Hurricane Katrina: Planning for and Management of Federal
Disaster Recovery Contracts (10-APR-06, GAO-06-622T).
The devastation experienced throughout the Gulf Coast region 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, and abuse. This
testimony discusses how three agencies--the General Services
Administration, the Federal Emergency Management Agency (FEMA),
and the U.S. Army Corps of Engineers (the Corps)--conducted
oversight of key contracts used in response to the hurricanes.
Efforts are ongoing by these agencies to address issues GAO and
others have identified.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-06-622T
ACCNO: A51277
TITLE: Hurricane Katrina: Planning for and Management of Federal
Disaster Recovery Contracts
DATE: 04/10/2006
SUBJECT: Contract oversight
Contract performance
Contractors
Disaster planning
Disaster recovery
Emergency preparedness
Hurricane Katrina
Hurricane Rita
Hurricanes
Interagency relations
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GAO-06-622T
* Order by Mail or Phone
Testimony before the Subcommittee on Federal Financial Management,
Government Information, and International Security, Committee on Homeland
Security and Governmental Affairs, U.S. Senate
United States Government Accountability Office
GAO
For Release on Delivery Expected at 11:30 a.m. CDT
Monday, April 10, 2006
HURRICANE KATRINA
Planning for and Management of Federal Disaster Recovery Contracts
Statement of William T. Woods, Director Acquisition and Sourcing
Management
GAO-06-622T
Mr. Chairman and Members of the Subcommittee:
Thank you for inviting me here today to discuss the management and
oversight of federal disaster recovery contracts related to Hurricanes
Katrina and Rita. The size and strength of Hurricane Katrina resulted in
one of the largest natural disasters in our nation's history, and in its
aftermath major questions have been raised about our nation's readiness
and ability to respond to catastrophic disasters. Hurricane Rita increased
demands on an already stressed response and recovery effort by all levels
of government.
GAO has a large body of ongoing work on a range of issues relating to all
phases of the preparation, response, recovery, and rebuilding efforts
related to Hurricanes Katrina and Rita. GAO's work has been 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, including contracting, are addressed while avoiding
unnecessary duplication of efforts.
Comptroller General Walker recently testified on GAO's preliminary
observations on the challenges encountered in the response to Hurricane
Katrina, and he identified four themes that are similar to lessons learned
from past catastrophic disasters.1 These include the central importance of
(1) clearly defining and communicating leadership roles, responsibilities,
and lines of authority for response in advance of a catastrophic disaster;
(2) clarifying the procedures for activating the National Response Plan
and applying them to emerging catastrophic disasters; (3) conducting
strong advance planning and robust training and exercise programs; and (4)
strengthening response and recovery capabilities for a catastrophic
disaster.
These themes directly relate to what I will discuss today, namely 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 (the
Corps). In doing our review we selected 13 mission-critical contracts each
with a dollar value in excess of $5 million that were awarded to 12
contractors performing work for the three agencies. We analyzed in detail
how monitoring policies and processes were put into practice. We conducted
our work from October 2005 through February 2006 in accordance with
generally accepted government auditing standards.
1Hurricane Katrina: GAO's Preliminary Observations Regarding Preparedness,
Response, and Recovery. GAO-06-442T , Washington D.C.: March 8, 2006.
Summary
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 three primary deficiencies:
o inadequate planning and preparation in anticipating
requirements for needed goods and services,
o lack of clearly communicated responsibilities across agencies
and jurisdictions to ensure effective acquisition outcomes, and
o insufficient numbers and inadequate deployment of personnel to
provide for effective contractor oversight.
A number of efforts are under way by these agencies to address the issues
we and others have identified.
Contractors Role in Responding to Emergencies is Increasing
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,2 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.
Over $87 billion of federal funding has been appropriated in response to
the recent hurricanes. In responding to Hurricanes Katrina and Rita, the
government 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. Overall, the
circumstances caused 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. Although achieving that
balance is sometimes hard to accomplish, that fact must not be allowed to
serve as an excuse for poor contracting practices.
