Earlier this month, a stinging Congressional letter from House Oversight and Government Reform Committee Ranking Member Elijah Cummings (D-MD) and Delegate Stacey Plaskett (D-VI) described a major, failed contract to deliver food to disaster victims in the wake of last summer’s devastating hurricanes in Puerto Rico.
Investigative work by the Democratic staff of the Committee detailed that a $156 million Federal Emergency Management Agency (FEMA) contract with the Georgia-based consulting firm Tribute Contracting LLC was terminated “for cause,” having only delivered 50 thousand of the required 30 million meals. Oddly, the firm, which had little experience in this level of disaster work, consisted of just one person, calling into question why it was tapped for such an important and massive contract. As the Project On Government Oversight pointed out last month, the Tribute contract was the largest recovery contract reported at that time in the government's spending data system.
But the story of Tribute gets worse. While the company was relatively new to disaster response, it was not unknown to the federal government. In 2016, the Government Publishing Office (GPO) terminated “for default” an unrelated Tribute contract to make 3,000 tote bags, and excluded the company from receiving further contracts above $35,000 until January 7, 2019, unless “there is a compelling reason.” The GPO’s contract exclusion should have raised red flags for FEMA because the federal government’s own database clearly lists the Tribute contract prohibition. Such contract prohibitions are considered as very serious. In fact, the federal government’s acquisition rules would typically extend GPO’s decision to exclude the company from future contracts to all federal agencies, but in this case the exclusion was limited to only GPO, thereby allowing FEMA to award its disaster response contract to Tribute.
The Congressional letter from House Oversight further detailed that many federal contracts with Tribute had been cancelled or terminated and funds had to be returned to Uncle Sam. POGO’s analysis of federal contracting spending data indicates that Tribute was paid for the completion of 8 federal contract transactions, but had to return funds on 16 others. With a track record like that, it is shocking that Tribute received a contract representing about half the total dollar value of FEMA’s Puerto Rico meal delivery contracts as of the fall of 2017.
Unfortunately, this type of FEMA contracting fiasco is not new. During the fall, a small two-person company failed to deliver on a $30 million contract for plastic tarps used to provide temporary roof covering in Puerto Rico. That contract was also terminated, delaying by months the supply of desperately needed plastic tarps. As with Tribute, FEMA should have seen the warning signs since the company had no track record for large disaster-related work, and in fact had just formed a few months before FEMA awarded the contract.
These incidents raise two important questions. First, why is FEMA scrambling to award contracts for supplying basic response and recovery contracts after a major disaster? While every disaster has its own specific challenges, delivering large amounts of food and large numbers of plastic tarps is both normal and predictable. It is unclear whether FEMA has adequately prepared for major disasters by having a pre-screened pool of contractors who can procure and deliver basic commodities.
The letter by Cummings and Plaskett also makes an important historical point: similar contracting oversight concerns were raised by Congress in 2005 after Hurricane Katrina. A key conclusion of a Select Committee report was that “the failure at all levels to enter into advance contracts led to chaos and the potential for waste and fraud as acquisitions were made in haste.”
Second, is FEMA properly vetting contractors? While contracts may fail at times, the warning signs for these two examples are glaring. While it may be tempting to rush the award process in the days prior to or just after a natural disaster when lives are at stake, the recent contracting debacles during Hurricane Maria response and recovery, on top of the past contracting boondoggles such as those during Hurricane Katrina, only underscore that poor contracting can harm those in need by slowing the acquisition and delivery of vital supplies.
This is especially true in the case of Tribute, which makes us wonder how thoroughly FEMA reviews contract applications and what information it examines when vetting companies.
The problem of federal agencies awarding contracts to companies and individuals on the exclusion list is not new. Nor is it exactly news that the government needs to improve its vetting of contractors. But it is particularly noteworthy that the Tribute revelations follow on the heels of an Inspector General report that found shortcomings in how FEMA’s parent agency, the Department of Homeland Security, excludes problematic companies from government contracting.
An agency should also look at the company’s business model when considering whether to award a contract. Buying from companies that are mere brokers—in other words when a company produces nothing and has to hire a cadre of subcontractors to get the job done—can be a recipe for failure. Cases such as Tribute should have the government rethinking such pass-through contracts, and looking at both potential costs and past performance when hiring a company that will do little or no work on the contract itself. Obviously, a company of one employee is going to have a hard time delivering 30 million meals.
The 2017 hurricanes will not be our nation’s last major disasters. As described by POGO, billion dollar-level disasters are on the rise. POGO will continue to work with Congress and government agencies on crafting fixes to the federal contracting system that will ensure the nation is better prepared to handle the next disaster. Our nation’s response to future disasters will hinge on the lessons learned from the past, including how to improve federal agencies abilities to pre-establish contingency contracts with pre-screened vendors. Planning should start now, not after the next disaster pops up on the radar.