I think it is a bureaucratic issue, and I also 
think that the Stafford Act is written with so much flexibility 
in it that it leaves room for various interpretations, and then 
interpretations change over time.
    Senator Pryor. Yes. Looking at the Stafford Act, to me, it 
seems like you want it to be flexible----
    Mr. Nagin. Yes.
    Senator Pryor [continuing]. Because you want discretion. 
However, that flexibility may also cause confusion, and it 
sounds like you have had a lot of that in Louisiana as you have 
tried to work through this process. Is that fair to say?
    Mr. Nagin. That is fair to say, and I think it goes back to 
the point that all of us are making. There needs to be more 
trained individuals inside of FEMA, pre-trained, pre-
positioned, and there needs to be a consistency. Every couple 
of months, we seem to have dealt with a different FEMA 
representative and we almost had to start from scratch every 
time the new person came in.
    Senator Pryor. Mayor, is there a FEMA team of people that 
are there full-time and have been there for the last 2 or 3 
years?
    Mr. Nagin. No, not any consistency that I have seen.
    Senator Pryor. OK. Have you seen anything different?
    Mr. Davis. No, Senator. In St. Tammany Parish, I actually 
have a liaison person there who now has been there for months, 
but that was not the case earlier. I have a lot of respect for 
Mr. Jamison, as the Mayor spoke about. It seems like when I do 
meet with him, I seem to get things moving.
    Mr. Nagin. Yes.
    Mr. Davis. But I get the impression that they want--I have 
to go through my field personnel, and it may take weeks, and 
they want to know particularly exactly what do we want to talk 
to Mr. Jamison about, and I don't know if he gets those 
messages a lot of times, so it is a little frustrating.
    Senator Pryor. So President Davis, are you saying that you 
have trouble getting time with Mr. Jamison? You can't just pick 
up the phone and----
    Mr. Davis. No, sir, I can't pick up the phone and call.
    Senator Pryor. You don't have a regular meeting scheduled 
with him?
    Mr. Davis. No, sir.
    Senator Pryor. The reason you can't just pick up the phone 
and call him, seems to be more on the FEMA end, not on your 
end. Am I correct in thinking that you would like to talk to 
him more frequently?
    Mr. Davis. Yes, sir.
    Senator Pryor. What about you, President Rodriguez?
    Mr. Rodriguez. I would like to talk to anybody that could 
give me a definite answer.
    Senator Pryor. Right.
    Mr. Rodriguez. That is one thing you can't do with FEMA, is 
you can't get anyone to give you anything in writing. Nobody 
will give you a definite answer. One of the problems that you 
have with regard to this is we are talking about contracts. We 
have contractors that will not bid on processes anymore. They 
will not bid on any projects because of the inability to get 
their funds through the FEMA PW process.
    A typical example is the last contract that I had--the 
vacuum truck service for St. Bernard Parish--didn't even bid on 
the last contract, refused to bid. We have contractors that are 
owed $4 or $5 million. I am talking about small subcontractors 
in the parish. We have a number of contractors in the parish 
that have gone out of business because of the inability of 
this, and that is what is driving the cost up. They are telling 
you we are not bidding, and if we do, we are going to have to 
drive the cost up to take care of business. We have one 
contractor that is paying $9,000 a day on money that he has 
borrowed.
    Senator Pryor. OK. This is a contracting process, and 
normally when there is a contract, there is some assurance that 
the contractors will be paid. Do they not have that type of 
contract here?
    Mr. Rodriguez. Not to my knowledge. There is no assurance 
of anything with FEMA that you are going to get paid. The only 
thing consistent about FEMA is the inconsistency. This is a 
typical example right here, this voluminous work that was done, 
and then the next gentleman that comes in says, no, we can't do 
it like that. We have to do it another way.
    Senator Pryor. President Rodriguez, let me ask you about 
FEMA. Is it your impression that they are resistant to help 
you, or is it more of a competence issue with FEMA?
    Mr. Rodriguez. I think, without using some special 
adjectives, I think it is a combination of both, lack of 
experience and competency and inability to make decisions based 
on a consistent issue. One of the things that they don't do is 
they don't listen to the local government engineers and 
officials that tell them that know exactly what it is going to 
cost or can give them a much better picture of what it is going 
to cost.
    Let us take the canals, for instance. He is exactly 
correct. I don't know, it is hard for me to explain to you, but 
its been 2 years and I have a fishing industry in my parish 
that cannot go back to work because our canals haven't been 
cleaned. The same issue with St. Tammany, pick up the debris. 
To pick up the debris, you have to get a barge in there, so you 
have to clean the canal to get the barge in. Basically, this is 
an area of stupidity because what they are doing, it is a 
double layer and they are spending your money twice.
    Gentlemen, I will just tell you this. In 1965, when 
Hurricane Betsy hit, the Corps of Engineers had our canals 
cleaned. FEMA has NRCS doing this job. NRCS should be inside 
the levee systems. The Corps should be outside, not the Coast 
Guard. The Coast Guard is a regulatory unit. They shouldn't be 
having to do it. They don't actually know what they are doing.
    I hate to tell you, because I am getting so frustrated. It 
is frustrating. I don't even want you to come down to see some 
of the problems and issues because there is no sense in you 
getting heartburn, too. But it is just pure ignorance on some 
people's part. We had a FEMA person that was from Idaho that 
was looking at one of our main fishing areas, and it was fully 
clogged with grass and she says, ``That was never a canal.'' 
Now, I could stand right there and then 50 feet away there is a 
guy that used to have a dock, used to have a home, and he used 
to have a boat. Well, his boat is a 65-foot double-rigger. The 
boat is there. What I asked her was, ``Honey, if you don't 
think this was a canal, how do you think this gentleman got 
this boat in? Although the boat is not usable anymore, and it 
is half there, do you think this guy airlifted his boat from 
here to the lake?''
    Those are the kind of angry things that you have to put up 
with that are so frustrating. In 1965, Hurricane Betsy hit in 
September 1965. Gentlemen, by December, we were enjoying 
Christmas. Our canals were cleaned. Our parish was cleaned. 
Everybody had their homes built. And you know what? All we had 
at that time from the government was a SBA loan. But they 
didn't require that you give them an arm and a leg or your 
property. You didn't have to do all of that. And you were 
forgiven $1,800. But by Christmas, we were back and enjoying 
Christmas. We had no FEMA and no Federal flood insurance. Does 
that tell you something? We had no DEQ, no EPA. All of these 
agencies are a problem. You have a catastrophe.
    One of the biggest jokes is the one that is concerned with 
historic preservation. Now, you talk about a joke. That is a 
joke and a half. I don't care what was historic about that. It 
is totally destroyed now. What am I going to do with it? It is 
still an eyesore. It is a problem. It is a health hazard. But 
that is one of the things they are telling us in the canal, 
that it is historic. If a board is connected to an old 
bulkhead, that is historic. The historic part about it is how 
ignorant it is to make that decision. That is historic.
    Senator Pryor. Thank you, Madam Chairman.
    Senator Landrieu. Thank you. I think the Mayor wanted to 
add to something, and then we are going to move to the second 
panel.
    Mr. Nagin. Well, I was just going to add a point to give 
the Senators a specific example of the undervaluation of a 
specific project. We have in Congo Square a performance venue 
called the Mahalia Jackson Performance Theater. It was severely 
damaged during Hurricane Katrina, roof damage as well as about 
eight feet of water. FEMA's initial Project Worksheet was 
valued at $3 million to repair this facility. Our staff thought 
it was going to be in excess of $6 million based upon our local 
knowledge. FEMA held that valuation up until recently, and now 
the valuation is over $8 million. But almost 2 years has gone 
by and we still haven't been able to start construction in a 
city that values culture, and it probably will be our only 
cultural institution that we can open and hold venues for our 
opera, jazz, orchestra, and so be it.
    Senator Landrieu. Any other final comments from you, 
President Davis?
    Mr. Davis. No. Thank you, Senator.
    Senator Landrieu. OK. I would just like to conclude by 
saying that I most certainly, as the Chairman of this 
Subcommittee, believe that it is the private sector that will 
rebuild and nonprofits, community-based civic organizations 
that will be part of the rebuilding, but none of that is 
possible without basic government infrastructure--sewer, 
drainage, clean canals, police and fire stations, libraries, 
schools, etc. Even the strongest and greatest businesses cannot 
function in a place where regular government services are not 
readily available. And what is stymieing this recovery is not 
the will of the people, it is the bureaucracy of the 
government.
    Finally, I will say--and we are going to plow through 
this--this parish President has had his parish destroyed not 
once, but twice, once in 1965 with Hurricane Betsy and then 
once in 2005 with Hurricanes Katrina and Rita. He has testified 
on the record----
    Mr. Rodriguez. Don't forget we got Hurricane Katrina and 
then we got Hurricane Rita.
