[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]



                       FIVE YEARS AFTER KATRINA:
       WHERE WE ARE AND WHAT WE HAVE LEARNED FOR FUTURE DISASTERS

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

                               (111-137)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
    ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS, AND EMERGENCY MANAGEMENT

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                           September 22, 2010

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure













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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                 JAMES L. OBERSTAR, Minnesota, Chairman

NICK J. RAHALL, II, West Virginia,   JOHN L. MICA, Florida
Vice Chair                           DON YOUNG, Alaska
PETER A. DeFAZIO, Oregon             THOMAS E. PETRI, Wisconsin
JERRY F. COSTELLO, Illinois          HOWARD COBLE, North Carolina
ELEANOR HOLMES NORTON, District of   JOHN J. DUNCAN, Jr., Tennessee
Columbia                             VERNON J. EHLERS, Michigan
JERROLD NADLER, New York             FRANK A. LoBIONDO, New Jersey
CORRINE BROWN, Florida               JERRY MORAN, Kansas
BOB FILNER, California               GARY G. MILLER, California
EDDIE BERNICE JOHNSON, Texas         HENRY E. BROWN, Jr., South 
GENE TAYLOR, Mississippi             Carolina
ELIJAH E. CUMMINGS, Maryland         TIMOTHY V. JOHNSON, Illinois
LEONARD L. BOSWELL, Iowa             TODD RUSSELL PLATTS, Pennsylvania
TIM HOLDEN, Pennsylvania             SAM GRAVES, Missouri
BRIAN BAIRD, Washington              BILL SHUSTER, Pennsylvania
RICK LARSEN, Washington              JOHN BOOZMAN, Arkansas
MICHAEL E. CAPUANO, Massachusetts    SHELLEY MOORE CAPITO, West 
TIMOTHY H. BISHOP, New York          Virginia
MICHAEL H. MICHAUD, Maine            JIM GERLACH, Pennsylvania
RUSS CARNAHAN, Missouri              MARIO DIAZ-BALART, Florida
GRACE F. NAPOLITANO, California      CHARLES W. DENT, Pennsylvania
DANIEL LIPINSKI, Illinois            CONNIE MACK, Florida
MAZIE K. HIRONO, Hawaii              LYNN A WESTMORELAND, Georgia
JASON ALTMIRE, Pennsylvania          JEAN SCHMIDT, Ohio
TIMOTHY J. WALZ, Minnesota           CANDICE S. MILLER, Michigan
HEATH SHULER, North Carolina         MARY FALLIN, Oklahoma
MICHAEL A. ARCURI, New York          VERN BUCHANAN, Florida
HARRY E. MITCHELL, Arizona           BRETT GUTHRIE, Kentucky
CHRISTOPHER P. CARNEY, Pennsylvania  ANH ``JOSEPH'' CAO, Louisiana
JOHN J. HALL, New York               AARON SCHOCK, Illinois
STEVE KAGEN, Wisconsin               PETE OLSON, Texas
STEVE COHEN, Tennessee               TOM GRAVES, Georiga
LAURA A. RICHARDSON, California
ALBIO SIRES, New Jersey
DONNA F. EDWARDS, Maryland
SOLOMON P. ORTIZ, Texas
PHIL HARE, Illinois
JOHN A. BOCCIERI, Ohio
MARK H. SCHAUER, Michigan
BETSY MARKEY, Colorado
MICHAEL E. McMAHON, New York
THOMAS S. P. PERRIELLO, Virginia
DINA TITUS, Nevada
HARRY TEAGUE, New Mexico
JOHN GARAMENDI, California
HANK JOHNSON, Gerogia

                                  (ii)






 Subcommittee on Economic Development, Public Buildings, and Emergency 
                               Management

           ELEANOR HOLMES NORTON, District of Columbia, Chair

BETSY MARKEY, Colorado               MARIO DIAZ-BALART, Florida
MICHAEL H. MICHAUD, Maine            TIMOTHY V. JOHNSON, Illinois
HEATH SHULER, North Carolina         SAM GRAVES, Missouri
RUSS CARNAHAN, Missouri              SHELLEY MOORE CAPITO, West 
TIMOTHY J. WALZ, Minnesota           Virginia
MICHAEL A. ARCURI, New York          MARY FALLIN, Oklahoma
CHRISTOPHER P. CARNEY,               BRETT GUTHRIE, Kentucky
Pennsylvania, Vice Chair             ANH ``JOSEPH'' CAO, Louisiana
DONNA F. EDWARDS, Maryland           PETE OLSON, Texas
THOMAS S. P. PERRIELLO, Virginia
HANK JOHNSON, Georgia
JAMES L. OBERSTAR, Minnesota
  (Ex Officio)

                                 (iii)

                                CONTENTS

                                                                   Page

Summary of Subject Matter........................................    vi

                               TESTIMONY

Bingham, Lisa Blomgren, Professor, School of Public and 
  Environmental Affairs, Indiana University and Visiting 
  Professor of Law, William S. Boyd School Of Law, University Of 
  Nevada, Las Vegas..............................................     7
Daniels, Stephen, Chairman, Civilian Board of Contract Appeals...    28
Jadacki, Matt, Assistant Inspector General for Emergency 
  Management Oversight, Department of Homeland Security..........     7
McCarthy, Francis, Federalism, Federal Elections and Emergency 
  Management Section, Congressional Research Service.............     7
Riley, Mark, Chief of Staff, Governor's Office of Homeland 
  Security and Emergency Preparedness, State of Louisiana........    28
Russell, Tony, Region VI Administrator, Federal Emergency 
  Management Agency..............................................    28
Womack, Mike, Executive Director, Mississippi Emergency 
  Management Agency, State of Mississippi........................    28

          PREPARED STATEMENT SUBMITTED BY MEMBERS OF CONGRESS

Taylor, Hon. Gene, of Missouri...................................    53

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

Bingham, Lisa Blomgren...........................................    58
Daniels, Stephen.................................................    66
Jadacki, Matt....................................................    70
McCarthy, Francis................................................    80
Riley, Mark......................................................    93
Russell, Tony....................................................   106
Womack, Mike.....................................................   115

                         ADDITION TO THE RECORD

Amnesty International, statement for the record..................   124








 
  HEARING ON FIVE YEARS AFTER KATRINA: WHERE WE ARE AND WHAT WE HAVE 
                      LEARNED FOR FUTURE DISASTERS

                              ----------                              


                     Wednesday, September 22, 2010

                  House of Representatives,
      Subcommittee on Economic Development, Public 
                Buildings and Emergency Management,
            Committee on Transportation and Infrastructure,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:11 p.m. in 
room 2167, Rayburn House Office Building, the Honorable Eleanor 
Holmes Norton [Chairman of the Subcommittee] presiding.
    Ms. Norton. Good afternoon.
    We are pleased to welcome our witnesses to another of our 
important series of Subcommittee hearings to make certain that 
there is real progress in the recovery from Hurricanes Katrina 
and Rita on the Gulf Coast.
    Today we will evaluate the efforts of the Federal Emergency 
Management Agency, as well as the affected State and local 
governments, in their efforts to proceed more rapidly with 
their work on the long five-year recovery from these storms.
    This hearing is part of the vigorous oversight agenda that 
this Subcommittee has pursued on a bipartisan basis since the 
storms struck our Nation in 2005.
    Today we will hear about the arbitration program mandated 
in the American Recovery and Reinvestment Act, as well as about 
other steps that the leadership at FEMA is taking to improve 
the pace and the quality of recovery efforts on the Gulf Coast. 
Nearly a year ago, before our arbitration mandate was 
instituted to break the logjam on billions of dollars of 
projects, the Subcommittee received testimony about how the 
arbitration program would be structured. Today we are not 
merely looking at what has been done and what currently is 
being done, we also are looking forward to seeing what lessons 
we can learn from these experiences for future disasters. We do 
not intend to allow logjams to develop when there is Federal 
money on the table again.
    We will hear from those who are engaged in these efforts to 
improve the recovery from Hurricanes Katrina and Rita and also 
from experts in the Federal Government and academia who will 
provide analysis on these efforts.
    Prior to last year, FEMA resisted efforts from the 
Subcommittee and other stakeholders to try to break the logjam 
on public assistance projects that were seriously impeding the 
recovery from the storms. Yet at that time, in testimony before 
the Subcommittee, FEMA officials denied that there was even a 
problem with the Public Assistance Program.
    Some of the key recommendations of the Subcommittee to 
improve the recovery from these storms were reflected in H.R. 
3247, the Hurricanes Katrina and Rita Recovery Facilitation Act 
of 2007. This is 2010. This Subcommittee reported H.R. 3247 and 
the House passed it in October of 2007. As a matter of fact, we 
passed this bill not once, but twice, as a similar bill was 
passed in October, 2008.
    Unfortunately, the Senate never passed this legislation. 
Many of the recommendations in today's testimony were included 
in that legislation three years ago. These include such common 
sense steps as encouraging the use of third parties to review 
and expedite public assistance appeals, simplified procedures 
under which small projects would be permitted to proceed on 
estimates for projects up to $100,000, and raising the Federal 
contribution for certain projects from 75 percent to 90 
percent.
    We are encouraged that recent hearings and the written 
statement submitted for today's hearing indicate progress. Like 
an individual who is in personal recovery, the first step to 
improvement is acknowledgment that there is a problem. FEMA 
Administrator Craig Fugate did acknowledge that there were 
problems with recovery from these storms at our Subcommittee 
hearing earlier this year.
    FEMA is taking steps short of arbitration to resolve 
disputes, including appointing special joint expediting teams 
of FEMA and State officials to resolve lingering disputes.
    In some cases, common sense solutions also are being 
applied in other areas. For example, moving FEMA officials so 
that they are in the same city as their state counterparts. 
Another costly and exasperating example is eliminating dual 
consultants, where both sides would hire licensed professionals 
to provide expert opinions. And this elimination of dual 
consultants was a strong recommendation of this Subcommittee.
    Astonishingly, both State and Federal consultants were paid 
with Federal disaster funds to essentially set up an 
adversarial process to determine costs. This was a prodigious 
waste of money.
    At a Subcommittee hearing earlier this year, Administrator 
Fugate announced that FEMA would move to a system, when 
appropriate, allowing both parties to rely on the advice of a 
single licensed professional.
    It is important to emphasize that many of the items that 
are recommended to improve the Public Assistance Program in 
testimony today are already authorized and within FEMA's 
discretion to carry out. For example, FEMA currently has 
authority to engage in alternative dispute resolution as a 
result of the Administrative Dispute Resolution Act of 1996, 
and has been encouraged to do so by this Subcommittee.
    A number of witnesses today note that one significant 
improvement in FEMA's Public Assistance Program would be to 
move to a system that pays State and local governments for 
repair and construction projects on the basis of the cost 
estimates as is done in the insurance industry. FEMA is not 
only encouraged to do so, but has been mandated to do so by the 
Disaster Litigation Act of 2000, a bill that was passed by this 
Committee, enacted by Congress and signed by President Clinton 
nearly 10 years ago.
    That Act mandated that FEMA move to a cost-estimating 
system once FEMA implemented a rule to do so. So it is 
unconscionable that nearly 10 years later, the required 
rulemaking has not occurred.
    As this Subcommittee previously noted, had FEMA implemented 
this provision as it was authorized to do in 2000, many of the 
delays in the recovery from Hurricanes Katrina and Rita would 
have been avoided.
    In order to remedy this delay, legislation recently passed 
by the Committee would require FEMA to implement this provision 
within 180 days of enactment. I hope that this new statutory 
mandate will prove unnecessary, however, because legislation 
should not be necessary and FEMA is fully empowered to make 
this step on its own.
    We are looking forward to hearing from today's witnesses 
and we very much appreciate their being here on how 
arbitrations are proceeding, how FEMA and the States are moving 
forward on the recovery from the devastating storms, and the 
lessons that their experiences teach us for further actions.
    Let me welcome again the witnesses and once again offer the 
gratitude of the Subcommittee for their willingness to come 
forward.
    It is my great pleasure to introduce the Ranking Member, 
Mr. Diaz-Balart, who is from a State which has extensive 
experiences of just the kind we are discussing today.
    Mr. Diaz-Balart. Thank you, Madam Chairwoman.
    Let me just first thank you for this very important 
hearing, for calling this very important hearing. Five years 
after Katrina, it is hard to believe. Right?
    But those of us in Florida understand that you have to 
learn from these disasters in order to mitigate for future 
disasters. Andrew was our wake-up call in Florida, Hurricane 
Andrew, and a lot of good lessons were implemented after that. 
And obviously Katrina was the wake-up call for the rest of the 
Country and it was a big wake-up call.
    So it has now been five years since it hit Louisiana, 
Mississippi, Texas, and Alabama, and also Florida. Florida was 
actually hit relatively hard by Hurricane Katrina. We had a lot 
of interesting issues in those days trying to remind people 
that Florida had also been hit by Katrina. It made landfall in 
the District that I am privileged to represent, and also just 
part of the Gulf Coast.
    So obviously we all know that Katrina left a tremendous 
amount of devastation in its wake. But since Hurricanes Katrina 
and Rita, Congress has taken a number of I think really 
important steps, frankly, to strengthen FEMA and our emergency 
management capabilities, including passing the Post-Katrina 
Reform Act.
    Now, while that legislation took I think some very 
important steps to improve preparedness and response, there is 
a lot more that obviously needs to be done. For example, all 
too often recovery following a major disaster has been 
painfully slowed by bureaucratic red tape and just inflexible 
policies. And the impact of this red tape is especially greatly 
magnified following a large scale disaster when that assistance 
is really critical, really critical to the rebuilding of those 
local communities that have been devastated.
    So finding ways to cut through that red tape and to 
expedite funding really ultimately I think also saves money in 
the long term. And it helps those communities recover more 
quickly. In hearing after hearing, and the Chairwoman has 
mentioned that, we have received testimony about the frankly 
very slow process which communities have to navigate. And this 
process, it really taxes Federal, State and local resources.
    So I need to mention Congressman Cao from this Subcommittee 
who has worked tirelessly, and frankly very effectively, to cut 
through the bureaucracy, the red tape, to free up funding for 
the recovery of Louisiana. And he is, as always, here today. 
But last year, Ranking Member Mica hosted two roundtables at 
Congressman Cao's request to bring together FEMA, the State and 
the local representatives, to work through that funding backlog 
to try to break through those barriers and figure out if we 
could work through that. And since then, FEMA put into place 
decision teams to tackle the growing funding backlog.
    Last year, a new arbitration process was established to 
expedite recovery funding which has freed out more funds for 
the rebuilding of Louisiana, and I think that is a really 
positive step. And I am pleased that today we will hear more on 
how well that process is moving along.
    So while it will be important to determine whether or how 
even an arbitration process should be used in the future, 
frankly it shouldn't take Congressional action and an 
arbitration panel to cut through the bureaucratic red tape. It 
is something that should just happen naturally.
    So responsible changes to the Stafford Act and to FEMA 
policies can go a long way to really speed up the recovery of 
communities after they have been hit by one of these disasters. 
And we know that others will be coming, unfortunately.
    For example, reviewing and streamlining FEMA policies and 
procedures or implementing the cost estimate provisions that 
the Chairwoman just mentioned, and as usual the Chairwoman and 
I really see eye to eye and there is very little light between 
us on most of these issues. Doing that could go a long way in 
speeding up the recovery process and again helping to rebuild 
the communities.
    This Congress, I am glad to have worked with my Chairwoman, 
Chairwoman Norton, along with Chairman Oberstar and Ranking 
Member Mica, on H.R. 3377, the Stafford Act bill. The bill, if 
passed, would improve preparedness and mitigation, including 
incentives for building codes, improving the Nation's public 
alert and warning system. Those are two things that I have been 
working on now for a number of years, along with the 
Chairwoman. And providing for the transfer of excess goods and 
housing units to local communities, which we keep hearing 
about. Unfortunately, this Congress has decided to not move 
that bill forward, maybe because they felt that naming post 
offices was more important.
    I hope that today we will be able to examine the progress 
made in the recovery efforts of the Gulf Coast and what lessons 
can we learn, have we learned, to better prepare for the future 
disasters that we know unfortunately will hit us.
    So I once again want to also thank the witnesses for 
joining us today. We really look forward to your testimony.
    And thank you, Madam Chairwoman, for calling this very 
important hearing.
    Ms. Norton. Thank you very much, Mr. Diaz-Balart.
    I ask unanimous consent that Representative Gene Taylor of 
Mississippi, a Member of the Committee on Transportation and 
Infrastructure, be permitted to participate in today's 
Subcommittee hearing.
    Without objection, so ordered.
    Mr. Taylor, have you any opening statement?
    Mr. Taylor. Madam Chairman, just only to thank you and the 
Ranking Member for letting me participate. I have a fairly 
lengthy statement for the record that I would like to submit.
    Ms. Norton. So ordered. Thank you, Mr. Taylor and welcome.
    Mr. Cao, have you an opening statement?
    Mr. Cao. Yes, I do, Madam Chair.
    And first of all, I just want to thank you and the Ranking 
Member for your leadership in this important Subcommittee and 
for working with me on some of my District's greatest 
challenges in our ongoing recovery. Both of you have been 
steady and compassionate partners, and together we have held 
government accountable for their responsibilities in the 
recovery of Orleans and Jefferson Parishes.
    We have made a good team both in oversight initiatives and 
on the legislation we have successfully passed during this 
Congress. So on behalf of my constituents, I would like to 
offer to both of you our thanks.
    August 29 of this year marked five years since Hurricane 
Katrina landfall along the Gulf Coast. The tragic loss of life 
alone made this one of the greatest disasters this Nation has 
ever seen. And more than 1.2 million people were under some 
type of evacuation order; 3 million were left without 
electricity for weeks; and hundreds of thousands were left 
jobless.
    So make no mistake, Hurricane Katrina destroyed Orleans and 
Jefferson Parishes and these effects are still felt today. Many 
of the critical institutions like Charity Hospital, and 
basically the entire health care infrastructure in the hardest-
hit New Orleans east have never reopened. Many basic services 
like hospitals, police, fire and rescue, libraries and schools 
were wiped away by the floodwaters and today remain empty and 
padlocked. In the immediate area around New Orleans, 80 percent 
of the buildings and 40 percent of the housing stock were 
damaged in some way.
    But hurricane recovery continues even in the face of the 
new environmental, economic and health challenges caused by the 
massive BP oil spill. We have had tremendous successes in the 
past two years, and this is because of the hard work of the 
people I see before me today, including Tony Russell and Mark 
Riley. So I thank both of you for everything, for your 
compassion, as well as for your partnership in this recovery 
process.
    For the past two years, I have been focused on both 
institutional change and the release of recovery money already 
approved by the Congress to the devastated region. Since 
January of 2009, through sustained oversight by this 
Subcommittee, FEMA has obligated $2.55 billion in recovery 
dollars to Louisiana. These are critical dollars for the State 
and include education, $1.62 billion; public works, $235 
million; public safety and protection, $177 million; health 
care, $7.9 million; public infrastructure, $428 million; and 
debris removal emergency protective measures, $83 million.
    From this, I fought for a resolution to the Charity 
Hospital dispute, which eventually came with the $475 million 
settlement to reopen that critical health facility. This is in 
addition to hundreds of millions for local universities, school 
districts, and public services which came only after I brought 
all the parties to the table to resolve their differences.
    I also launched an investigation into allegations of 
mismanagement, inordinate delays and unnecessary additional 
levels of bureaucracy at the FEMA office in New Orleans, which 
directly led to the closure of the office and its 
reorganization. It also led to the streamlining by Mr. Russell 
and his staff of hundreds of projects that had been stalled.
    In addition, we have worked hard on institutional reform 
within FEMA to ensure that policies are relevant and responsive 
to actual disasters and catastrophes. In talking with 
constituents, with State, local and Federal officials, with 
FEMA Administrator Fugate, and with one of our witnesses today, 
Mr. McCarthy, I drafted H.R. 3635, the Disaster Relief and 
Recovery Development Act of 2009. This would streamline 
operations and increase accountability and transparency at 
FEMA; return focus on FEMA's role as the recovery and 
coordinating agency; formally direct FEMA to consider lump sum 
settlements for projects similar in nature; and ensure critical 
emergency information is reaching citizens.
    I am pleased to report that the majority of these 
provisions were included in H.R. 3377, which passed out of 
Committee.
    My constituents know Stafford Act as something that was 
evil and prohibited us from progress and recovery. But because 
of our working together on this in this Subcommittee, we will 
make it work for those who have been affected by the disaster.
    We still have a long way to go. I look forward to working 
with my colleagues to continue our important reforms. I look 
forward to the testimony from our witnesses and discussing the 
critical areas remaining for reform.
    So again, I would like to thank the Chairwoman and the 
Ranking Member for their hard work on this Subcommittee and I 
yield back.
    Ms. Norton. Thank you very much, Mr. Cao.
    We will proceed to panel one. We will begin with Matt 
Jadacki, Assistant Inspector General for Emergency Management 
Oversight at the Department of Homeland Security.
    Mr. Jadacki?