2GAO, 21st Century Challenges: Reexamining the Base of the Federal
Government, GAO-05-325SP (Washington, D.C.: February 2005).
There Was Inadequate Planning and Preparation in Anticipating Requirements for
Needed Goods and Services
The need for strong planning is one of the themes identified by the
Comptroller General in regard to the government's overall response to the
hurricanes. Planning also must explicitly address the need for and
management of the contractor community. In this regard, we found that some
key agencies did not always have adequate plans for contracting in a major
contingency situation. We also noted the competing tensions between the
selection of national contractors and the requirement under the Stafford
Act for a preference for contractors from the affected area. Better
planning could have alleviated those tensions.
For example:
o While contracts for some items were in place prior to the
storm, the Federal Emergency Management Agency 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 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, faced with a compressed time frame for acquiring
portable classrooms and with no prior knowledge about the
classroom mission they were assigned, Corps contracting officials
placed an order, under an existing agreement, with a subsidiary of
an Alaska Native Corporation under the Small Business
Administration's section 8(a) Business Development Program. The
Corps accepted the contractor's proposed price of $39.5 million
even though the Corps had information that the cost for the
classrooms was significantly less than that. Based on our analysis
of a quote obtained by the contractor from a local Mississippi
business, the price the contractor actually paid for the
classrooms, and prices for similar units from General Services
Administration (GSA) schedule contracts, our preliminary
conclusion is that the Corps could have, but failed to, negotiate
a lower price.
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 The Corps staff expressed uncertainty regarding
how to apply preferences or determine if a company was in an
affected area.4 Several 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.5
In discussing our findings and observations with FEMA officials, they
indicated that in order to better respond to future disasters, they were
taking steps to improve in areas such as staffing and premobilization
capabilities. However, they also stated that such pre-planning and
preparedness has a cost. The Corps commented that contracting staff need
to have defined requirements in order to get the right type of contracts
put in place, and the contracting staff did not always get defined
requirements in a timely manner. Additionally, a Corps official commented
that until funding for a particular mission is secured, preparation for it
cannot go forward and this also delayed contracting efforts. Finally, both
GSA and the Corps 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.
342 U.S.C. S: 5150.
4GAO recently issued a decision on a protest of the terms of a
solicitation issued by the Corps for demolition and debris removal in the
State of Mississippi. The protester asserted, in part, that the Corps
decision to limit the competition for this work to Mississippi firms
improperly exceeded the authority granted under a provision of the
Stafford Act to provide a preference to firms residing, or primarily doing
business, in the area affected by a major disaster. GAO's decision did not
view the Corps decision to implement the Stafford Act preference with a
set-aside as an abuse of the agency's discretion, and the Corps did not
act improperly by limiting this competition to Mississippi firms.
AshBritt, Inc. B-297889, March 20, 2006.
5See FAR, Subpart 26.2-Disaster or Emergency Assistance Activities.
There Was a Lack of Clearly Communicated Responsibilities Across Agencies and
Jurisdictions
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 the Corps. 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 our findings, 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.
There Were Insufficient Numbers and Inadequate Deployment of Personnel to
Provide for Effective Contractor Oversight
The purpose of agencies' monitoring processes is to ensure that contracted
goods and services are delivered in accordance with the agreed-upon
schedule, cost, quality, and quantity provisions stated in the contract.
Without sufficient numbers of trained people properly deployed, however,
effective monitoring is hampered and agencies may not be able 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, and staff were not always effectively deployed. 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.6
o Corps officials responsible for overseeing the "blue roof"
program's field operations told us it was slowed down due to the
lack of sufficient monitors.7
6Data provided by FEMA official was dated November 18, 2005.
7 he Corps 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.
