DEPARTMENT OF HOMELAND SECURIT

i 

Office of Inspector General 

Y 

Costs Incurred for Rejected 

Temporary Housing Sites 

OIG-08-86 August 2008
 

 

 

Office of Inspector General 

U.S. Department of Homeland Security 

Washington, DC 20528

 August 11, 2008 

Preface 

The Department of Homeland Security, Office of Inspector General, was established by the 

Homeland Security Act of 2002 (Public Law 107-296) by amendment to the Inspector General Act of 

1978. This is one of a series of audit, inspection, and special reports prepared as part of our 

oversight responsibilities to promote economy, efficiency, and effectiveness within the department. 

This report, prepared for us by Williams, Adley & Company, LLP, addresses contract costs incurred 

by the Federal Emergency Management Agency for rejected temporary housing sites in the 

aftermath of Hurricane Katrina. It is based on interviews with employees and officials of relevant 

agencies and subgrantees, direct observations, and a review of applicable documents. 

The recommendations herein have been developed to the best knowledge available to our office, and 

have been discussed in draft with those responsible for implementation. It is our hope that this 

report will result in more effective, efficient, and economical operations. We express our 

appreciation to all of those who contributed to the preparation of this report. 

Richard L. Skinner 

Inspector General 
 

 

 

February 28, 2008 

Mr. Matthew Jadacki 

Assistant Inspector General 

Office of Inspector General 

Department of Homeland Security 

Washington, DC 20528 

Dear Mr. Jadacki: 

Williams, Adley & Company LLP performed a review of costs incurred by the Federal Emergency 

Management Agency (FEMA) on rejected temporary housing sites for the Hurricane Katrina relief 

effort during the period September 1, 2005 through June 30, 2006. The review was performed in 

accordance with our Task Order TPD-FIG-06-K-00029, dated January 9, 2006. This report 

presents the results of our review and offers recommendations to improve FEMA operations. 

Our review was conducted in accordance with applicable Government Auditing Standards, 2003 

revision. The review was an attestation engagement as defined by Chapter 2 of the Standards 

and it included a review and report of costs incurred, with a compliance element. Although the 

review report comments on costs incurred by FEMA, we did not perform a financial audit, the 

purpose of which would be to render an opinion on the agency's financial statements. 

We appreciate the opportunity to have conducted this review. If you have any questions, or if we 

can be of further assistance, please call me on 202.371.1397. 

Sincerely, 

WILLIAMS, ADLEY & COMPANY, LLP 

Jocelyn Hill, CPA

Partner 
 

 

Williams, Adley & Company, LLP 

Table of Contents/Abbreviations 

Executive Summary 1 

Background 2 

Results of Review 4 

Other Observations 10 

Conclusions 10 

Recommendations 12 

Management Comments and OIG Analysis 12 

Figures 

Figure 1 – Rejected Cancellation Costs by Contractor 2 

Figure 2 – Site Development Process 3 

Figure 3 – Rejected Sites by Parish A1-3 

Appendices 

Appendix 1 – Objectives, Scope and Methodology 

Appendix 2 – FEMA Official Comments 

Appendix 3 – Site Development Process 

Appendix 4 – Other Observations 

Appendix 5 – Report Distribution 

Abbreviations 

COTR 

DHS 

FAR 

FEMA 

GSA 

IA-TAC 

OIG 

PWS 

WA&Co 

Contracting Officer’s Technical Representative 

Department of Homeland Security 

Federal Acquisition Regulation 

Federal Emergency Management Agency 

General Services Administration 

Individual Assistance – Technical Assistance Contracts 

Office of Inspector General 

Performance Work Statement 

Williams, Adley & Company, LLP 
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Executive Summary 

This report describes the results of Williams, Adley & Company, LLP’s review of contract costs 

incurred by the Department of Homeland Security, Federal Emergency Management Agency 

(FEMA), on temporary housing rejected sites for the Hurricane Katrina relief effort. Rejected sites 

are sites such as parking lots or farm land that were initially identified as potential temporary 

housing unit group sites but were later rejected during the assessment, design, or development 

stage. The objectives of the review were to determine whether: 

•	 FEMA implemented and enforced control procedures to ensure contractor compliance with 

the Individual Assistance – Technical Assistance Contract Performance Work Statement 

and minimize the risk of fraud, waste, and abuse. 

•	 Contractors were in compliance with the Performance Work Statement requirements 

established through the Contract. 

•	 FEMA effectively inspected, accepted, and paid for services. 

We determined that FEMA incurred up to $5.6 million in excessive costs for rejected sites because 

controls were not always implemented and enforced. Actions that should have happened 

sequentially sometimes occurred simultaneously, and important procedures were not followed. 