  TESTIMONY OF MATT JADACKI, ASSISTANT INSPECTOR GENERAL FOR 
    EMERGENCY MANAGEMENT OVERSIGHT, DEPARTMENT OF HOMELAND 
 SECURITY; FRANCIS MCCARTHY, FEDERALISM, FEDERAL ELECTIONS AND 
 EMERGENCY MANAGEMENT SECTION, CONGRESSIONAL RESEARCH SERVICE; 
    LISA BLOMGREN BINGHAM, PROFESSOR, SCHOOL OF PUBLIC AND 
    ENVIRONMENTAL AFFAIRS, INDIANA UNIVERSITY AND VISITING 
PROFESSOR OF LAW, WILLIAM S. BOYD SCHOOL OF LAW, UNIVERSITY OF 
                       NEVADA, LAS VEGAS

    Mr. Jadacki. Good afternoon, Madam Chairwoman and Members 
of the Subcommittee.
    Thank you for the opportunity to discuss where we are and 
what we have learned in the five years since Hurricane Katrina. 
In brief, we have learned a lot since Katrina, and FEMA is 
better prepared to handle large disasters.
    There is, however, still room for improvement to ensure 
that preparedness, response, recovery and mitigation efforts 
are carried out effectively and efficiently, and in a manner 
that minimizes waste, fraud and abuse.
    My office has conducted a significant amount of work in the 
past five years assessing FEMA's programs and policies, as well 
as conducting audits of disaster grantees and sub-grantees. Our 
program let us cover a wide range of areas, including 
acquisition management, logistics, individual assistance, 
public assistance, and mitigation.
    Today, I will discuss our recent report on public 
assistance policies and procedures, as well as the arbitration 
process that has been established for some public assistance 
projects.
    In response to concerns raised by this Committee, my office 
conducted an in-depth assessment of design and implementation 
of FEMA's Public Assistance Program policies and procedures. 
Our review focused on the efficacy of FEMA's policies and 
procedures with respect to the individuals and organizations 
that have to navigate them, the grantees and the sub-grantees.
    Our assessment revealed multiple challenges that 
significantly hinder FEMA from consistently administering the 
PA Program in an effective and efficient manner. These 
challenges include untimely funding determinations, 
deficiencies in program management, and poorly designed 
performance measures. Although we determined many of these 
obstacles derive from personnel-based issues, there are other 
noteworthy causes that contribute to the obstacles that FEMA 
must overcome.
    Consequently, we presented FEMA with 16 recommendations to 
improve not only FEMA's process for reviewing and approving the 
public assistance projects, but the overall administration and 
delivery of the program.
    FEMA has taken some actions in response to our 
recommendations. As I said, we found challenges in the areas of 
program management and performance measures. FEMA needs to 
improve the timeliness of PA to avoid project delays and 
improve program efficiency. Such improvements should center on 
the appeal determination process, the environmental and 
historic preservation process, and the reconciliation of 
insurance settlements.
    In its response to our report, FEMA acknowledged the 
untimeliness issue, but insisted the problem is being addressed 
through the application of additional resources and 
improvements in the process of appeals. We remain concerned 
that FEMA does not plan to take action to establish time frames 
in the appeal process beyond what is currently in regulation.
    For example, current regulations do not include a time 
frame for applicants who have submitted additional information 
to support their appeal or a time frame for independent 
technical experts to provide information to FEMA on the appeal.
    Another area that could benefit from improvement is FEMA's 
management of the PA Program. Keys to successful program 
management include the use of the cost estimating format, as 
required by the Disaster Mitigation Act of 2000; more accurate 
cost estimation and scopes of work; procedures to minimize 
repetitive documentation requests; and identifying eligible PA 
hazard mitigation work early on in the process.
    Contributing to many of the challenges we identified in our 
report are turnover, inexperience and limited training within 
FEMA's disaster workforce. FEMA has identified several areas of 
planned improvement in its personnel system and is taking a 
number of actions in this area, but full implementation is 
lacking.
    We identified various alternatives that could be employed 
to streamline the PA process. All those alternatives represent 
opportunities to improve the program. Each alternative also 
presents drawbacks. Those alternatives that we explored include 
negotiated settlements, increasing the large projects 
threshold, replacing some grants with mission assignments, 
transferring Federal disaster programs from other agencies to 
FEMA or vice versa, and providing interval payments based on 
project estimates.
    Despite the challenges here, we have learned that many of 
FEMA's customers consider the current PA Program design 
inherently sound. They believe the flaws are primarily in 
execution. Consequently, we are in agreement that most of the 
challenges could be significantly diminished by focusing on the 
fundamentals upon which the PA Program rests.
    There are times, however, when FEMA and its grantees and 
sub-grantees reach an impasse in the application and appeals 
process. Hurricane Katrina occurred five years ago, yet there 
are still critical public assistance projects that have not 
been funded. In an effort to break the impasse that sometimes 
leaves PA applications in limbo for years, Congress enacted 
legislation that established an arbitration process for PA 
projects related to Hurricanes Katrina and Rita. As of 
September 9, 2010, there were 25 arbitration requests, 20 of 
which have been undecided. The most well known of these 
arbitration cases is Charity Hospital, in which the arbitration 
panel awarded the applicant $474 million for replacing the 
hospital.
    We suggested in our report on public assistance policies 
and procedures that FEMA should consider establishing a 
mediation and arbitration process for appeals that reach an 
impasse. We are currently monitoring the arbitration cases and 
plan to conduct work in this area to determine whether the 
current arbitration framework provides a means for speeding 
assistance to communities, while protecting the interests of 
American taxpayers.
    Madam Chair, this concludes my prepared remarks. I welcome 
any questions that you or the Members may have.
    Thank you.
    Ms. Norton. Thank you very much, Mr. Jadacki.
    Next, Francis McCarthy, Federal Elections and Emergency 
Management Section of the Congressional Research Service.
    Mr. McCarthy?
    Mr. McCarthy. Thank you, Madam Chair.
    Good afternoon. It is an honor to appear before you today 
to talk a bit about public assistance, or the PA Program, and 
ways that we might be able to improve it.
    The appeals process for PA generates a lot of interest 
based upon the huge number of dollars involved, but also 
because the projects are important to a community's recovery 
from a disaster. Two of the criticisms that stand out on PA 
appeals are usually the time-consuming nature of the appeal and 
how long it can drag out, but also a feeling that the appeals 
process is internal to FEMA without enough outside review.
    Many have noted that due to its experience in disaster 
situations, it is important for FEMA both to provide leadership 
and to offer flexibility in the administration of disaster 
programs. In essence, FEMA works on disasters every day, while 
States and localities become involved due to an extraordinary 
event that may never recur in their area. So it is difficult 
for States and local governments to match FEMA's mastery of the 
details of the appeals process.
    That is also why it is important that FEMA explain its 
process fully to applicants in order to provide a level playing 
field for the exploration of eligible damage and the costs to 
address that damage.
    There are a couple of options that could be utilized to 
lessen the need for appeals. As has been mentioned by everyone, 
the cost-estimating process was approved in DMA2K in 2000. And 
what that provides for is the ability for FEMA to pay for large 
projects based upon an agreed upon estimate. Finally 
implementing that authority would go a long way towards 
shortening any appeals.
    A second option is to use the alternate projects option to 
turn multiple projects into a single project that captures the 
recovery vision of a community. I think the recent experience 
with the New Orleans Recovery School District might suggest a 
promising approach in this area.
    There are two existing options to lessen appeals, and maybe 
improve the process itself. A project decision team, similar to 
one used on the Gulf Coast, is a concept that is of interest 
not due to only its recent success, but also in the fact that 
conceptually it brings in experts from within the agency that 
have not previously been associated with the case in dispute 
and they can provide an objective review.
    A second existing option is for increased use of the 
alternative dispute resolution process. FEMA has an office that 
can do this, and it could be used more extensively to really 
improve the relationship between FEMA and applicants.
    Regarding the arbitration system, it is not new to Federal 
disputes, but it is very new to the recovery process. And while 
the arbitration system may arguably lead to a more equitable 
result, it may also stretch out the time of the recovery 
process and thus the time of restoration.
    A vital consideration is whether the arbitration process 
should move toward a common agreement, or whether it 
approximates litigation, rather than mediation. If so, an 
adversarial arbitration process could undercut the existing 
Federal-State relationship and reduce the overall level of 
cooperation for all disaster response and recovery programs.
    In approaching the establishment of permanent arbitration 
authority, Congress ought to consider a number of criteria; if 
the authority should be triggered by the projected cost of a 
project, or by the definition of the project itself. One of the 
things I thought of in looking at arbitration is that in some 
ways we could suggest that maybe the threshold for dollars 
should be higher so that the there will be fewer requests.
    On the other hand, maybe we should think of arbitration as 
something to have in the quiver that is going to encourage more 
settlements, but also that could be used for any problem, no 
matter how small, whether it involves not just large public 
assistance projects, but also the kind of disputes that arise 
within individual assistance where people are disputing the 
types of housing that is being used or the way that services 
are being provided.
    I think if we are going to use arbitration, it might be 
something that gives the President the discretion to use it 
regardless of the size of the project, but as a way to overcome 
an impasse.
    Finally, I want to mention that a block granting approach 
has a number of different angles to it. I think a number of 
approaches have come forward. We have heard lump sums referred 
to, and I would particularly speak to the special procedures 
for widespread damage that are in H.R. 3377, that really 
suggest a means of getting to a cost-estimating proposal that 
could end with a block grant for disaster areas.
    There are many approaches that can make a positive 
contribution to the discussion. Congress may also wish to 
conduct a study of the current arbitration pilot process to 
determine the efficacy of the panel findings. Similarly, 
Congress may also wish to examine the New Orleans Recovery 
School Project that I mentioned, and the arbitration process 
that has just completed to see which ones merit replication.
    In addition, other suggestions such as the special 
procedures in H.R. 3377 could at least initially be used as a 
pilot program to see how it works. The pilot programs in both 
I.A. and PA I think really did succeed in showing some 
effective processes that can be used for the benefit of 
disaster victims and their communities.
    I hope my testimony was focused on those themes and 
proposals that can improve PA and I would be happy to answer 
any questions you might have.
    Ms. Norton. Thank you, Mr. McCarthy.
    Finally, Lisa Bingham, Professor Bingham, School of Public 
and Environmental Affairs, University of Indiana, also the 
University of Nevada, Las Vegas.
    Professor Bingham?
    Ms. Bingham. Thank you, Madam Chairwoman and Members of the 
Committee. It is a tremendous honor and privilege to be here 
today to discuss the use of dispute resolution in public 
assistance programs under the Stafford Act.
    My areas of expertise include dispute resolution in the 
Federal Government. I have done research with the United States 
Postal Service on mediation of discrimination cases; with the 
Department of Justice on its use of dispute resolution in 
Federal litigation involving the Assistant U.S. Attorneys; with 
the Occupational Safety and Health Review Commission on its use 
of settlement procedures.
    In addition, I have served as a consultant with the 
Departments of the Air Force, Agriculture and the National 
Institutes of Health. I have, however, never served as a 
consultant in any capacity with FEMA and this is my first 
experience doing research on their project.
    The arbitration program to date has entailed approximately 
26 cases. A number of those involve cases in which the parties 
have asked for the case to be withdrawn by agreement or 
dismissed by agreement. It appears that there are settlements. 
In addition, there are a number of awards. But the arbitration, 
the total number of cases is too small to do any empirical 
research on the program.
    What we can say about the program is that there do not 
appear to be any administrative problems. I believe it was 
anticipated when this program was created that there would be 
many more cases than have in fact been filed. And the Civilian 
Board of Contract Appeals, which has substantial expertise in 
the substantive area of these disputes, has been able to absorb 
this caseload and establish an orderly system that does not 
present any concerns about due process or fairness, unlike 
arbitration programs, for example, for consumers and employees 
that are mandated by corporations or employers.
    This is an entirely voluntary program and therefore it 
doesn't present issues about unequal bargaining power or 
fairness of process.
    However, the program has resulted in substantial awards 
against FEMA and there are a number of alternatives that would 
provide perhaps faster, less expensive and better ways of 
handling conflicts involving the Public Assistance Program. 
FEMA has an Office of Dispute Resolution. That Office of 
Dispute Resolution has authority under the Administrative 
Dispute Resolution Act to help the agency design systems for 
handling conflict. To date, it has designed a system for 
employment disputes.
    FEMA does have some experience using mediation and 
voluntary processes for hurricane-related damage. It did so in 
1998 in a dispute involving Hurricane George and the island of 
Puerto Rico, and mediated very successfully a dispute there.
    Mediation is very different from arbitration. Arbitration 
is an adjudicatory process that is adversarial, involves the 
imposition of a final and binding award as it is designed in 
this program. Mediation is assisted negotiation and a voluntary 
process in which the parties use a third party to help them 
reach a voluntary settlement.
    FEMA could, and I would recommend, that FEMA undertake a 
comprehensive dispute system design process. It could develop a 
system that involves negotiation, mediation, potentially non-
binding fact finding, that could get at disputes much earlier 
in the life of the conflict. It could involve stakeholders, 
including grantees, sub-grantees, nonprofits, local 
governments, as well as the public in its design process, and 
its own staff. It should develop interest-based negotiation 
training for its staff, and a comprehensive design would 
include an evaluation system that would entail feedback from 
stakeholders, including grantees.
    This system should also address the question of the scope 
of negotiation under the Stafford Act, which I believe has been 
the source of some conflict as reflected in the Inspector 
General's report.
    This concludes my prepared remarks. I am happy to answer 
any questions of the Committee.
    Ms. Norton. Thank you very much, Ms. Bingham.
    I want to thank all three of you for really quite 
informative and interesting testimony.
    Let me say a word as a predicate for my questions about the 
arbitration process. This Subcommittee was faced with more than 
$3 billion lying on the table in the middle of the Great 
Recession. It hadn't moved. A Member from Louisiana in the 
Senate was so disturbed, I can't blame her, at the misery of 
seeing nothing happen that she actually put into legislation in 
an appropriations bill that the President would appoint 
arbitrators for the Gulf Coast. It just got that bad.
    So the first thing you should bear in mind is that the 
Subcommittee is very aware that arbitration is rarely used 
except in circumstances where agreement has broken down.
    We then worked with the Senate to say that is going to be 
even more cumbersome to go through the Administration. And the 
result was the arbitration process that you have. And you do 
note that we looked to the existing procedures and found that 
there were people of some independence that could all along 
have been used and are used in this process.
    Now, we would be very interested and do note that we 
believe the fact that the arbitration process has had an effect 
on both the agency and on the States. That is what it is 
supposed to do.
    This is my concern, and I think particularly, I don't know 
if it is you, Professor Bingham, or you, Mr. McCarthy, talked 
about what we are very aware of and very exasperated was not 
used, and that is an ADR system within FEMA. One of the reasons 
we figured out that the process didn't move, whether you were 
talking about the appeals process, it still doesn't move, or 
the negotiation process, is quite simply FEMA is a party. 
FEMA's job is to preserve the taxpayer funds of the people of 
the United States of America. The job of Mississippi, the job 
of Louisiana is to extract as much as these States and these 
localities can.
    As Chair of the Equal Employment Opportunities Commission, 
I set up a system that got rid of the backlog, an early 
resolution system. So I am not only familiar, but a great 
proponent of early resolution systems. But the EOC was an 
independent agency. So when you suggest that FEMA as a party, 
for example, within FEMA, if I am Mr. Cao's District or I am 
Mr. Taylor's District, and FEMA invites me into its processes, 
and says just come right here. And here you have an agency, a 
part of FEMA, which will decide this dispute.
    I want to know whether you believe that the localities and 
the States involved are to have full confidence that out of 
such a process located within FEMA, there could be a just 
resolution, and particularly whether you believe it would go 
any faster than the present appeals process or the present 
arbitration process.
    I give that to any of you who care to answer. It is a 
question of independence. Who gets to decide when one of the 
parties is holding the money and the other side wants the 
money? And there is by definition an adversarial relationship 
unless FEMA isn't doing its job, or Mississippi and Alabama 
aren't doing their jobs.
    Ms. Bingham. I understand the question and I would be happy 
to address it, Madam Chairwoman.
    A comprehensive system would be one that started at the 
point that the parties are developing the project worksheet. 
The parties are already negotiating and working collaboratively 
in many instances in developing the estimates of costs. But we 
don't have a system that provides interest-based negotiation 
training skills.
    Ms. Norton. Which would mean they would develop the costs 
collaboratively, the cost sheets collaboratively as well?
    Ms. Bingham. I confess I am not an expert on FEMA's 
internal procedures.
    Ms. Norton. No, but go right ahead. Don't assume that those 
procedures can't be changed. OK?
    Ms. Bingham. My understanding of the nature of the disputes 
are that they involve facts, the facts of estimates of costs, 
the estimates of construction, how those relate to total costs. 
That is analogous to any kind of an insurance program where we 
are trying to estimate what the policy should pay. Negotiation 
in that circumstance is common. It is a daily fact, but it is 
improved greatly with skills training. And that skills training 
would encompass how to negotiate constructively using 
principles and interests, as opposed to adversarial bargaining 
like haggling over the price of a car.
    It would also encompass discussions of the scope of 
bargaining. I believe that one of the areas of disagreement is 
the question of FEMA's obligations under the law, as 
distinguished from the facts of a particular project. And so a 
comprehensive system would start with negotiation. You could 
then move to mediation. Mediation could either be provided by 
inside neutrals, but there are also outside neutrals. There is 
a shared neutrals program in the Federal Government that would 
provide employees from other Federal agencies who are 
substantially neutral. And that could be a next step.
    There are other alternative processes that are designed to 
encompass, including fact finding which can be either non-
binding or binding arbitration just on the facts, not the law. 
And then there is also a process called partnering that the 
Army Corps of Engineers uses where when there is a big 
construction project, they set up a team. That sounds to me 
that it may have some similarity to the expedited teams that 
FEMA is now using, where all the players involved in that 
project have a retreat. They have shared negotiation training. 
They set up an agreed procedure for handling conflict. And then 
there are backup processes. Binding arbitration of rights is a 
last resort under these kinds of designs.
    Ms. Norton. That is very helpful, your suggestions, and 