    Senator Landrieu. Yes, I said Hurricanes Katrina and Rita. 
He has testified on the record that after 1965, by Christmas, 
their parish was basically back up and rebuilding. It has been 
2 years. It will be not the first Christmas, but the second 
Christmas, and we still can't get these drainage canals 
dredged. We have a major problem.
    So thank you all. We are going to continue to get to the 
bottom of it and we will see the second panel in a minute.
    Mr. Nagin. Thank you, Senator.
    Mr. Davis. Thank you, Senator.
    Mr. Rodriguez. Thank you, Senator.
    Senator Landrieu. All right. I am going to introduce the 
second panel and we will begin in the order that they are 
introduced.
    Colonel Jeff Smith is Acting Director of the Governor's 
Office of Homeland Security and Emergency Preparedness, and 
that would be the Governor of Louisiana. He assisted in 
coordinating the State of Louisiana's response to Hurricanes 
Katrina and Rita. He has also been involved in recovery and 
response from several other Presidentially-declared disasters. 
He is a Certified Public Accountant and has his own firm, and 
he has served the maximum years allowed with the Louisiana 
National Guard.
    Next, we will have Bryan McDonald, Director of the 
Mississippi Governor's Office of Recovery and Renewal. Mr. 
McDonald is responsible for leading the team charged with 
coordinating the State's Hurricane Katrina response and 
recovery. Prior to joining that office, he served as 
Mississippi's Director of Recovery Accounting Oversight. And 
prior to that, he worked to provide Hurricane Katrina 
assistance to governmental and nonprofit applicants under the 
Stafford Act.
    Finally, we will have Mark Merritt, Senior Vice President 
for Crisis and Consequence Management at James Lee Witt 
Associates. Mr. Merritt has been the Project Manager for James 
Lee Witt Associates' efforts in Louisiana. He has developed and 
delivered training programs for local emergency responders for 
numerous government officials, so he brings a wealth of 
experience from the private sector now to this endeavor.
    Colonel Smith, we will start with you, and please limit 
your testimony to 5 minutes, the same for all of you, and then 
we will get into questions. Thank you.

 TESTIMONY OF COLONEL PERRY ``JEFF'' SMITH, JR.,\1\ EXECUTIVE 
DIRECTOR, GOVERNOR'S OFFICE OF HOMELAND SECURITY AND EMERGENCY 
                PREPAREDNESS, STATE OF LOUISIANA

    Colonel Smith. Madam Chairman and distinguished Members of 
the Subcommittee, thank you for inviting me here today. I 
appreciate the opportunity to come before you and share my 
thoughts about the difficulties we have encountered with the 
FEMA Public Assistance Program, and in particular the manner in 
which and the use of Project Worksheets is adversely impacting 
our ability to recover from the catastrophic Hurricanes Katrina 
and Rita.
---------------------------------------------------------------------------
    \1\ The prepared statement of Colonel Smith with an attachment 
appears in the Appendix on page 59.
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    Today's testimony is not necessarily intended to be 
critical, but only a reflection of events so that we may 
examine a process that is not serving any of us as well as it 
could. Our 23 months of experience leads us to the inexplicable 
conclusion that we must develop realistic procedures that are 
more responsive to and more supportive of the recovery effort.
    Before I begin, I want to thank the very dedicated field 
staff of FEMA who have spent countless time away from home and 
family in assisting our recovery.
    I want to thank Congress and especially you, Senator 
Landrieu, and the Louisiana delegation for the recent 
legislation for giving the cost share match. We are aware that 
FEMA has administratively waived some level of the cost share 
in over 30 cases in which the catastrophic nature of the 
disaster overwhelmed the State and the community. However, the 
Administration did not support a full waiver for Louisiana, a 
State impacted by the most devastating hurricane in U.S. 
history. Without Congressional intervention, our recovery 
efforts would have been that much more difficult, and in some 
instances brought to a halt. Again, thank you.
    Just a couple of examples that will sum up the Project 
Worksheet issues and problems and policies. One story is the 
Henry School in Vermilion Parish. Almost every school in 
Vermilion Parish was damaged to the extent that students were 
displaced outside the community. Almost 2 years later, the same 
students are still waiting to return to their schools.
    When FEMA first evaluated the Henry Elementary School, they 
approved approximately $2 billion of funding to replace the 
facilities. Facilities that are more than 50 percent damaged 
can be replaced. Relying on this determination, school 
officials announced that they were going to build a new school 
and begun moving.
    As the school board proceeded, expending considerable time, 
money, and emotional investment, a new FEMA team rotated in, 
conducted a second assessment, and came to a contrary decision. 
The new assessment concluded that a replacement facility was no 
longer justified and FEMA would only authorize $855,000 to 
repair. Obviously, this shocked and frustrated the school board 
and they immediately appealed.
    Vermilion Parish School Board asked for our assistance. We 
went out and we hired engineers and architects and we looked at 
this and came up with a new cost estimate. It was pretty 
obvious that a building that had been under eight feet of salt 
water was completely destroyed, but after going through months 
of reevaluation, FEMA obligated $5 million for the replacement 
of the school. So though Vermilion Parish is satisfied with the 
end result, this process took over a year.
    This illustration points out how constantly rotating staff, 
misapplication of cost data, the complete failure to properly 
scope the Project Worksheet, and the time it takes to engage 
and correct a highly bureaucratic process all greatly hinder 
the recovery.
    Bootheville High School in Plaquemines Parish is another 
example. The parish questioned FEMA's original estimate of $1.9 
million to make repairs to the building and actually added 
$500,000 to the Project Worksheet. Though the school board was 
not comfortable with FEMA's estimates, it proceeded with the 
repair process and accepted a low bid of $3.4 million. Anxious 
to get the school back in service as soon as it could, the 
school board took the risk that necessary funds would 
eventually be obligated by FEMA. The Public Assistance Program 
provides reimbursement on all large projects based on actual 
cost, not cost estimates.
    The school board requested a revision to the Project 
Worksheet to actually recover the entire cost. However, over 
the last year, the costs have escalated by $6.2 million with 
change orders. FEMA has only obligated an additional $867,000. 
The school board is still waiting on FEMA to obligate nearly 
$5.3 million. They have already paid their contractor and the 
lack of FEMA funds has a severe budgetary impact on the parish.
    Additional questions lingered. How could the original 
estimate of $1.9 million been so far off the mark from almost 
$10 million? Had the damages been accurately identified in 
estimates in the first instance, would the school have been 
eligible for replacement?
    These two examples are representative of hundreds of 
similar Project Worksheets causing endless challenges to 
Louisiana's recovery. Making decisions with poor information 
cannot yield optimum results and makes planning not much more 
than guesswork.
    Another challenge has been Louisiana's State Administrative 
Allowance, which to date is approximately $22 million. 
Historically, the Administrative Allowance provides States 
funding for a broad range of activities to manage the Public 
Assistance Program, which would enhance our support to the 
local jurisdictions that badly need the help. However, FEMA has 
limited the use of these funds to only overtime, travel, and 
per diem. FEMA applied an unnecessarily restrictive 
interpretation to regulatory language that actually states that 
funds can be used for administrative costs, including these 
three categories. This is not restrictive language but only 
illustrative. FEMA's restrictive interpretation is--the 
approach that FEMA is taking will not allow the State to use 
the full authorization that would otherwise be used.
    Accountability is essential. However, that should not 
preclude us from addressing our issues quickly and effectively. 
Unfortunately, this is not happening. In fact, it is my 
observation that decisionmaking from FEMA and DHS on critical 
issues is excessively delayed. Nearly every issue goes to 
Washington, DC, for resolution. Further compounding the slow 
decisionmaking process is FEMA's continued refusal to honor our 
repeated request to locate their key players and decisionmakers 
with the State staff and decisionmakers in Baton Rouge.
    I hope that this Subcommittee will find ways to encourage 
an environment at DHS and FEMA that looks to appropriately 
utilize the flexibilities that were built in the Stafford Act.
    Madam Chairman, thank you. That concludes my statement.
    Senator Landrieu. Thank you. Mr. McDonald.
    Mr. McDonald. Thank you, Madam Chairman.
    Senator Landrieu. And before you begin, let me just make 
clear, I think to the audience, they understand, but FEMA is 
divided into separate regions. So Texas, Louisiana, and several 
other States are covered by Region 6, and Mississippi, Alabama, 
Florida, and several other States are covered by Region 4. 
Major Phillip May is over Region 4 and Bill Patterson is over 
Region 6. So if we hear discrepancies in testimony, it could be 
because the regions are operating somewhat differently. 
However, we may see similar problems in Mississippi, as well. 
Please proceed.