Although FEMA made initial use of checklists to monitor contractor compliance with the 

processes as defined in the Performance Work Statement, it did not consistently enforce the 

controls and follow up on outstanding matters in a timely manner. In addition, not all contractors 

were in compliance with the requirements of the contract. In some cases, the contractor did not 

conduct thorough assessments of the proposed sites, did not obtain permits as required, and did not 

adhere to the proper sequence of procedural steps as defined in the Performance Work Statement. 

Because FEMA did not consistently enforce adherence to the established protocols, the process 

was dependent on each contractor’s site assessment practices. Based upon our estimates, one 

contractor’s costs were over 790 % greater than the other contractors. If FEMA had provided 

sufficient oversight for the Contract, the excessive costs could have been avoided. 

As of April 2006, FEMA rejected 176 sites with a total cancellation cost of $8,546,372. Of this 

amount, we estimated that between $5.4 million and $5.6 million was excessive. We judgmentally 

selected rejected temporary housing sites with estimated costs over $300,000 under the four 

Contracts for the Hurricane Katrina Relief. Our efforts resulted in the selection of seven rejected 

sites from Shaw, the only contractor meeting our criteria. We judgmentally selected three Hill 

sites for comparison because the reasons for rejection were similar to those given for the Shaw 

sites, but the estimated costs were much lower with each being under $50,000. No specific Fluor 

sites were reviewed; and Bechtel had no rejected sites. See Appendix 1 for a more detailed 

discussion of the Objectives, Scope, and Methodology for this review. 

Overall, FEMA needs to improve contract oversight monitoring by employing an adequate number 

of trained acquisition staff and using effective construction management tools to monitor 

contractor performance and assure compliance with the terms of the contract. 

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Background 

On August 29, 2005, Hurricane Katrina devastated the Gulf Coast regions of Louisiana, 

Mississippi, and Alabama. The scope of relief effort was massive in terms of the area impacted, 

number of displaced persons needing housing, and required resources. In an effort to ramp up both 

human and material resources, the Federal Emergency Management Agency (FEMA) issued 

purchase orders to four contractors for temporary housing assistance in those states devastated by 

Hurricane Katrina including the transportation, installation, storage, and deactivation of temporary 

housing units. FEMA awarded no-bid contracts to Fluor Enterprises, Inc. (Fluor), Shaw Group 

(Shaw), Bechtel National, Inc. (Bechtel) and CH2M Hill Constructors, Inc. (Hill). These 

contracts, referred to as Individual Assistance – Technical Assistance Contracts (IA-TACs), tasked 

the contractor to provide and coordinate comprehensive project management services to include all 

phases of design, planning, budgeting, construction, destruction, and restoration from project 

beginning through completion and closeout. 

The contractors were tasked with: 

• Identifying and confirming appropriate housing sites based on feasibility analyses, 

• Performing group site designs and site preparation work, and 

• Providing ongoing maintenance and security for each of the sites. 

Appropriate housing sites could be any property, such as vacant land or a parking lot, identified as 

a potential temporary housing unit group sites. Sometime during the feasibility assessment, 

design, or development process, a site could be determined to be unsuitable or unusable, and 

therefore rejected. 

As of April 2006, FEMA rejected 176 sites with total cancellation costs of $8,546,372. Of the four 

IA-TACs, Fluor had 99 (56%) rejected sites, Shaw had 39 (22%) rejected sites, Hill had 38 (22%) 

rejected sites, and Bechtel had no rejected sites. Figure 1 below graphically depicts the actual 

cancellation cost for each IA-TAC and the percentage of total cost as well as the number of 

rejected sites by contractor. 

Figure 1: Rejected Sites Cancellation Costs by Contractor 

Total Cancellation Costs: $8.5 Million 

Fluor- 99 sites 

$1.9 million Shaw – 39 sites 23% 

Hill - 38 sites 

$0.4 million 

5% 

$6.2 million 

72% 

Source: WA&Co analysis of data provided by FEMA 

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The process for identifying, inspecting, accepting, and designing plans for group sites and 

determining the sequence of decision points is detailed in the Performance Work Statement 

(PWS). As discussed more thoroughly in Appendix 3, a sequence of successive tasks should have 

been undertaken for each potential site, with each task providing additional information to advise 

FEMA whether a group site was feasible. The sequencing of steps is summarized in Figure 2 

below: 

Figure 2: Site Development Process 

Source: WA&Co analysis of Performance Work Statement provided by FEMA 

Preliminary site assessments, feasibility analyses, and site inspections identified above as Steps

and 4, were critical points, in terms of cost savings, because FEMA relied on contractor input t

decide whether to proceed with design and construction activities. During Step 3, the contract

was responsible for obtaining key information about site locations, including site conditions an

readiness for development, utility services, flood plain issues, environmental hazards, necessar

permits, availability and ownership of the sites, and availability of services such as shopping, 

public transportation, and schools. During Step 4, FEMA instructed the contractor to obtain 

additional information for those specific sites including obtaining local official input and appro

of site development; gathering contact information for key individuals such as site owners, 

building and permit officials, community leaders, and elected officials; and checking zoning 

requirements. 