that is from within the Federal Government. Your last 
suggestion comes from within the Federal Government itself.
    Mr. McCarthy, you speak about cost estimating procedures, I 
take it, from the insurance industry, in your testimony?
    Mr. McCarthy. Actually, insurance and other industry 
experts. That was FEMA's charge, was to streamline.
    Ms. Norton. Now, those are profit-making enterprises. How 
come they rely on, how are they able to rely on estimates and 
still stay in business and the Federal Government hasn't been 
able to figure it out?
    Mr. McCarthy. Madam Chair, I have to confess I worked at 
FEMA and I worked on DMA2K and I didn't expect it was going to 
be questioned 10 years later on why it hasn't been implemented.
    Essentially, FEMA put together the panel it was supposed to 
immediately after the bill passed. It did bring in industry 
experts, insurance experts and other experts to set up a system 
that would work, to develop estimates that would be of 
assistance to local governments both on the high end and the 
low end.
    Ms. Norton. But it is the part of my question, I would be 
particularly interested in. Somebody bumped into my car coming 
to the Congress. I called the insurance agency. They said go to 
the insurer and find out what is the estimate, and they paid 
it. And the people who did the car reported to them, and they 
didn't come and negotiate with me. They told how much it would 
be.
    I am trying to understand why they are able, and I 
recognize that they have people there who look at it, who come 
over. They are not just a pass-through.
    I am asking how very profitable industries like the 
insurance industry can say give me your cost estimate, take it, 
and my car was fixed in a few days. Now, that is small compared 
to what my colleagues have gone through on the Gulf Coast, but 
I do not understand the process and would like to understand 
it. And maybe I would understand why it took some time for FEMA 
to implement it.
    Mr. McCarthy. I can't answer on why that happens. I think 
in some ways the culture that grew up in the PA Program was we 
are going to be certain of every cost before a dollar is spent; 
before the audit comes and gets us; that we are going to be 
certain so that we are not going to be caught on anything, so 
we will wait until the end of the process to pay.
    Ms. Norton. I see. You may be right in the government.
    Mr. Jadacki, and then I am going to go on to my colleagues 
before I come back. I am interested in the shortest way to get 
an answer. That is why the arbitration process ought to be a 
last resort. It hasn't always been a last resort. After all, 
the State, I understand we have been using both. And the State 
can opt for arbitration, I guess it is. But once they do, they 
are into arbitration, which is the way it ought to be.
    But I understand from your report that the appeals process 
still can go on for as much as eight or nine months, and that 
the arbitrator gets done in 60 days. Now, I am trying to find 
out what the reasons for the much longer process, because I 
don't even think they accept, do they, the findings such as 
they are of the appeals process? They do their own independent 
findings.
    How in the world could you do that in 60 days with judges? 
That is who they are. And the appeals process takes many times 
that.
    Mr. Jadacki. In some cases, it takes years to get the 
appeals done. There are several rounds of appeals and there are 
timelines. I think there are 90 days, and I think in reviewing 
your bill, the proposed legislation, you reduce that to 60 
days, which I think is a good idea.
    The problem is with the arbitration process, my 
understanding is everything has to be in, the witnesses have to 
be, everything has to be prepared so they make a decision. In 
the appeals process, what we found was that documentation 
submitted, may be deficient. They go back and ask the applicant 
for additional documentation. The clock stops. It starts again 
when the additional information comes in. And the process just 
takes an inordinate amount of time to get done because there is 
a lot of negotiating back and forth.
    Ms. Norton. Mr. Jadacki, that doesn't sound like an appeals 
process. That sounds like an ordinary negotiation.
    Mr. Jadacki. That is a negotiation. That is exactly what it 
is. In a lot of cases, some of the ones I have been reviewing, 
and you used the example before about the accident. I think a 
lot of the cases it's the extent of damage. How much damage did 
it cause? I have seen some cases where FEMA comes in and says, 
well, we are going for repairs because it is less than 50 
percent, versus replacement. The same thing with the insurance 
company with your car. If your car was totaled, you get the 
entire replacement cost for that and a lot of the disputes 
result from exactly how much damage was caused.
    Now, the use of an independent, I don't know whether it 
resides in FEMA. I think that would be very difficult to have 
an arbitrator or mediation in FEMA, but if you can agree on an 
independent assessor like you do in insurance companies, that 
both parties agree with, saying yes, it is 150 percent damage; 
we are going to pay replacement costs. Or no, it is somewhat 
less than that; we are just going to pay for the repairs.
    I think that is the basis for a lot of these problems.
    Ms. Norton. Do you think this notion that I spoke about in 
my opening statement about dual consultants. You tell me, 
Mississippi, what the damage is. FEMA will tell you what the 
damage is. That sounds like a real setup there.
    Mr. Jadacki. Yes. It is kind of similar to what the 
arbitration, you know, there is maybe one arbitrator if you use 
an independent engineer. But it is the same basis the 
arbitration is, where you present your evidence and they 
present their evidence, and somebody decides.
    So if it is a damaged building, you have one entity instead 
of paying for both on the State side and the Federal side, and 
they decide, yes, this is substantially damaged and you both 
live by that.
    Ms. Norton. So just getting rid of dual consultants and 
having one agreement well ahead of time, that might not even 
get you to the appeals process. Maybe you could decide it so 
you wouldn't even have to appeal.
    Mr. Jadacki. I think if they can agree on somebody that is 
truly independent and doesn't have any of either side's 
interest at stake, just like an insurance assessor, an 
independent insurance assessor, as long as you are not 
affiliated with the insurance company, same thing. They will go 
out and do an honest assessment and the parties live by that. 
There could be some negotiations back and forth still, but 
right now the process is we want this, we want this, and it 
just seems a long time to get these things settled.
    Ms. Norton. Thank you very much, Mr. Jadacki.
    Mr. Cao, please.
    Mr. Cao. Thank you, Madam Chair.
    My first question to the panel, or anyone who might have 
expert knowledge on community disaster loans. I would like for 
you to compare for me the rules promulgated by FEMA for 
disasters before Katrina, and the rules promulgated by FEMA in 
relation communities as to loans for Katrina.
    Mr. McCarthy. Mr. Cao, the biggest difference would be how 
the first sets of loan were made for Katrina. I think rules 
were written differently at that point because there was an 
idea that there would be no forgiveness of any loans and that 
they all had to be paid back. And that when the second set of 
loans were done, that was after Congress had permitted the idea 
of forgiveness for loans.
    So I think it was somewhat different between the two sets 
of loans for CDLs, but I don't know the exact details of how 
they changed it.
    Mr. Cao. But for disasters prior to FEMA, it was routinely 
done that CDLs were forgiven. Is that correct?
    Mr. McCarthy. Yes, absolutely. I think you could count on 
one hand the number of loans that were actually paid back, and 
those were very small loans to smaller communities. I think the 
amount of loans that were forgiven was well over 90 percent. In 
fact, dollars forgiven was well over 90 or 95 percent.
    Mr. Jadacki. Right. I actually worked in the FEMA CFO's 
office and they had a default rate of 96 percent prior to 
Katrina, which means 96 percent of the money that was lent 
wasn't expected to come back. And it was based on three years' 
average revenues, post-disaster revenues. I don't know all the 
formulas on that, but there were a couple that paid it back, 
but for the most part, most of them were canceled.
    Mr. McCarthy. Those were loans from Hurricane Andrew.
    Mr. Jadacki. There were floods.
    Mr. McCarthy. Yes.
    Mr. Cao. Now, based on the data that you have collected, 
can you provide me with a percentage of CDL loans forgiven by 
FEMA in connection with Katrina?
    Mr. McCarthy. I can get that information.
    Mr. Cao. I can ask Mr. Tony Russell when he comes up here 
later. That would be a lot easier.
    Mr. McCarthy. OK. Yes.
    Mr. Cao. I know that one of the biggest issues in regards 
to the community disaster loans forgiveness for Katrina-related 
projects, or municipalities, is the issue of income, three 
years' income. That is one of the requirements for St. Tammany, 
for instance, for Jefferson Parish, and some other 
municipalities like the Jefferson Parish Sheriff's Department. 
Right after Katrina, they received a spike in income because of 
the tremendous number of people moving over there to 
temporarily reside while waiting for their homes to be rebuilt 
in New Orleans.
    Based on your understanding of rules promulgated by FEMA 
for previous disasters, were the income criteria, were they the 
same? Or are they different from what was drafted for Katrina? 
Do you know?
    Mr. McCarthy. I don't know if they are different. I just 
don't know if there was a similar circumstance with the 
jurisdiction absorbing that kind of population. I can't think 
of one in Florida that was similar, but I am sorry, but I could 
look into that and see if there was at least something similar.
    Mr. Cao. OK. In regards to the arbitration process, I guess 
I am somewhat in a similar circumstance as you, Mr. McCarthy, 
in the sense that I am somewhat skeptical of the arbitration 
process because I do feel that if the process is available to 
them, they might just kick everything to arbitration, and thus 
slow down the recovery after a disaster.
    What we have seen in Louisiana after Katrina was the need 
to move at a very quick pace. And that was not available there. 
I guess when we are looking at ways to resolve disputes, what 
would be some of your recommendations to possibly allow for an 
expedient resolution to the many disputes that we have?
    Mr. McCarthy. I guess one of the things I would point to 
really is some of the things that you have experienced. The 
idea of a project decision team of people admittedly within 
FEMA, but still without a stake in the ongoing argument, 
bringing in those people really does open a new page.
    And it also starts dialogue within FEMA where people have 
to start looking at regulations. And if you are bringing in 
people from different regions who worked on different disasters 
at different periods, I think it really does broaden the kind 
of conversation and maybe make things a bit more flexible and 
move you toward settlement.
    On the other hand, having an arbitration process probably 
also encourages many settlements that never go to arbitration. 
It may be the threat of arbitration that helps to move some of 
it that way. But I do think that the kind of action team that 
was put together with Mr. Russell previously is good example of 
what can be used for future disasters as well.
    Mr. Cao. That is all the questions I have of this panel. 
Thank you very much. I yield back.
    Ms. Norton. Thank you very much, Mr. Cao.
    Mr. Taylor of Mississippi?
    Mr. Taylor. Again, I want to thank the panel for being 
here.
    Early on when it came to debris removal, something that 
stuck out in my mind was the Corps of Engineers came to my home 
county which lost the county courthouse and city hall. And 
basically gave them the option of saying we estimate the debris 
removal should cost this much per cubic yard; we will let you 
put it out for bid; you do all the paperwork, and we will 
reimburse you up to this. Or given the fact that you guys don't 
even have a pocket calculator to your names, which was 
accurate, we will do it, and let the Board of Supervisors make 
that decision.
    What I have really noticed in some of these adjustments 
that have been dragging on for five years is the total lack of 
initiative on the part of HUD for housing or the Department of 
Education when it came to schools, to find an expert who could 
look at a school or a building and say this is our estimate of 
what it would cost to not only make it look like it did the day 
before the event, but bring it up to compliance with the laws 
that have been passed since that building was built, whether it 
is for asbestos; whether it is for the Americans With 
Disabilities Act, and say: This is what we have estimated it 
will cost to fix; this is what we will make available to you, 
or we will do it, and absolve you of all responsibility. We 
will do it and we think we can bring it in at that price.
    Given the enormous amount of money that has been spent and 
is still being requested, I am still to this day appalled at 
what I sense is a total lack of expertise within our Nation as 
far as estimating what something should cost. And we ought to 
be the experts, not communities of 4,000 or 5,000 people. They 
can't afford an expert. We certainly have to afford an expert.
    What, if anything, has happened in the past five years to 
address those things?
    Mr. McCarthy. I can't point to a specific instance where 
that has happened. I guess that is why I have kind of belabored 
the point about FEMA using the cost-estimating formula that 
Congress gave it. And that goes back to when Director Witt was 
at FEMA when that was granted. Since that hasn't been 
implemented, everything FEMA worked on as far as developing 
expertise to be able to do cost estimating right at the start 
of a disaster to try to reach an agreement, use industry 
experts to develop all that, has just lain dormant for those 10 
years.
    I think FEMA can have people that are expert at estimating. 
They do a lot of disasters every year. They can have some staff 
that is good at estimating. And I think they have also tried to 
at least encourage a bit more that the local governments 
themselves can begin to establish those kind of contracts for 
debris removal and give them a greater cost share if they have 
those kind of things in place.
    But the overall expertise you are discussing I think, at 
least as far as FEMA PA projects, wouldn't really develop 
because I think we are staying with the system we have and not 
with the authority Congress had given to maybe increase that 
expertise.
    Mr. Taylor. Going back to Congressman Cao's observation, 
which we saw the same thing in many of the Mississippi Gulf 
Coast communities that rely on sales tax for their revenue. 
When all the stores are gone, obviously the sales tax revenue 
is gone. But then when the big box stores come back, you will 
have a spike since everyone is replacing every refrigerator, 
every air conditioner, every microwave oven. So for a short 
period of time, there will be a huge spike in sales tax, but 
then it gets back to a desperate situation.
    To what extent are the Federal agencies empowered to just 
on their own turn to their bosses in Washington and say, look, 
I have looked at this. These guys cannot repay the loans. I am 
asking you, FEMA, to forgive them.
    Why do even, in many instances when it is just blatantly 
obvious in some of these communities, why do you even have to 
wait for a town of 1,500 or 2,000 or 3,000 to hire an attorney 
and a staff to put together that, when in so many instances it 
is just obvious?
    Does anyone wish to address that?
    Mr. Jadacki. I have worked on CDLs for a number of years, 
going back to Hurricane Hugo and Hurricane Marilyn, and I tend 
to agree with you. There is a big spike. I mean, the whole 
purpose of the CDL program is there is going to be a drop in 
the tax base because homes are destroyed; people are moving 
out. But eventually in some cases after disasters, you have a 
real big spike on that.
    I think the idea of the CDLs is a sound idea, that 
communities do need the working capital. They do need to pay 
the police force and the firemen and those types of things 
because of that base. But they are eventually going to recover, 
they are going to get back to where they were before, so they 
are going to be living at this same level, but yet trying to 
pay a big Federal loan back, too, at the same time.
    So I think that needs to be taken into account also, even 
though they did return to their tax base, now they have the 
additional liability of paying back this Federal loan. And I 
think, again I mentioned before, historically there is about a 
95 percent, 96 percent default rate because communities have 
just demonstrated through their financials that they just can't 
recover. And I think that has to be taken into consideration 
when the loans are up for cancellation.
    Mr. McCarthy. And I would mention, too, check on this, but 
I think another thing historically is that when CDLs first 
began, very briefly, it was a grant program and not a loan 
program. And I think when I was at FEMA years back, and I think 
when we would look at straight up costs of looking at the 
finances of many communities and sending auditors down and 
trying to guesstimate things, and the cost involved in hiring 
accounting firms to go to various counties and look, certainly 
what we came back to is maybe another approach would be, maybe 
loans not of that size, but maybe a smaller size that just 
become grants to smaller communities, rather than trying to put 
both the Feds and the communities through that kind of process. 
In some cases, you can end up spending as much on the 
administration of the loan as on the interest on the loan 
itself.
    So one of the suggestions that was made, at least back in 
2000, was to consider making it a partial grant program. But 
given all the other costs on the Federal Government, it is not 
the kind of thing that gets a lot of traction.
    Mr. Taylor. Mr. McCarthy, and again I very much appreciate 
the Chairwoman. I am not even a Member of this Subcommittee, so 
she is very kind of let me participate. But what, if anything, 
if it happened again tomorrow, only this time it was coastal 
North Carolina or coastal Georgia or Charleston for the second 
time in 20 something years, if it happened again tomorrow, what 
assurances can you give me that it would be done better than it 
has been done since 2005? And if you can't give me any 
assurances that it would be done better, what specific 
recommendations would you or anyone on that panel make for 
changes in the law so that we don't keep making the same 
mistakes?
    Mr. McCarthy. Mr. Taylor, I want to say that I think there 
have been improvements. And when people ask me about the Act, 
it wasn't retroactive to what Mississippi and Alabama and 
Louisiana went through, but I think the pilot programs from 
that project were useful. FEMA experimented in Iowa and Texas 
and found out they could do something about helping to restore 
the rental inventory, rather than just thinking about trailers, 
of thinking of fixing up apartment buildings in areas so that 
there is more available housing.
    And another thing I always point to is I think when we had 
all the people dispersed around the Country in 38 States after 
Katrina, trying to meet up with family members, FEMA at that 
point didn't have a case management authority where you could 
actually have them talk to people and make them aware of what 
services they were entitled to and how they could be linked 
back with their family.
    I think there have been small improvements. And I think 
that Mr. Fugate at FEMA really has reinvigorated the agency to 
be looking forward. And I think you put your finger on it, 
initiative. You can't just have a law that sits there or 
regulations that sit there. You have to have administrative 
initiative to make it work because you can't legislate the 
spirit of an organization. You can only give them the tools.
    I think Congress has given the Administration a number of 
tools to make disaster recovery work better, but it is partly 
how it is administered that really counts.
    Ms. Norton. Yes, Mr. Taylor, certainly.
    Mr. Johnson of Georgia?
    Mr. Johnson. Thank you, Madam Chair, for holding this 
hearing, a very important hearing, five years after Hurricanes 
Katrina and Rita, which struck the Gulf Coast. All of us will 
never forget that area just literally being drowned, an 
enormous stretch of land and an enormous number of people who 
were adversely impacted. And to go back there now and look at 
the lay of the land, it doesn't really look like a lot has been 
done.
    And as I understand it, I am pretty much interested in this 
arbitration process that has been put into place to resolve 
disputes. And I wanted to know who are the arbitrators? And do 
the decisions come from arbitrators or arbitration panels?
    Does anyone really know? I know we don't have anybody from 
GSA.
    Ms. Bingham. The arbitrators are experienced administrative 
law judges with the Civilian Board of Contract Appeals. They 
sit in panels of three. And each arbitrator has a vote and they 
decide cases by majority vote, analogous to an appellate court, 
for example, but they conduct the hearings using de novo 
review. They take in evidence and argument from witnesses.
    Mr. Johnson. Are there any rules of procedure, rules of 
evidence?
    Ms. Bingham. Arbitration is by design an informal process. 
Arbitrators generally are not bound by the rules of evidence.
    On the other hand, the rule of thumb is they let almost 
everything in because that is the safer practice. So to my 
knowledge, there haven't been disputes about arbitrators 
excluding evidence in this program, and the rules of evidence, 
when you have an expert decision maker, and these are expert 
decision makers with substantial background in contracting and 
construction disputes, for example, the rules of evidence 
