Testimony

of

J. M. "Jim" Bernhard, Jr.

Chairman of the Board and Chief Executive Officer

The Shaw Group Inc.

Before the

Select Bipartisan Committee

to Investigate the Preparation for and Response to Hurricane Katrina

Wednesday November 2, 2005

**INTRODUCTION**

Chairman Davis, members of the Select Committee, thank you for holding
this hearing today and for inviting me to testify about our role as a
federal contractor in disaster preparedness and response.

My name is Jim Bernhard and I am the CEO, Chairman of the Board, and
founder of The Shaw Group.

I come before this committee not only as a contractor working on the
recovery and rebuilding of the Gulf Coast region, but also as a native
son of the great state of Louisiana. As a Louisianan, I have seen my
share of hurricanes in the past, but Hurricanes Katrina and Rita have
caused a level of devastation in this region that was unimaginable,
especially for New Orleans, southwest Louisiana, and our neighbors in
coastal Mississippi and Texas.

I have been overwhelmed by the outpouring of concern and support from
the citizens of this great country and around the globe, and I am
particularly proud of the response by the people of my home state and
our outstanding team at Shaw.

We've all read phenomenal stories of heroism and personal sacrifice,
neighbors saving neighbors, and strangers opening their hearts and their
homes to those in need. My employees are some of those heroic
individuals you've read about. Some have made incredible sacrifices in
the days and weeks following Katrina. Some lost their homes and all
their possessions. We've had employees taking in hurricane victims,
relief workers, and other Shaw employees who had come to Baton Rouge to
aid in the relief efforts. At one point, one of my employees had 17
people living in his home. I am proud to say that many of my employees
were involved in the rescue and recovery efforts from day one; some of
whom were helping others while still uncertain about the fate of their
very own family members.

With nearly 5,000 of Shaw's own employees living and working in
Louisiana, we have been particularly impacted by this devastating storm.
However, we are committed to this region and grateful for the
opportunity to play a leadership role in the rebuilding of Louisiana,
our sister city, New Orleans, and the entire Gulf Region.

Mr. Chairman, members of the Committee, I am here today because you
asked me to discuss Shaw's role as a federal contractor in disaster
preparedness and response, particularly our role in the response and
recovery efforts in the Gulf Coast region in the aftermath of Hurricane
Katrina. Before I do that, it is important that you know more about The
Shaw Group, its vast capabilities, and its extensive experience in
emergency response and recovery. I will then describe Shaw's
extraordinary efforts in response to this immense tragedy and our
positive contributions to the rebuilding efforts.

**Shaw's History and Capabilities**

I founded The Shaw Group in 1987 in Baton Rouge, Louisiana, as a small
pipe fabricator dedicated to supporting the energy and chemical
industries. Since that time, The Shaw Group has achieved unprecedented
growth due in large part to technical innovation, strategic acquisitions
of engineering companies, Stone & Webster in 2000 and The IT Group in
2002, and a strong entrepreneurial culture. The Shaw Group has evolved
into a diverse engineering and design, construction, fabrication,
environmental, infrastructure, maintenance and operations services
organization with approximately 20,000 employees and 170 offices in
strategic locations around the world. Shaw is the largest company
headquartered in the state of Louisiana.

The Shaw Group provides premier services and state-of-the-art
technologies to government and private-sector clients in a wide array of
industries, including the energy, chemicals, environmental,
infrastructure, and emergency response markets. Uniquely positioned in
the energy market, Shaw provides comprehensive engineering, consulting,
procurement, pipe fabrication, construction, and maintenance services to
the power and process industries.

**Emergency Preparedness and Response Experience**

Our emergency preparedness and response services are unparalleled. Shaw
responds to approximately 300 emergency calls a year nationwide. We are
accessible to our clients through a single phone call 24 hours a day,
365 days a year. Within hours of notification, Shaw can deliver
equipment, materials, and professional response personnel on site from
any of our numerous facilities.

