Hurricanes Katrina and Rita: Contracting for Response and	 
Recovery Efforts (02-NOV-05, GAO-06-235T).			 
                                                                 
The devastation experienced by those throughout the Gulf Coast in
Louisiana, Mississippi, Alabama, and Texas in the wake of	 
Hurricanes Katrina and Rita has called into question the	 
government's ability to effectively respond to such disasters.	 
The government needs to understand what went right and what went 
wrong, and to apply these lessons to strengthen its disaster	 
response and recovery operations. The federal government relies  
on partnerships across the public and private sectors to achieve 
critical results in preparing for and responding to natural	 
disasters, with an increasing reliance on contractors to carry	 
out specific aspects of its missions. At the same time, the	 
acquisition functions at several agencies are on GAO's high risk 
list, indicating a vulnerability to fraud, waste, abuse, and	 
mismanagement. GAO was asked to provide an overview of (1) its	 
role in evaluating the contracting community with regard to	 
disaster preparedness and response; (2) GAO's plans for reviewing
the performance of the federal government and its contractors in 
preparing for and responding to the hurricanes; and (3) what GAO 
has learned so far about the performance of the federal 	 
government and its contractors in preparing for and responding to
the hurricanes. 						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-235T					        
    ACCNO:   A40918						        
  TITLE:     Hurricanes Katrina and Rita: Contracting for Response and
Recovery Efforts						 
     DATE:   11/02/2005 
  SUBJECT:   Contract administration				 
	     Contract oversight 				 
	     Contract performance				 
	     Disaster planning					 
	     Disaster recovery plans				 
	     Emergency preparedness				 
	     Government contracts				 
	     Hurricanes 					 
	     Lessons learned					 
	     Monitoring 					 
	     Natural disasters					 
	     Performance measures				 
	     Private sector					 
	     Procurement practices				 
	     Government/business relations			 
	     Hurricane Katrina					 
	     Hurricane Rita					 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-06-235T

Testimony

Before the House Select Bipartisan Committee to Investigate the
Preparation for and Response to Hurricane Katrina

United States Government Accountability Office

GAO

For Release on Delivery Expected at 1:00 p.m. EST

Wednesday, November 2, 2005

HURRICANES KATRINA AND RITA

Contracting for Response and Recovery Efforts

Statement of David E. Cooper, Director, Acquisition and Sourcing
Management

GAO-06-235T

Mr. Chairman and Members of the Select Committee:

Thank you for inviting me here today to discuss the Nation's response to
Hurricanes Katrina and Rita. We have witnessed many heroic efforts by
dedicated public servants and volunteers working long hours to reduce the
pain and suffering of those affected and to restore some sense of normalcy
to the impacted regions. Yet, as you know, the devastation experienced by
those throughout the Gulf Coast in Louisiana, Mississippi, Alabama, and
Texas has undermined the Nation's confidence in its government's ability
to effectively respond to such disasters. Ultimately, we need to
understand what went right and what went wrong, and to apply these lessons
to strengthen the government's response and recovery operations as we look
toward our long-range 21st century challenges.

GAO has already had teams in the hurricane-stricken areas, which have
begun collecting information and gaining the insight that will be
necessary to identify lessons learned and improvements needed for future
emergencies. Our work is being coordinated with the rest of the
accountability community at the federal, state, and local levels to ensure
that all significant issues associated with relief and recovery are
addressed while avoiding unnecessary duplication of efforts. The
Comptroller General has been personally involved in the coordination
effort, and has spoken a number of times with the Department of Homeland
Security (DHS) Inspector General, Mr. Skinner. While the Inspectors
General are expected to be on the front lines of reviewing agencies'
response and recovery efforts, GAO plans to take a more systemic,
cross-cutting look at a broad range of issues. As provided for in our
congressional protocols, we plan to conduct hurricane-related work under
the Comptroller General's statutory authority since it is an issue of
interest to the entire Congress and numerous committees in both houses. We
plan to review the use of Katrina and Rita related funds by various
federal agencies.

My statement today will highlight GAO's role in evaluating the federal
contracting community with regard to disaster preparedness, response, and
recovery; our plans for conducting hurricane-related work in the future;
and what we have learned so far about the performance of the federal
government and its contractors in their preparations for and response to
Hurricanes Katrina and Rita.

