Agency Management of Contractors Responding to Hurricanes Katrina
and Rita (15-MAR-06, GAO-06-461R).				 
                                                                 
In February 2006, we briefed Congress on the results of our	 
review of various contracting issues related to the Gulf Coast	 
hurricanes. We conducted this work under the Comptroller	 
General's statutory authority in order to assess how three	 
agencies--the Federal Emergency Management Agency (FEMA), the	 
U.S. Army Corps of Engineers (USACE), and the General Services	 
Administration (GSA)--planned for and conducted oversight of	 
several key contracts in support of Katrina and Rita response and
recovery efforts.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-461R					        
    ACCNO:   A49237						        
  TITLE:     Agency Management of Contractors Responding to Hurricanes
Katrina and Rita						 
     DATE:   03/15/2006 
  SUBJECT:   Contract administration				 
	     Contract oversight 				 
	     Disaster recovery					 
	     Emergency preparedness				 
	     Federal procurement				 
	     Government contracts				 
	     Hurricane Katrina					 
	     Hurricane Rita					 
	     Hurricanes 					 
	     Procurement planning				 

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GAO-06-461R

March 16, 2006

Congressional Committees

Subject: Agency Management of Contractors Responding to Hurricanes Katrina
and Rita

In February 2006, we briefed the staffs of your committees on the results
of our review of various contracting issues related to the Gulf Coast
hurricanes. We conducted this work under the Comptroller General's
statutory authority in order to assess how three agencies-the Federal
Emergency Management Agency (FEMA), the U.S. Army Corps of Engineers
(USACE), and the General Services Administration (GSA)-planned for and
conducted oversight of several key contracts in support of Katrina and
Rita response and recovery efforts. The briefing document is attached.

After we completed our work and briefed your staffs, the House Select
Bipartisan Committee to Investigate the Preparation for and Response to
Hurricane Katrina and later the White House issued reports based on their
reviews of the various hurricane response issues. These reports contain
findings and recommendations intended to address a number of the issues
identified in our briefing. Additionally, the Senate Committee on Homeland
Security and Governmental Affairs has been reviewing these issues, and
various inspectors general are proceeding with their reviews as well. In
general, while the inspectors general are reviewing a broad range of
contracting issues, such as competition and pricing, we focused our
efforts on contract planning and oversight. During the course of our work,
the agencies informed us that they are taking a number of steps to address
the issues that we identified, and we reflected those actions in the
briefing where appropriate. Given these developments, we are not making
any recommendations at this time; however, we continue to monitor agency
actions in this area.

We provided this briefing document to the Department of Homeland Security
(DHS), the Department of Defense (DOD), and GSA for review and comment.
While DOD did not have any comments, the Corps of Engineers provided some
technical clarifications, which we incorporated in the briefing where
appropriate. Officials at DHS said they had no further comments beyond
those provided at the agency exit conference, which were incorporated
where appropriate. GSA provided technical comments, which have also been
incorporated in the briefing.

We are sending copies of this briefing to interested congressional
committees, the Administrator of General Services, and the Secretaries of
Defense and Homeland Security. We will make copies available to others
upon request. This briefing also will be available on the GAO Web site at
http://www.gao.gov . Should you or your staff have any questions, please
contact me at (202) 512-4841. Key contributors may be found on the last
page of the briefing.

William T. Woods

Director, Acquisition and Sourcing Management

Enclosure

List of Committees

The Honorable Susan M. Collins

Chairman

The Honorable Joseph I. Lieberman

Ranking Minority Member

Committee on Homeland Security and

Governmental Affairs

United States Senate

The Honorable Tom Davis

Chairman

Select Bipartisan Committee to Investigate the

Preparation for and Response to Hurricane Katrina

Chairman

Committee on Government Reform

House of Representatives

The Honorable Henry A. Waxman

Ranking Minority Member

Committee on Government Reform

House of Representatives

The Honorable Peter T. King

Chairman

The Honorable Bennie G. Thompson

Ranking Minority Member

Committee on Homeland Security

House of Representatives

(120495)

c

                                 iallyBriefing

Background

Congress has appropriated over $62 billion as an initial commitment of
federal support to the Gulf Coast states impacted by the recent
hurricanes. The government's response to Hurricanes Katrina and Rita
depended heavily on contractors to deliver ice, water, and food supplies;
patch rooftops; and provide housing to displaced residents and temporary
facilities to local government agencies.