Steps 3 and 4 provided the information used by: 

•	 The contractor to develop up to 50% of the group site design work and a rough cost

estimate; 

•	 FEMA to decide on the feasibility of constructing each group site; and 

•	 General Services Administration (GSA) to negotiate lease agreements. 

Contractor was to proceed with the more costly effort of 100% group site design and 

construction activities only after Step 4 was completed. 

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Results of Review 

Although each IA-TAC contractor knew the steps detailed in the PWS, FEMA did not enforce 

adherence to the procedural steps and relied heavily on the contractors’ work and judgment rather 

than on its own quality assurance activities. Contractor compliance with the sequence of work was 

inconsistent, and some steps were executed simultaneously or only partially executed. 

Furthermore, the thoroughness of feasibility analyses and site assessments varied from site to site 

and among the contractors. 

Pursuant to Section 2.2 of the PWS, Management and Administration, subsection 2.2.2.1, the 

contractors were required to support FEMA on a project-by-project basis with sound project 

management and resources to achieve the best value of the work being performed. The contractors 

were required to understand FEMA’s recovery mission, principles, and procedures, and act in the 

best interest of FEMA. Also, per the Federal Acquisition Regulation (FAR), Subpart 1.602-2, 

Responsibilities, Federal Contracting Officers are responsible for ensuring the performance of all 

necessary actions for effective contracting, ensuring compliance with the terms of the contract, and 

safeguarding the interests of the United States in its contractual relationships. We determined that 

compliance with these requirements was not consistent, either on the part of FEMA or the 

contractors, and resulted in excessive costs, at least in the case of one contractor, Shaw. 

Shaw’s excessive costs were incurred in part because FEMA did not always implement or enforce 

contractor oversight control. Although FEMA made initial use of checklists to monitor the 

process, it did not consistently enforce controls and follow up on outstanding matters in a timely 

manner. Because FEMA did not consistently enforce adherence to the established protocols, the 

process was dependent on the contractor’s site assessment practices. While contractor compliance 

was inconsistent and the thoroughness of feasibility analyses and site assessments varied from site 

to site and among the contractors, Fluor and Hill contained their costs for sites ultimately rejected 

by FEMA. However, Shaw performed various contract tasks simultaneously rather than 

sequentially or failed to follow important procedures. These practices resulted in an estimated 

$5.4 million to $5.6 million in excessive costs related to rejected temporary housing sites, when 

compared to Fluor and Hill. Shaw’s inconsistent adherence to contract protocols and insufficient 

oversight by FEMA led to waste of government funds as discussed below. 

Shaw incurred the highest average estimated cost by type of rejection as well as the highest 

average cost per rejected site. The average estimated cost of a Shaw rejected site was $159,635, at 

least eight times higher than the lower average costs per site of $19,541 and $10,157 for Fluor and 

Hill, respectively. This cost disparity was irrespective of the reason for rejection, except for sites 

rejected as unsuitable early in the process before substantial work commenced. While Fluor and 

Hill’s average cost per site was substantially lower then Shaw’s, we did not determine the 

reasonableness of their costs. However, we noted that the lower average costs for sites rejected by 

Hill were attributed to the contractor’s more thorough site assessments and early identification and 

communication of potential problems to the Project Review Board. Because there was only 

limited site identification and design activity prior to the creation of the Project Review Board and 

all three contractors had sites rejected within the same timeframe, between October 2005 and 

March 2006, we could not determine a direct correlation between cost containment and creation of 

this oversight body. 

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We reviewed the geographic locations within Louisiana where the rejected sites were located to 

determine if a direct correlation existed between the rejected site locales and costs. As described 

in Appendix 1, each contractor was responsible for multiple parishes in the southern part of 

Louisiana; however, three contractors, Fluor, Shaw, and Hill, all worked Orleans Parish. The 

southeastern portion of Louisiana was the most devastated as a result of Hurricane Katrina. A 

reasonable assumption would be that costs could be higher in this area of the state, but Fluor and 

Hill’s incurred costs in the most affected areas were comparably lower than Shaw’s costs. 