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. Corps officials stated their policy is to rotate certain
personnel every 29 days to keep personnel costs to a minimum because of
regulations under the Fair Labor Standards Act.8
Previous Lessons Can Guide Agency Contracting Actions in Emergencies
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 prearranged contracts in place in advance of the disaster
or other contingency.
85 CFR S: 551.208.
Among the issues that we have identified in previous reports that warrant
consideration by agencies when contracting in an emergency are:
o the strategies and flexibilities they will use to plan their
procurements to avoid the risks associated with undefined
contracts;
o the knowledge they need to have to identify, select, and manage
contractors to achieve successful outcomes; and
o the need to have competitively awarded contracts in place prior
to the event against which orders can be placed as needed.
In executing these contracts, agencies should consider such issues as how
to effectively
o communicate and coordinate with other agencies and with
contractors;
o define contract terms and conditions to avoid excessive costs
and ensure desired performance; and
o monitor contractors.
Finally, agencies should consider crosscutting issues that affect their
overall ability to manage contractors, such as the
o capability of their 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.
In closing, in any acquisition, agencies must 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.
- - - - -
Mr. Chairman this concludes my statement. I would be happy to respond to
any questions you or other members of the Subcommittee may have at this
time.
For further information regarding this testimony, please contact William
T. Woods at (202) 512-4841 or [email protected]. Individuals making key
contributions to this testimony included Penny Augustine, James Kim, John
Needham, and Shannon Simpson.
Appendix I: Recent GAO Products on Hurricanes Katrina and Rita
Hurricane Katrina: Comprehensive Policies and Procedures Are Needed to
Ensure Appropriate Use of and Accountability for International Assistance.
GAO-06-460, Washington, D.C.: April 6, 2006
Hurricane Katrina: Policies and Procedures Are Needed to Ensure
Appropriate Use of and Accountability for International Assistance.
GAO-06-600T , Washington, D.C.: April 6, 2006
Hurricane Katrina: Status of the Health Care System in New Orleans and
Difficult Decisions Related to Efforts to Rebuild It Approximately 6
Months After Hurricane Katrina. GAO-06-576R , Washington, D.C.: March 28,
2006
Agency Management of Contractors Responding to Hurricanes Katrina and
Rita. GAO-06-461R , Washington, D.C.: March 16, 2006
Hurricane Katrina: GAO's Preliminary Observations Regarding Preparedness,
Response, and Recovery. GAO-06-442T , Washington D.C.: March 8, 2006
Emergency Preparedness and Response: Some Issues and Challenges Associated
with Major Emergency Incidents. GAO-06-467T. Washington: D.C.: February
23, 2006.
Disaster Preparedness: Preliminary Observations on the Evacuation of
Hospitals and Nursing Homes Due to Hurricanes. GAO-06-443R. Washington:
D.C.: February 16, 2006.
Investigation: Military Meals, Ready-To-Eat Sold on eBay. GAO-06-410R.
Washington: D.C.: February 13, 2006.
Expedited Assistance for Victims of Hurricanes Katrina and Rita: FEMA's
Control Weaknesses Exposed the Government to Significant Fraud and Abuse.
GAO-06-403T. Washington: D.C.: February 13, 2006.
Statement by Comptroller General David M. Walker on GAO's Preliminary
Observations Regarding Preparedness and Response to Hurricanes Katrina and
Rita. GAO-06-365R. Washington, D.C.: February 1, 2006.
Federal Emergency Management Agency: Challenges for the National Flood
Insurance Program. GAO-06-335T. Washington, D.C.: January 25, 2006.
Hurricane Protection: Statutory and Regulatory Framework for Levee
Maintenance and Emergency Response for the Lake Pontchartrain Project.
GAO-06-322T. Washington, D.C.: December 15, 2005.
Hurricanes Katrina and Rita: Provision of Charitable Assistance.
GAO-06-297T. Washington, D.C.: December 13, 2005.
Army Corps of Engineers: History of the Lake Pontchartrain and Vicinity
Hurricane Protection Project. GAO-06-244T. Washington, D.C.: November 9,
2005.