In any acquisition, agencies need to have in place sound acquisition
plans, processes to make and communicate good business decisions, and a
capable acquisition workforce to monitor contractor performance so that
the government receives good value for the money spent. These components
are critical to successfully managing contracts in any environment-even in
a contingency situation such as that presented by Hurricanes Katrina and
Rita.

In reviewing contracts awarded for Iraq-another contingency situation-GAO
found that without effective acquisition planning, management processes,
and sufficient numbers of capable people, poor acquisition outcomes
resulted. GAO made recommendations regarding the need for: ensuring that
requirements for placing orders are within the scope of contracts; timely
definition of contract terms and conditions; and sufficient numbers of
trained staff who have clear responsibilities and guidance for overseeing
contractor performance.  Having these capabilities requires preparation,
such as having pre-arranged contracts in place in advance of the disaster
or other contingency.

Summary of Findings

Given the environment in which they were operating, agency acquisition and
contractor personnel have been recognized for their hard work in providing
the goods and services required to be responsive. The response efforts
nonetheless suffered from:

           o  Inadequate planning and preparation to anticipate requirements
           for needed goods and services.

           o  Lack of clearly communicated responsibilities across agencies
           and jurisdictions.

           o  Insufficient numbers and inadequate deployment of personnel to
           provide for effective contractor oversight.

Briefing Structure

      Risk Areas

Inadequate planning and preparation page 2

Lack of clearly communicated responsibilities page 3

Insufficient numbers and deployment of page 4

oversight personnel

Appendix

Scope, methodology, and contributors page 5

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 recently noted,1 such partnerships increasingly
underlie critical government operations.

With hundreds of billions of tax dollars spent each year on goods and
services, it is essential that all federal agency acquisitions be handled
in an efficient, effective, and accountable manner. The fact that
disasters, such as hurricanes, are not entirely predictable must not be an
excuse for poor contracting practices. Nevertheless, the circumstances
created by the hurricanes created a difficult environment in which
agencies had to balance the need to deliver goods and services quickly
with the need for appropriate controls.

Under the Comptroller General's statutory authority, GAO conducted work to
assess how three agencies planned for and conducted oversight of several
key contracts in support of Katrina and Rita response and recovery
efforts: the General Services Administration (GSA), the Federal Emergency
Management Agency (FEMA), and the U.S. Army Corps of Engineers (USACE). A
number of efforts are underway by these agencies to address the issues we
and others have identified. This briefing does not contain any
recommendations.

All three agencies reviewed this briefing and either had no comments or
provided technical clarifications, which we incorporated where
appropriate.

1 GAO, 21st Century Challenges: Reexamining the Base of the Federal
Government, GAO-05-325SP (Washington, D.C.: February 2005).

Overview

Briefing for Congressional Staff

Why GAO Did This Study

                                                                   March 2006

Agency Management of Contractors Responding to Hurricanes Katrina

and Rita

Some key agencies involved in responding to the disaster did not have
adequate acquisition plans for contingency situations. For example:

           o  While contracts for some items were in place prior to the
           storm, the Federal Emergency Management Agency (FEMA) did not
           adequately anticipate needs for such services as providing
           temporary housing and public buildings.

           o  The practice of the U.S. Army Corps of Engineers (USACE) is to
           establish Planning and Response Teams for various missions
           assigned to it by FEMA prior to an event, with specific
           responsibilities assigned to team members. However, the Corps
           indicated it did not know prior to the hurricane that it would be
           tasked by FEMA with some of the mission assignments it received.
           In one case, FEMA tasked the Corps with acquiring temporary
           classrooms for Mississippi within a very short time frame. To meet
           the requirement, USACE placed a non-competitive order on a
           pre-existing agreement for portable buildings. Information in the
           contract files suggests the negotiated prices were inflated and
           indicates USACE did not have sufficient time or information to
           ensure a good acquisition outcome.2

           o  Similarly, better management of requirements development could
           have avoided costs to house workers and victims. Based on
           information provided by local officials, FEMA spent $3 million for
           4,000 base camp beds that were never used.