We were unable to determine an exact amount of excessive costs incurred by Shaw because their 

invoices did not identify costs to specific contract activities such as preliminary site inspections, 

researching permit requirements, or meeting with local officials. Instead Shaw’s costs were 

identified to reflect general timeframes based on the period billed by subcontractors. Therefore, 

we estimated excessive costs for Shaw, at a summary level, based on the entire population of Shaw 

rejected sites. Based on our estimates, we found that Shaw’s costs were between 793 to 1,158% 

higher than that of Flour and Hill, respectively. As shown in Table 1 below, we used Fluor and 

Hill’s average rejected site costs per type of rejection to estimate what Shaw’s rejected site costs 

may have been. 

Table 1 

SHAW GROUP 

ESTIMATED EXCESSIVE COSTS FOR REJECTED SITES 

REASON FOR REJECTION 

NUMBER 

OF SITES 

COST USING 

FLUOR AVERAGE 

ESTIMATED COST 

PER SITE 

COST USING 

HILL AVERAGE 

ESTIMATED COST 

PER SITE 

Parish/Mayor Rejected 8 $ 166,608 $ 81,143 

Owner Withdrew Site 12 224,256 141,429 

Cost Prohibitive 6 128,604 75,000 

Environmental Concerns 6 125,010 125,010 

No Need in Parish 2 36,066 50,000 

Site Unsuitable 2 52,686 45,000 

Lease Issues 1 7,311 11,000 

Other 2 45,139 8,800 

TOTAL 39 $ 785,679 $ 537,381 

Estimated Costs – Shaw $ 6,225,787 $ 6,225,787 

Estimated Excessive Costs $ 5,440,108 $ 5,688,406 

Source: WA&CO analysis of data provided by FEMA 

As indicated above, costs of between $5.4 million and $5.6 million for Shaw sites rejected by 

FEMA could have been avoided if: 

•	 Shaw had complied with its obligation to provide the best value for its work and acted 

in the best interest of FEMA, and 

•	 FEMA had provided sufficient oversight for this IA-TAC. 

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Specific areas that contributed to excessive costs for sites rejected by FEMA are discussed 

below. 

Approvals without Required Permits 

Shaw did not conduct thorough assessments of two of seven proposed sites, did not obtain permits 

as required, and did not adhere to the proper sequence of procedural steps. In addition, FEMA did 

not effectively implement and enforce contract oversight procedures that would have precluded 

these things from occurring. For the two proposed sites, FEMA issued a notice to proceed on 

construction activities although the contractor had not obtained the necessary building permits. 

These events led to wasteful activities and excessive costs that were not in the government’s best 

interest. Excessive costs associated with these rejected sites could not be determined because 

subcontractor invoices did not contain a sufficient level of detail. However, we estimate that about 

$438,000 in construction costs at one site could have been avoided, as well as over $600,000 in 

construction and demobilization costs at the other site. 

The Federal Acquisition Regulation under 48 CFR 37.503(a), Agency-head Responsibilities, says 

that it is an agency head responsibility to ensure that requirements for services are clearly defined 

and appropriate performance standards are developed. This responsibility is established so that the 

agency’s requirements can be understood by potential offerors and that performance in accordance 

with contract terms and conditions will meet the agency’s requirements.
 

The PWS defines work requirements and had FEMA implemented and enforced contract oversight 

procedures to ensure that the contractor followed it, the excessive costs associated with rejected 

sites would have been prevented or mitigated. 

The PWS requires the contractor to: 

•	 Identify and contact points-of-contact for state and local officials with jurisdiction over the 

use of temporary disaster housing in affected areas including, but not limited to: 

- State and local requirements or restrictions, and process for obtaining permits 

within the identified counties and 

- Placement (zoning) restrictions for temporary disaster housing. (Exhibit 2 - Work 

Plan, §4.1-2 – Points of Contact). 

•	 Adhere to applicable local, state, and federal building regulations and laws; and be 

responsible for acquiring all permits and approvals for items identified in the scope of work 

for facilities and structures as specified in task orders. (Exhibit 12 – Group Design, §2.3 – 

Permits, Codes & Applicable Laws, and the PWS, §2 – Scope of Work, in particular, §2.12 

- Group Site Design, §2.12.2 and §2.13.7 - General Construction Services). 

•	 Identify prospective sites and perform site feasibility analysis of commercial, public, and 

private properties in areas designated by FEMA. The contractor shall also identify any 

local or state code requirements and applicable laws and ordinances pertaining to the 

property sites and expected uses. The contractor shall incorporate identified code 

requirements and laws or ordinances into the site feasibility analysis. (Exhibit 3 - 

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Preliminary Land or Property Identification and Usage Assessment, §2.6 - Site Assessment 

& Feasibility Analysis). 