Shaw has over 100 office locations nationwide, including 12 designated
emergency response facilities equipped to support emergencies anywhere
in the nation. With a fleet of emergency response vehicles and over
10,000 pieces of equipment, we have the capacity to respond to almost
any emergency. Shaw designs and fabricates standard construction and
specialty equipment at in-house facilities. This self-performance of
design, modification, and maintenance optimizes equipment availability
to the client, maximizes quality performance, and minimizes periods of
inactivity. Within our \$100 million inventory, we also have three
specially designed transfer trailers, enabling us to respond to
incidents in remote locations that require special capabilities and
equipment. Consequently, our clients have a wide range of options and
state-of-the-art remediation services available to them.

Shaw has a legacy of powerful past performance, including 13 prime
contracts for emergency and rapid response and over 14,000 emergency
response actions completed nationwide, addressing both natural and
man-made disasters. Shaw's experience in hurricane recovery spans more
than 15 years. From Hurricane Hugo in 1989 to Hurricanes Charley,
Frances and Jeanne last year, Shaw has responded in the first days after
each hurricane, working to restore utilities and infrastructure and
remove toxic and hazardous wastes. Shaw worked on remediation efforts at
Homestead Air Force Base after Hurricane Andrew, debris removal and
management in North Carolina after Hurricane Frances, and facility
decontamination in the Virgin Islands as a result of Hurricane Hugo.

During the 2004 hurricane season, Shaw was contracted to assist in the
recovery efforts following Hurricanes Frances, Ivan, and Jeanne. Shaw
provided over 200 linemen, 160 trucks and other equipment to support
Florida Power & Light, Progress Energy, and Sumter Electric Cooperative.
We worked with the U.S. Army Corps of Engineers (Corps) to build
temporary housing for families displaced after the storms. Additionally,
we provided temporary roofing and repaired roofs on commercial and
residential properties under our "blue roof" contract after all three
hurricanes.

Shaw played an integral role in responding to the 2001 anthrax attacks
and threats in Florida, New Jersey, and Washington D.C. by providing
emergency screening, sampling, and anthrax decontamination services at
more than 30 U.S. Postal Service (USPS) mail handling facilities,
including the Brentwood facility, the Hart Senate Office Building, Navy
facilities, State Department embassies, hospitals, federal agency
headquarters, private residences, and private facilities across the
United States. Combined, we have responded to the calls of 55 clients at
138 facilities.

Shaw has provided continuous service to the Environmental Protection
Agency (EPA) since 1984, including emergency, time-critical, and
non-time-critical removals of oil, petroleum, hazardous substances,
radioactive, and biological waste.

We performed nearly 1,800 EPA responses under the Emergency and Rapid
Response Services (ERRS) contract or the Emergency Response and Cleanup
Services contract. Shaw provides all personnel, materials, and equipment
to perform timely response actions. Work may include anything required
to mitigate or eliminate hazards or damage to the environment resulting
from a release or threat of release of hazardous substances.

Shaw has provided response services to some of the nation's largest
recorded spills of oil and petroleum products. The company's expertise
and equipment are suited for spills on land and bodies of water ranging
from small lakes to harbors.

Shaw's Health and Safety Department has more than 100 professionals
experienced in dealing with the complex demands of chemical spills and
emergency responses. These professionals have provided support services
to a wide range of projects from natural disasters to emergencies
involving chemical and biological accidents.

I assure you, Mr. Chairman, that Shaw's extensive experience in
emergency response, environmental restoration, debris cleanup, power
restoration and distribution, design-build, housing, and logistics
support are well-suited to the recovery needs of the Gulf Coast. We have
been battle-tested during recent hurricanes and other natural and
man-made disasters. We build on our past experience and apply the
lessons learned to the current recovery efforts in the Gulf Coast area,
as well as future response and recovery efforts.

**Shaw's Response and Recovery Activities AFTER HURRICANE KATRINA**

Let me now turn to our efforts in the emergency response, recovery, and
rebuilding of the Gulf Coast areas affected by Hurricanes Katrina and
Rita.