aren't as necessary. They are designed primarily to keep 
evidence away from lay people on juries.
    Mr. Johnson. Yes, how are these experts selected for a 
particular case? Is there a wheel system or somebody pulls 
their name out of a hat? Or do they volunteer, I want to hear 
this one, I want to hear that one?
    Ms. Bingham. I believe Chief Judge Daniels can respond to 
that question. He is on a subsequent panel. I don't have 
detailed information about that.
    Mr. Johnson. Yes, I would be concerned about even with 
trained witnesses or trained arbitrators without a set rule of 
law, if you will, you know, on what basis can a decision be 
made? And then how can one rely upon that decision as precedent 
for any future decisions to be made? And without rules of 
evidence, how can you determine whether or not something is 
material or relevant or whether or not any evidence may be 
tainted in some way? I wonder about those things.
    Is there an ability to appeal from the arbitration panel's 
decision?
    Ms. Bingham. The process of arbitration is different.
    Mr. Johnson. It is a binding arbitration?
    Ms. Bingham. It is a binding arbitration. And it is 
different from an administrative adjudication in that it does 
not set precedent of any kind. It is substantially final under 
the Federal Arbitration Act. Arbitration awards can only be 
appealed on certain limited grounds, and these include fraud, 
evident partiality, collusion, corruption of the arbitrators, 
the failure to execute an award that is within the scope of the 
submission, the refusal of arbitrators to admit evidence or to 
postpone a hearing on good cause shown. These are very limited 
grounds for appeal.
    Mr. Johnson. Yes. So now on the front end of the process, 
do the litigants or contestants, or whatever you want to call 
them, are they given a choice as to whether or not to proceed 
in binding arbitration? Are there any alternatives for them at 
the beginning of the dispute?
    Ms. Bingham. This is a voluntary program, so the claimants, 
who are grantees and sub-grantees in the Public Assistance 
Program, can opt into it by filing a request for arbitration. 
Their other alternative is the two-stage administrative appeal 
within FEMA, which results in a final agency decision that is 
also not appealable, but largely committed to agency 
discretion.
    There is not in place right now a formal, more 
comprehensive dispute system design for these kinds of cases 
that start with a negotiation step or providing the mediation 
alternative. And such a design, especially if it provides for a 
prompt and early intervention at the outset of a dispute, might 
resolve. Evidence shows in other programs that the earlier that 
there is some sort of a dispute resolution intervention in the 
life of that case, the more quickly it terminates and the 
shorter time it spends on the docket.
    Mr. Johnson. Yes, is mediation an alternative dispute 
resolution process that is available?
    Ms. Bingham. Yes. Mediation is voluntary assisted 
negotiation. FEMA has a mediation program for employment 
disputes in place. It has an ADR office with substantial 
expertise in mediation, and there are mediators available 
across the Federal Government in the Shared Neutrals Program 
who are in agencies outside FEMA who could also provide 
assistance. In addition, under the Administrative Dispute 
Resolution Act, Federal agencies have the authority to hire 
outside neutral mediators, as well as outside neutral 
arbitrators.
    Mr. Johnson. Are these mediators, by the way, paid hourly? 
Are they hourly workers or salaried workers? Or do they work 
for private dispute resolution companies, arbitration 
associations and what not?
    Ms. Bingham. Under the Shared Neutrals Program, the 
mediators who participate in that program I believe are given 
special duty assignments across agency lines in order to 
mediate. So that there is no additional cost to the agency.
    Mr. Johnson. And when you say mediators, are you referring 
to the arbitrators as well? I am really wanting to know about 
the arbitrators with that question.
    Ms. Bingham. My understanding of the arbitrators that are 
currently used, Civilian Board of Contract Appeals, is that 
these folks are already salaried employees of the Federal 
Government in the General Services Administration, and 
therefore there are no additional fees paid to arbitrators as 
there would be in the case of resort to outside neutrals. There 
are panels of arbitrators available from nonprofit 
organizations like the American Arbitration Association or 
JAMS. And they charge varying fees, depending on the individual 
practitioner. It is a private business, so it is as variable as 
what lawyers charge.
    Mr. Johnson. If I might ask one more question. What 
determines whether or not to use the salaried arbitrators, as 
opposed to an outside arbitration group?
    Ms. Bingham. My understanding is that the previous 
legislation in the stimulus bill delegated to the President the 
authority to set up the program. The President, in turn, 
delegated that to the Secretary of Homeland Security, who 
designated the Civilian Board of Contract Appeals. It is within 
the authority of FEMA to establish a different kind of 
arbitration program provided it complies with guidance from the 
Department of Justice and publishes a policy and establishes a 
written agreement to arbitrate in each case. FEMA could, with 
the voluntary agreement of the grantees and sub-grantees, the 
other side of the dispute, could voluntarily agree to arbitrate 
using outside neutrals.
    Mr. Johnson. Thank you.
    Ms. Bingham. You are welcome.
    Ms. Norton. Thank you very much, Mr. Johnson.
    I am going to quickly ask a few more questions to clarify 
the record, and then move on to the next panel.
    Mr. Jadacki, do you have any concerns about the arbitration 
procedures now being used? You have looked at what they have 
been doing. Or about any of the arbitration decisions that have 
been made?
    Mr. Jadacki. There haven't been that many decisions and I 
haven't been privy to the proceedings. But I did review a lot 
of the decisions that were made. Without knowing, having 
intimate knowledge and being there and seeing what was 
presented by both the oral testimony and some of the 
documentation that was provided, it is really difficult for me 
to say that.
    I still believe that I think a lot of the cases that are 
being presented could have been resolved a while ago.
    Ms. Norton. Through what procedures, Mr. Jadacki?
    Mr. Jadacki. I am sorry?
    Ms. Norton. You have testified, though, that it takes nine 
months through the appeals procedure. You mean through 
procedures at the negotiating stage, the cost setting stage?
    Mr. Jadacki. Right. I think some of the ideas that we 
discussed earlier where we got the independent assessments, 
some of those folks. I think if you could get buy-in from both 
parties, you can probably avoid or prevent a lot of these cases 
going to arbitration. Again, it is just sort of one party says 
this, one party says this, and they can't agree. But if you get 
somebody to come in before that and says this is what we are 
going to do, this is the decision we are going to make, and we 
both have to agree to do that. Because it is a very expensive 
process. There is a lot of time that is consumed presenting 
documentation and evidence and those types of things. It is a 
very time consuming process.
    Ms. Norton. This is very important because, as I said, 
people are suffering when we are talking about this program. 
Legal procedure is exasperating and therefore what you have to 
say here is going to be the basis for our calling in FEMA after 
this hearing to see whether or not we can go below the present 
processes and get to where you can begin to get some kind of 
agreement. We ourselves, just hearing FEMA talk back and forth, 
got the dual consultants. That was pretty easy.
    But you are suggesting that, and so did Professor Bingham, 
that way down in the process, you could begin to get early 
agreement on numbers so that you might even avoid other 
processes, including the appeals process.
    In fact, arbitration does seem has had the effect of 
increasing settlements. Arbitration does seem to do that, an 
independent somebody who is not beholden to either side does 
get the attention. We see that eight have been settled. Several 
more have been resolved before arbitration. It is as if you 
look arbitration in the eye, it looks like the State can, once 
you get into one system, you are into it. But then the State 
can always look at what has happened before and make a decision 
as to whether it is going to try arbitration the next time.
    Do you think that arbitration should therefore be the bogey 
man that is always there for disasters of a certain kind or 
only for certain disasters?
    Mr. Jadacki. What the arbitration does, it forces the 
agency to do something it should be doing anyway. They should 
be working with the States and the locals. They should be 
coming up with the amount of the projects. And because they 
promulgate the regulations based on the law, and that should be 
it.
    When you get to an arbitration point where you have to use 
an arbitrator, there is something entirely wrong with the 
system. OK? The system is not working if you have that much of 
a disagreement on such a large scale.
    I think in the case of Katrina, and I think you mentioned 
it in some of the legislation that you have about the special 
provisions, you know, using project worksheets for small 
disasters may work very well. City hall gets damaged. You 
rebuild city hall where it is. Where you have widespread people 
being displaced, you don't know what the demographics are going 
to be, I think that the States and locals need more 
flexibility. Instead of possibly funding by P.W., why not fund 
by category? Like, I think the RSD is a good example of that 
where let them make the decision. If it doesn't make sense to 
build a school here, build it here, but don't get penalized 
because there is an alternative project.
    So larger scale disasters, I think when there is 
uncertainty about people moving back, what is going to happen, 
I think you need to get more flexible. I am not familiar with 
what the special provisions would be, but I certainly think in 
a catastrophic type event, that the P.W. process may not work 
as well as it did in the smaller types of disasters.
    Ms. Norton. Ms. Bingham, I was interested in your 
suggestions. I became Chair of the EOC as a litigating lawyer, 
and quickly understood that my job was to help people, not to 
help lawyers. I am a tenured professor of law, still, at 
Georgetown, and I am always looking for ways to break through 
legal processes because America has learned to hate lawyers, I 
have to say, for good reasons. And we shouldn't let that go on 
by looking as if there is no other way to get things done and 
that we can't facilitate agreement.
    You mentioned something called non-binding fact finding.
    Ms. Bingham. Yes.
    Ms. Norton. If it is non-binding fact finding, why should 
the parties participate in it? What is the credibility to the 
parties to make them have confidence that the fact finding is 
something that they should rely upon? How would it work? Who 
would do it?
    Ms. Bingham. There are a couple of different models. First, 
let me comment on non-binding arbitration. Fact finding is a 
sub-category of arbitration.
    Ms. Norton. Yes, or even of an appeals process, not just 
arbitration.
    Ms. Bingham. Right.
    Ms. Norton. Could it be used even in an appeals?
    Ms. Bingham. Absolutely.
    Ms. Norton. All right.
    Ms. Bingham. But in non-binding processes in general that 
result in an award, the parties comply with the award over 90 
percent of the time. And the reason for that is that it is a 
public statement of what the appropriate and fair outcome is, 
and there is a certain amount of moral suasion associated with 
that public statement.
    You can use fact finding in two different ways. You can use 
it as a way to essentially adjudicate fact and determine a set 
of facts retroactively that then are the basis for further 
negotiation. Or the term is also used in labor relations as a 
step toward creating a contract. So in labor relations if there 
is a dispute between labor and management over what the new 
contract should be, then a fact finder will come in, hear 
evidence about the economics and comparable contracts in the 
industry, and then recommend what that contract should be.
    So it is actually a very broad use of fact finding, but it 
can also be, again, non-binding and the parties then can sit 
down and negotiate the parameters of their final deal.
    So what that does is there is a conflict here. FEMA's 
obligation is to enforce the law and act within the scope of 
its delegated authority. And the disputes that are arising are 
largely disputes of fact. The arbitration panel is not subject 
to review on grounds of error of law. I think that under the 
Federal Arbitration Act, an error of law is not a basis for 
overturning an arbitration award, unlike an administrative 
adjudication. When these same decision makers sit as 
administrative law judges, then they are subject to a broader 
scope of review.
    Ms. Norton. Because both sides have agreed this will be the 
fact finder, if the arbitrator is the agreed-upon fact finder.
    Ms. Bingham. The parties could agree.
    Ms. Norton. Often, the arbitrator is. Now, if I understand 
it, in this case the State can say we want arbitration and 
FEMA, I think, has to agree.
    Ms. Bingham. Correct. That is my understanding.
    Ms. Norton. One more question for you. Just let me say for 
the record, I agree. I think it is you, Mr. Jadacki, who 
indicated that by the time you get to arbitration, you have a 
failed process. That is the only way this Committee got to 
arbitration, with almost $4 billion on the table, a disgrace.
    So I couldn't agree more that nobody would want to think of 
arbitration as a way to proceed and we see that this was a 
highly unusual act.
    Let me say another, the reason we looked at arbitration at 
all, given the size of the dispute, is that it was brought to 
our attention that there were disputes between a number of 
States, a large number of States, in fact, and the Federal 
Government some years back. And somebody got smart and figured 
out to try to take something like Medicaid and disentangle it 
enough State by State just wasn't going to work. They used 
arbitration and we figured that that was the failed dispute of 
the size and scope that we were faced with. Impact means 
failure and therefore the fact that this process is unable to 
do in 60 days what the entire process hasn't done in months, 
and sometimes years, does speak to the efficacy of arbitration, 
at least in such large disputes.
    I am wondering if any of you are aware of, perhaps you, 
since you are a student of these procedures, of the Federal 
Arbitration Act, and whether the Federal Arbitration Act 
informs or could inform what FEMA has done with arbitration 
until now.
    Ms. Bingham. The Federal Arbitration Act was adopted to 
provide safe haven for arbitration from the courts.
    Ms. Norton. What from the courts?
    Ms. Bingham. To provide a safe haven for arbitration in the 
early parts of the 20th century. Courts were interfering in 
arbitration awards and commercial parties at arms length were 
trying to use arbitration to resolve their conflicts and stay 
out of court. So what the Federal Arbitration Act does is it 
creates a space that is protected from judicial review for 
parties to use a private justice system or private adjudicatory 
process. And it does not speak to the design details of 
arbitration.
    Ms. Norton. Thank you.
    Just a couple more questions. Mr. Jadacki, I was 
interested, especially in light of all you know about the 
issues and problems that FEMA has had with Katrina and Rita 
public assistance programs that you recommended transferring 
other disaster programs to FEMA. I wonder what you had in mind 
and whether you think that would improve those particular 
programs?
    Mr. Jadacki. Yes, and I think it goes both ways. There 
might be some FEMA programs. And I will use the case of the 
highways, roads, you know, clearing debris. FEMA is responsible 
for the local roads and in some cases the State roads, and the 
Federal Highway Administration is in charge of the Interstates 
and the Federal highways and those type of things. You have two 
separate processes going on that essentially do the same thing, 
remove debris.
    So it might make sense for economies and efficiencies to 
combine those efforts where you would have one entity, whether 
it is FEMA or the Federal Highway Administration would be 
responsible for that, versus having two separate things. In 
some cases it could be the States and locals going through a 
project worksheet to work debris. In some cases, the Corps of 
Engineers would come in. So there is a lot of jurisdictional 
issues there.
    So looking at some of the places where there is duplication 
and jurisdiction issues might be good.
    Ms. Norton. But is there real duplication? The States are 
supposed to do their part.
    Mr. Jadacki. Right.
    Ms. Norton. The roads intersect.
    Mr. Jadacki. You are having in some cases Feds contract out 
to debris removal people at the same time the States or locals 
are doing the same thing. You could achieve economies by doing 
it once and then sorting it out later on under the auspices of 
one organization.
    Ms. Norton. Just like your cost estimating procedures.
    Mr. Jadacki. Just like that, yes.
    Ms. Norton. Finally, Mr. McCarthy, I was intrigued and 
could understand almost instantly when you said that the 
Recovery School District, consolidating the schools and doing 
it together, economies of scale, I guess, or even decisions of 
scale might work. I wonder if it did work. If putting all the 
schools together, in your judgment, as neat as it sounds, given 
all of the issues that were raised in the process we have just 
gone through whether you think it really worked, or if it 
should work, because you would think theoretically schools 
would have much in common and that would do it. So did that 
work because people acted rationally when they had schools 
together and said, hey, we are just building schools.
    So all schools should cost no more than, and this is the 
maximum amount, and we are going to make them out of the same 
material. Did it have that effect? And do you think that there 
are other examples other than school consolidations where the 
desired effect, theoretical effect could come about?
    Mr. McCarthy. I believe so. And I am basing it, I think we 
are all students of Katrina at this point after five years. And 
there were a lot of discussions at the beginning on the number 
of schools affected and what the future would be, and the 
reason I have expressed some enthusiasm regarding the Recovery 
School District is that it was locally generated and it was 
their decision as to how to approach it, about how many 
campuses they wanted to have eventually.
    And I think what Matt and others have pointed out is that 
if you are going by a project worksheet for each school 
building and suddenly you say, well, we are not planning on 
having that campus anymore, and we want to move that money over 
here. If there are questions about that throughout that process 
and if you are doing it school by school by school, that is how 
things stretch out into years.
    But in this case, it really appeared to be the local 
initiative and the local decision making that drove it. And the 
good part is that Congress, first of all, gave the authority 
that provided additional money. Because usually if you make 
that choice to do something different than just repairing or 
replacing that school, that means you will get 90 percent of 
the Federal money, not 100 percent.
    So in this case, Congress made sure that it was a full 
Federal payment. They provided for 100 percent. So that is 
something else that could be looked at in the future is whether 
those kind of in lieu payments perhaps, I think the idea always 
was that you don't want FEMA's money to be just repairing 
overall infrastructure in an area. You just want to go to the 
areas that were affected by the disaster.
    And that was I think part of the reason to only pay 90 
percent, to make sure that people are making a decision, a wise 
decision on that. But I think the Recovery School District 
maybe presents the argument that perhaps it ought to be treated 
like every other PA project and that if people make a choice to 
redesign parts of their public infrastructure that that ought 
to be their decision, and that there shouldn't be a 10 percent 
penalty for making that choice.
    Ms. Norton. We think about Charity Hospital, which was one 
of the projects which drove us to suggest arbitration, one 
wonders if it would work with clinics and with smaller health 
services, and where the economies of scale could come about 
that way. So that you shouldn't really be preferring one 
jurisdiction over another when it comes to health centers and 
clinics and that you might, indeed, get some economies that you 
would not otherwise get, jurisdiction by jurisdiction, after 
the initial planning had been done and approved from the local 
jurisdiction.
    Could I thank all three of you for coming? We asked you to 
come first because we don't like the experts from the agencies, 
who are going to come next, to simply engage in show and tell. 
They don't. They are often very analytical, but I have never 
understood the witnesses who have looked at them come 
afterwards, and then they come and testify and they leave. So 
they don't even get to hear the independent critiques.
    So we thought, while we have our own questions for the 
officials from the States and from the Federal Government, we 
thought it might be good to hear the critics first and that 
would even inform our own questioning, and it certainly has.
    Thanks to all three of you for very informative and 
invaluable testimony. Thank you very much.
    Now, could I ask the second panel to approach now: FEMA 
from the State of Mississippi, from the State of Louisiana, and 
of course from the Civilian Board of Appeals. We are going to 
begin with Stephan Daniels, Chairman Daniels of the Civilian 
Board of Appeals.
    Mr. Daniels?