     GAO's Approach to Assessing the Impact of Hurricanes Katrina and Rita

GAO has a broad and deep reservoir of knowledge, which we will draw on to
conduct our work. Much of our response and recovery work was done in the
aftermath of the terrorist attacks of September 11, 2001, and the
subsequent creation of the Department of Homeland Security in March 2003.
In all, we have published over 120 reports on disaster preparedness and
response and other issues raised by the hurricanes.1

Our framework of analysis for this work will be based on the National
Response Plan.2 We will draw on our large body of knowledge to address
several cross-cutting issues one of which is contracting. Our past work on
preparedness-programs to prevent disasters or prepare in advance to
respond-has identified needed improvements in a number of areas, including
balancing efforts to prepare for terrorism with efforts related to natural
disasters; providing training, exercises, evaluations, and lessons learned
to first responders; providing flood control and protection; and improving
public health preparedness. Our prior work on disaster response also has
identified needed improvements, including coordination of federal, state,
and local responses, the role of the military, and the medical and public
health response capabilities. Finally, our work on recovery-programs to
help affected communities get back to normal-has identified challenges
related to federal assistance to recovery areas, private non-government
assistance efforts, and lessons from overseas recovery programs. In many
of these areas we have made a number of recommendations, some of which
have yet to be implemented.

Contractors Play a Key Role in Response and Recovery

The private sector is an important partner with the government in
responding to and recovering from natural disasters such as Hurricanes
Katrina and Rita. As we noted early this year, such partnerships
increasingly underlie more and more government operations and missions.3
Networks that are being created often include multiple federal agencies,
for-profit contractors and not-for-profit organizations, and state and
local governments. Importantly, federal agencies are relying increasingly
on contractors to carry out specific aspects of their missions. The
government's response to Katrina and Rita, for example, depended heavily
on contractors to deliver ice, water, and food supplies, as well as the
effort to patch rooftops and supply temporary housing to displaced
residents and evacuees.

1GAO has posted on its website (www.gao.gov) more than 120 prior reports
and testimonies related to preparedness, response and recovery from
natural disasters and terrorist attacks. The list includes, for example,
our reports on the federal government's response to Hurricane Andrew in
1992, including the military's role in South Florida. GAO's past work has
noted a host of needed improvements in a variety of government programs
related to Hurricane Katrina and other natural disasters.

2The National Response Plan, prepared by the Department of Homeland
Security, establishes a comprehensive all-hazards, both natural and
manmade, approach to enhance the ability of the United States to manage
domestic incidents.

With hundreds of billions of tax dollars spent each year on goods and
services, it is essential that federal agency acquisitions be handled in
an efficient, effective, and accountable manner. However, as the
government increases its reliance on contractors, GAO and other
accountability organizations, inspectors general, and agencies continue to
identify systemwide weaknesses in key areas of acquisition. The
acquisition function at several agencies has been on GAO's high-risk list
for over a decade,4 and in January 2005, we added interagency contracting
to this list.5 For Katrina relief alone, the Congress has appropriated
over $62 billion-over 95 percent of which is being administered through
the Department of Homeland Security. In January 2003, we designated DHS's
formation through the merger of 22 agencies as high-risk6 because of the
size and complexity of the effort and the wide array of existing
challenges faced by the components being merged into the department.

Far too often, the result of poorly planned and executed acquisitions has
been an inability to obtain quality goods and services on time and at a
fair price. Given the fiscal challenges we currently face and are likely
to continue to face for decades to come, the federal government must
improve its ability to acquire goods and services in a cost-effective
manner.

Key elements must be in place to manage risks and achieve successful
contract outcomes. To ensure good contracting outcomes, agencies must have
sound acquisition plans, sufficient knowledge to make good business
decisions, and the means to monitor contractor performance and ensure
accountability. These components are critical to successfully managing
contracts following any disaster-especially catastrophic disasters, such
as Hurricanes Katrina and Rita. The fact that these disasters are not
precisely predictable must not be an excuse for careless contracting
practices.

321st Century Challenges: Reexamining the Base of the Federal Government,
(Washington, D.C.: February 2005). GAO-05-325SP

4GAO's High-Risk Series identifies areas in the federal government with
vulnerability to fraud, waste, abuse, and mismanagement.

5High-Risk Series: An Update, GAO-05-207 (Washington D.C.: January 2005).

6Major Management Challenges and Program Risks: Department of Homeland
Security, GAO-03-102 January 2003.

  Achieving Successful Contracting Outcomes Will Be the Focus of GAO's Work on
                     Katrina and Rita Contracting Practices

Our preliminary field work indicates that agency contracting practices in
preparing for and responding to natural disasters are in need of review
and revision. GAO's work on contracting issues related to Hurricanes
Katrina and Rita both in the near and long term will focus on agency
planning, execution, and monitoring of contractor performance.