Hurricanes Katrina and Rita: Preliminary Observations on Contracting for
Response and Recovery Efforts. GAO-06-246T. Washington, D.C.: November 8,
2005.
Hurricanes Katrina and Rita: Contracting for Response and Recovery
Efforts. GAO-06-235T. Washington, D.C.: November 2, 2005.
Federal Emergency Management Agency: Oversight and Management of the
National Flood Insurance Program. GAO-06-183T. Washington, D.C.: October
20, 2005.
Federal Emergency Management Agency: Challenges Facing the National
Flood Insurance Program. GAO-06-174T. Washington, D.C.: October 18, 2005.
Federal Emergency Management Agency: Improvements Needed to Enhance
Oversight and Management of the National Flood Insurance Program.
GAO-06-119. Washington, D.C.: October 18, 2005.
Army Corps of Engineers: Lake Pontchartrain and Vicinity Hurricane
Projection Project. GAO-05-1050T. Washington, D.C.: September 28, 2005.
Hurricane Katrina: Providing Oversight of the Nation's Preparedness,
Response, and Recovery Activities. GAO-05-1053T. Washington, D.C.:
September 28, 2005.
(120550)
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To view the full product, including the scope
and methodology, click on the link above.
For more information, contact William T. Woods at (202) 512-4841 or
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Highlights of GAO-06-622T , a testimony before the Subcommittee on Federal
Financial Management, Government Information, and International Security,
Committee on Homeland Security and Governmental Affairs, U.S. Senate.
April 10,2006
HURRICANE KATRINA
Planning for and Management of Federal Disaster Recovery Contracts
The devastation experienced throughout the Gulf Coast region 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, and abuse.
This testimony discusses how three agencies-the General Services
Administration, the Federal Emergency Management Agency (FEMA), and the
U.S. Army Corps of Engineers (the Corps)-conducted oversight of key
contracts used in response to the hurricanes. Efforts are ongoing by these
agencies to address issues GAO and others have identified.
What GAO Recommends
While GAO is not making any new recommendations in this testimony, GAO
highlights previous recommendations and also identifies other issues
agencies should consider when conducting emergency procurements.
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 three primary deficiencies:
First, there was inadequate planning and preparation in anticipating
requirements for needed goods and services. Some key agencies did not
always have adequate plans for contracting in a major contingency
situation. For example, while contracts for some items were in place prior
to the storm, the Federal Emergency Management Agency did not adequately
anticipate needs for such services as providing temporary housing and
public buildings. There were also competing tensions between the selection
of national contractors and the Stafford Act requirement that there be a
preference for contractors from the affected area. Better planning could
have alleviated those tensions.
Second, there was a lack of clearly communicated responsibilities across
agencies and jurisdictions to ensure effective outcomes. In a disaster
situation, sometimes local or state officials determine the requirements
and communicate them to FEMA, which then 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 will oversee contract
performance. To ensure effective execution of the contract, this approach
puts a premium on clear alignment of responsibilities and good
communications, but our fieldwork identified examples where unclear
responsibilities and poor communications resulted in poor acquisition
outcomes. For example, the process for ordering and delivering ice heavily
depends on effective communications between FEMA and the Corps. 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 to handle the volume ordered.
And third, there were insufficient numbers and inadequate deployment of
personnel to provide for effective contractor oversight. The purpose of
monitoring is to ensure that contracted goods and services are delivered
in accordance with the agreed upon schedule, cost, quality, and quantity
provisions stated in the contract. Without sufficient numbers of trained
people properly deployed, however, monitoring will not be effective,
agencies may not be able to quickly identify and correct poor contractor
performance, and agencies will be at risk of overpaying contractors. Our
work indicated that while monitoring was occurring on the contracts we
reviewed, the number of staff available was not always sufficient and
staff were not effectively deployed. For example: 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.
*** End of document. ***