           o  Preparation was also lacking in implementation of the Stafford
           Act preference for contractors residing or doing business in the
           affected area.3 USACE staff expressed uncertainty regarding how to
           apply preferences or determine if a company was in an affected
           area. Several General Services Administration (GSA) and FEMA
           officials indicated they were aware of the Stafford Act but stated
           it is difficult to immediately factor in local businesses in such
           a catastrophic event. GSA officials stated they plan to review the
           Federal Acquisition Regulation (FAR) to see if additional Stafford
           Act guidance is necessary. 4

In discussing our findings and observations with FEMA officials, they
indicated they were taking steps to improve in areas such as staffing and
pre-mobilization capabilities in order to better respond to future
disasters. However, they also stated that such pre-planning and
preparedness has a cost. The USACE commented that contracting staff need
to have defined requirements in order to get the right type of contracts
put in place and, unfortunately, the contracting staff did not always get
defined requirements in a timely manner. Additionally, a USACE official
commented that until funding for a particular mission is secured,
preparation for the mission cannot go forward and this also delayed
contracting efforts. Finally, both GSA and the USACE noted that they tried
to reach out to local and small businesses through forums and other means
to make them aware of opportunities to contract with the federal
government.

2 GAO, Hurricanes Katrina and Rita: Contracting for Response and Recovery
Efforts, GAO-06-235T (Washington, D.C.: Nov. 2, 2005).

3 42 U.S.C. S: 5150.

4 See the FAR, Subpart 26.2-Disaster or Emergency Assistance Activities.

           o  Continuity of Operations: Agency Plans Have Improved, but
           Better Oversight Could Assist Agencies in Preparing for
           Emergencies, GAO-05-619T (Washington, D.C.: Apr. 28, 2005).
           o  Results-Oriented Government: Improvements to DHS's Planning
           Process Would Enhance Usefulness and Accountability, GAO-05-300
           (Washington, D.C.: Mar. 31, 2005).
           o  Homeland Security: Effective Regional Coordination Can Enhance
           Emergency Preparedness, GAO-04-1009 (Washington, D.C.: Sept. 15,
           2004).
           o  Continuity of Operations: Improved Planning Needed to Ensure
           Delivery of Essential Government Services, GAO-04-160 (Washington,
           D.C.: Feb. 27, 2004).

Inadequate Planning andPreparation

Related GAO Reports

Briefing for Congressional Staff

                                                                       Page 2

                                   Risk Areas

We also found that processes for executing contracts were hindered by poor
communication. As envisioned under the National Response Plan (NRP),
federal agencies responding to a disaster carry out their acquisition
functions through a network of federal, state, and local agencies. In some
instances, the local or state officials determine the requirements and
communicate them to FEMA; FEMA may write and award the contract or
communicate the requirements to another agency that writes and awards the
contract; and then FEMA or another agency oversees contract performance.
This approach puts a premium on aligning roles and responsibilities
clearly and maintaining good communications to ensure effective execution
of the contract.

Our fieldwork identified examples where unclear responsibilities and poor
communications resulted in poor acquisition outcomes. For example:

           o  FEMA officials stated that a contractor spent approximately $10
           million to renovate 160 rooms and furnish another 80 rooms in
           military barracks in Alabama that a FEMA survey team identified
           for use as temporary housing. To renovate the facility, FEMA
           headquarters awarded a contract without consulting local FEMA
           officials in Alabama. According to FEMA officials in Alabama,
           however, the facility was not needed and they tried to stop the
           renovation. These same FEMA officials stated that few evacuees
           agreed to live at the facility, and when officials decided to
           close the facility, it had only six occupants.

           o  The process for ordering and delivering ice heavily depends on
           effective communications between FEMA and USACE. However,
           according to Corps officials, FEMA did not fully understand the
           contracting approach used by the Corps and ordered at least double
           the amount of ice required, resulting in an oversupply of ice and
           a lack of distribution sites available to handle the volume
           ordered. Additionally, the local Corps personnel were not always
           aware of where ice might be delivered and did not have the
           authority to redirect ice as shipments arrived, resulting in
           inefficient distribution and receipt at the state level.

           o  FEMA tasked GSA to write three contracts in Louisiana for base
           camps, hotel rooms, and ambulances, with a total value of over
           $120 million. GSA contracting officers awarded the contracts, but
           could not tell us which FEMA officials would be responsible for
           overseeing contractor performance. The FEMA official identified as
           the main point of contact by GSA did not have any knowledge of
           these contracts or who was responsible for oversight. Only after
           contacting multiple FEMA officials over a 3-week period were we
           able to determine the agency officials responsible for contract
           oversight.