TESTIMONY OF BRYAN McDONALD,\1\ EXECUTIVE DIRECTOR, GOVERNOR'S 
      OFFICE OF RECOVERY AND RENEWAL, STATE OF MISSISSIPPI

    Mr. McDonald. Thank you, Madam Chairman, for that 
clarification. I would like to thank the Members of the 
Subcommittee for allowing me to share with you to tell you 
about the recovery that is occurring in our great State. I want 
to thank you very much, Chairman Landrieu and Ranking Member 
Stevens, for giving me the opportunity to come before you 
today. I do appreciate it.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. McDonald appears in the Appendix 
on page 66.
---------------------------------------------------------------------------
    On August 29, 2005, Hurricane Katrina struck Mississippi a 
grievous blow. The combination of the storm's slow speed and 
shallow waters off the Mississippi shoreline created a storm 
surge in excess of 30 feet in some areas. More than 80 miles of 
Mississippi's coastline were completely destroyed. Hurricane-
force winds extended more than 200 miles from the coast. FEMA 
reported that over 65,000 homes in South Mississippi were 
damaged or destroyed. Electricity was lost to 80 percent of the 
State's three million residents, and the miles upon miles of 
utter destruction are unimaginable, except to many like you, 
who witnessed it with your own eyes.
    Mississippians found themselves having to scramble, adjust, 
innovate, and just make do. However, it was the spirit of our 
people that pulled us through. Our people are strong and 
resilient.
    After the storm passed, they set about the work of putting 
their lives back together and helping their neighbors do the 
same thing. Their spirit has been an inspiration to all of us, 
and that spirit remains key to our recovery.
    The Federal Government has been a good partner. However, 
the size and nature of this disaster brought new challenges 
that have tested us all. We appreciate the opportunity to 
address changes that may help in future disasters. It is our 
hope that this Subcommittee's work, along with that of others, 
will allow us to leave the Project Worksheet process better 
than we found it.
    Local governments in Mississippi have done a stellar job of 
working with State and Federal officials to manage the process 
of obligating more than $2.2 billion in Public Assistance. To 
date, FEMA has generated nearly 14,000 Project Worksheets for 
repair and rebuilding projects in Mississippi's communities. 
Full transparency and cooperation were two of the cornerstones 
in Mississippi's effort to work with FEMA after this disaster.
    We recognized the potential information void present in the 
traditional NEMIS system, FEMA's electronic system for grants 
management, and we developed the Mississippi Public Access 
Management System, M-PAM, or PAM as we refer to it, to provide 
real-time access to applicant cost and procurement information 
and a systematic means for identifying funding roadblocks in an 
attempt to speed up the funding process. M-PAM utilizes the 
latest advancements in computer-based management technology to 
scan, record, and store all documents, invoices, and receipts 
related to every Project Worksheet written in Mississippi.
    It is an Internet-based solution and it does allow real-
time management and analysis and communication of issues 
related to all of our Public Assistance matters, the systems 
used by FEMA, the FBI, Homeland Security's OIG, and our Office 
of State Auditor as a tool for early identification of fraud or 
mismanagement. It was designed to effectively fill the void 
between the obligation and close-out process in NEMIS. We 
believe that closing those existing Project Worksheets is 
absolutely critical to ensuring that local governments receive 
final allocations of recovery money and thus are able to pay 
contractors and subcontractors for work that in many cases was 
completed more than a year ago.
    Mississippi is committed to working to maintain the 
positive momentum and cooperative spirit that exists between 
FEMA, the State, and locals. In recognition of that cooperative 
spirit that exists, we also seek to ensure that FEMA 
headquarters continues to honor critical decisions made by 
local FEMA leadership and field personnel in the weeks and 
months immediately following the disaster. We believe it is 
important for decisions made by local FEMA leaders during the 
immediate post-disaster environment to be affirmed and upheld 
throughout the disaster recovery process so that the State and 
local officials can act quickly and in good faith based on 
those decisions.
    Furthermore, the State of Mississippi seeks to ensure that 
FEMA's reasonable cost standards are applied in a manner that 
protects communities that adhere to all reasonable and prudent 
requirements and that worked with FEMA personnel during the 
process. The State asks that FEMA expand its standards through 
which reasonable costs are established to take into account all 
factors contributing to the market conditions that exist in the 
post-disaster environment.
    Despite the challenges we still face, Mississippi is well 
on its way towards recovery. We understand that our work to 
recover, rebuild, and renew will take years. More importantly, 
it will take the continued support of our Nation's leaders and 
the American people. Much opportunity lies ahead. Hurricane 
Katrina, with all of its destruction, gave birth to a 
renaissance in Mississippi and that will result in rebuilding 
our State bigger and better than ever before. Our citizens will 
be at the heart of that renaissance, and the people of the Gulf 
Coast have been a model of the spirit and character of 
Mississippians.
    Our people are rebuilding one day at a time. We ask for 
your continued assistance in helping them move forward. Through 
your efforts and the efforts of the people of our great State, 
we are rebuilding a Mississippi that will exceed anything we 
have ever known. Thank you, Madam Chairman.
    Senator Landrieu. Thank you. Mr. Merritt.

TESTIMONY OF MARK MERRITT,\1\ SENIOR VICE PRESIDENT OF RESPONSE 
            AND RECOVERY, JAMES LEE WITT ASSOCIATES

    Mr. Merritt. Madam Chairman, Senator Stevens, thank you for 
inviting me to participate in today's hearing. I appreciate the 
opportunity to come before you to discuss the impact of Project 
Worksheets (PWs), on the local recovery efforts and on the 
overall allocation of Public Assistance dollars. My testimony 
has been shaped by my perspective of working on these issues in 
both the public and private sector and at all levels of 
government, Federal, State, and local.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Merritt appears in the Appendix 
on page 71.
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    I had the honor and privilege to work for the Federal 
Emergency Management Agency (FEMA), from 1993 to 2001, on 
hundreds of disaster responses, from the great Midwest floods 
of 1993, to the catastrophic Northridge earthquake experienced 
by the Los Angeles area in 1994, to the bombing of the Murrah 
Federal Building in 1995. The professional staff I worked with 
at FEMA throughout the 1990s were some of the most dedicated 
and creative problem solvers with whom I have ever worked. To 
me, this is high praise for this great public servant, since I 
am a graduate of West Point who also served with some of our 
Nation's finest from the First Gulf War.
    My experience and the experience of State and local 
emergency management professionals during the 1990s was that 
when you dealt with FEMA, you were working with the best of the 
best. These were the people who knew how to get things done. 
They were people who knew how to quickly identify and meet the 
needs of individuals and communities struggling to recover from 
a disaster. They were empowered to make decisions.
    While I believe many of the same people with the same 
spirit still exist in the agency, our experience over the past 
few years shows that things have changed. I want to make it 
clear that the people at FEMA, both permanent and local hire, 
are good people with a lot they can bring to the table. But the 
reality is that over the past few years, many of the most 
experienced staff have left the agency or retired and neither 
FEMA nor DHS have empowered the field staff to problem solve, 
make decisions, and creatively address the unique issues that 
arise during every disaster.
    Also, the FEMA regions, and I want to stress this point, 
the FEMA regions who we relied on heavily during my tenure at 
FEMA for their expertise and relationships are scarcely 
utilized during the recovery any longer. I find this to be 
highly disappointing.
    My experience leading the Special Disaster Close-Out Teams 
while at FEMA required that I become intimately familiar with 
the Stafford Act, 44 C.F.R., the regulations and the body of 
knowledge and experience codified throughout the years through 
various FEMA policies and precedent. I know how flexible the 
laws, regulations, and policies governing FEMA disaster 
recovery programs can be. They are written broadly enough to be 
adapted to a variety of situations, since no two disasters are 
alike and there are unique needs and lessons that are learned 
on each disaster, particularly those that are considered to be 
catastrophic.
    The Stafford Act, 44 C.F.R, and the 9500 Series, which is 
the compendium of policies for FEMA's Public Assistance, or PA 
Program, are short and broad in scope. They are meant to 
outline some of the things you can fund and all the things that 
you can't. The idea was to place boundaries on what is possible 
with Federal disaster relief dollars, yet provide maximum 
flexibility within the law to meet critical disaster needs at 
the State and local levels. However, FEMA's current leadership 
has been working under a philosophy that unless something is 
specifically mentioned in the law, regulations, or policy, that 
it cannot be done.