   TESTIMONY OF STEPHEN DANIELS, CHAIRMAN, CIVILIAN BOARD OF 
   CONTRACT APPEALS; TONY RUSSELL, REGION VI ADMINISTRATOR, 
  FEDERAL EMERGENCY MANAGEMENT AGENCY; MIKE WOMACK, EXECUTIVE 
  DIRECTOR, MISSISSIPPI EMERGENCY MANAGEMENT AGENCY, STATE OF 
 MISSISSIPPI; MARK RILEY, CHIEF OF STAFF, GOVERNOR'S OFFICE OF 
    HOMELAND SECURITY AND EMERGENCY PREPAREDNESS, STATE OF 
                           LOUISIANA

    Mr. Daniels. Thank you very much, Madam Chairwoman and 
Members of the Subcommittee.
    A year ago when I testified before this Subcommittee, I 
assured you that the Civilian Board of Contract Appeals would 
do its utmost to fulfill a mission we have been assigned by the 
Congress and the Secretary of Homeland Security. As the 
arbitration panel established under the American Recovery and 
Reinvestment Act of 2009, we would resolve as quickly and as 
fairly as possible disputes between the Federal Emergency 
Management Agency and State and local jurisdictions in the Gulf 
Coast region concerning public assistance grants resulting from 
damage caused by Hurricanes Katrina and Rita.
    I am pleased to be able to report to you today that the 
Civilian Board has over the past year been doing exactly that. 
State and local governments have filed 26 cases with us seeking 
arbitration of their disputes with FEMA regarding these grants. 
The cases involve all sorts of facilities: schools, hospitals, 
arenas, roadways, parks, port areas, canals, water and 
wastewater treatment plants, solid waste disposal areas, and 
fire hydrants.
    Most of the cases have come from jurisdictions in Louisiana 
and Mississippi, with 14 from Louisiana and 10 from 
Mississippi. We have had one case from a jurisdiction in Texas 
and one from a jurisdiction in Alabama.
    Eight of the cases have been settled by the parties. Six 
cases are still pending. Of the cases that have ended other 
than by settlement, we resolved each one of them within the 
time limit prescribed by regulation, which is 60 days after the 
parties have completed their presentations.
    Three of the applications have been granted in full. Six 
have been granted in part. Two have been denied, meaning that 
FEMA's position was upheld. And one was dismissed for lack of 
jurisdiction.
    Some of the cases, as was noted by the previous panel, have 
involved large sums of money. The most publicized of them, 
Charity Hospital in New Orleans, resulted in a determination 
that FEMA should pay to the State of Louisiana nearly $475 
million as the replacement value of the damaged facility. Other 
cases have involved far less funds, and in some the project 
value has been only slightly greater than the minimum of 
$500,000 necessary to place a case before us.
    However large the case, our proceedings have taken far less 
time and required the expenditure of far less resources by the 
parties than would have been involved in a court or even in a 
contract case before the Board. Nevertheless, I feel confident 
that we have understood the essence of every one of the cases, 
and in each of them, we have reached a result which has been 
fair and appropriate.
    FEMA issued regulations on August 31, 2009, opening the 
possibility for resolution of these disputes by arbitration. 
And during the fall of 2009, the Board experienced an initial 
rush of case filings. Indeed, 15 of our 26 cases were filed in 
October, 2009. The numbers of filings has slowed since then, 
and increasingly cases have been settling, rather than going to 
decision.
    My own personal sense is that this trend has occurred 
because the ability of State and local governments to opt for 
arbitration has had a positive impact on the process of 
resolving the disputes. The parties have been addressing issues 
earlier and more cooperatively in an effort to come to 
positions which are mutually acceptable.
    I thank you again for the opportunity to testify this 
afternoon, and I am happy to respond to any questions the 
Subcommittee may have.
    Ms. Norton. Thank you very much, Chairman Daniels.
    Tony Russell, Region VI Administrator, FEMA.
    Mr. Russell. Yes, good afternoon, Madam Chairwoman, and the 
distinguished Members of the Subcommittee.
    My name is Tony Russell. I am the Region Administrator for 
FEMA Region VI, which includes States of Texas, Louisiana, New 
Mexico, Oklahoma, and Arkansas.
    Before coming to Region VI, I served as the Acting Director 
of the Louisiana Transitional Recovery Office. It is my honor 
to appear before you today to discuss what we have done in the 
aftermath of Hurricanes Katrina and Rita, and to help 
facilitate a faster, smarter and better recovery for the Gulf 
Coast.
    Now, when I say what we have done, I mean we in the 
broadest sense of the word, from individuals in the community, 
the State, the parents, the local leaders, FEMA field and 
regional staff, our Congressional partners, Administrator 
Fugate, Secretary Napolitano, and President Obama. Together, 
what we have done is to fundamentally adjust our attitude so 
that we can create solutions to common problems.
    We use the trust that we have built in order to speed up 
the recovery process in the Gulf Coast.
    When I began a year and a half ago as the Acting Director 
for the LATRO, I noticed many obstacles to recovery. One was a 
culture of formality where process prevailed over a focus on 
outcomes. Another was that we lacked a system for regular 
communication with our partners and the pace and the scale of 
recovery suffered as a result.
    My life experience has shown me that when working with 
others, you can only go as fast as the speed of trust. So we 
worked hard to establish a level of trust between the 
communities, the States and FEMA. We also opened up the lines 
of communication. Instead of writing letters back and forth, we 
began sitting down across the table from each other and working 
together.
    As a result, we were able to use the law, the regulation 
and the policies as tools to serve the communities. But with 
time and with an established level of communications and trust, 
we were able to shift the focus from the process to the 
outcomes and break many of the logjams to recovery.
    As an example, we completely changed the way we approached 
disputed recovery projects. When I arrived in Louisiana, we had 
hundreds of projects that were simply not moving forward. In 
order to resolve these projects that were in dispute and speed 
up the process of making a decision, Secretary Napolitano 
established two joint public assistance decision teams in March 
of 2009. To date, these review panels have resolved 173 
previously disputed cases, helping those stalled projects move 
forward.
    Our ability to resolve these disputes was a direct result 
of the relationships we have built in the community and our 
willingness to sit in the same room together and arrive at 
common sense solutions.
    We try hard to communicate and resolve disputes with the 
State before adjudication becomes required. However, there will 
always be disagreements. Last year, you gave us another 
important tool, an arbitration process to resolve those 
disagreements. Most importantly, the use of arbitration allows 
us to continue to remove barriers to communication and work 
with our partners in an informal setting in order to speed up 
the recovery process. While the law specifies that the 
arbitration process be used for certain projects relating to 
Hurricanes Katrina and Rita, we will evaluate whether the use 
of arbitration could be useful in other contexts as well.
    But there is no doubt that the trust we have built in the 
community and the close collaboration with our partners has 
been key to our ability to settle disputes and get stalled 
projects moving again.
    The good news is that our approach is getting real tangible 
results. In Louisiana, FEMA has obligated $9 billion in public 
assistance funds, including $2.5 billion in just the past year 
and a half alone. In Mississippi, FEMA has obligated over $3 
billion in public assistance funds, including more than $240 
million in the past year and a half. We are seeing the results 
of our work, which we measure not in terms of the dollars 
spent, but in terms of communities rebuilt, parents getting 
back to work, and children learning and growing in new and 
improved schools.
    As we at FEMA help our States and communities recover from 
the devastation of Hurricanes Katrina and Rita, we have learned 
and continue to learn valuable lessons about how to deliver the 
best possible service to our communities. We view the work of 
recovering from Hurricanes Katrina and Rita with a simple 
approach. First, we are here as partners. Second, we work 
closely with the affected communities to resolve common sense 
outcomes. And third, we will be flexible and pragmatic as we 
work to help the Gulf Coast rebuild.
    Thank you again for the opportunity to testify before you 
and I am happy to take your questions at this time.
    Ms. Norton. Thank you very much, Mr. Russell.
    Mike Womack, Executive Director of the Mississippi 
Emergency Management Agency for the State of Mississippi.
    Mr. Womack?
    Mr. Womack. Thank you, Madam Chairwoman and Members of the 
Committee.
    I have been the State Coordinating Officer for Katrina 
since the disaster happened on the 29th of August, and I have 
been on the Mississippi Gulf Coast at least half the time since 
then. I have been directly involved in the Public Assistance 
Program, as well as housing programs and the mitigation 
programs.
    Mississippi has approximately $3.1 billion obligated for 
public assistance projects. We have dispersed $2.1 billion of 
that, meaning the projects are complete and we have paid the 
applicants their money to pay their contractors.
    We feel like the State of Mississippi, in partnership with 
FEMA, has done a very good job in trying to resolve disputes. 
Therefore, the fact that we only have 10 disputes that have 
gone to arbitration, which represents about $40 million, which 
is less than 2 percent, really a little bit more than 1 percent 
of the total amount obligated, is a pretty good showing of how 
well we have done with this.
    It has been a partnership. It was a partnership from the 
very beginning. We decided that we would try to build a team of 
FEMA, MEMA and the local governments to make sure that we would 
minimize the number of appeals and arbitrations, and certainly 
minimize the amount of money that was ultimately not paid to 
local governments or to the State.
    Now, we did this primarily using the FEMA management cost 
funds that were provided to the State. Now, I will say that if 
under current rules and regulations, they are limited to 3.34 
percent for all disasters after Katrina, roughly. There is no 
way that we could have done what we have done in partnership 
with FEMA with 3.34 percent. It just cannot be done.
    Now, I will say that everything I am going to talk about 
today I have discussed with Administrator Fugate, Associate 
Administrator Bill Carwile, and Deputy Associate Administrator 
Beth Zimmerman. They are very cooperative. They are working 
with not only Mississippi, but all the States in trying to work 
through these very difficult issues.
    But getting back to how we tried to minimize the number of 
disputes, we had integrated project management where we would 
work with the State agency that was administrating the CDBG 
funding, and with our State Department of Archives and History 
and with the Department of Education and other State agencies 
and Federal agencies, because we know that the rebuilding was 
not just public assistance money. It was all sorts of Federal 
grants. In fact, in total, about $24 billion worth of Federal 
money has been provided to the State of Mississippi.
    We developed a whole series of management tools to go well 
beyond what the MEMA's program does as far as being able to 
track the funding all the way from the date of obligation 
through disbursement, through the final inspection process. We 
also worked with FEMA on trying to make sure that the applicant 
did in fact get the estimated amounts that they deserved before 
they went and requested the improved and alternate projects.
    So of the $40 million that is in dispute, I would say that 
the arbitration process has been very favorable for our 
applicants. Every one of the cases that has been settled, the 
applicant received at least partial funding. The smallest 
amount was about one-third of what they requested. All the 
others were over half or a full amount that they requested.
    I would say that while we have made great progress, we have 
dozens of new facilities across the coast that are already 
completed; dozens of others that are under completion right 
now, to include numerous fire stations, police stations, city 
halls that were built with mitigation money to harden them so 
that they will be much safer for the next storm that comes to 
the Mississippi Gulf Coast.
    We do have some challenges. The biggest challenge we have 
is that of FEMA individuals coming, changing decisions 
throughout the process. Again, Administrator Fugate is going to 
try his best to try to fix these problems, but just the fact 
that many of the arbitration cases that we see are the result 
of the fact that one FEMA employee or contractor would make a 
decision, and then a year or two or three years later that 
would change.
    Now, the other thing that I want to mention is that the 
role of the IG is absolutely critical, but the IG sometimes 
drives those decisions that FEMA makes changes on. So it should 
be a matter of making sure the IG is there at the very 
beginning so when the decisions are made they agree with it and 
there doesn't have to be a change.
    As I have run out of time, I will simply say the one 
program that we need to reinstitute or find out a way to do 
administratively is the PA pilot program. It is a great program 
and needs to be reinstituted.
    Thank you.
    Ms. Norton. Thank you very much, Mr. Womack.
    Mark Riley, Chief of Staff of the Governor's Office of 
Homeland Security and Emergency Preparedness, the State of 
Louisiana.
    Mr. Riley?
    Mr. Riley. Madam Chairwoman, Committee Members, Louisiana 
is in the midst of the recovery of several compounding 
disasters that have occurred since 2005. Although I have not 
always been able to say this, I believe that FEMA and the State 
are now on the same path with common objectives in the 
recovery. We now have a true and transparent partnership with 
FEMA thanks to the leadership of people like Administrator 
Fugate and Regional Administrator Russell.
    With this change of leadership at FEMA, we are looking at 
recovery as a holistic approach to restoring a community, not 
just the repair of an individual piece of damaged 
infrastructure.
    The testimony that I will present today will review the 
effects of several pieces of legislation which have assisted 
the recovery, to include provisions authorizing arbitration. I 
will also discuss additional actions that we may want to 
consider, especially in the circumstances of a catastrophic 
disaster.
    In 2007, FEMA had obligated $5 billion for the recovery 
from Katrina and Rita. Today, we have a little more than $9 
billion or a $4 billion difference. At the fifth anniversary of 
Katrina and Rita, we have 2,789 cases that we designate as 
unresolved, and we believe that when we have resolved all these 
projects, final dollar amounts will be between $13 billion and 
$14 billion.
    Our short-term goal with FEMA is to complete the funding 
determinations in the Public Assistance Program and we think 
this will take another 18 to 24 months at the current pace.
    Arbitration has been a very effective tool and has 
instilled a sense of independent evaluation and fairness in the 
Stafford Act. We have filed 14 arbitration cases with the 
Civilian Board of Contract Appeals, for an approximate value of 
$952 million. The value of claims settled are determined by the 
CBCA in favor of applicants total approximately $613 million. 
Several new requests for arbitration are currently being 
prepared and the need for this process will continue until we 
have completely resolved the remaining 2,789 project worksheets 
that have funding issues.
    Based upon the State's experience with the arbitration 
process, we recommend that Congress consider making the 
arbitration option available or some other option that includes 
independent third parties to all applicants in all future 
disasters.
    We would recommend three changes to the current process. 
Allow applicants to be reimbursed for the costs that they incur 
in the arbitration effort if the case is not frivolous. 
Increase the time to file an arbitration filing from 30 days to 
60 days from the FEMA decision. And lower the jurisdictional 
threshold from $500,000 to $100,000.
    I would like to take this opportunity to comment on the 
service and professionalism of the CBCA, its Chairman, Judge 
Stephen Daniels, and the judges serving on the assigned panels. 
The Stafford Act Assistance Program is a very complex and 
nuanced program and the CBCA has given each case detailed 
attention and responded to the process in a fair and even-
handed manner.
    There is a completely different toolkit that is needed to 
respond to a catastrophic event as an ordinary disaster. The 
Stafford Act needs a catastrophic annex to deal with such a 
catastrophic event. The average disaster over the last 10 
years, measured in terms of public assistance dollars, was 
approximately $40 million. Hurricanes Katrina and Rita in 
Louisiana will top $12 billion or 300 times the size of the 
average disaster.
    In order to effectively recover from a catastrophic event 
like Katrina-Rita, communities need the following. They need 
assistance in developing master recovery plans. They need 100 
percent Federal funding of recovery activities even if that 
includes a loan for the non-Federal cost share. And they need a 
waiver of the alternate project penalty of 25 percent.
    I would like to take a minute to discuss two other issues 
affecting Louisiana's current recovery process. After 
Hurricanes Katrina and Rita, 57 local governmental entities 
took advantage of the Community Disaster Loan Program and 
borrowed approximately $822 million. FEMA is in the process of 
completing the review of these loans to determine the level of 
payback.
    Initial indications are that 42 local governmental entities 
will be required to pay back all or part of the loans. We 
suggest this puts an unfair burden on these communities still 
attempting to recover and still in need of support, and that 
FEMA's analysis of the ability of these local governmental 
entities to repay CDL loans is flawed.
    Finally, we ask for support to implement common sense 
investment of hazard mitigation funds into shelters. Louisiana 
and the Federal Government spent $50 million in transporting 
critical transportation need individuals outside the State of 
Louisiana during Hurricane Gustaf. We would like to take money 
that is already appropriated to us and invest it in multi-
purpose facilities for sheltering.
    Few jurisdictions in our Nation have experienced the levels 
of disaster brought upon our State in the last five years. 
Louisiana continues to recovery from Hurricanes Katrina and 
Rita, the largest disasters in U.S. history, which have been 