Our emergency response efforts began even before Katrina came ashore on
Monday, August 29. In response to the threat posed by Hurricane Katrina,
we pre-positioned response staff in the states of Louisiana and
Mississippi. We were anticipating task orders under our blue roof
contract and had mobilized teams so we could repair the greatest number
of roofs in the shortest possible time. After Hurricane Katrina had
passed over our region, and within hours of receiving our first task
order under the blue roof contract, Shaw responded with program
management personnel, followed immediately by field supervisors, health
and safety staff, and work crews.

Within days following the hurricane and floods, Shaw had mobilized more
than 3,000 people, consisting of our own personnel and subcontractor
forces. Much of the local hiring of craftsmen, laborers, and other
professionals included hiring persons displaced by the storm.

We also quickly began performing services under previously existing
contracts with the Corps, the National Aeronautics and Space
Administration (NASA), Jefferson Parish, and other local government
agencies. Immediately following the storm, we were awarded contracts by
the Corps and the Federal Emergency Management Agency (FEMA) to assist
in the unwatering of New Orleans and to provide temporary housing for
displaced families and individuals. Once again we mobilized our forces
in a timely manner in response to the task orders awarded under both of
these contracts. I will talk more specifically about these two contracts
later.

We quickly set up a Response and Recovery Command Center in our
corporate office in Baton Rouge, which provides command and control of
our response and recovery efforts and serves as the operations hub of
our work. It is available to all of our employees engaged in the
recovery efforts in the region and to all of our subcontractors
currently working with us and all other subcontractors interested in
performing work with us under our existing contracts. It is open 24
hours a day, 7 days a week and continues to operate, providing overall
coordination of corporate response activity from one location.

In brief, within a week of Hurricane Katrina battering the coast, Shaw
was providing temporary roofing and repairs under its existing blue roof
contract; providing temporary housing for hurricane victims; providing
critical logistical support to the U.S. Postal Service to restore mail
service; providing critical food, water, and supplies to hospitals in
the area; providing emergency communications capabilities to both the
city of New Orleans and St. Bernard Parish; and pumping the floodwaters
from the city of New Orleans and St. Bernard and Plaquemines Parishes.

From the earliest days of the recovery work, I personally provided clear
direction to all Shaw employees involved in hurricane recovery
operations that, in order to ensure that the public funds entrusted to
us in this effort are properly spent, Shaw personnel must be vigilant in
complying with all government contract laws and regulations, at all
times avoiding any real or perceived conflicts of interest. Prior to
Hurricane Katrina, Shaw maintained a comprehensive compliance/ethics
program emphasizing the importance of full compliance in government
contracting. We have made substantial commitments of personnel, time and
resources to ensure Shaw's adherence to all of its compliance
obligations. We have hired highly respected outside auditors to review
our cost-accounting systems and outside legal counsel to further enhance
and augment our government contract law compliance efforts. Shaw is
committed to ensuring that all Hurricane Recovery Command Center
personnel strictly adhere to the company's government contracts
compliance program, and our in-house and outside counsel have been
closely reviewing all hurricane recovery contracts and the various task
orders issued under those contracts to spot, avoid, and mitigate all
real or perceived conflicts of interest.

Mr. Chairman, I would now like to provide in more detail a description
of the work we performed in preparation for and as a response to
Hurricane Katrina. The overview I will provide is fairly comprehensive
but certainly not complete. There are many smaller tasks which we are
performing, too numerous to mention, but no less significant to the
recovery efforts in Louisiana and the region.

-   Under an existing U.S. Army Corps of Engineers (Corps) contract,
    Shaw quickly mobilized and began providing temporary roof protection
    for homes damaged by Katrina and then later by Rita. "Operation Blue
    Roof," funded by FEMA, is so named because most repairs involve the
    installation of FEMA-issue heavy-duty blue plastic sheeting over
    damaged roofs. Shaw also furnished and installed structural panels,
    joists, and rafters to provide the structural support necessary to
    attach the plastic. The goal was to repair the greatest number of
    roofs in the shortest possible time. Over the past 8 weeks Shaw has
    installed over 25,000 temporary roofs, recently at a rate that has
    exceeded 1,000 per day, with as many as 500 crews (2,000 workers) in
    the field.