    Colonel Smith's testimony today does a very good job of 
illustrating the difficulties the State of Louisiana has 
experienced with the PW process as applied to Hurricanes 
Katrina and Rita. His examples highlight the fact that PWs 
written in this disaster are chronically underfunded and/or 
poorly scoped. Colonel Smith's testimony also does a very good 
job of summarizing the primary reasons for the four PWs, 
including a lack of flexibility being applied to meet real-
world local issues present in these catastrophic disasters; the 
unintentional consequence of establishing numbers-based 
management goals related to Project Worksheet production as 
opposed to measuring or demonstrating progress in the 
rebuilding process--we should be counting the number of 
schools, hospitals, and miles of roads repaired or replaced, 
not the numbers of PWs written; the failure to take into 
account local factors impacting reconstruction costs, including 
the scarcity of labor and construction materials, when 
preparing cost estimates for work; and the lack of experience 
and suitably-trained staff with the authority to make decisions 
working for FEMA on this disaster, who both understand the 
Public Assistance Programs and the nuances of how it has been 
and both can and should be implemented.
    I want to especially emphasize this last point, that there 
aren't enough experienced staff working for FEMA on this 
disaster who know enough about the program and its history to 
understand how flexible it can be to meet unexpected needs 
after a disaster. I believe this to be the core of what is 
hindering the PW process.
    The problems were compounded, however, through the 
institution of the Transitional Recovery Office (TRO) concept. 
In order to reduce costs, FEMA has moved to hiring locally to 
fill recovery positions, including senior management. The 
hiring of people with little or no FEMA experience and putting 
them in charge of the recovery programs with little or no 
oversight by experienced staff is not working. Again, the staff 
hired locally in Louisiana and elsewhere are dedicated and 
talented people, but most personnel are coming into the largest 
and most complex recovery and reconstruction project in U.S. 
history with only the practical experience that they have 
gained since being hired after the hurricane. For the most 
part, that translates to, at most, 23 months, not enough to 
understand the nuances of the program and how it has been 
applied previously.
    It is not fair to the committed temporary staff who have 
been hired and it is not fair to the parishes. The communities 
in Louisiana deserve FEMA's full complement of staff and 
resources to help them to obtain the full disaster funding due 
them under the law and to provide the technical assistance that 
will help them to build back stronger. The TRO must have a core 
of experienced program staff from regional offices and 
headquarters in Washington, DC that can help to guide the 
process. We need people who know how far they can stick their 
necks out without getting them chopped off.
    Compounding this issue is the fact that senior agency 
officials rarely make it to the State to participate in 
meetings that would help bring resolution to many of the 
complicated policy issues. Senior leadership involvement is 
sporadic and from a distance. Most have only come to the State 
a handful of times, usually for brief periods and with few 
meetings with State and local officials designed to resolve 
critical issues. In my days with FEMA, it was understood that 
large disasters provide a laboratory for the disaster programs 
because it was assumed that we would encounter and have to 
overcome many unusual situations and complicated issues, issues 
that would present new policy questions or would require the 
participation of staff having the deepest understanding of the 
laws, regulations, policies, and past precedent.
    During the Northridge earthquake, perhaps the most 
complicated and costly disaster prior to Hurricanes Katrina and 
Rita, senior FEMA staff--to include the director and his 
associate directors and general counsel--spent weeks in Los 
Angeles meeting with State and local officials to deal with 
critical issues firsthand. The lack of this involvement has had 
consequences. As a West Pointer, I learned quickly that the 
longer your lines of communications, the more difficult it is 
to be successful. Attempting to have effective communications 
that will result in timely and effective resolution of issues 
in Louisiana is very difficult to do from Washington, DC, 
without senior staff understanding and involving themselves in 
the issues they are deciding. These long lines of 
communications have created more difficulty in managing the PW 
process and delays in getting decisions made than just about 
anything else.
    When I was coordinating the disaster close-out for 
Hurricane Andrew and several other large disasters, I would 
make sure our teams from headquarters included the best 
programmatic minds, the Office of General Counsel, and, yes, 
the Office of Inspector General. That way, we would resolve 
issues without leaving the room in real time.
    FEMA and DHS rarely, if ever, involve the Inspector General 
on the front end in a proactive fashion in Louisiana. Doing so 
could save a lot of time and potential eligibility problems 
downstream. I have always said getting the money is the easy 
part. Keeping the money is difficult.
    We have to find a better way to do all of this. It did not 
used to be this difficult. It does not need to be this 
bureaucratic. The second anniversary of the storms is quickly 
approaching and we are nowhere near where we should be in our 
recovery efforts.
    Madam Chairman, I applaud your efforts with this hearing 
today and I suspect this dialogue that you and the Subcommittee 
have opened with FEMA and DHS may give us insight into whether 
legislative fixes are in order or whether the existing laws, 
regulations, and policies allow the flexibility and discretion 
necessary for a quick and complete recovery in the State of 
Louisiana.
    This hearing is not just about the physical and economic 
recovery of Louisiana and Mississippi. This hearing is just as 
importantly about the credibility and viability of FEMA and the 
critical roles and responsibility that Congress has given them. 
If the public loses faith in the process, they will lose faith 
in the organization responsible for that process.
    I am a true believer in FEMA, its mission, and its people. 
I want nothing more than for FEMA to regain its place as the 
premier Federal agency it once was. Thank you, and I would be 
glad to answer any of your questions.
    Senator Landrieu. Thank you.
    Senator Stevens. If I may, Madam Chairman, I do have an 
appointment at 11:30 and have to leave.
    Senator Landrieu. Go right ahead.
    Senator Stevens. Mr. Merritt, we spent some time together 
and I think your criticism is valid to a certain extent. There 
is no question but that you and James Lee Witt used great 
ingenuity in dealing with the disasters you faced, including 
the California earthquake. But it was, after all, 20 square 
miles within one State. We are dealing now--we have been 
dealing with a disaster that covered the area from the East 
Coast to Texas, an area the size of France and Germany. The 
disaster was roughly equivalent to the destruction of World War 
II in France and Germany, and I don't think any of us have come 
up with a solution to how to manage really the requests of each 
individual area within each State that has demanded immediate 
attention, and they are entitled to immediate attention.
    It seems to me that we really need a command structure that 
is different from FEMA for this, and probably should have 
recognized that some time ago. But the difficulty is trying to 
deal with an agency that has to make the decisions that affect 
so many different localities at the same time. I think we have 
to go back to the drawing board and find a way to get the 
Federal oversight much broader and, in effect, have what you 
and James Lee Witt devised for California in each area. The 
trouble is, we are looking to the FEMA management to do what 
you did in that area, but there are literally hundreds of those 
areas.
    While I respect you, I think your criticism of the agency 
really ought to be a criticism of the law. We did not 
contemplate such a disaster or series of disasters. After all, 
we have at least two disasters here in terms of Hurricanes 
Katrina and Rita, but there were many disasters within those 
areas that resulted from the failure of the systems that had 
been designed by the Corps of Engineers or the failure of the 
recovery plan that existed in various areas because there was 
total destruction. They all assumed that we were going to be 
moving in and dealing with a few entities within each State 
that had been affected by disasters, but this is a whole area 
that was affected, as I have seen it.
    I think we have to go back to the drawing board, and I 
really think this Subc8ommittee is going to have to come up 
with some suggestions to change the Stafford Act. Now, that 
will take too much time, so we really have to come up with some 
suggestions and we have to look to find ways, in my judgment, 
so we can bring about the creation of an arbitration process.
    From the point of view of money, Mr. Merritt, there has 
been a lot of money put up there. It is not a question of 
money. It has been arguing over who gets it first. This has 
been a problem, I think. FEMA has had to try and figure out 
where to put the money first. What is the total we put in? I 
think we put up about $130 billion so far, haven't we?
    Senator Landrieu. A hundred-and-ten.
    Senator Stevens. A hundred-and-ten billion dollars. It is 
not just a little pot of money, it is a big pot of money and it 
could have been replenished, as needed. But the difficulty is 
it has not been effective yet in terms of meeting the immediate 
demands of each area, which are unique and not comparable at 
all. You can't compare any part of this to Los Angeles. Los 
Angeles was a well-defined earthquake, very small compared to 
our earthquakes, by the way, in Alaska, but it was really a 
staggering impact on about 20 square miles of Southern 
California.
    I do believe we should call on you and James Lee Witt to be 
part of the group to give some advice on how to be prepared for 
any future disaster of this type, but right now I think we need 
an interim solution in terms of getting some way to get 
arbitration involved in these areas and get decisions made that 
will make this money available to proceed in every area where 
the recovery has been delayed because of the argument over who 
gets the money first.
    Now, that is my analysis of it. I could be wrong, but it 
wouldn't be the first time. Thank you, Mr. Merritt. It is nice 
to see you all.
    Senator Landrieu. Senator, I would like to respond. I know 
that you have to leave, but I think you have hit the nail on 
the head, comparing this to the rebuilding of parts of Europe 
after World War II. If you use that analogy and think about 
where we would be if this country and our allies decided to 
rebuild Europe using a Project Worksheet process, we would 
still be building Europe. I mean, think about that. Every 
building, every library, every sewer system, every street that 
was destroyed by bombs or warfare would have to go through a 
bureaucratic nightmare to get rebuilt. I don't think that is 
the way this was done, and I think the comparison is very apt 
and very appropriate.