compounded by Hurricanes Gustaf and Ike in 2008, another $1 
billion disaster. Most recently, the State has been contending 
with the environmental and economic impact of the largest oil 
spill in U.S. history. The 2010 hurricane season is still upon 
us and we are keeping our fingers crossed.
    In closing, the State of Louisiana greatly appreciates the 
attention and interest that this Committee has demonstrated 
over the years in helping the State navigate a very cumbersome, 
bureaucratic, highly regulatory recovery process.
    Thank you very much.
    Ms. Norton. Thank you very much, Mr. Riley.
    Let me begin with Chairman Daniels. First of all, let me 
congratulate you, Chairman Daniels, on apparently meeting the 
60-day time frame in every single arbitration. We would like to 
understand why, particularly in light of testimony here and our 
own investigation that shows that it has taken, what is the 
charitable way to put this?, close to a year, let's put it, and 
often longer for the ordinary appeals process.
    So I would like to know whether it is you, the personnel, 
Chairman Daniels, or whether there is something about the 
process, which everybody fears, doesn't want to go to it. 
Except when you go to it, it looks like you get an answer in 
what I suppose the average layman would think would be a very 
complicated process, in a whole lot less time than you do in 
the so-called more simplified processes.
    Could you explain that to us?
    Mr. Daniels. Certainly by the time a case is presented to 
us, each party presents the very best evidence and arguments it 
has.
    Ms. Norton. If I could pause there, Chairman Daniels. But 
you reach the facts de novo.
    Mr. Daniels. Yes, we do, but it is on the basis of what we 
learn from the presentations and the hearings. And I think part 
of it also is that as administrative judges, we are all trained 
to be dispute resolution experts. We come into the process 
thinking there needs to be an answer here, and the parties 
benefit the faster we can get them the answer.
    Ms. Norton. Do you sometimes find that in the middle of the 
proceedings, as is the case with a District Court Judge, for 
example, the parties will reach decision while the arbitration 
is ongoing?
    Mr. Daniels. That occasionally happens. And obviously, it 
is the process that drives them to think about what really are 
the strengths and weaknesses of each position; where can we 
reach a middle ground? Because my goodness, parties came to 
believe, we would rather have control over the resolution of 
this case than leave it up to those ``crazy'' judges. Who knows 
what they are going to come up with?
    Ms. Norton. Do the 60 days include the time for 
presentation of the evidence, as well as your own decision 
making time?
    Mr. Daniels. The 60 days is the period after the case is 
finally presented to us.
    Ms. Norton. About how long does it take the case to be 
presented?
    Mr. Daniels. Once an application is filed with us the State 
has 15 days to file its comments, then FEMA has 30 days to file 
its comments.
    Ms. Norton. And you hold them to those time frames?
    Mr. Daniels. Yes, we do. We will then have a hearing within 
60 days and usually less of the time that we get FEMA's 
comments. And we will issue a decision within 60 days after the 
hearing.
    Ms. Norton. This is notable because apparently not only do 
you stay with your own time frames, you have been successful in 
keeping the parties within time frames as well.
    Mr. Daniels. Well, if a party doesn't choose to file any 
particular comments, then all we have to rely on is what we 
receive from the applicant. And I think that is quite an 
inducement to having the other parties file comments.
    Ms. Norton. I would like to hear something about Charity 
Hospital. We were very chagrined when Charity Hospital took so 
long. Charity Hospital was settled through this process. Can 
you describe how that decision was reached? Why had it taken so 
long before? And how you were able to do it within the 60-day 
time frame, apparently holding the State and FEMA to the time 
frames you just discussed?
    Mr. Daniels. I couldn't tell you why it took so long for 
the case to get to us. I think we might have some other 
witnesses here who could address that. I could just tell you 
that once the case did come to us, each party made a very 
thorough and professional presentation. We then had a hearing 
which took four days. We heard from all the witnesses that all 
the parties felt were critical for us to hear from.
    The feeling of the panel, the three of us who heard the 
case, was that the witnesses who were presented by the 
applicant, which was the State of Louisiana, were far more 
qualified, far more experienced and knowledgeable, had spent a 
lot more time in the facility than the FEMA people had, and had 
given a great deal more thought to how to do their cost 
estimates.
    As a result, we found them a lot more credible than the 
FEMA people. The issue in the Charity Hospital case involved 
FEMA's rule, that if a facility is damaged during a disaster, 
you are supposed to do estimates of the cost to repair and the 
cost of replacement. Then you compare the two. If the cost of 
repair is more than 50 percent of the cost of replacement, then 
FEMA should reimburse the applicant for the replacement costs. 
If the cost to repair is less than 50 percent, FEMA reimburses 
for the repair costs.
    In this case, the uniform evidence presented to us by the 
applicant and believed by us was that the cost of repair would 
be considerably more than 50 percent of the cost of 
replacement. We went through the analysis that is required 
under FEMA's regulations and came to the conclusion that the 
cost of replacement is what should be reimbursed.
    Ms. Norton. It just sounds like a very rational process. We 
are only sorry that this was not available to FEMA beforehand. 
But Mr. Russell, what was available to FEMA beforehand was its 
statutory mandate to implement cost estimating procedures. Now, 
that was 10 years ago and you have heard testimony from the 
prior witnesses. All of them were experts. None of them could 
tell me, because it is only appropriate to ask you, Mr. 
Russell, perhaps the other witnesses as well from the States if 
they have any insight. But why FEMA has not promulgated the 
implementing regulations which were mandated when President 
Clinton was President?
    Mr. Russell. Well, yes, Madam Chair. I know that we are 
working through that process now.
    Ms. Norton. You are. Yes, Mr. Russell. We would really be 
disappointed if you weren't at least working through it. Why 
has it taken 10 years to do anything on the process is our 
question. We don't think you have been doing nothing, unless 
that is what you going to tell me.
    Mr. Russell. Yes, ma'am. In fact, at this moment now, I can 
tell you, ma'am, that we are working through that process now.
    Ms. Norton. Mr. Russell, when will FEMA publish the 
regulations? When is it your present plan to publish the 
regulations under a law enacted 10 years ago?
    Mr. Russell. Yes, ma'am. I know that we are working through 
it now, and I don't have an exact date for you, ma'am.
    Ms. Norton. I tell you what, Mr. Russell, I understand. We 
don't want to shoot the messenger, but we are trying to find 
somebody to shoot. We really think that there is a problem and 
that the problem was acted out on the ground. And this is what 
we would like you to submit, this is FEMA to submit, within 30 
days, a timeline for the publishing of the cost estimating 
procedures required by Federal law 10 years ago.
    I am going to act like Chairman Daniels: no extension, 
charted timeline. And we would hope, and there must be a very 
good reason why, it could be rebuttable, but I doubt it. We 
would expect to have implementing procedures on paper by the 
end of the year. I am giving you 30 days, and by that time, 
because as you say, you have been working on it for 10 years.
    So we are impatient with any more extensions. The question 
should have been called before Katrina. And frankly, hundreds 
of thousands of people paid the price. Thirty days, less if 
possible, timeline, end of the year. That is this year, Mr. 
Russell. We want to see some implementing regulations.
    I am simply reflecting the frustration of the entire 
Committee. And this is two administrations. So we are 
bipartisan in our concern here.
    Why, Mr. Russell, or let me put it this way. I understand 
that your own Office of Alternative Dispute Resolution is 
largely confined to employee disputes. Is that correct? And is 
that the intended purpose?
    Mr. Russell. Yes, Madam Chair. At the moment now, they are 
used mainly for disputes with the employees. But they are a 
tool in the tool box.
    Ms. Norton. Say that again?
    Mr. Russell. They are a tool in the tool box to be used 
where they are required to be used. Now, my goal and what I 
push for in Louisiana is to solve things on the ground, to do 
whatever we can to put the elements of arbitration into the 
field. By that I mean by making it transparent between the 
State, between FEMA, and between the applicant. We all come 
together and work on the outcome, and the outcome is whatever 
they want to build in this case. And so put all the minds 
together towards that.
    And I think that is why you have seen a reduction of the 
cases going before arbitration because we are solving them in 
the field now and that has been our main focus to do exactly 
that.
    Ms. Norton. Mr. Russell, yes, we know everyone's working 
for the same outcome, but that hasn't in and of itself stopped 
disputes at the very beginning level. I hope you heard the 
testimony of the witnesses who preceded you, for example, the 
whole notion of I asked Professor Bingham how non-binding fact 
finding was useful. And it was very interesting to hear what 
she said. And I am not sure people learn from these hearings 
that once it is a matter of public record what somebody that is 
not primarily involved, it becomes easier to reach conclusions.
    We are going to ask you to work on the 10 year old statute 
first, but we would be very interested in the agency's view of 
what it could do outside of arbitration that would have the 
confidence of the public that a fair decision would be reached, 
and of the States involved.
    As you may have heard me say, we regard FEMA as nothing 
short of a party, so we think that if, or at least I think, 
that if you set up a procedure within FEMA, you are already 
suspect unless you can show some degree of independence to give 
the other side confidence so that otherwise you are going to 
have the same disputes arise because they don't think you are 
fair.
    And I have never regarded that as your fault or the fault 
of FEMA, Mr. Russell, because it is true that we are looking at 
FEMA not to squander taxpayers' funds.
    And Mr. Womack and Mr. Riley are there representing 
taxpayers of Louisiana and Mississippi, and they have had a 
terrible disaster and they are not out here to save you money.
    So it really does take some thinking, hard thinking, and I 
would recommend to each of you that you look to the kind of 
experts that preceded you to consider what FEMA should do for 
the first time, it would appear, since your own internal 
mechanism is largely for employees, to make alternative 
resolution live in your work and in the field. And I am going 
to go on because I want to ask a question of Mr. Womack and Mr. 
Riley, and then go to my colleagues.
    I want to ask something that I think may have plagued both 
Mr. Womack and Mr. Riley, and that is something that FEMA 
apparently is trying to come to grips with, which is the 
turnover in the field that results in inconsistency of 
decisions.
    So that I take it you get a decision and it could actually 
be turned around on you. And I want to know whether you have 
seen any improvement in that, and what do you think should be 
done with respect to that inconsistency beyond what you may 
already know about? FEMA has recently issued standard operating 
procedure. Do you think that will help it? And whether you 
think that has really been a real issue in the recovery from 
Rita and Katrina?
    Both of you, it seems to me, would help us by answering 
that question.
    Mr. Womack. Yes, ma'am, I would say the turnover has been a 
tremendous factor, and I quite frankly in a catastrophic event 
am not sure how you would fix this, because you have to have 
tens of thousands of very competent people. That may be too 
large a number, but certainly thousands of competent people. 
And they have to be mobilized and they have to be brought in 
very quickly, and they have to live in very, very difficult 
conditions.
    So I would like FEMA to consider and the IG and all the 
rest of the regulatory agencies to consider something. If a 
FEMA representative, either a full-time FEMA employee or a 
contractor, comes in and writes a project worksheet based on an 
estimate, and they do this early on, if in fact there is not 
fraud or a deliberate mission of trying to get somebody to 
mislead someone, then say that FEMA has to stand behind it 
unless the local government wants to change that project 
worksheet.
    Because these are good-intended people that I have worked 
with over the past five years. They say by regulation, I have 
to change the project worksheet because the initial one was 
incorrect. And in my opinion, we should not delay recovery, 
because that is exactly what it does, by having the local 
governments have to go back and start over and redesign and 
fight to try to get what they were originally told, and so 
forth and so on.
    So if we could just simply say that the first FEMA 
representative that writes the estimate, that FEMA is bound by 
that. And that no regulatory agency is going to come back and 
say, nope, it wasn't done right so we have to change it, unless 
there was fraud or directly trying to mislead the FEMA 
representative.
    Ms. Norton. It really is an outrage to make a State go all 
through that again. I don't know if Mr. Riley agrees or 
whether, for that matter, Mr. Riley or Mr. Womack believe that 
this new standard operating procedure gets them toward that 
goal
    Mr. Riley. We have, in fact, experienced the change of 
personnel, change of decision event on a number of occasions. I 
think two mistakes were made at the front end of this. One, 
FEMA headquarters took direct control of the people on the 
ground that were making decisions, so you had headquarters 
personnel involved in this decision making process. What 
normally happens in a disaster is the people that are on the 
ground responding to the disaster work for the region, and the 
region has a close association with the people at the State 
level and have a good working relationship. Well, that 
relationship was abandoned and we could never, until recently, 
get that good partnership approach with FEMA.
    Secondly, because this was catastrophic and when FEMA 
showed up to the event, they were looking for a hurricane and 
they didn't find it. They found a catastrophe, a large 
catastrophe. We have 23,000 projects. So one of the decisions 
they made is we are going to go out and issue project 
worksheets as placeholders, just to identify that there is a 
building or some infrastructure that has been damaged. Now, we 
are going to put just a very bland estimate on it and we will 
come back later and then do the detailed analysis of what the 
damage was.
    Well, that group of people rotated out and a new group of 
people came in. The new group of people took the position that 
those project worksheets were good project worksheets, and so 
if you, applicant, want to change that, the burden of proof is 
on you, and you have to come in and change that.
    Again, it belied this very collaborative relationship that 
should have existed to really determine what the recovery was, 
what the end goal was, as opposed to just what the dollar 
amount might be.
    But having a consistent relationship with the FEMA 
personnel on the ground is very important.
    Ms. Norton. I think you indicated there have been 
improvements with that kind of partnership now.
    Mr. Riley. Correct. One of the things FEMA did was transfer 
the responsibility for the recovery back to the region. Tony 
Russell said it. One of the things you have to do is establish 
that trusting relationship between those people. We work 
closely with Region XI, always have, and the people there know 
us and we know them. And that trust is there because they know 
how we operate. We know how they operate.
    Ms. Norton. One more question for you both before I ask my 
colleagues if they have questions.
    It goes to Mr. Daniels' process. I have indicated I 
certainly don't think the arbitration process is the way to 
resolve most disputes; that we were driven to it by the 
problems we were reaching while FEMA was getting a new act, 
shall I say, together. But I think it is in Mr. Riley's 
testimony that there was some concern about the impartiality or 
the possible perception of impartiality in the first and second 
appeals in FEMA's traditional appeals process.
    Could you explain, since I take it that doesn't have the 
same kinds of safeguards that Mr. Daniels' process has, what 
your concerns are in these appeals processes which are where we 
are still having problems? And do you still see problems there?
    Mr. Riley. The problem we were having is as we were trying 
to develop a project worksheet, we would sit down with a FEMA 
counterpart on the other side of the table and we would work 
through the project worksheet. We would come to some impasse.
    So we would go away and we would file the appeal. Well, the 
appeal would then be worked by the same guy that was sitting on 
the other side of the table from us to begin with and he would 
provide the Regional Director his input as to the answer to the 
appeal.
    So we don't get someone else looking at this thing afresh. 
We get the same people involved.
    Ms. Norton. And that is an appeal? I appeal to my 
adversary?
    Mr. Riley. That is exactly what our complaint was about 
independent process. Even within FEMA, if they had had an 
independent team come in and look at it, but their practice 
was, and I don't have enough experience to know whether it was 
unique to Louisiana TRO or whether this was throughout the 
system, but the practice was when we filed that appeal, it 
would go back to the same individual that made the decision in 
the first place.
    Ms. Norton. Mr. Womack, was that your experience as well?
    Mr. Womack. It is a little bit more complicated than that. 
You had the people, in our case in Biloxi, that wrote the 
project worksheets. If it was a difficult decision, they might 
in fact call the region, or before the region had control of 
the recovery office, they would call headquarters. And they 
would ask their opinion on these things.
    Then once a decision was made, the applicant didn't like 
the decision, they appealed it. Before it went to the Regional 
Administrator, the same office that made the decision had a 
chance to write their comments. Then it went to the Regional 
Administrator and his staff, the public assistance staff that 
in fact may have consulted with the local field office for 
FEMA, they wrote their recommendation back to the Regional 
Administrator.