Among the issues that warrant consideration in assessing agency approaches
to emergency contract planning are

           o  the strategies and flexibilities agencies used to plan their
           procurements to avoid the risks associated with undefined
           contracts;
           o  the knowledge agencies used to identify, select, and manage
           contractors to achieve successful outcomes;
           o  the foresight to have competitively awarded contracts in place
           prior to the event against which orders can be placed as needed;
           and
           o  the decisions agencies make about how best to maximize the use
           of local contractors.

In assessing the execution of these contracts, we will consider such
issues as how effectively agencies

           o  communicated and coordinated among themselves and with
           contractors;
           o  defined contract terms and conditions to avoid excessive costs
           and ensure desired performance; and
           o  monitored contractors.

We will consider the possible underlying causes of the problems we
identify in agency planning and execution such as the

           o  capability of information systems to provide visibility into
           financial and contracting operations;
           o  skills and training of the acquisition workforce;
           o  alignment of responsibilities among the key officials in
           managing the award and oversight of contracts; and
           o  the policies, procedures, and guidance for managing contracts.

                  Preliminary Observations From One GAO Review

To illustrate what can happen when sound contracting practices are not
followed, I would like to discuss some preliminary observations about the
purchase of portable classrooms for the state of Mississippi. In response
to a tip received through GAO's hotline7 that the government is paying
highly inflated prices, we are reviewing a contract the Army Corps of
Engineers awarded on behalf of the Federal Emergency Management Agency to
purchase portable classrooms for Mississippi schools damaged along the
Gulf Coast.

The Corps faced a significant challenge in this acquisition. It was faced
with acquiring the classrooms in a short time frame and negotiations were
compressed. To meet the requirement, the Corps placed a non-competitive
order on a pre-existing agreement established by the Army Contracting
Agency in Ft. Eustis, Virginia. The agreement was intended to be used to
acquire and install portable buildings (not specifically classrooms) on
Army installations. In negotiations, the contractor proposed to provide
the classrooms for $39 million and that amount was accepted. Since being
awarded, the order has been amended several times to adjust the type and
quantity of classrooms provided and other work required.

We have concerns that the government may be paying more than necessary. We
question whether Corps contracting officials had sufficient knowledge to
ensure a good acquisition outcome. For example, we found information in
the Corps' contract files and from other sources that suggest the
negotiated prices were inflated. Further, we found the Corps modified the
contract after it was awarded to allow the contractor to substitute a
different mix of classrooms than required by the contract. However, we
found little evidence that the Corps conducted a complete analysis to
determine the impact of the modifications on the contract price.

7The Government Accountability Office's FraudNET is to facilitate the
reporting of allegations of fraud, waste, abuse, or mismanagement of
federal funds. Allegations are received via e-mail at: [email protected].

In this situation, the Corps was heavily dependent on information provided
by the vendor and did not have the benefit of competition. These
circumstances, as we have shown in prior work, increase risk and often
result in poor outcomes. We will pursue the question of whether the
contracting staff had sufficient information to make a sound business
decision.

As a part of our ongoing work on Katrina and Rita, we will continue to
review the facts and circumstances of this particular contract and other
contracts supporting hurricane recovery efforts as we assess the overall
contracting environment and practices in place.

In closing, as federal agencies prepare for and respond to unforeseen
devastation that result from hurricanes and other natural disasters and
terrorist attacks, they must be effective in planning and executing
contracts with private firms to achieve critical mission outcomes and
ensure accountability. We will continue to work with the accountability
community and have already reached out to relevant congressional
committees, federal Inspectors General, and state and local auditors in
the affected states to coordinate our efforts and most effectively utilize
our resources.

Mr. Chairman this concludes my statement. I would be happy to respond to
any questions you or other members of the Committee may have at this time.

                        GAO Contact and Acknowledgments

For further information regarding this testimony, please contact David
Cooper at (617)565-7500 or [email protected], Individuals making key
contributions to this testimony included William T. Woods, Penny Berrier,
John Needham, Ralph Roffo, Karen Sloan, Katherine Trimble.

(120502)

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.

GAO's Mission

The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting its
constitutional responsibilities and to help improve the performance and
accountability of the federal government for the American people. GAO
examines the use of public funds; evaluates federal programs and policies;
and provides analyses, recommendations, and other assistance to help
Congress make informed oversight, policy, and funding decisions. GAO's
commitment to good government is reflected in its core values of
accountability, integrity, and reliability.

Obtaining Copies of GAO Reports and Testimony

The fastest and easiest way to obtain copies of GAO documents at no cost
is through GAO's Web site (www.gao.gov). Each weekday, GAO posts newly
released reports, testimony, and correspondence on its Web site. To have
GAO e-mail you a list of newly posted products every afternoon, go to
www.gao.gov and select "Subscribe to Updates."