    So Senator Stevens, thank you for your comments and I 
appreciate them.
    Senator Stevens. You need a new Marshall Plan for this 
area, not just FEMA. Thanks.
    Senator Landrieu. Thank you. Let me just try to get a few 
questions in here to this panel. I don't know if you all have 
access to this particular data. I am going to ask the staff if 
they have copies of this to pass it out because I would just 
like to get clear, this is the ``Public Assistance Project 
Worksheet (PWs), and Dollars.'' This is on the FEMA website. It 
talks about Texas, Louisiana, Mississippi, and Alabama, total 
gulf-wide. Now, maybe you all have this data, but in a 
different form. If there is a copy, if you could get it to the 
table.\1\
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    \1\ ``FEMA, Public Assistance, Louisiana,'' June 22, 2007, Global 
Report, submitted by Senator Landrieu appears in the Appendix on page 
81.
---------------------------------------------------------------------------
    But let me just ask for clarification purposes. This is 
percentage of PWs obligated, 91 percent in Texas, 88 percent in 
Louisiana, 61 percent in Mississippi, 71 percent in Alabama, 
for a total gulf-wide average of 80 percent.
    Now, these numbers--those are the percentages according to 
FEMA. The numbers vary substantially in that there is only $1 
billion of damage estimated in Texas, $6.3 billion in 
Louisiana, $2.8 billion in Mississippi, and only $114,000 in 
Alabama. Obviously, the major damage was in Louisiana, a 
distant second, is Mississippi, and then again, a distant third 
is Texas, with Alabama being quite a distant fourth.
    But I am interested in what these percentages actually mean 
to each of you, not you, Mr. Merritt, but to Mr. McDonald and 
Mr. Smith. Do you agree that 91 percent of all the Project 
Worksheets have basically been agreed to, processed, money 
obligated, and projects moving forward, or in your rules as the 
recovery chief for Louisiana and Mississippi, is it your 
experience that they are less a percentage or more a percentage 
of the projects that have basically been agreed to by both 
sides? And maybe the staff can help me clarify this for this 
panel.
    I don't know, Mr. Smith, if you want to respond.
    Colonel Smith. Senator, of course, I don't see exactly what 
you are looking at, but in general, that doesn't mean that 
those Project Worksheets are agreed to. What that percentage is 
is FEMA's estimate of how many total Project Worksheets that 
they think will be written when it is all said and done, and 
then the percentage that had been written to date.
    Also, they can write a Project Worksheet that has an 
estimate in it, but they don't have the funds obligated yet for 
some reason, and maybe the FEMA officials would be better to 
say why those funds had not been obligated. But one of the 
things that I think it is important to understand is there is a 
difference in obligated funds and whether those funds are due 
out to the local jurisdictions, because much of the money that 
is left is on work that is not even started yet.
    Senator Landrieu. Well, what I am trying to get at, and I 
am going to press this issue until we get a clear answer so 
that I can communicate it to my constituents and to the Members 
of Congress that are depending on us, I need to understand 
today, 2 years almost after this disaster, two hurricanes and a 
great flood, what percentage of this money that has been 
appropriated by Congress, $110 billion, of which only $10 
billion is represented in this discussion today, so when people 
say, we sent you $110 billion to rebuild, the record reflects 
today that we are only talking about $10 billion out of the 
$110 billion that are involved in these particular Public 
Project Worksheets. Less than 10 percent of the money is even 
directed to these public projects that basically form the basis 
of recovery.
    I am now honing down on of the $10 billion, what percentage 
are you, Colonel Smith, and you, Mr. McDonald, agreeing to? In 
other words, you and FEMA see eye to eye that this particular 
school building is going to cost $5 million. They have said it, 
you have said it, and you are getting ready to build it. You 
might not have built it yet, but you have agreed to it. You 
acknowledged that is what you think the appropriate cost is.
    Colonel Smith. A very small percentage----
    Senator Landrieu. Well, that is what I need to know. I need 
this hearing to be able to get to the bottom of what percentage 
we are talking about. Are we talking about a 20 percent 
agreement? Or a 30 percent agreement? Or an 80 percent 
agreement?
    Colonel Smith. Senator, in one e-mail that I got about 4 
months ago, FEMA has even acknowledged that they feel like 
there were well over 1,000 Project Worksheets out of what you 
have seen written here that were undervalued. You can see from 
some of the information that we supplied, we feel like that 
probably at least 75 percent of the Project Worksheets for 
permanent work projects are grossly undervalued, so there is 
very little that the locals or the State has actually agreed on 
the permanent work and construction.
    Senator Landrieu. Because this is going to be of great 
interest to Congress, and I will tell you why. Let us assume 
that most of these Project Worksheets, thousands that are 
outstanding, are 50 percent less than what has been reported to 
Congress, based on what our future obligations may be. These 
estimates could go up by 50 percent? Seventy-five percent? I 
don't know.
    And that is what we are going to try to find out by 
submitting questions to you, very specific questions.
    Now, let me ask you, Mr. McDonald, of all of the 
Mississippi Project Worksheets, what percentage do you think 
have actually been agreed to, roughly? And you can go back and 
check and resubmit the data if you think the statement you have 
given is inaccurate this morning.
    Mr. McDonald. I appreciate that, Senator. Jeff and I 
visited a little bit about this before. Our legislative or our 
statutory environment is somewhat different, as I appreciate 
it, from Louisiana's in that one of the barriers in Louisiana's 
case is the need to make sure that money is agreed to before 
work begins, the funding source is identified and agreed to.
    In Mississippi's case, Stafford, as you well know, is a 
cost-reimbursable statute, so in Mississippi's case, the key 
component has been getting the PWs scoped properly, making sure 
that we agree on the scope of the PW. We have also experienced 
some of the same situations with respect to the RSMeans use and 
in moving that to reflect what an actual or more accurate 
amount might be, certainly critical to educational institutions 
as they try to evaluate whether they rebuild in an area or move 
to safer ground.
    But in terms of the numbers, which we tend to be numbers 
guys, in terms of the numbers, we have about $2.2 billion that 
have been obligated in Mississippi, $1.1 billion that is 
essentially out the door. Of course, as I mentioned earlier in 
my testimony, we are certainly keenly interested in making sure 
that that process continues so that the remaining monies can be 
distributed.
    Senator Landrieu. But let me ask you this, then. I am going 
to rephrase my question to you. What percentage, then, of the 
projects in Mississippi to date do you believe have been scoped 
in an agreeable fashion--let me just finish my question--in an 
agreeable fashion between FEMA, the State, and the locals? In 
other words, let us take Waveland. That was virtually 
destroyed. Of the projects in Waveland, which of the projects--
what percentage has the Mayor of Waveland agreed, you have 
agreed, and FEMA has agreed to try to give us some idea of how 
accurate this scope is, not just from FEMA's perspective, but 
from the mayor whose obligation it is to stand up his town, you 
from the State who are representing the governor and his view 
of this, and FEMA?
    Mr. McDonald. Well, Senator, my answer to that question 
would have been different had I not seen this report, which 
indicates that FEMA believes that number to be at 61 percent. 
With 14,000 Project Worksheets, statistically speaking, I 
believe that number is in excess of 61 percent.
    Now, certain jurisdictions, do we have jurisdictional 
issues that we continue to work on where we are not at a high 
percentage? Absolutely. Is Waveland one of them? Bay St. Louis, 
the school districts there. But generally speaking, agreement 
on scope of the PWs is not a significant issue for us and a 
pressing issue. There is a mechanism to resolve that. But we 
don't----
    Senator Landrieu. What is that mechanism to resolve it?
    Mr. McDonald. Our communication flow is through the TRO, 
and we are very thankful that as recently as yesterday, we 
received our first permanent TRO Director. But that mechanism 
is to work quickly with----
    Senator Landrieu. TRO is a Transitional----
    Mr. McDonald. Transitional Recovery Office. Mr. Merritt 
mentioned that in his testimony, that under this disaster, we 
have the presence of Transitional Recovery Offices.
    Senator Landrieu. Do you have one?
    Colonel Smith. Ours is the same one, Senator. The regions 
are not involved.
    Senator Landrieu. You all have the same Transitional 
Recovery Office?
    Colonel Smith. Well, Gil Jamison has the Transitional 
Recovery Office and then we have a unit of that Recovery Office 
in New Orleans and then he has one----
    Mr. McDonald. In Biloxi.
    Colonel Smith [continuing]. In the sub-units.
    Senator Landrieu. OK. So the scope of the work is not a 
problem for you, but it is a problem for you. I am trying to 
understand, why is it not a problem for you, Mr. McDonald?