> Within days of the hurricane, Shaw received the first Rights of Entry
> (ROE), which are required to begin work, from the Corps. At any given
> time, Shaw had a backlog of as many as 2,500 ROEs. Throughout the
> process, Shaw partnered with stakeholders, including local police,
> fire and medical as well as the homeowners to schedule work in a way
> that was both efficient and convenient for the homeowners.
>
> One of the landmark structures Shaw repaired was the Old U.S. Mint in
> New Orleans, which lost a large portion of its copper roof. Shaw
> secured the Mint roof with tarp, and temporary repairs were completed
> within two days following authorization to proceed.
>
> Prior to sending workers into the field, Shaw provided
> project-specific health and safety quality control training for all
> Shaw and subcontractor personnel. All personnel were required to take
> the safety course, which concentrated on basic accident prevention as
> well as OSHA steep roof work standards. Training was conducted as new
> workers were brought onto the project. Shaw trained more than 7,500
> workers. With our constant focus on safety and safe work practices,
> Shaw's craft labor had no lost-time accidents in working the first
> 250,000 man hours on roofs during the project.
>
> Shaw has installed over 22 million square feet of blue roof plastic.
> To visualize the massive scope of this project, this same plastic
> would cover the 486,000 square foot roof of the Louisiana Superdome 46
> times or 10% of the District of Columbia. Shaw has used enough
> 1\"x2\"x8\" furring strips that, when laid end-to-end, stretches from
> the Louisiana Superdome to Yankee Stadium in the Bronx. The tape used
> in securing the plastic is long enough to connect New Orleans to
> Mobile, AL via Interstate 10.

-   Under a recently awarded FEMA Indefinite Delivery/Indefinite
    Quantity (IDIQ) contract, Shaw is deeply involved in providing
    temporary housing for persons displaced by the hurricane. Since
    displaced citizens were housed in shelters, the need for immediate
    action to establish temporary housing was critical. Within days
    following the hurricane, Shaw was tasked with assessing hundreds of
    individual sites in Louisiana, including hotel properties and vacant
    land that would be suitable to either house displaced citizens or
    establish temporary housing. Upon completion of the assessments,
    several Baton Rouge area locations were selected for placement of
    temporary housing, consisting of recreational trailers communities

> We recently opened the first temporary housing site completed on
> entirely undeveloped property. The site is just north of Baton Rouge
> and was named "Renaissance Village" by its residents. Renaissance
> Village has 573 20- to 30-foot travel trailers and just under 2,000
> residents. The village is fully operational with electricity and water
> installed in all trailers, U.S. Postal Service, school bus and local
> bus service, food service for three meals per day, recreational
> facilities and a volunteer-run school for children not in formal
> schools. Shaw is responsible for the operation and maintenance at the
> site.
>
> Shaw has three additional sites for displaced persons under
> construction for approximately 550 travel trailers. These three sites
> are also in Baton Rouge. In addition, we have another site under
> construction in Orleans Parish for approximately 48 units. This site
> is located very near a hospital and may be used exclusively by medical
> workers. Shaw has over a dozen additional sites in various stages of
> review and approval.
>
> Under the same FEMA contract, Shaw is working on the "Home Again"
> program which provides travel trailers at or near the home site of the
> displaced resident. In this situation, the displaced person cannot
> live in his own house, but he can live in the trailer on his property
> or nearby, work to repair and restore his property, and possibly be
> gainfully employed "at home."
>
> In addition to establishing temporary housing sites, Shaw is working
> with FEMA to operate several large displaced-person centers in Texas.
> Shaw mobilized over 1,000 employees to process over 250,000 evacuee
> applications in a 30-day period. Shaw recently completed a successful
> transition to become the operator of a large shelter at Kelly Air
> Force Base near San Antonio. The shelter, previously operated by the
> Red Cross, will be prepared to handle up to 12,000 displaced persons
> if needed.