The site development process in the PWS requires contractors to perform assessments of locations 

that could be used as potential group sites for temporary housing solutions. If performed as 

required, the site assessments provided basic and vital information needed by the contractors and 

FEMA to determine the suitability of a location. As discussed below, site development 

requirements for the two rejected Shaw sites—Annunciation Playground and the Old JC Penney 

building—were not followed by Shaw or enforced by FEMA. 

 Annunciation Playground 

Shaw performed many site development processes simultaneously, instead of sequentially 

as defined in the PWS. In addition, Shaw did not perform proper feasibility activities, such 

as identifying and obtaining all required permits and obtaining local officials’ approval for 

the planned construction activities. Further, FEMA did not effectively manage contract 

activities for the site or follow up on outstanding matters in a timely manner. 

The business case summary created by Shaw at the initial stages of the site planning 

process reported that if the permits, building inspections, and design review processes were 

waived, construction could begin before design was complete and it would take the 

contractor a shorter timeframe to construct the site. In the November 15, 2005, design 

meeting minutes, FEMA’s Project Review Board expressed concern that Shaw did not 

provide the list of permits needed for the construction of the site. On November 19, 2005, 

FEMA granted authority to proceed with the construction of the site and required that the 

contractor immediately provide copies of permits. During the November 23, 2005, 

construction kick-off meeting, Shaw reported that the underground utilities needed to be 

examined, but Shaw did not have a certificate to dig. Nonetheless, Shaw continued to work 

on the site without permits until the mayor and the city council rejected the site and a stop 

work order was issued on January 7, 2006. 

The total cost billed to the government for this project as of the date of our review included 

$438,000 billed by their subcontractor for construction activities. These included activities 

such as labor ($54,300), materials ($217,200), and equipment ($65,800), along with the 

associated overhead and profit. 

Although FEMA made initial use of checklists, it did not use construction management 

tools such as a construction schedule and milestones to monitor the process. As a result, 

FEMA did not effectively manage the contractors’ activities or follow up on outstanding 

matters. For example, FEMA did not obtain, nor require Shaw to obtain, written 

assurances from city officials that the site could be used for the intended purpose. In 

addition, FEMA did not require that Shaw identify and obtain needed permits earlier in the 

process and before substantial costs had been incurred. If FEMA had required Shaw to 

obtain permits and letters of approval from local officials before construction commenced, 

most of the costs incurred for this rejected site, such as the approximately $438,000 billed 

for construction-related costs by their subcontractor, could have been avoided. 

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 Old JC Penney Building 

FEMA did not institute a quality assurance program to verify that the contractor conducted 

proper assessments in the field before granting authority to proceed. As a result, FEMA 

did not identify critical issues or important performance gaps in a timely manner, resulting 

in excessive costs for this rejected site. 

On October 25, 2005, Shaw began site assessment activities and obtained the notice to 

proceed with the design on November 17, 2005, without the knowledge that the site 

contained restrictive covenants prohibiting mobile home parks and governmental 

subsidized housing. The minutes from Shaw’s December 12, 2005, construction kick-off 

meeting documented Shaw’s belief that FEMA-managed projects did not require permits, 

but Shaw committed to investigating the matter further. We found no evidence that Shaw 

followed up on the permit issue and construction commenced without obtaining a permit. 

Shaw believed that FEMA-managed projects did not require permits and it proceeded with 

construction; it also believed the site was located in an area subject to Jefferson Parish 

Council Emergency Ordinance #22604, which waived building permit requirements. 

Section 4 of the ordinance allowed, with a building permit, the temporary placement of 

RVs, travel trailers, motor coaches, mobile homes, pop ups, and other equipment designed 

for short-term living purposes on commercial, business, and industrial zoned private 

property, but only through January 1, 2006. On December 15, 2005, after construction had 

commenced, the FEMA Contracting Officer’s Technical Representative (COTR) issued a 

stop work order due to the restrictive covenants for the site. The site was cancelled on 

January 26, 2006, due to lease issues related to the restrictive covenants. 

The total cost billed to the government as of the date of our review included: 

• $82,000 for construction documents, 

• $98,200 for security guard services during demobilization of the site, 

• $426,800 for site construction and demobilization work, and 

• $127,100 for actual site demobilization. 