Order by Mail or Phone

The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent of
Documents. GAO also accepts VISA and Mastercard. Orders for 100 or more
copies mailed to a single address are discounted 25 percent. Orders should
be sent to:

U.S. Government Accountability Office 441 G Street NW, Room LM Washington,
D.C. 20548

To order by Phone: Voice: (202) 512-6000 TDD: (202) 512-2537 Fax: (202)
512-6061

To Report Fraud, Waste, and Abuse in Federal Programs

Contact:

Web site: www.gao.gov/fraudnet/fraudnet.htm E-mail: [email protected]
Automated answering system: (800) 424-5454 or (202) 512-7470

Congressional Relations

Gloria Jarmon, Managing Director, [email protected] (202) 512-4400 U.S.
Government Accountability Office, 441 G Street NW, Room 7125 Washington,
D.C. 20548

Public Affairs

Paul Anderson, Managing Director, [email protected] (202) 512-4800 U.S.
Government Accountability Office, 441 G Street NW, Room 7149 Washington,
D.C. 20548

www.gao.gov/cgi-bin/getrpt?GAO-06-235T.

To view the full product, including the scope

and methodology, click on the link above.

For more information, contact David E. Cooper at (202) 512-4841 or
[email protected].

Highlights of GAO-06-235T, a report to Select Bipartisan Committee to
Investigate the Preparations For and Responses To Hurricane Katrina, House
of Representatives

November2, 2005

HURRICANES KATRINA AND RITA

Contracting for Response and Recovery Efforts

The devastation experienced by those throughout the Gulf Coast in
Louisiana, Mississippi, Alabama, and Texas in the wake of Hurricanes
Katrina and Rita has called into question the government's ability to
effectively respond to such disasters. The government needs to understand
what went right and what went wrong, and to apply these lessons to
strengthen its disaster response and recovery operations.

The federal government relies on partnerships across the public and
private sectors to achieve critical results in preparing for and
responding to natural disasters, with an increasing reliance on
contractors to carry out specific aspects of its missions. At the same
time, the acquisition functions at several agencies are on GAO's high risk
list, indicating a vulnerability to fraud, waste, abuse, and
mismanagement.

GAO was asked to provide an overview of (1) its role in evaluating the
contracting community with regard to disaster preparedness and response;
(2) GAO's plans for reviewing the performance of the federal government
and its contractors in preparing for and responding to the hurricanes; and
(3) what GAO has learned so far about the performance of the federal
government and its contractors in preparing for and responding to the
hurricanes.

The private sector is an important partner with the government in
responding to and recovering from natural disasters such as Hurricanes
Katrina and Rita. Such partnerships often include multiple federal
agencies, for-profit contractors and not-for-profit organizations, and
state and local governments. Importantly, federal agencies are relying
increasingly on contractors to carry out specific aspects of their
missions. The government's response to Katrina and Rita, for example,
depended heavily on contractors to deliver ice, water, and food supplies
as well as the effort to patch rooftops and supply temporary housing to
displaced residents and evacuees. GAO can draw on its large body of
knowledge to evaluate the procurement and contracting community's
preparation for and response to Katrina, Rita, and other disasters. GAO's
past work has shown that far too often, poorly planned and executed
acquisitions have resulted in the government's inability to obtain quality
goods and services on time and at a fair price-an outcome that is
unacceptable, particularly in the current fiscal environment.

GAO's work on contracting issues related to Hurricanes Katrina and Rita
will focus on agency planning, contract execution, and monitoring of
contractor performance. To ensure good contracting outcomes, agencies must
have sound acquisition plans, sufficient knowledge to make good business
decisions, and the means to monitor contractor performance and ensure
accountability. These components are critical to successfully managing
contracts following any disaster, especially catastrophic disasters such
as Hurricanes Katrina and Rita. The fact that natural disasters are not
precisely predictable must not be an excuse for careless contracting
practices.

GAO's preliminary observations about the purchase of classrooms by the
Army Corps of Engineers illustrate what can happen when sound contracting
practices are not followed. The Corps was faced with a significant
challenge in this acquisition because the classrooms were purchased in a
short time frame and negotiations were compressed. GAO has concerns that
the government may be paying more than necessary and questions whether
Corps contracting officials had sufficient knowledge to ensure a good
acquisition outcome. As a part of our ongoing work on Katrina and Rita, we
will continue to review the facts and circumstances of this particular
contract and other contracts supporting hurricane recovery efforts as we
assess the overall contracting environment and practices in place.
*** End of document. ***