In commenting on this briefing, GSA officials stated that their role is to
provide resource support in the response phase of a disaster, meaning they
are responsible for executing contracts under the NRP, and FEMA is
responsible for monitoring the contracts. FEMA officials commented that
there needs to be more clarity regarding procurement roles and indicated
one of their goals is to work with GSA to clarify procurement
responsibilities for the future. GSA officials indicated that the current
memorandum of understanding between GSA and FEMA is being updated to
reflect the standards of the new NRP as well.

Lack of Clearly Communicated Responsibilities

           o  Hurricanes Katrina and Rita: Contracting for Response and
           Recovery Efforts, GAO-06-235T (Washington, D.C.: Nov. 2, 2005).
           o  Interagency Contracting: Problems with DOD's and Interior's
           Orders to Support Military Operations, GAO-05-201 (Washington,
           D.C.: Apr. 29, 2005).
           o  Homeland Security: Successes and Challenges in DHS's Efforts to
           Create an Effective Acquisition Organization, GAO-05-179
           (Washington, D.C.: Mar. 29, 2005).
           o  Homeland Security: Effective Intergovernmental Coordination Is
           Key to Success, GAO-02-1013T, (Washington, D.C.: Aug. 23, 2002).

                                   Risk Areas

                                     cont'd

Briefing for Congressional Staff

                                                                       Page 3

Related GAO Reports

Insufficient Numbers and Deployment of OversightPersonnel

           o  Contract Management: Opportunities to Improve Surveillance on

           Department of Defense Service Contracts, GAO-05-274 (Washington,
           D.C.: Mar. 17, 2005).

           o  Rebuilding Iraq: Fiscal Year 2003 Contract Award Procedures and
           Management Challenges, GAO-04-605 (Washington, D.C.: June 1,
           2004).
           o  Human Capital: Opportunities to Improve Federal Continuity
           Planning Guidance, GAO-04-384 (Washington, D.C.: Apr. 20, 2004).
           o  Contract Management: Coast Guard's Deepwater Program Needs
           Increased Attention to Management and Contractor Oversight,
           GAO-04-380 (Washington, D.C.: Mar. 9, 2004).

Ensuring that contracted goods and services are delivered in accordance
with the agreed upon schedule, cost, quality, and quantity provisions as
stated in the contract is the purpose of agencies' monitoring processes.
Without sufficient numbers of trained people properly deployed, however,
effective monitoring is hampered and agencies are at risk of being unable
to identify and correct poor contractor performance in a timely manner.
Furthermore, agencies can be at risk of paying contractors more than the
value of the services performed.

Our work indicated that while monitoring was occurring on the contracts we
reviewed, the number of monitoring staff available was not always
sufficient or effectively deployed to provide effective oversight. For
example:

           o  FEMA's contracts for installing temporary housing in four
           states had only 17 of the 27 technical monitors that had been
           determined necessary to oversee contractor performance.5

           o  USACE officials told us that the "blue roof" program was slowed
           down due to the lack of sufficient monitors.6

Deployment practices did not always provide for appropriate notification
of responsibilities or overlap of rotating contracting officers and
oversight personnel, thus making knowledge transfer and continuity of
contract management operations difficult. For example:

           o  For four of the contracts we reviewed, officials were either
           unaware or not notified by FEMA of their oversight
           responsibilities.

           o  The lack of overlap between oversight personnel for a large
           temporary housing contract left the most recent contract
           administrator with no knowledge or documentation of who had
           authorized the contractor to perform certain activities or why the
           activities were being performed.