    Now, the Regional Administrator in some cases would go 
against his program staff, but that is very difficult to do in 
many cases because you hire these people to be the experts. But 
if they were already consulted on the front end as to what they 
thought the project should be, then it doesn't seem that there 
is a lot of value in having those same people provide input 
into the appeal.
    Ms. Norton. Mr. Russell, I understand if you are sitting 
outside of the system that we are, and trying to get inside a 
moment. When sitting outside, this sounds kafkaesque. If you 
are inside, you are inside a Federal bureaucracy and you are 
trying to operate according to regular procedure.
    You can understand, though, I am sure, if you extract 
yourself for a moment from your own processes, how circular 
this process necessarily is.
    What if, for example, I heard neither of these State 
representatives say go hire yourself somebody like Professor 
Bingham. But they seem to imply that there have got to be fresh 
eyes. What about a different regional office, for example, 
looking at the matter? So that you don't have the frustration 
of no confidence, even when the appeal goes upstairs, because 
those who had input, who are closer to the decision maker, have 
already influenced the decision maker as to the outcome. What 
about a different regional office?
    I mean, this is off the top of our head. You might be able 
to think of a better person inside of FEMA. I might even ask 
you to go to Mr. Daniels. I am trying to find something within 
your own processes that would eliminate the appearance of 
unfairness that our two State officials have spoken of
    Mr. Russell. Yes, ma'am. I think that, at least for me, my 
first objective has always been to solve this in the field. And 
that is with a culture shift to where the default answer is 
yes. OK? That is my default answer. So when my employees come 
to meet with the applicant in the State, the default is yes.
    Ms. Norton. Mr. Russell, you are not answering my question. 
The default answer is the no. When the default answer is no, 
and as you said yourself in your own testimony, there will be 
some things that have to be appealed.
    Mr. Russell. Yes.
    Ms. Norton. I am now trying to find, out of this hearing, 
some procedures which FEMA would consider. The default answer 
is no. You tried your best. Now, Mr. Womack and Mr. Riley are 
appealing. They are now spending months upon months in the same 
process, essentially. Would it assist the process in having, 
for example, a different Regional Administrator who has not 
been part of the process look at it? Or do you have a 
suggestion as to how to restore the perception of fairness of 
the State officials who are on the ground?
    Mr. Russell. Ma'am, you know, we are looking at a bottom-up 
review as we review our whole PA process, and I will definitely 
take that back as an option for us to take a look at.
    Ms. Norton. Thank you very much. In 30 days, Mr. Russell, 
we would like an answer to the following question. Will FEMA 
consider, in order to--let me, the predicate of this question 
is, we have seen huge improvement once we reach impasse and go 
to the arbitrators. They have stayed within their timelines and 
they have been successful in getting the parties to stay within 
their timelines. We are very, very satisfied with how that 
process, should that process be used, go.
    According to those who testified before you, the process 
that we now have the most trouble with doesn't have anything to 
do with this atom bomb process which has done its work 
apparently in keeping wars from breaking out, and of course, 
once things get to arbitration. Our process now is in the 
ordinary appeals process.
    In 30 days, will FEMA consider the use of a different 
regional office at the first level of appeal so that the 
appeals process will be not only close to a year, but will get 
closer to what the arbitration process is? And if you find that 
unsatisfactory, within 30 days, let the Subcommittee know what 
alternatives are under consideration.
    I will turn now to Mr. Cao, who is acting as Ranking 
Member.
    Mr. Cao. Thank you, Madam Chair.
    I thought that my hari-kari statement was tough. You just 
want to line up people and--anyway.
    [Laughter.]
    Ms. Norton. So you are right with me.
    Mr. Cao. Well, maybe. Anyway, thank you very much.
    Tony, it seems to me that, based on my conversation with 
counsel, that the Hazard Mitigation Act of 2000 enables us to 
prevent many of the backlogs that we saw after Katrina. And if 
the Chairwoman is right that it has taken FEMA 10 years, over 
10 years to come up with the rules and regulations, I see that 
as inexcusable.
    And I hope that you can bring the words back to 
Administrator Fugate that this Subcommittee is thoroughly 
disappointed and I hope that a greater urgency would be put on 
FEMA to come up with these rules because based on what I have 
heard so far, the Act itself would provide incentives for the 
State to actually save money, and in essence save FEMA money.
    At the same time, it would create a structure upon which 
FEMA can settle many of the projects through a lump sum 
settlement type of procedure that we have been pushing for.
    So again, once you have come up with a time line to submit 
to the Chairwoman, I would like to get a copy of that time 
line, if you don't mind. But beyond that, I would have to say 
that you have done a wonderful job as the TRO Director and now 
as the Regional Director of Region VI.
    And I have mentioned it many, many times before. I 
appreciate your cooperation and your hard work and your staff's 
hard work in the past two years.
    But now we have a new problem and this new problem that we 
have is the Community Disaster Loan Forgiveness Program. It 
seems to me, based on the testimony of the prior panel members, 
that for previous disasters, community disaster loan 
forgiveness has been routinely given, up to 96 percent of the 
loans.
    The question that I have here is why is FEMA changing its 
perception or its position on the forgiveness of these loans? I 
am not sure what the rationale is based on the fact that 
Katrina was and still is the most devastating disaster to 
befall upon our Country. It seems to me a no-brainer to forgive 
these loans so that communities can recover and then to 
obviously continue with what they have to do in order to 
rebuild and to assist their citizens.
    I know that I have confronted Administrator Fugate many, 
many times in the last two years, pushing for very friendly 
regulations so that loans can be forgiven. And it seems to me 
that our plea has fallen on deaf ears because we are 
encountering frustration upon frustration, before with P.W.s, 
now with community disaster loan forgiveness.
    And it seems to me that, again, rather than to work in 
cooperation with municipalities to rebuild and then to carry on 
with their lives, obstructions are now being put forward and 
barriers are being built. And again, I would like for you to 
approach the Administrator and ask him to revisit this problem.
    With that being said, based on what I have heard so far 
with respect to the appeals process and with respect to the 
arbitration panel that we now have, would it be more efficient 
for us just to simply get rid of the appeals process, to go 
from first termination and allow the members to ask for 
arbitration?
    Mr. Russell. Well, sir, you know I will go back to my first 
statement that we tried to do it all in the field, but if we 
can't do it in the field, then I think that what is going to 
happen is we are going to look at this from the bottom up. And 
to look at arbitration and to look at appeals and to see how 
those timelines match up. And is it more efficient? And in my 
mind, what is the less amount of burden on the applicant? 
Because there is a burdensome process to get your case 
together, to file your case. There is an expense there when it 
comes to arbitration.
    And so I would like to be able to analyze both of those and 
figure out what is the best way to proceed for the applicant. 
And we are in that process now.
    Mr. Cao. But based on the testimony of the previous panel, 
the average time wait for the appeal process to go through was 
about a year. And if children were waiting for schools to 
reopen, if ill people were waiting for hospitals to reopen, it 
seems to me that the one-year period is a time that people 
cannot afford to waste. And if you can look at really, really 
streamline this process and to bring as much efficiency, as 
much as possible, I am pretty sure that future victims of any 
natural disaster would appreciate that.
    Mr. Riley, first of all, I just want to thank you so much 
for everything that you have done for Louisiana. I know that 
you and your staff have worked very hard to push forward the 
recovery. As we go forward to look at how we would deal with 
future disaster, what would be the most important area based on 
your experience that we need to focus on right now?
    Mr. Riley. I think this was mentioned by the earlier panel. 
You get these small communities that have been hit by a 
disaster and if it is an ordinary disaster, in my terms, they 
might have a building or two that needs to be repaired or 
replaced, and that is pretty simple to do.
    When it is a catastrophic event, they are overwhelmed and 
they don't have the capabilities necessary to really develop 
the kind of planning that it takes to bring an entire community 
back, as opposed to just build a building back.
    Now, the experience that we had early on with FEMA was that 
they would come in and they would concentrate on building the 
building back, not reestablishing the community. And it is that 
sort of urban planning master planning expertise that FEMA 
could bring with them to help the community do a good planning 
process.
    We want to build communities back more resilient, safer, 
stronger than they were before the storm so that the next storm 
doesn't hurt them the same way.
    So bring in the right expertise to help them do that sort 
of planning to become more resilient, safer, stronger and to do 
the sorts of things that you need to do to bring the community 
back. What are the priorities of processes or infrastructure 
that you need to be back? How do you bring it back? Do you 
bring it back exactly like it was? Or do you do something like 
the Recovery School District and develop a master plan and 
bring schools back online in a different sequence of events 
that matches the community coming back to town.
    So that sort of expertise at the front end of a disaster, 
to help these communities I think would be really helpful.
    Mr. Cao. So, Tony, based on what Mr. Riley has said, what 
is FEMA's position, FEMA's perspective going forward?
    Mr. Russell. Yes, sir. I think that we have an emergency 
support function 14, which is long-term recovery. And during a 
disaster, we can mobilize them. They can get with the State and 
begin those long-term planning of that matter. So that is 
something that can be done.
    Mr. Cao. Thank you, and I yield back.
    Ms. Norton. Thank you, Mr. Cao.
    Mr. Taylor of Mississippi?
    Mr. Taylor. Thank you, Madam Chairman.
    I want to thank our panelists for being with us this late 
in the day.
    Mr. Russell, let me start by saying that the people of 
South Mississippi are incredibly grateful for the help this 
Congress and your agency has provided. Mr. Womack says $24 
billion. My number if $21.8 billion. That is a lot of money to 
the State of Mississippi and we are grateful for every penny of 
it.
    There have, however--and I want to context everything in 
that we are grateful for the help we have received. But there 
are still some communities where the majority of neighborhoods 
are driveways that lead to a vacant lot; where the houses have 
not come back.
    As you know, most local communities are a combination of 
property taxes, and so if the house isn't there, the property 
tax revenue is way down. And sales taxes, again if people 
aren't there, they aren't buying things, and in many instances 
the stores haven't come back because the people haven't come 
back, et cetera.
    Some of the communities that I represent, the loans have 
been forgiven for rebuilding schools. There are other 
communities that in my mind's eye were actually more 
devastated, where the loans haven't. One of the things that has 
happened that I think has skewed this is that our Nation, and 
again I say this with gratitude, came up with re-start money 
knowing that the houses were gone, that the stores were gone, 
therefore there was no property tax or sales tax to pay for 
this. Our Nation stepped forward to get these schools going 
again within about 60 days of the storm with re-start money, 
and we are grateful for it.
    The problem comes in in that that was one-time money from 
our Nation to get these schools going, but it was counted as if 
it was an ongoing source of funds for these communities trying 
to get their loans forgiven, when it was not an ongoing source 
of funds. It was a one-time source of funds.
    I was wondering if this has been brought to your attention 
by Mr. Womack or others? And if it has not, I would certainly 
ask that you take a look at this because I do think some of 
these communities--no, I know some of these communities have a 
very legitimate request for help.
    Mr. Russell. Yes, sir. At this time, we are still in the 
process of gaining additional information about the loan 
process. And if the recipient has information to bring forward, 
we are receptive to receiving that because nothing is final 
yet. We are still in the process and it is still being under 
review even as I speak. And it is on a case-by-case basis also.
    So as more information comes through that is advantageous 
toward the recipient, then they can be taken into account.
    Mr. Taylor. OK. Secondly, and I am going to shift gears, 
Madam Chairman, if you don't mind. But again, hopefully we have 
learned some lessons from the last storm.
    In my mind's eye, one of the visions that I both said, gee, 
I am grateful to my Nation, and boy, there has got to be a 
better way to do this, is passing about a week after the events 
of the storm, passing by the Stennis Airport and seeing an L-
1011, an absolutely enormous cargo plane, the nose of which is 
now picked up and looking in the cargo plane it is full of ice.
    So on one hand, I am going, gee, we sure need that ice. I 
am sure grateful for this. On the other hand, being a self-
professed logistician, I am going, that is the most expensive 
way on earth to get that ice here. We need the stuff. We are 
grateful for it, but, boy, there had to be a cheaper way to get 
this stuff here.
    Mr. Brown never got it on the importance of ice. You've got 
people who weren't working outside suddenly working outside. It 
prevents them from getting a heat stroke.
    Mr. Womack and I recall the very sad situation where we 
actually commandeered an ice truck to put corpses in because 
there was no electricity and they were rotting in the sun.
    For those people who could find their refrigerators, it 
gives them a few days to take their frozen goods and slowly 
thaw them out so they can feed themselves for a period of weeks 
until the stores get open again. It is a necessity. I can tell 
you from experience, it is a necessity to help people be as 
self-reliant as possible under these terrible circumstances.
    Having said that, Brown and I think his predecessor said in 
the future that there would not be ice. And again, going back 
to that L-1011 full of ice, I am grateful for it, but boy, 
there has got to be a better way to do this.
    One of the advances that I have seen since then, and 
understanding that the cost of moving that commodity is 
extremely expensive. Something that has come along since 
Katrina are these portable ice-making machines. It is actually 
a vending machine, that are fairly common throughout South 
Mississippi now.
    Almost every city in my District has their own water wells. 
Almost all of them have backup generators to get water to those 
wells.
    I would ask that FEMA strongly consider as a short-term 
relief buying machines, or at least having the ability to lease 
machines like that so that they could be placed at the water 
wells in a community that has lost its electricity and needs 
some ice, and cut down on those huge logistics costs of taking 
ice from the Midwest and dragging it down to coastal 
Mississippi or the Midwest that in a future storm and taking it 
to coastal North Carolina.
    Again, I have a responsibility to the taxpayers who aren't 
affected, but also to those people who are affected. We want to 
help those people affected and we have to do it in the most 
cost-effective manner. I think this is just a common sense 
thing that ought to be looking at.
    Secondly, hurricanes can hit a coastal community. There is 
a really good chance the bridges will be out, just like they 
were last time. I never really could get it through the 
previous Administration of the need to have a response from the 
sea, a rescue from the sea. And there are businesses that 
transport fuel by barge. And I would hope that you would 
seriously consider pre-negotiated contracts with those barge 
firms to deliver fuel.
    And that does a couple of things. Number one, it gets the 
fuel to the point of greatest impact, which is going to be 
closest to the water. But the second phenomena that we went 
through is that everyone who went through the hurricane thought 
they had it the worst, when the truth of the matter is the 
people the farthest from the refinery actually had it the worst 
because they were right there on the coast. But every community 
between that inland refinery and the coast tried to grab that 
fuel truck.
    And in many instances, that fuel truck ended up where it 
really didn't need to be, and never got to where it needed to 
be.
    Secondly, you can carry a heck of a lot more fuel on a 
barge than a truck. And it becomes the filling station if 
properly designed.
    And so again, lessons learned, response from the sea, and 
keeping in mind that over half of all Americans live in coastal 
America, so something bad happens and it is not the hand of 
God, but a terrorist, is probably going to happen in a coastal 
community; and a response from the sea for a floating hospitals 
using large-deck amphibious assault ships that the Marines 
have; fuel; food.
    Again, I would hope that you would be working with the 
Military Sealift Command and others in the military to come up 
with this response ahead of time, rather than doing it on the 
fly after one of these events.
    Mr. Russell. Yes, sir. In fact we are doing exactly that. 
We are looking at every avenue for health and safety, and I 
will take this back with me to make sure this is one the agenda 
also.
    Mr. Taylor. OK. Again, Madam Chairman, thank you for your 
courtesy of letting me participate in your hearing.
    Ms. Norton. Of course, Mr. Taylor.
    I don't have many more questions, but I would like to ask a 
couple more questions before we dismiss this panel, because 
these are questions I like; when everybody who is engaged in a 
process are before us, so that you can react candidly to one 
another.
    Now, I note that in the arbitrations, and remember that is 