-   Under a recently awarded Corps IDIQ contract, Shaw was tasked with
    pumping the floodwaters from the city of New Orleans and St. Bernard
    and Plaquemines Parishes. Shaw provided construction services, as
    well as equipment, materials, labor, logistics, and all supporting
    services for immediate response. With more than 600 workers on the
    project at its peak, Shaw pumped the main areas of New Orleans
    virtually dry in 17 days. In contrast, the job was initially
    estimated by the Corps to take as long as 80 days. New Orleans was
    pumped dry of standing water by September 24, not December 1, as
    originally estimated. We mobilized and positioned 125 mobile pumps
    and re-established pumping in some of the existing pump stations.
    Shaw removed over 56 billion gallons of water during the 17-day
    period immediately following Katrina. At full capacity, we were
    pumping more than one million gallons per minute. When Hurricane
    Rita raised the water levels in the New Orleans area again, we
    re-mobilized, repaired new levee breaks and pumped out St. Bernard
    Parish a second time.

> Under the same contract, Shaw performed emergency repairs to levee
> breaches on the 17^th^ Street and London Avenue Canals caused by
> Katrina's storm surges. In four days, we repaired a 300-foot long
> breach in the east levee of the 17^th^ Street Canal and breaches of
> 330 feet and 630 feet in both levees of the London Avenue Canal.
>
> We also performed an aeration program in the canals leading to Lake
> Pontchartrain to raise the oxygen levels of floodwaters that were
> pumped out of the city, thus reducing contaminant loading.

-   After Hurricane Katrina knocked out power and power infrastructure,
    our Shaw Energy Delivery Services unit performed in an exemplary
    fashion restoring power lines, poles and electricity to tens of
    thousands of residential and business customers in Louisiana, Texas,
    Mississippi, Alabama and Florida.

-   Under a pre-existing NASA contract, Shaw was able to respond quickly
    to the needs of Stennis Space Center in south Mississippi, one of
    the areas hit hardest by Katrina. Shaw was able to restore power,
    repair roofs, reinstate communications, remove debris, provide
    emergency food, water and ice, perform damage assessments, provide
    temporary worker housing, and many other tasks to get the space
    center back up and running within three weeks after Katrina came
    ashore.

> In conjunction with providing emergency services under the contract,
> we obtained employment applications from nearly 200 evacuees in an
> effort to build our workforce with local personnel. We hired more than
> 50 evacuees as laborers, carpenters, and drivers to assist in
> performing emergency services and building repairs. Many of the
> individuals we hired lost everything in the storm; we provided
> clothing, shelter, food, and employment to those in desperate need.
>
> While our work was nearing conclusion, we were requested to restore
> operations to the Little Red Schoolhouse, an historic building on
> site. The structure was going to be used as a temporary school
> facility for children in the area as it had been many years in the
> past. It was important to NASA to resume operations and provide
> stability for children.
>
> Shaw's overall response effort at Stennis was a tremendous success. As
> circumstances changed by the hour, our personnel were flexible and
> resourceful, committed to solving all problems and getting the Stennis
> facility back in full operational capacity.

-   Shaw has an existing emergency services contract with the U.S.
    Postal Service (USPS); one that governed the 2001-2004 bioterrorist
    anthrax decontamination of the two postal distribution and
    processing centers in Washington DC and New Jersey. The USPS added
    the scope of hurricane-related support to our contract during the
    busy hurricane season of 2004. In the wake of Hurricane Katrina,
    Shaw provided logistical support to restore mail services at postal
    facilities along the Alabama, Mississippi, and Louisiana Gulf Coast
    that were damaged by the storm. Later Texas was added to address
    damage from Hurricane Rita.

> The USPS also requested Shaw to provide other health, safety, and
> relief services. We delivered and distributed more than 160 tons of
> emergency supplies of food, ice, water, personal hygiene products,
> toiletries, cleaning supplies, and blankets to USPS employees in
> Mobile, Hattiesburg, and Gulfport, Mississippi during the first two
> weeks after Katrina. More than 2,500 meals ready-to-eat (MREs) were
> delivered to postal employees and their families.
>
> Shaw's efforts in response to Hurricane Rita required us to stand up
> six sites within one week. We accomplished this effort with 20 field
> staff and an additional 8 staff providing back office logistics
> support.