While discussing our findings and observations with FEMA officials, they
emphasized that they lacked adequate staffing, but said they have made
efforts to fill staffing gaps. Additionally, FEMA officials stated they
recognize the need for continuity in contract oversight and indicated they
are implementing a process to ensure workload and knowledge sharing among
rotating personnel. However, they also believe that fewer transition
difficulties exist now as a result of hiring more people and having more
oversight officials staying in the affected areas. GSA officials indicated
there may also be other alternatives for ensuring adequate contract
oversight, such as designating GSA employees to conduct oversight on some
contracts. USACE officials stated their policy is to rotate certain
personnel every 29 days to keep personnel costs to a minimum due to
regulations under the Fair Labor Standards Act.7

5 Data provided by FEMA official was dated November 18, 2005.

6 The USACE manages the Operation Blue Roof mission for FEMA. Operation
Blue Roof provides assistance to storm victims in disaster areas through
the installation of rolled plastic sheeting on damaged roofs, helping to
protect property and allowing residents to remain in their homes.

7 5 CFR S: 551.208.

                                   Risk Areas

                                     cont'd

Briefing for Congressional Staff

                                                                       Page 4

Related GAO Reports

If you have any questions concerning this briefing, please call Bill
Woods, Director, Acquisition and Sourcing Management, at (202) 512-4841,
or John K. Needham, Assistant Director, Acquisition and Sourcing
Management, at (202) 512-5274.

Other key contributors to this report were Penny Augustine, Elaine
Boudreau, Myra Watts Butler, Dave Cooper, Lisa Henson, James Kim, Victoria
Klepacz, Sandy Reigle, Ralph Roffo, Jeff Rose, Moshe Schwartz, and Shannon
Simpson.

Due to the level ofcongressional interest in the federal response to
Hurricanes Katrina and Rita, we initiated this review under the
Comptroller General's statutory authority. We conducted our work from
October 2005 through February 2006 in accordance with generally accepted
government auditing standards.

In order to determine which agencies to include in our review, we analyzed
data collected from the Federal Procurement Data System-Next Generation
(FPDS-NG) and agency websites on contract awards and dollar amounts for
Hurricanes Katrina and Rita response and recovery work. This led us to
review three agencies: GSA, USACE, and FEMA. We discussed acquisition
management issues with, and obtained documentation from, officials in
these agencies, as well as with employees from other agencies that served
in oversight positions on behalf of these agencies. We also traveled to
sites in Louisiana and Mississippi to meet with agency officials at field
locations and observe oversight practices at contractor locations.

We selected 13 contracts from 12 contractors performing work for the
agencies in our review to analyze in further detail how monitoring
policies and processes were put into practice (see table below). Our
criteria for selection included:

           o  Minimum contract value of $5 million.
           o  Variety of missions (type of activity to be conducted under the
           contracts).
           o  Coordination with the Inspectors General and other audit
           offices to avoid duplication to the extent possible.
           o  Contract award and administration locations (to facilitate data
           collection and interviews).

        Contractor Name                Contracted Product or Service          
C. Henderson Consulting,   Ambulance services                              
Inc.                       
Americold Logistics, LLC   Transportation, storage, and delivery of        
                              commodities                                     
Clearbrook, LLC            Base camp construction and operation            
CS&M Associates            Hotel rooms for displaced persons               
Gulf Stream Coach, Inc.    Gulf Stream travel trailers                     
Morgan Building & Spas,    Travel trailers and shipping                    
Inc.                       
Bechtel National, Inc.     Installing trailers/ mobile homes for temporary 
                              housing                                         
Fluor Enterprises, Inc.    Installing trailers/ mobile homes for temporary 
                              housing                                         
CH2M Hill Constructors,    Installing trailers/ mobile homes for temporary 
Inc. (2 contracts)         housing (FEMA); site preparation/installation   
                              of portable public buildings (USACE)            
E.T.I., Inc.               Quality assurance inspectors for temporary      
                              housing                                         
Ceres Environmental        Temporary roofing repairs ("blue roof" program) 
Services, Inc.             
Thompson Engineering, Inc. Quality assurance inspectors                    

Source: GAO.

                                    Appendix

AnswerScope and Methodology

Briefing for Congressional Staff

                                                                       Page 5

Contributors
*** End of document. ***