FEMA did not hold Shaw accountable for any of the costs incurred and there were no costshare provisions in the task order to penalize the contractor for wasteful spending of 

government funds. Even if cost–share provisions had been made, invoices submitted by 

subcontractors were not sufficiently detailed and costs were not identified to narrowly 

defined timeframes, making it difficult to determine the questioned costs. Shaw invoices 

reflected that all work, except for demobilization efforts, was completed the day before the 

stop work order was issued. However, both construction and demobilization costs should 

not have been incurred if the permit process had been properly followed. 

In contrast to these results, Hill’s site assessments contained more complete information than 

Shaw’s. For example, Hill’s initial site assessment for the Brandt Dufrene location in Paradise, 

Louisiana, indicated that St. Charles Parish was not interested in a FEMA group site. Furthermore, 

the assessment disclosed that new parish ordinances specifying numerous conditions to obtain 

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parish permits could impact the placement of the site. The site was rejected on February 22, 2006. 

At the time of our review, this site had a total estimated cancellation cost of $25,000. We 

concluded that the costs for the Shaw rejected sites would have been in line with those for Hill if 

Shaw had followed proper protocols and FEMA had enforced adherence to them. 

Work Performance 

FEMA and Shaw did not follow work performance guidelines and protocols established in the 

PWS. As a result, unwarranted approvals to begin construction activities occurred. For example, 

at the Robinson Road site, FEMA issued a notice to proceed on construction activities although 

Shaw had identified serious environmental conditions. $380,000 in design work could have been 

avoided if FEMA had rejected the site based on the initial site assessment. At Buckhorn Bend in 

Quachita Parish, Shaw granted its subcontractor a notice to proceed on construction activities 

without first receiving a notice to proceed from FEMA. The two sites discussed below 

demonstrate the impact of FEMA and contractor noncompliance with work performance 

requirements. 

 Robinson Road 

Shaw’s site assessment, completed on September 23, 2005, indicated that the temporary 

housing site would be located on a pecan orchard that contained seven small buildings and 

eight 55-gallon drums of lubricant oil. FEMA expressed concern about the suitability of 

the location due to the pesticides used in the pecan orchard and the potential hazard of the 

eight 55-gallon drums of lubricant oil found on the site. Email communication between 

Shaw and FEMA made it clear that FEMA was not in favor of the site, but on October 1, 

2005, FEMA allowed Shaw to proceed with design. On October 9, 2005, the COTR 

notified Shaw that the project was put on hold, and on October 11, 2005, the Project 

Review Board removed the hold. FEMA rejected the site on October 20, 2005, because it 

was not viable. 

Shaw was aware of the environmental issues but continued with design work instead of 

advising FEMA against it. PWS §2.2, Management and Administration, subsection 

2.2.2.1, required that Shaw support FEMA on a project-by-project basis with sound project 

management and resources to achieve the best value of the work being performed and to 

act in the best interest of FEMA. As such, Shaw should have discontinued design work 

until the environmental issues were resolved. We calculated that Shaw billed FEMA 

$398,664 for the assessment and design of this site, including over $380,000 for 1 week of 

design work performed by a subcontractor prior to Shaw receiving the notice to proceed 

with the design. 

Since FEMA did not have a quality assurance process in place to ensure Shaw acted in the 

best interest of the federal government, it did not follow up and resolve the environmental 

concerns prior to the contractor incurring unnecessary costs. More importantly, FEMA’s 

decision to grant the notice to proceed with design was a questionable management 

decision and increased the risk of fraud, waste, and abuse of federal funds. 

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 Buckhorn Bend - Whitehall 

Shaw allowed its subcontractor to proceed with construction activities at Buckhorn Bend – 

Whitehall on October 1, 2005, without receiving a notice to proceed from FEMA. On 

October 9, 2005, the FEMA COTR notified Shaw that based on the 100% design review by 

the U.S. Army Corps of Engineers and FEMA Disaster Housing Operations, the project 

was suspended and should not proceed beyond the design phase. 

We calculated that Shaw had billed FEMA $347,792 for this site including costs for design, 

permit, engineering, and site investigative work performed by Shaw’s subcontractor for the 

period September 26, 2005 to October 4, 2005. Shaw’s invoicing format did not provide a 

clear and concise detail of when costs were incurred for each activity undertaken. For 

example, the invoice Shaw submitted did not specify the cost incurred by period of 

performance for each site development phase (i.e., site assessment, design and 

construction) or the type of work performed in detail. Therefore, we were unable to 

calculate the questioned costs for construction related activities. 

Limited training and high turnover within FEMA contributed to their inability to provide adequate 

oversight. The IA-TAC contracts were awarded based on an urgent and compelling need without 

sufficient time for training. Further, high turnover prevented adequate knowledge transfer from 

one COTR to the next. Consequently, FEMA COTRs were not fully knowledgeable of all contract 

requirements, and even if they had been, there were limited personnel available to provide 

effective oversight. With limited staffing and numerous contractor activities to oversee, it was 

unreasonable to expect a COTR to be able to effectively administer quality assurance programs. 