    Mr. McDonald. And we are working directly with the, I refer 
to it as our TRO in Biloxi, our local Biloxi TRO. Now, you 
mentioned earlier that we are in Region 4 and I believe you 
guys are in Region 6, do I understand that correctly?
    Colonel Smith. Correct.
    Mr. McDonald. In scoping the PWs, Madam Chairman, I would 
have to research that. I don't have a direct answer for you on 
that point.
    Senator Landrieu. Well, I would like you to do that 
because, first of all, the numbers are opposite your testimony. 
Colonel Smith, you are testifying that you have had less 
agreement in your situation, but the document indicates a 
greater percentage than Mississippi. Mississippi is testifying 
that they are pretty happy with all their scope of work and 
they don't really have much of a problem, but their scope is, 
on that document, only 61 percent. So we are going to hone down 
and figure this out.
    Mr. Merritt. Madam Chairman----
    Senator Landrieu. Go ahead, Mr. Merritt, maybe you can----
    Mr. Merritt [continuing]. That was the point I tried to 
make in my testimony. PWs are a tool and it is very difficult 
to manage the recovery effort by the numbers of PWs written 
because one building could have 50 PWs written for it or 
another building might have one. So to use numbers like that to 
gauge how far the recovery is going is very difficult, at best. 
The circumstances are very different, and the State does not 
have to agree with the Project Worksheet to be obligated. So 
FEMA has the ability to obligate a Project Worksheet whether 
the State or the local governments agree to it. They don't like 
to do it, but it can be done----
    Senator Landrieu. Well, that is exactly my point, but I am 
going to find out, of the obligated monies that FEMA has told 
Congress is obligated for this disaster, what percentage of 
those have been actually agreed to by the locals so that we can 
give an estimate of how much the recovery might ultimately 
cost. It is not just what FEMA has obligated. If FEMA has 
obligated, for instance, only 20 percent of the actual dollars 
to rebuild a school, for instance, we should have some 
indication that perhaps there is another 80 percent of the 
project that has yet to come to us to be even requested, 
because in FEMA's mind, they think they can build a school for 
20 cents on the dollar, but the school president is saying, you 
are shorting me 80 percent of the money for the school. That is 
what I am trying to get at.
    And I am not measuring the recovery by this process. I am 
just trying to manage or to get to the bottom of what 
Congress's obligations are as well as the problems with the 
process itself.
    Go ahead, Mr. McDonald. Anything else?
    Mr. McDonald. No. Madam Chairman, I would just add, as I 
mentioned in my more thorough testimony that the specific 
issue--that issue as it relates to education is critical. As 
you mentioned in your comments, the impact on education and 
making sure that we give them priority and ensure that the 
schools are able to recover.
    Senator Landrieu. And how many schools, just really 
quickly, do you think you still have in Mississippi that have 
not been rebuilt that need to be, do you know?
    Mr. McDonald. I don't know the exact number, Madam 
Chairman, but we were able to return our kids to the classrooms 
fairly quickly through superhuman efforts, many of which you 
have witnessed. But we still have schools and issues that are 
awaiting resolution, and I guess one of the observations that I 
have kind of gleaned from some of this frustration has to do 
with the role of education and the updating of the Stafford 
Act. I have a personal belief that while FEMA recognizes that 
there are areas that need specialists and deserve those--debris 
being one of them--that in the years since the Stafford Act, 
education should also be one of them.
    I think in regional disasters, and one of the themes that 
has been mentioned here is catastrophic events and regional 
disasters, Senator, the ability to send someone that has the 
education focus to sit beside and with a school district that 
may, in a 10-year period of time, be able to rebuild one school 
and is now facing a rebuild of all schools, having that 
resource present that is knowledged and skilled and sustained 
in education and Stafford would be a welcomed legislative 
relief to the Stafford Act in the future.
    Senator Landrieu. Thank you. Colonel Smith, any final 
words?
    Colonel Smith. Senator, something that may help you frame 
this. Out of FEMA's projected $6.3 billion that they will 
ultimately obligate, right now is a projection, about $4 
billion of that is for permanent work. That is rebuilding 
infrastructure. So if you assume that that is undervalued by 
two to four times, then you could be looking at an 
undervaluation of two to four times $4 billion. So that 
ultimate amount could be $16 billion. In fact, most people will 
do that.
    Another thing, the difference between Louisiana and 
Mississippi, many of their buildings were 100 percent 
destroyed, so it is easier, actually, to do the scope of work 
on a destroyed building because you are rebuilding this 
building, versus trying to figure out all of the repairs to an 
existing facility.
    Senator Landrieu. I think that is a very excellent point, 
and we continue to try to express in every hearing we have that 
while the disaster, the results of it were the same to people 
in terms of loss of house, loss of job, loss of school, loss of 
livelihood, the characteristics of the disasters between these 
States was so wholly different based on what basically you just 
described. The destruction from a wave and a wind that 
eliminated structures in total down to the slab, and the 
difference between a city and suburbs and urban areas sitting 
under eight to 20 feet of water, when the water goes down, the 
structure is still there. The roof is still on. The walls are 
still there. The structure is intact, but it is uninhabitable 
and cannot in many instances be repaired without knocking it 
down and rebuilding it again. I mean, the structure itself is 
just rendered wholly not fixable. I don't know what the word is 
that engineers will use.
    And that is the scope of the disaster in difference 
between, in large measure, Mississippi and Louisiana, which was 
never initially recognized. Hopefully, this Subcommittee can 
help the country understand a little bit better about walking 
to a slab and estimating what a 5,000-square-foot building 
costs and then walking to a 5,000-square-foot building that has 
had 20 feet of water sitting in it and spend the next 2 years 
deciding what was broken before the 20 feet of water entered 
the building----
    Colonel Smith. Exactly right.
    Senator Landrieu [continuing]. And what we are responsible 
for fixing when the 20 feet of water left. And that is part of 
our challenge and dilemma.
    Does anybody have final questions before we move on, or 
comments?
    Mr. Merritt. Two quick thoughts, Madam Chairman.
    Senator Landrieu. Mr. Merritt.
    Mr. Merritt. Short-term, if the Subcommittee could 
encourage FEMA and DHS to bring decisionmakers down to the Gulf 
Coast region to not only make creative and innovative decisions 
that stick would be the short-term solution.
    The second thing is to benefit FEMA. The Stafford Act was 
not written for a catastrophic event. I think Senator Stevens 
hit it exactly on the head, as well as your previous panel. We 
are desperately in need of a catastrophic annex to allow the 
rules that they are restricted by to be modified in those 
circumstances, and those things that are too open for 
interpretation because of the general nature of the Stafford 
Act can be restricted a little bit further to take people's 
interpretation out of it, so we know exactly what our rules are 
going into it.
    So short-term, creative, innovative solutions that stick. 
Long-term, I think we desperately need a catastrophic annex to 
the Stafford Act, because it is a good Act and it has worked 
well for what we call garden-variety disasters.
    Senator Landrieu. And finally, if we did take the 
suggestion to move the appropriate FEMA personnel on the 
ground, which person would it be, Colonel Smith, that you 
report to? Who is your ultimate decisionmaker in your region?
    Colonel Smith. Well, right now, the ultimate 
decisionmaker----
    Senator Landrieu. Is it Bill Peterson?
    Colonel Smith. No, ma'am. That is--the FEMA Region 6 is not 
involved in our recovery to almost no degree. I think that is 
one of the problems. They have a lot of excellent people. It is 
the Transitional Recovery Office that is down in New Orleans 
where they have got decisionmakers. The FCO that is down there 
that is in charge is the one that makes those decisions, but 
they won't even come locate their key decisionmakers with the 
key decisionmakers in Baton Rouge. As you know, facility 
planning that has 2,300 buildings to repair, it is a logistical 
nightmare to try and even get meetings with them when they are 
down so far away.
    So there are a few quick hits. The Stafford Act, we know 
needs to be amended, and there is a lot of long work, but there 
are some quick things that could be done. They could relocate 
their key people that are there to Baton Rouge. They could set 
up a problem resolution system, as Senator Stevens talked 
about, call it arbitration, whatever you wanted, where once a 
month decisionmakers got together and made decisions and move 
on. So there are some things that we can do to jump-start this.
    Twenty-two million in administrative money that I can't 
use, I can hire engineers, architects. We can go down into 
these areas and help them start, and that is what the law is 
supposed to allow. But they won't let us use it for anything 
but travel, per diem, and overtime. So there are some things 
that could be done like this that could help. The long-term 
solution, fix the Stafford Act and other things.
    Senator Landrieu. Mr. McDonald, who would it be if somebody 
showed up and stayed on the ground to help you all?