a new process, so we had a very special obligation to look at 
it. We note that three had resulted in full implementation for 
the State; six in partial implementation for the State; and two 
were denied.
    So I would like to ask Mr. Russell, Mr. Womack and Mr. 
Riley, are you all satisfied with Mr. Daniels sitting right 
here? He would be glad to hear it, I know. Are you all 
satisfied with the arbitration process? What has been its 
effects on other parts of the process? And why have more 
arbitrations not been requested?
    Mr. Russell, why don't you start?
    Mr. Russell. Yes. Madam Chairwoman, my goal is to put Mr. 
Daniels out of business, and that is by solving things at the 
lowest level possible.
    Ms. Norton. Has this process, arbitration, had the effect, 
if not of putting him out of business, he is very much still in 
business, but had an effect on the speed or ease of the process 
you are necessarily involved in? And if so, how? Be specific, 
Mr. Russell.
    Mr. Russell. Well, I think that the trust that we have 
built has had a factor in the field of getting things done. And 
that we continue to try to solve that, and we know that 
arbitration is there. It is a choice that we can take, but we 
will try as much as possible not to go there if at all 
possible.
    Ms. Norton. Mr. Womack?
    Mr. Womack. I personally participated on behalf of the 
State in four of the hearings that were held. First of all, I 
think that the panel, the judges, do a tremendous job with it. 
I was at the very first one and we were allocated two days for 
the oral testimony. And now they have shortened it for most 
cases down to one day. And it is a very good process as far as 
I am concerned.
    I will be quite frank with you. I have very good friends at 
the local level in Mississippi, the Regional Administrator, 
Deputy Administrator, much of his staff and here at FEMA 
headquarters. It was almost like my support for the arbitration 
process I was being disloyal to my friends in some way because 
they felt like they had been doing the right things.
    And what I tried to emphasize, and I have continued to 
emphasize to them is look at what the arbitration panel said 
and say: Do we need to change our policies and process? Is 
there something that we missed in all of this?
    And as I looked at it, what I thought was that the judges 
looked at things like what was an applicant told early on; did 
decision, were they changed throughout the process?
    And the other thing is one of the cases where you had one 
part of FEMA, Public Assistance, who said one thing and the 
National Flood Insurance Program, who had a different set of 
regulations. And so the school district got a new school based 
on the fact of the National Flood Insurance Program regulations 
versus the Public Assistance, or at least that was part of the 
decision making process.
    Has it assisted us in decision making? I think so. I think 
that, yes, we are moving forward quicker on some cases. As to 
why there haven't been more cases filed, you have to remember 
if you had already gone through your second appeal process, you 
could not go back and enter into arbitration. So well over $1 
billion had already been dispersed, maybe $1.5 billion, that 
was not subject to arbitration.
    Mississippi is further along in the recovery, I believe, 
than Louisiana, but basically because $12 billion versus $3 
billion in PA cost. So logically speaking, I think we are at 
the end of many of our processes.
    Ms. Norton. The reason Mississippi is further along is?
    Mr. Womack. Well, they had $12 billion worth of PA 
projects. We had $3 billion. So their disaster is about four 
times the size of ours, if that makes sense. And I also like to 
say that the water came up and went down in 12 hours in 
Mississippi. It had to be pumped out of New Orleans and it took 
months.
    So it is two different disasters, and in many of their 
projects they are still in that negotiation phase of trying to 
sort through what they are actually entitled to, where we are 
really under construction on most of ours. So that is why we 
don't have as many arbitration cases.
    Ms. Norton. Mr. Riley?
    Mr. Riley. First of all, I think that the arbitration 
services that the CBCA provides have been excellent. Whether we 
win or lose, we walk away with a feeling that we have fair and 
impartial and very professional services. What that tool has 
done for us is it has allowed us to bring FEMA to the table in 
a manner with a larger propensity to work the issue out.
    When I first met Tony Russell, he said just give me 
something to hang my hat on and the answer is going to be yes. 
He didn't wear a hat, so I gave him a hat and then I gave him a 
nail. And it has worked.
    And so we have been able to in a very professional manner 
with the personalities involved currently to sit down and come 
to reasonable solutions. But I do think one of the reasons that 
you haven't seen as many arbitrations, when we came here last 
year, we said that there were over 4,000 cases in dispute. And 
now we are saying there are a little over 2,600 and almost 
2,000 have been resolved.
    One of the reasons more have not ended up in arbitration, 
however, is because I think the dollar limit for arbitration is 
too high, and when FEMA adopted its regulations it said that 
the applicant will pay for the costs of arbitration. And in 
order to do this, in the cases that have been successful before 
the CBCA, hired lawyers and experts. In order to do that, you 
need money. And if you are a small applicant, you don't have 
the money to hire lawyers and experts.
    Ms. Norton. What do you think the ceiling should be? Or 
should they vary based on the size of the community?
    Mr. Riley. In our disaster, the way I have looked at it, if 
we were at $100,000 or more, that would be a good arbitration 
case. And so that is just a casual observation from us.
    Ms. Norton. Do you think the State or local government 
should use the administrative or management funds to help 
defray the costs, if allowed?
    Mr. Riley. Yes, I do. Many of them are stretched as it is 
to provide the necessary administrative management just to 
oversee the projects. So it would be helpful if there was a 
consideration of additional funding. And you can use your 
arbitrator to kind of balance that out. You could give him 
authority to set fees maybe for attorneys, and also to deny 
costs if the case is simply a frivolous case.
    So you could manage it so that it is not excessive. But 
Charity Hospital, for example, is a good example. We had a 
highly professional team of lawyers. We had three experts in 
architectural construction engineering, cost-estimating world. 
And that cost money to do that.
    Ms. Norton. Final question. What all of you have had to say 
has been very encouraging.
    And let me say, Mr. Russell and Mr. Womack, Mr. Riley, it 
has been the first time I have heard States speak so favorably, 
Mr. Russell, of FEMA. And so it says a great deal about 
improvements at FEMA that you hear two guys on the ground, if I 
may call them that, who in their respective positions and with 
their predecessors have flooded us with complaints about FEMA, 
now speak about a new partnership. It is very encouraging to 
the Subcommittee.
    It is very encouraging from all of you to hear both the 
effects of arbitration, shall we say, direct and indirect. And 
we use these hearings to resolve issues. We don't do ``gotcha'' 
hearings. We then follow up based on your answers and our 
questions just as we have given Mr. Russell a time frame. We 
give the agency a time frame for responding based on what we 
have learned here.
    Now, because we have with us Mr. Russell and Mr. Womack and 
Mr. Riley who have an effective partnership, and because we 
would like to see the appeals process, for example, and the 
negotiating process at the ground level do the job so that, as 
Mr. Russell says, Mr. Daniels just fades away like an old 
soldier. Because we would really like to see that. And he looks 
like he is ready to go, if need be.
    I would most appreciate your using this opportunity, Mr. 
Womack and Mr. Riley, to indicate for the public record what 
other steps FEMA should take. You may discuss what steps they 
have taken, if you like, to hasten, cut red tape, speed 
recovery for public assistance projects on the ground where you 
are. What more would you like Mr. Russell to do?
    We can start at the very beginning and especially going 
through appeals.
    Mr. Womack. Well, first of all, I think we need to keep the 
appeals in place. I think we need to have a form of 
arbitration. Whether what we have now is the right one, I don't 
know, but some sort of independent way of looking at things.
    But what I would like as part of the bottom-up review that 
Tony has talked about, that FEMA is looking at Public 
Assistance. I really think over the last 20 or 30 years that 
FEMA and the other regulatory agencies have kind of lost sight 
a little bit of what the Stafford Act is all about. And it may 
mean that we need to go back and rewrite regulations that say, 
OK, let's always give the applicant the benefit of the doubt; 
rather than let's try to figure out to make sure that they are 
not getting something they are not entitled to.
    And certainly, local governments and sometimes their 
contractors will push to try to get more than they are truly 
entitled to, and I fully understand that. But I think now we 
have a whole set of regulations, policies and procedures, and I 
don't want to over-emphasize this, but I think a lot of them 
were driven by external sources to FEMA. So that now it is such 
a cumbersome process that I think a lot of the regulations need 
to be rewritten.
    One example is this. Under the PA pilot program, you could 
get straight time for debris removal for your employees, for 
the local employees. OK? It is now in regulation that they 
cannot do that.
    Ms. Norton. The statute allows it? The regulations say you 
cannot do it?
    Mr. Womack. As I understand it, the statute doesn't address 
straight time for emergency work and debris removal. The 
regulation does.
    Ms. Norton. And it disallows it?
    Mr. Womack. It does. Which means that your incentive is to 
go out and hire a contractor, rather than let your employees do 
the work. You can get overtime and you can get equipment cost, 
but you cannot get their straight time.
    Ms. Norton. Mr. Russell, excuse me, while we have that on 
the table, could you explain that one to us?
    Mr. Russell. Yes, ma'am. Again, as Mr. Womack said, that is 
part of our bottom-up review to make sure that we are not 
overly taxing our State partners.
    Ms. Norton. You are not taxing your State partners. They 
are making a rational decision to get as much money from FEMA 
as possible because of a regulation you put in place.
    Mr. Russell. Yes, and then that was, my understanding of 
it, it was to ensure that we didn't double-pay somebody for 
doing the exact same work. But again, it is going to be under 
review, ma'am, and we are going to take a look at it again.
    Ms. Norton. You have 30 days to tell us whether you intend 
to change that particular regulation and whether it is under 
consideration for change and the options you are considering.
    Mr. Russell. Will do.
    Ms. Norton. The taxpayers, it seems to me, are on the bad 
end of that one, U.S. taxpayers, because the encouragement is 
to do exactly what Mr. Womack says: maximize your costs, and he 
is not doing it to jack up the government. He is trying to get 
as much as is possible for reimbursement for work done.
    Mr. Womack, you can continue.
    Mr. Womack. I would just finish that by saying that I think 
there are a lot of other regulations and policies that need to 
be looked at. And I do know that the senior leadership at FEMA 
are doing this. They are looking at this.
    It is going to take some time. If it took us 20 years or 30 
years to get here, an overly cumbersome Public Assistance 
Program, it is going to take some time to move back the other 
direction. I think they are moving in the right direction.
    Ms. Norton. Mr. Riley, do you have any thing you would like 
to say to Mr. Russell about how the process leading up and 
going through appeals could be streamlined, shortened and the 
rest?
    Mr. Riley. The Stafford Act, the Act itself is full of the 
ability to make subjective decisions. And I think it was 
intentionally done that way because every disaster is 
different. So when you get on the ground, you have to make 
different decisions.
    The regulations have removed a lot of that subjective 
decision making. And so, again, you have to default to the 
ordinary hurricane by regulation. That is what you can do. OK? 
But it may not fit the circumstance you have.
    So I would encourage the regulation to give the Regional 
Administrator a lot more flexibility on how he responds to a 
disaster. The goal of a disaster is recovery, not the 
expenditure of funds. And if both the State and FEMA have that 
same goal of recovery, not to reduce the amount of funds that 
are necessary for recovery, but to do an adequate job at 
recovery.
    I think what we do in our program is we design the program 
so that one person that is trying to get over on us won't get 
over on us. And if we design it so that we have adequate 
safeguards in place, but focus on the necessity to recover and 
to give the applicant the necessary means to recover. From an 
applicant's point of view, it is all about the cash flow. I 
can't start my project until I have identified all the money 
that I think I am going to need. OK? So we have to get there 
quickly.
    From the State's perspective, for example, when we bring an 
architect or an engineer to the table to give a professional 
opinion, he is a licensed architect or engineer. Our experience 
with FEMA is that that is not always the case. He may have an 
architectural or engineering background, or he may be an 
engineer who has experience on roads and we are talking about a 
building.
    So we don't have the same experts talking to each other, 
and sometimes they talk a different language. So having the 
ability to get with FEMA and to agree on a single expert for a 
project I think is a very important thing, someone that both 
the applicant and FEMA can trust to make a professional opinion 
that he signed off on and his license is at risk and every 
other thing that is at risk when you hire an architect or an 
engineer in the private sector.
    So I do think that we need to work on the culture that Mr. 
Russell has built about the trust between the State and FEMA, 
and that is a lot of what happened to us in the first part of 
this disaster was that lack of trust, and it was hard to work 
through.
    So a culture of trust, some more subjective decision making 
for the Regional Administrator who knows what is going on on 
the ground, and putting the right experts in place to make 
decisions that people have confidence in.
    Ms. Norton. Thank you very much.
    I want to thank all of you. Because this is a hearing on 
Katrina and Rita and because I have learned of some assistance 
from the private sector this Committee or at least this Chair 
did not know of, but you may know of, for the record I would 
like to get your comments.
    Though I am a Member of the Aviation Subcommittee, of the 
Homeland Security Committee as well, I was unaware of the role 
that general aviation played during Katrina and Rita. And I 
wonder if you had any comments on what I am told was the case 
that general aviation planes played an important role in the 
early days of the disaster. What has been cited to me is 
delivering of supplies.
    I raise general aviation because of the difficulty of 
planes at all getting in. And of course, even in New Orleans, 
for example, it was difficult for plane travel to occur. So if 
that was the case, imagine these smaller areas in Mississippi 
and New Orleans. And what we are told is that there were 
missions to deliver supplies to devastated areas in the Gulf 
Coast. This is general aviation, smaller planes which can 
sometimes maneuver into disaster areas to transport evacuees, 
to coordinate relief flights, to connect available aircraft to 
people who needed airlifting to Gulf Coast area hospitals, or 
from those hospitals to other hospitals. That general aviation 
was instrumental in a rescue operation and an example was cited 
to us of patients who were airlifted. This happened with 
helicopters as well.
    I wondered if any of you in your experience for the record 
have anything to say about the role of general aviation in this 
disaster, these smaller planes that can get where larger planes 
didn't and couldn't.
    Mr. Womack. Congressman Taylor may know more about this 
than I do. I do know that there were a lot of general aviation 
aircraft that had volunteered their services; that did come in 
and provide services. It was similar to what we saw with people 
driving up with their pickup loads full of water and food and 
diapers and that sort of thing. It was volunteers, spontaneous 
volunteers. It was extremely helpful, but the flip side of it 
was it was very difficult to control all that aviation into the 
area.
    Ms. Norton. How do you control it? I mean, you have to go 
through some kind of----
    Mr. Womack. Exactly, and there were so many aircraft 
flying. If you think of all the military aircraft that were 
flying and then you bring in all the civilian aircraft, all 
trying to get to the same areas and do the same things.
    But yes, absolutely. They did some life-saving missions 
early on in Katrina.
    Ms. Norton. Mr. Riley?
    Mr. Riley. We had the same experience. The volunteerism is 
a very important part of any disaster response. And I think 
what we are trying to do is put together a process where we 
organize it a little better up front so that it is not so 
haphazard and we have a single source to go through for 
aviation requests and that sort of thing.
    Ms. Norton. Yes, and we do understand these are volunteer 
efforts. I don't know if Mr. Taylor knows anything about this. 
Do you know anything about the general aviation? Because you 
certainly had smaller areas.
    Mr. Taylor. Madam Chairman, I am certain it happened. I 
would be fibbing if I said I was an eyewitness to it. We saw 
the Mississippi National Guard. We saw C-130's with Navy SEALs. 
We saw a 13 year old kid hop on a street sweeper to clear a 
10,000-foot runway the day of the storm, which I mistook as an 
act of God that there wasn't a twig on this runway, and it was 
a 13 year old kid jumped on his dad's street sweeper. I know of 
a 13 year old kid who was refueling Blackhawk helicopters, 
which I am sure violated every OSHA rule on earth.
    [Laughter.]
    Mr. Taylor. But that crew got the fuel they needed and no 
one got hurt. So there were a lot of remarkable things 
involving aviation, and I am sure something like that happened. 
I am just not a witness to it.
    Ms. Norton. Thank you very much. I just thought that in 
this hearing on Katrina after five years, we ought to take note 
of all the unsung heroes. We certainly have before us some of 
the more visible heroes and we thank each of you for being here 
and for your very valuable testimony.
    The hearing is adjourned.
    [Whereupon, at 5:22 p.m., the Subcommittee was adjourned.]




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