Federal Contracting: Lessons Learned from Hurricane Katrina

Executive Summary

The Project On Government Oversight (POGO) has identified several systemic failures in, and evaporating oversight controls of, the federal contracting process and recommends that government contracting laws and regulations need to be strengthened because of:

1. Poor Planning – To make every effort to get the best results for taxpayers, the government must have an acquisition strategy based on informed market research.
2. Inadequate Competition – To better evaluate goods and services and get the lowest practical cost, the government must promote aggressive arm's–length negotiations with contractors and encourage competition, correcting the current trend of entering into non-competitive contracts in nearly 50 percent of government dollars spent.
3. Lack of Accountability – To ensure that taxpayer dollars are being spent responsibly, the government must regularly monitor and audit contracts.
4. Minimal Transparency – To regain public faith in the contracting system, the government must ensure that the contracting process is open to the public, including requests for proposals, contract data, and contracting officers' decisions and justifications.

As a case study demonstrating the impact of how these failures in the federal contracting system impacts the public, POGO researched and analyzed Hurricane Katrina-related federal contracting. POGO has reviewed the vast majority of Katrina-related federal reports, and has compiled a comprehensive analysis of contracting problems, as well as recommendations to address those problems. The intent of this report is to present lessons that need to be learned both from the mistakes made by the federal government, as well as from the occasional successes. POGO's findings and recommendations are primarily based on government reports that have been published publicly.

The Federal Emergency Management Agency (FEMA), as the federal agency primarily responsible for relief and recovery, has issued tasks and mission assignments to at least 57 federal agencies and programs to respond to Hurricane Katrina. These agencies and programs include the Army Corps of Engineers (ACE), NASA, the Department of Health and Human Services (HHS), the Department of Housing and Urban Development (HUD), and even the Farm Service Agency. All of these entities had a defined role as outlined in the National Response Plan. It was FEMA's responsibility to manage the national disaster response, but many of FEMA's partners in the federal government share the blame for the failures of Hurricane Katrina relief efforts.

Overall, the federal government has struggled to track all of its Katrina relief-related spending. The White House Office of Management and Budget told The National Journal that it is the responsibility of each agency to track its own spending, but "Spokesmen at several federal agencies said they could only track 'obligations'—what the agency has promised to pay—and not the money that had actually been dispensed." The GAO also complained of the challenges of tracking all of the federal spending when documentation is not centralized. In fact, this problem is indicative of the federal government's general failure to adequately track and report its spending.

The scale of Hurricane Katrina contracting becomes clear by reading the most recent FEMA numbers: nearly 100,000 roofs damaged by Hurricane Katrina have been temporarily covered by FEMA's "Blue Roof" program; more than 99 million cubic yards of debris have been removed in Alabama, Louisiana, and Mississippi; more than $6 billion has been paid directly to Hurricane Katrina victims from FEMA for housing and other needs; and more than $15.3 billion has been paid out to National Flood Insurance Program policy holders.5 (See Appendix A).

The federal government must do everything it can to ensure that relief money reaches Hurricane Katrina victims and is not exploited by disaster profiteers. Some of the government's determinations that contracts were "appropriate" and costs and/or prices were "reasonable" most likely were based on the emergency situation and the restrictions that situation imposed. Mistakes will be made because of the urgency to conduct the relief effort, but POGO believes that following these recommendations will help to minimize waste and fraud and ensure that as much money as possible goes to the victims.

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