    Mr. McDonald. Well, at present, Sid Melton, who officially 
began work yesterday as the TRO's Permanent Director. Mr. 
Melton does have a history both in Louisiana and Mississippi on 
the Individual Assistance side. Prior to him, there were a 
number--actually, there were three interim directors.
    Senator Landrieu. Are you testifying that between the storm 
and today, there has not been a permanent Director for Project 
Worksheets for Mississippi and Louisiana?
    Mr. McDonald. That is correct, Senator, but we have had a 
series of competent interim directors. The permanency, I 
appreciate, as has been pointed out here, finding the depth of 
resource from FEMA to properly place a permanent person has 
been a challenge. But Sid Melton is the short answer to your 
question, and then from there in our process, it gets elevated 
to Gil Jamison.
    Senator Landrieu. OK. Thank you very much.
    Mr. Walke, I understand that you are the Director of the 
Public Assistance Division that we have just spent the last 
hour and a half speaking about. You began your career at FEMA 
as a civil engineer with the National Flood Insurance Program. 
You have held various positions, including the Chief of Public 
Assistance. You were responsible for managing the Public 
Assistance Program.
    I most certainly look forward to your testimony today to 
try to shed some light on the situation that we are dealing 
with, so please proceed.

   TESTIMONY OF JAMES WALKE,\1\ DIRECTOR, PUBLIC ASSISTANCE 
 DIVISION, DISASTER ASSISTANCE DIRECTORATE, FEDERAL EMERGENCY 
MANAGEMENT ADMINISTRATION, U.S. DEPARTMENT OF HOMELAND SECURITY

    Mr. Walke. Thank you. Good morning, Senator Landrieu. My 
name is James Walke. I am the Director of the Public Assistance 
Division, which is part of the Disaster Assistance Directorate, 
formerly known as Recovery Division, at FEMA. I have been a 
career FEMA employee for 23 years and have been with the Public 
Assistance Division for 14 years. I am responsible for planning 
and providing national-level policies and oversight of the 
Federal Government's efforts to restore and build eligible 
public infrastructure that is damaged as a result of 
Presidential-declared disasters and emergencies.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Walke appears in the Appendix on 
page 75.
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    It is my pleasure to be here today to discuss with you the 
Public Assistance process, the status of projects in the Gulf 
Coast, and initiatives FEMA has taken to improve the delivery 
of assistance following Hurricanes Katrina and Rita.
    The Public Assistance, or PA Program, provides cost-shared 
grants to assist State and local governments and certain 
private nonprofit organizations to remove debris, carry out 
emergency protective measures, and repair or replace damaged 
infrastructure. The Public Assistance Program is a vital part 
of the community disaster recovery process.
    The process begins with the creation of a Project 
Worksheet. FEMA uses the Project Worksheet to record the scope 
and amount of grants to applicants. The Project Worksheet 
includes a description of eligible damages, the scope of work, 
and estimated cost to repair the disaster damages. FEMA assigns 
technical experts, such as structural engineers, sanitary 
engineers, hospital specialists, etc., from our Disaster 
Reservist cadre or from our Technical Assistance contractors to 
work with the applicants to develop the Project Worksheet.
    In most cases, agreement on eligible scopes of work is 
achieved quickly. In a few cases, there are differences in 
professional opinion as to what are considered disaster-related 
damages and the appropriate repairs. If agreement is not 
reached, FEMA will approve its version of the Project Worksheet 
and provide the applicant an opportunity to appeal. In 
Louisiana, applicants have submitted over 200 appeals to date.
    As of June 25, 2007, we have prepared 80,179 of an 
estimated 84,474 Project Worksheets for all of the Gulf Coast 
States. In Louisiana, we have obligated 34,205 for an 
approximately $4.8 billion. This represents about 88 percent of 
the total estimated number of Project Worksheets to be written. 
In Mississippi, we have obligated 12,842 for approximately $2.1 
billion, and this represents 61 percent of the total estimated 
number of Project Worksheets.
    Over the last 6 months, we have implemented several 
initiatives to improve the Public Assistance process in 
Louisiana. First, we have established a new management team led 
by John Connolly, one of our most experienced Public Assistance 
Officers. We have also implemented an aggressive staff training 
and mentoring program to improve staff knowledge of the PA 
Program. In addition, we have deployed more cost estimating 
experts to ensure that our estimates are appropriate. And 
finally, we have collated program staff at the applicant's 
premises to expedite the development of the remaining Project 
Worksheets.
    In addition, Senator, we have also taken several 
initiatives to further improve the delivery of assistance of 
the Public Assistance Program in the future. We have 
established a Public Assistance Steering Committee that is 
comprised of the senior Public Assistance staff person in each 
of the 10 regions, as well as 10n State persons, to serve on 
the Subcommittee. The steering committee will develop the 
visions, strategies, and policies to ensure efficient, 
effective, and consistent implementation of the program. We 
will continue to update all of our policies, guidance, and 
training documents so that our staff will have the tools to be 
successful. And also, we are evaluating more cost-effective 
ways to train our staff before disasters strike, as well as in 
the immediate aftermath of a disaster, to improve the level of 
service.
    On June 1, 2007, we implemented the Public Assistance Pilot 
Program that Congress authorized in the last session. The pilot 
encourages local governments to adopt pre-disaster debris 
management plans by providing an additional 5 percent in 
Federal cost share for debris removal for those that do so. In 
addition, the pilot will also speed recovery by making grants 
on the basis of estimates for projects up to $500,000. It is 
our hope that this pilot will yield good information that we 
can use in the future to improve delivery of services.
    FEMA is committed to the recovery and rebuilding of the 
Gulf Coast and will remain on the ground until the job is 
finished. The Public Assistance Division is using lessons 
learned from Hurricanes Katrina and Rita to refine our policies 
and pilot new initiatives to retool and improve the Public 
Assistance Program.
    And finally, Senator, we would like to reserve the 
opportunity to respond for the record to some of the comments 
that were made by some of the previous panel members.
    Senator Landrieu. Thank you, Mr. Walke, who is your point 
person in Louisiana to work these problems out with the Project 
Worksheets? As I understand, you are in charge for the whole 
country for FEMA. Who is the guy or gal that you depend on to 
report to you on a daily basis what is happening regarding this 
in Louisiana?
    Mr. Walke. That person would be John Connolly, who is our 
Public Assistance Officer for----
    Senator Landrieu. John Connolly. And who is it for 
Mississippi?
    Mr. Walke. For Mississippi, it is Randy Walker.
    Senator Landrieu. And who is it for Texas?
    Mr. Walke. Well, the disaster is closed in Texas, so we 
don't have anybody there right now.
    Senator Landrieu. And I am assuming it is closed in 
Louisiana?
    Mr. Walke. No.
    Senator Landrieu. I am sorry, I am assuming it is closed in 
Alabama.
    Mr. Walke. In Alabama, we have a residual staff there.
    Senator Landrieu. So we only have two that are open for 
this. Tell me again their names, the Louisiana first?
    Mr. Walke. John Connolly in Louisiana, and Randy Walker.
    Senator Landrieu. Where do they live and where do they 
work?
    Mr. Walke. John Connolly is originally from Philadelphia.
    Senator Landrieu. Where is he presently residing?
    Mr. Walke. Presently, he is in New Orleans. Randy Walker is 
from the Gulf Coast and he is working out of Biloxi.
    Senator Landrieu. So they are on the ground?
    Mr. Walke. They are on the ground, yes.
    Senator Landrieu. And they handle this disaster for Project 
Worksheets, working through them, and report directly to you?
    Mr. Walke. That is correct.
    Senator Landrieu. OK. When you said that FEMA has initiated 
a pilot, and I am somewhat familiar with the actions that 
Congress took. The pilot allows projects to move forward that 
are under $500,000. Do you know what the average cost of a fire 
station is with two fire trucks?
    Mr. Walke. I do not know what----
    Senator Landrieu. Let me tell you what it is. It is 
somewhere between $2 and $3 million to replace one fire station 
with two fire trucks. So this pilot program of $500,000, I 
don't know necessarily a school that could be rebuilt, a police 
station, or a fire station for this pilot. So I would start 
with suggesting that the pilot is not sufficient and that we 
need to think more broadly.
    You said that Louisiana--this is still a puzzlement to me--
you have testified and FEMA documents show that 81 percent of 
the Project Worksheets are agreed to, are being processed. Yet 
in Mississippi, it is only 61 percent. But it seems like there 
are more problems in Louisiana than Mississippi. This number 
would indicate to me that there are more problems in 
Mississippi than Louisiana. Am I correct or incorrect, or is it 
just a misreading, or are these numbers misleading?