As such, contractors were left to themselves to ensure that they acted in FEMA’s best interest. 

Systemic shortcomings in FEMA’s quality assurance process and questionable contractor 

performance resulted in excessive costs to the federal government for the sites ultimately rejected 

by FEMA. In contrast to Shaw’s performance, Hill’s performance on the Balliviero property site 

in South Buras, Louisiana, resulted in this site being rejected before substantial costs were 

incurred. The Shaw rejected sites incurred substantially greater costs for site design and 

construction activities than the Fluor and Hill rejected sites, leading to the conclusion that Shaw 

and its COTR placed less emphasis on the viability of the sites before incurring such costs. 

Other Observations 

Other matters outside our objectives surfaced during this review. They are discussed in Appendix 

4 of this report. We believe that these additional issues warrant consideration in FEMA’s planning 

and management of current and future disaster relief efforts. 

Conclusions 

Based on our review of rejected temporary housing sites, we concluded that excessive costs were 

incurred for the seven Shaw rejected sites. Shaw’s inconsistent adherence to contract protocols 

and insufficient oversight by FEMA led to waste of government funds. The excessive costs were 

attributable to poor decision making, communication breakdowns, nonadherence to established 

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protocols, and procedural deficiencies. FEMA’s oversight of the IA-TAC contractors was 

inadequate, due in part to limited training, staff shortages, and high turnover. The IA-TAC 

contracts were awarded by FEMA based on an urgent and compelling need without sufficient time 

for training. Further, high turnover and staff rotations prevented adequate knowledge transfer 

from one COTR to the next. Consequently, FEMA COTRs were not fully knowledgeable of all 

contract requirements, and staff shortages limited their ability to provide effective oversight. 

We observed lower average costs per site for the Hill and Fluor rejected sites although these 

contractors performed the same types of services under FEMA’s oversight. The disparity between 

average rejection costs for Shaw, as compared to Hill and Fluor, helps to demonstrate that the 

effectiveness of management controls and the ability to ensure accountability when controls fail 

are critical to efficient and effective operations within any organization. Hill and Fluor held 

themselves accountable to FEMA in a manner that resulted in lower average rejection costs despite 

FEMA’s inadequate monitoring of their performance. 

Controls and accountability mechanisms help to ensure that resources are used appropriately. 

Nevertheless, during a catastrophic disaster, decision makers struggle with the tension between 

implementing controls and accountability mechanisms, and the demand for quick response and 

recovery assistance. It is well understood that one of FEMA’s biggest challenges during disaster 

relief efforts is to balance the need to quickly provide housing and other assistance to victims, 

while ensuring accountability and providing proper oversight to protect against waste, fraud, and 

abuse. FEMA has already taken steps to address the limitations in their capacity to respond to 

disasters. As noted in other studies and reports issued during the past year by Congress, the 

Government Accountability Office (GAO), Department of Homeland Security, Office of Inspector 

General (DHS-OIG), and others, FEMA has begun the process of correcting operational and 

control deficiencies. As FEMA continues to make improvements in cost efficiency, decision 

making effectiveness, and service delivery, we recommend that FEMA include a focus on 

improvements in oversight monitoring. 

Since award of the IA-TACs that we reviewed under this contract, FEMA rebid the contracts as 

IA-TAC IIs, which were awarded in August 2006 for a 2-year period. While FEMA is aware that 

it needs to strengthen its emergency management capabilities in advance of another catastrophic 

disaster, a remaining concern is that waste may be occurring now under the current IA-TAC I. 

This waste would be occurring as a result of the control deficiencies we observed in the areas of 

procedures and protocols, communication, and oversight during our review of rejected sites under 

the initial IA-TACs. Prior to issuance of the IA-TAC III contract, it is critical that FEMA 

implement recommendations contained in this report, to reduce the risk of waste and abuse and to 

improve service delivery during future disaster recovery efforts. Timely implementation of our 

recommendations will serve to address the highly relevant issues reported herein and enhance 

current disaster recovery efforts already underway, as documented in FEMA’s Gap Analysis 

Initiative, the National Disaster Housing Strategy, and the National Response Framework. 

Costs Incurred for Rejected Temporary Housing Sites 

11 
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Recommendations 

We recommend that FEMA: 

•	 Recommendation 1: Develop and implement quality assurance procedures to ensure 

the contractor is carrying out its duties in accordance with the contract and in the best 

interest of the government. At a minimum FEMA should: 

- Determine reasonable workload requirements, institute minimum staffing 

levels, and create redundancies in key positions to ensure that service delivery 

meets the agency’s goals. 