-   Shaw was contracted by Jefferson Parish during Katrina and
    immediately afterwards to support recovery efforts throughout the
    parish. Shaw support included repairing hundreds of water line
    breaks, delivering critical supplies to local hospitals, and
    managing the Jumpstart Jefferson Parish Program to get business
    owners up and running following the hurricane. In addition, Shaw
    unwatered a section of the parish that flooded along with the City
    of New Orleans and provided temporary housing for parish workers.

-   Under an existing U.S. Air Force contract, Shaw provided an
    Emergency Response Start-Up Team to Keesler Air Force Base in
    Biloxi, Mississippi that included seasoned senior construction
    superintendents, engineers, estimators, procurement, and project
    controls personnel, who were located onsite to execute damage
    assessment activities to enable immediate identification of required
    execution actions. Within several weeks, Shaw demolished two heavily
    damaged buildings and started repairs on numerous others.

-   Shaw is performing debris removal monitoring in Washington and St.
    Tammany Parishes. The project includes over 300 debris monitor
    personnel to observe, record, measure and document debris removal
    performed by another contractor. Monitoring the amount of debris to
    be disposed of is a critical component in successful debris
    operations and in the justification and documentation of any
    application for FEMA Public Assistance funding.

> As the majority of the monitoring personnel were local hires, Shaw
> provided debris monitoring training to ensure that FEMA guidelines
> were adhered to during the monitoring process. A side benefit of this
> project was to provide much needed jobs for local workers whose jobs
> were affected by the hurricane.

-   Shaw was recently awarded a contract by the City of New Orleans to
    perform numerous tasks which are in progress, including disaster
    recovery program management, building assessments and inspections,
    establishing environmental, health and safety guidelines and
    practices, and critical services master planning and scheduling.

-   Under contract to the Archdiocese of New Orleans, Shaw is performing
    Preliminary Engineering Design Assessments at the Archdiocese's 263
    local church parishes. More than 1,600 buildings owned by the church
    were affected by Katrina. We are conducting a program of property
    damage assessment, which includes documenting, inventorying
    property, and developing repair costs estimates.

-   Shaw is providing services for six railroads in the areas affected
    by Katrina and Rita. We are assessing damage and providing repair,
    restoration and safety recommendations following the storms' high
    water and severe wind conditions.

-   Shaw's EDS crew restored power and established lighting and
    electricity for the New Orleans Naval Air Station's temporary
    housing facilities.

-   Shaw is currently subcontracted to Dewberry & Davis under Dewberry's
    existing FEMA Public Assistance TAC (PA TAC). Although we are not
    currently executing any work under this contract, we anticipate
    beginning work in Mississippi. We made the decision to recuse
    ourselves from doing any work in Louisiana under this contract as
    there might be the perception of an organizational conflict of
    interest, as Shaw is both a contractor on the PAC TAC and a
    contractor to some state and local agencies.

Mr. Chairman, the majority of the contracts and tasks I mentioned were
performed or are being performed with Shaw as the prime contractor. This
role has been aligned in the press recently, and I'd like to take the
opportunity to clarify to some in the audience the role of the prime
contractor.

The fundamental role of a prime contractor is to integrate and manage
the safe and effective operations of all activities performed under the
contract's work scope - including but not limited to the management of
all subcontractors at all tiers, which at times can be at the
sub-sub-contractor level. In the absence of direction and instruction
from the client, a prime contractor uses its expertise,
entrepreneurialism and best commercial practices and industry standards
in all matters pertaining to the performance of the contract.

This integrating contractor role commonly manages, for example, 80 to
100 subcontractors under one IA TAC contract. As one of Louisiana's
largest companies, the Shaw Group is uniquely positioned to manage and
lead scores of small and local subcontractors to get the job done in
rebuilding the Gulf Coast. Working in the prime contractor role, I
strongly believe Shaw has been an effective partner with our Federal
clients to integrate, lead and manage almost 100 smaller firms as
subcontractors - and please note this is just for one contract.

Mr. Chairman, you have spoken in previous hearings about the life and
death difference between theory and practice regarding emergency
response. I know that my company's actions are grounded in the
real-world practicality of what works and what doesn't work to help
people prepare, survive, and recover from disasters such as Katrina and
Rita.