    Mr. Walke. Well, we have an updated number for Mississippi, 
and instead of 61 percent, that number is 75 percent----
    Senator Landrieu. So it is closer. So the numbers that you 
have now in your records are 81 percent processed for Louisiana 
and 75 percent----
    Mr. Walke. That is right.
    Senator Landrieu [continuing]. For Mississippi. OK. At 
least that clears that up.
    But again, do you agree that these figures now, 81 percent 
and 75 percent, can be somewhat misleading in terms of the fact 
it is not an indication that these final dollar amounts for 
repair have been agreed to. It is just what FEMA has obligated. 
From FEMA's perspective, it is agreed to, but not from the 
State or locals, or can you give us the percentage, if it is 
not 81 and 75, what is it that has been agreed to at the local, 
State, and FEMA level on the Project Worksheets under your 
jurisdiction?
    Mr. Walke. Senator, I can only estimate that. The 
percentage of PWs that are obligated does include some--many or 
most that have been concurred with by the State and local. As I 
said before, in Louisiana, those who have not agreed with the 
scope and the estimates for the projects have appealed, and out 
of the thirty-some-thousand estimated Project Worksheets, we 
have only had 200 or so appeals.
    Now, that is not just to say that is the total universe. I 
mean, our folks are working with some of the applicants, I 
think that Jeff Smith had mentioned, where there were some need 
to align the scope. And I think it is critically important to 
understand that we need to concentrate on what is the ultimate 
scope of work, because the estimate can flow from the ultimate 
scope of work.
    And I think the protracted discussion we are having on some 
of the Project Worksheets reside or revolve around what is 
disaster-related damages, and I think this is what we preach to 
our staff and to the States as well, that let us just figure 
out--let us get some consensus on what is the eligible scope of 
work, what are the disaster-related damages, and I think we 
can--reasonable people can come to some understanding of what 
it is going to cost.
    Senator Landrieu. We would like to help reasonable people 
come together, but I am going to ask you for the record, not 
for today, but to submit to this Subcommittee, of the Project 
Worksheets that you have in Louisiana and Mississippi----
    Mr. Walke. Right.
    Senator Landrieu [continuing]. What Project Worksheets were 
agreed to without much debate or discussion, how many and what 
percentage. Then what percentage they have serious arguments 
about, but came to some settlement, but there were serious 
arguments. And then those that are under official appeal. What 
do you estimate future appeals to be, because I want to get a 
very clear indication of these projects, multiple millions, 
billions of dollars worth of projects, what were agreed to by 
reasonable people, what were disagreed to but finally came to 
some conclusions? Whether they were satisfactory or not is a 
wholly different question.
    Mr. Walke. Right. We can do that, Senator.
    Senator Landrieu. And then what are under appeal, and I 
will tell you just from a perspective of a public official, as 
I have been for many years, for a small town--I am not even 
going to use a town in Louisiana. I could use many, but for a 
small town like Waveland that had only 10,000 people that was 
virtually destroyed, the pressures of that mayor and those 
public officials to accept whatever the Federal Government is 
giving them are great, because they don't have the lawyers to 
appeal. They are a small town and can't necessarily fight the 
Federal Government. They are at a distinct disadvantage. So if 
you say that you are going to give them $200,000 to rebuild 
their library, they might just accept the money and move on 
when they really were owed $2 million.
    Now, I am going to get to the bottom, as the Chairman of 
this Subcommittee, for the big Project Worksheets and how well 
you are working with these small towns in my State and in 
Mississippi and how well you are not, and if I am mistaken that 
it is going swimmingly well, I will be the first to make that 
clear and apologize. But from my own instincts, I don't think 
that is happening, either in Mississippi or Louisiana. Now, I 
could be wrong, but we are going to sift through these numbers 
until we get there.
    And then the final piece is we are going to sift through 
these numbers so that I can, as an appropriator, give some 
heads up to Congress that these numbers have been either 
grossly underestimated or that they have been relatively 
accurately estimated and we are not going to have to go find 
another $10 or $20 or $30 billion when it comes to budget 
discussion time up here in Washington.
    Mr. Walke. I understand.
    Senator Landrieu. Let me ask you this. What is your opinion 
about an arbitration process? Would it be helpful to you? Is it 
necessary?
    Mr. Walke. Well, the current regulations allow for the 
Recovery Division Director or the Assistant Administrator for 
Recovery to engage a third party, independent third party for 
technical advice on appeals. It does not relinquish authority 
to this third party. It is just for input into the 
decisionmaking. So that is available to us right now short of 
the arbitration because the statute and the regulations do not 
allow for binding arbitration.
    Senator Landrieu. Would you support binding arbitration?
    Mr. Walke. I do not. I think I stand by the regulations as 
they are written, to get professional input, technical input 
from technical experts to the decisionmaker.
    Senator Landrieu. Would you allow, then, the locals to hire 
those technical third parties as opposed to FEMA?
    Mr. Walke. I think the whole notion of getting a third 
party is to get an independent person that doesn't have a 
vested interest in the situation to provide technical advice 
and----
    Senator Landrieu. Then how do you abide by the worthy goal 
of independence if you are the one hiring them?
    Mr. Walke. What I think the process would be, Senator, that 
we would mutually agree to who that third party would be.
    Senator Landrieu. Is that how it works?
    Mr. Walke. We have only availed ourselves of this procedure 
for, maybe on a couple of occasions in the past 20 years that I 
am aware of.
    Senator Landrieu. OK. What is FEMA's rationale for 
rebuilding damaged public infrastructures in exactly the same 
way, in exactly the same State that they were found when they 
were destroyed by the storm? We say, and I even say it myself 
in speeches, we are going to build it better, stronger, and 
better and stronger. Actually, I have come to the conclusion 
that may be against the law, because the Stafford Act 
specifically, I think, says you can't build it any better than 
it was when it was destroyed. They call it in the lingo of the 
community, is it ``gold capping''? You are prohibited from gold 
capping. Can you comment about how does FEMA help Waveland 
build a better sewer system under the current law that you 
operate? Is that even possible?
    Mr. Walke. Well, there are two things. For structures that 
are totally destroyed, obviously they are built back to the 
current codes and standards, which I think by definition makes 
them stronger and perhaps a little more resistant to some of 
the forces----
    Senator Landrieu. But those that are repaired.
    Mr. Walke. The ones that are repaired, yes, the basic 
statute and regulations require us to return the facility to 
its pre-disaster condition. However, there are provisions to 
provide hazard mitigation to include in the repair that would 
make the building stronger than before, and I think we are 
looking at opportunities to do that in most cases, if not all 
cases.
    Senator Landrieu. Well, I think that it is important for 
our Subcommittee to focus on that the current law, and this is 
not a fault that I would levy to administrators but this is a 
fault that is apparent to me in the law, that when you are 
reconfiguring buildings or infrastructure in cities like New 
Orleans or places along the Gulf Coast that are older, in some 
instances certain neighborhoods much poorer, that all FEMA 
allows you all, the Stafford Act allows you to do is replace a 
60- or an 80- or a 100-year-old sewer system. If it is not 
completely destroyed, you can only repair it up to the level it 
was before. It was insufficient before. It doesn't make any 
sense to me to pour good money after bad money, and I would 
like to try to help save taxpayers money and build with common 
sense as opposed to the letter of the law, which doesn't seem 
to me to be making any sense. I would appreciate any 
suggestions that you have along those lines.
    Our time has almost expired. Is there anything that you 
would like to add to your testimony?
    Mr. Walke. Well, I would certainly like to say that we have 
done, I think, a very credible job in Louisiana and the Gulf 
Coast, notwithstanding some of the comments we heard before. I 
think it is to be expected that as we get further along, we 
encounter more complex projects, which takes longer to resolve, 
and I think that is where we are in both of these States. When 
you look at the number of projects that we have approved, that 
we have got consensus on, I think it is remarkable.
    So I would say that not judge us by the number of comments 
or criticism that you have heard here today, but measure us by 
how well we can respond and positively react to and solve the 
problems that have been raised, and I think we are committed to 
do that, Senator.
    Senator Landrieu. Well, Mr. Walke, you can be assured that 
I am going to let the numbers speak for themselves, that my 
instincts could be wrong, but the numbers need to speak for 
themselves. But we are going to get these numbers to show an 
accurate picture of this and that we are going to take this 
criticism that we have heard to heart. I am going to ask you 
how many people have worked for your division since this storm 
happened and what your turnover rate is. I am going to ask you 
how you train your people and how long they stay with you. We 
are going to look at these numbers again and find out which 
Project Worksheets were agreed to, which were disputed, which 
are under appeal, and what your projections are, and then we 
are going to let the numbers speak for our performance or lack 
thereof and figure out what we need to do to rebuild the 
Southern part of these two great States.
    Thank you, and the hearing is adjourned.
    [Whereupon, at 12:08 p.m., the Subcommittee was adjourned.]


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