**"No-Bid" Contracts**

I would now like to take the opportunity to discuss two of the contracts
I mentioned which were awarded to us in the days immediately following
Hurricane Katrina. The Corps IDIQ (New Orleans Recovery) contract, which
included unwatering of the city, was awarded to us under emergency
conditions that obviated normal competitive procedures. The FEMA IDIQ
(Individual Assistance) contract, which provided temporary housing for
displaced storm victims, was awarded to us under a limited competition
basis. There have been a number of inaccurate and misleading statements
made recently in the press about these contracts. Charges of cronyism,
political favoritism, and back-room dealings have been made. I'd like to
take this opportunity to set the record straight.

**FEMA IDIQ Contract**

The truth is that FEMA had begun a full and open competitive process for
the Individual Assistance Technical Assistance Contracts (IA TAC) prior
to Hurricane Katrina. The Shaw Group was one of several companies
actively involved in the competition. In fact, just four days before
Hurricane Katrina made landfall, a team of Shaw employees met with FEMA
in Washington D.C. to present our capabilities and experience. FEMA was
scheduled to release a request for proposals (RFP) by the end of
September, and awards were anticipated by the end of the calendar year.
We felt confident in our capabilities, given we had performed much of
the same type of work under a Corps contract during the 2004 hurricane
season. Under that contract we were responsible for providing
construction services to build a mobile home community, transport (haul)
and set up (install) travel trailers and mobile homes for displaced
families, and conduct temporary roof repairs (blue roofs) to almost
10,000 homes, all in response to Hurricanes Charley, Frances, and
Jeanne.

On Sunday, August 28, we were contacted by a FEMA official from
Washington D.C. FEMA at the time was confronting urgent and compelling
circumstances as the imminent threat of a Category 4 hurricane loomed
over the Gulf Coast. During that conversation, we were told by the FEMA
official that, in anticipation of Hurricane Katrina hitting the Gulf
Coast, FEMA was going to award IA TAC contracts to four of the firms
with whom they had met that week, chosen on the basis of their
experience and capabilities. We were informed Shaw would be one of those
companies. Consequently, we had a contract in place by Tuesday, August
30, and we immediately began executing work under that contract.

On September 8, FEMA made its official announcement that it had
contracted with the following four corporations to speed emergency
housing relief to Gulf Coast families displaced by Hurricane Katrina:
The Shaw Group, Bechtel, CH2M HILL, and Fluor Corporation.

The scope of work of this IDIQ contract is to provide any support
services necessary to provide housing assistance for displaced residents
including assessments, design, construction, transportation, utilities
and facilities management. The initial terms of the contract included a
value of \$100 million, with provisions for cost-plus, time and
materials or fixed price task orders, and had a base period of one year,
and an additional one-year option.

**U.S. Army Corps of Engineers New Orleans Recovery Contract**

On July 8 of this year, the Corps awarded Shaw an indefinite delivery
contract for temporary roofing repairs on structures damaged by natural
disasters, better known as a "blue roof" contract.

On September 1, three days after Hurricane Katrina devastated our
region, we received a phone call from our blue roof contracting officer
(CO) in the St. Louis District of the Corps. He had been reviewing our
capabilities and qualifications submitted just two months prior as part
of the competitive process for the blue roof contract. The CO noted we
had extensive construction capabilities and asked us to verify that
information. Subsequently, we were told by the contracting officer that
the Corps intended to award an indefinite delivery contract for the
emergency recovery of the City of New Orleans, including unwatering.
Shaw was asked to provide a capabilities letter, which we provided
within hours. We were notified the next day, September 2, by the Corps'
St. Louis District that we were awarded a \$100 million IDIQ
construction services contract for the recovery of New Orleans.

Press coverage of these contracts also failed to highlight the large
percentage of subcontractors - the majority of which are from the
affected states of Louisiana, Mississippi, and Alabama -- performing
work under both of these contracts. Shaw is the primary contractor for
the Corps and FEMA contracts; however, the majority of work being
performed under these contracts is being performed by subcontractors, a
significant portion of which are small businesses.

As of last week, 95% of all work being performed under the Corps' New
Orleans Recovery Contract was being performed by subcontractors; 96% of
which are local firms from the affected states of Louisiana,
Mississippi, and Alabama. Small businesses make up 44% of all
subcontractors, 55% of which are disadvantaged or minority-owned.

Shaw has made extensive use of local, Louisiana-based subcontractors for
activities that included earthmoving, plumbing, electrical, landscaping,
and other functions on our FEMA IA TAC contract. As of last week, almost
83% of all work being performed is being done by subcontractors. In this
case, 85% of our subcontractors are local firms from the affected states
of Louisiana, Mississippi, and Alabama; small businesses make up 55% of
all subcontractor performance, of which 60% are disadvantaged or
minority-owned.

So you can see, Mr. Chairman, these emergency response contract awards
were not made without consideration of previous Shaw experience as well
as the resources and people that Shaw has on the ground in Louisiana and
the Gulf region. Shaw had the capability, Shaw had the capacity. Shaw
was participating in an ongoing solicitation process, but urgent
circumstances demanded urgent acquisitions which resulted in the
awarding of these contracts, which for the most part are being performed
by local subcontractors under federal cost accounting standards and
subject to the most stringent of audit requirements.

I am deeply proud of my company's performance in the wake of Katrina and
Rita, and we will continue to operate to the best of our abilities for
FEMA, the Corps and all of our federal clients.

**REBUILDING LOUISIANA**

The recovery and the rebuilding of Louisiana and the Gulf Region are
going to take time and require a lot of financial help. It's important
that we quickly restore the region to give people hope. It's also
important that the Federal Government continue to aid in the rebuilding
of our schools, our infrastructure, our economy, our coast, and our
lives.

Given the devastation to Louisiana's economy, I believe it is important
for the Federal Government to continue to fund 100% of the recovery and
rebuilding efforts until the job is done. A significant percentage of
Louisiana's tax base was lost after the storms; tens of thousands of
businesses have been either displaced or destroyed by Katrina and Rita.
Our state's finances have been severely crippled. It would be equally
devastating if the state were faced with a staggering bill associated
with the cleanup and restoration of our state.

We must also make sure we are promoting and supporting local
businesses - our own Louisiana-based companies, especially small and
disadvantaged businesses; this is a crucial way to reinvigorate the
economy and help restore our state to what it once was. This must be
done as a coordinated effort among all levels of government and the
private sector.

I have tried to emphasize today that our focus at Shaw is to employ
contractors and small and minority-owned enterprises from the Gulf Coast
states. We are particularly committed to working with those companies
and individuals who have been personally affected by Hurricanes Katrina
and Rita. In fact, to date, of all subcontractors working under our
response and recovery contracts, 75% are Louisiana-based; 60% are small
businesses; and 33% are disadvantaged or minority-owned.

And finally, we need to spend time and money rebuilding and restoring
the coast of Louisiana. Even prior to Hurricane Katrina, our coast and
many of our coastal ecosystems on the Gulf Coast were in need of
restoration. Unless erosion of a coastline is held in check, the marshes
will continue to recede and leave New Orleans even more exposed to the
elements. Restoration of these areas is vital to maintain the
productivity of the coastal ecosystem and the livelihoods of many
coastal communities.

**CLOSING REMARKS**

The state of Louisiana and this nation face a long and enormous
challenge in the restoration and rebuilding of the entire Gulf Coast
region so tragically affected by Hurricanes Katrina and Rita. But I am
confident the Gulf Coast and Louisiana will recover and rebuild stronger
and better.

At Shaw, we always say that we are "Louisiana Committed...Louisiana
Proud." Those words are even more significant to us today. We are
committed to rebuilding our home state and proud to be making a positive
impact across the Gulf Coast region.

Mr. Chairman, in closing, I'd like to say I applaud this committee's
efforts to investigate the preparedness for and response to Hurricane
Katrina. You, yourself, have said there is very much to examine here. I
commit to you today, that we are ready and willing to work with you and
the committee to come up with answers, improvements, and solutions to
the process of preparing for and responding to disasters, both natural
and man-made.

I would like to thank you and the committee for the opportunity to speak
here today, and I would be happy to answer any questions you may have.