- Provide ongoing training to COTRs and other personnel responsible for 

contractor oversight to ensure proper understanding of contract requirements 

and contractor responsibilities. 

- Use construction management tools such as checklists to ensure the submission 

of all required documents in the proper sequence and to ensure oversight duties 

are conducted in a manner that will minimize enforcement deficiencies and 

inconsistencies. 

- Develop and implement a protocol to resolve site development issues before 

authorizing the contractor to proceed with the next level of work. 

- Actively monitor contractor performance through timely and periodic 

verification of construction progress and site development reports to ensure that 

information provided by contractors is accurate and timely. 

•	 Recommendation 2: Develop and communicate a structured process for transferring 

knowledge among key personnel responsible for contractor oversight. This process 

should include a resource library for procedural, policy, contract, best practices, and 

other information that can be readily accessed and shared by FEMA employees 

monitoring the contract. 

Management Comments and OIG Analysis 

FEMA provided written comments on the draft of this report and concurred with all of our 

recommendations. FEMA’s written comments are contained in Appendix 2. 

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12 
 

 

HILL REJECTED SITES SUMMARY BY PARISH 

Parish Number of Sites Total Estimated Cost Average Cost 

1 Calcasieu 1 $25,000 25,000 

2 Lafourche 4 21,000 5,250 

3 Orleans 27 200,000 7,407 

4 Plaquemines 5 115,000 23,000 

5 St. Charles 1 25,000 25,000 

 38 $386,000 

Williams, Adley & Company, LLP 

Appendix 1 - Objectives, Scope, and Methodology 

Objectives 

The objectives of the review were to determine whether: (1) FEMA implemented and enforced 

control procedures to ensure contractor compliance and minimize the risk of fraud, waste and 

abuse; (2) contractors were in compliance with the PWS requirements and other requirements 

established through the IA-TAC; and (3) FEMA effectively inspected, accepted, and paid for 

services. 

Scope 

The scope of this engagement included conducting a review of judgmentally selected, rejected 

temporary housing sites with estimated costs over $300,000 under the four IA-TACs for the 

Hurricane Katrina Relief Effort, as well as a small sample of rejected sites with lesser costs, 

from two other contractors, for comparability purposes. This report covers our review of seven 

rejected sites under Shaw’s IA-TAC and three Hill rejected sites for which we performed a 

limited review for comparison purposes. We did not review rejected site files for Fluor; and 

Bechtel did not have rejected sites. 

As shown in the following table, we reviewed three rejected sites for Hill under the IA-TAC 

and seven rejected sites for Shaw, with a total estimated cancellation cost of $3,132,581. The 

rejected sites reviewed were selected judgmentally by DHS-OIG and WA&Co, based on the 

reason for rejection and the total dollar amount of estimated cancellation costs. We used 

estimated cancellation costs because FEMA was not able to provide actual costs at the time of 

review. 

Shaw rejected sites were primarily concentrated in the Jefferson and Orleans parishes of 

Louisiana. Fluor had 23 rejected sites in parishes including Calcasieu, Cameron, Orleans, 

Saint Bernard, Washington, Tangipahoa, Saint Tammany, Saint John the Baptist, and Saint 

Mary. Hill rejected sites were located mainly in Lafourche, Orleans, and Plaquemines 

parishes. A list of parishes with rejected sites and the associated average cost for each is 

provided below for three of the IA-TAC contractors: 

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Parish Number of Sites Total Estimated Cost Average Cost 

1 East Baton 2 $397,034 $198,517 

Rouge 

2 Grand Isle State 1 9,703 9,703 

Park 

3 Jefferson 14 2,207,655 157,690 

4 Lincoln 1 19,041 19,041 

5 Orleans 18 2,350,595 130,589 

6 Ouachita 2 807,354 403,677 

7 Point Coupee 1 434,405 434,405 

 39 $6,225,787 

Parish Number of Sites Total Estimated Cost Average Cost 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

Acadia 1 $225 $225 

Calcasieu 12 267,335 22,278 

Cameron 8 117,137 14,642 

Concordia 2 805 403 

East Feliciana 1 264,354 264,354 

Iberia 1 4,415 4,415 

Iberville 3 19,899 6,633 

Jefferson Davis 1 28,841 28,841 

Lafayette 1 595 595 

Livingston 1 2,796 2,796 

Orleans 13 87,614 6,740 

Rapides 2 301,485 150,743 

St. Bernard 12 235,323 19,610 

St. Helena 1 0 0 

St. James 3 32,489 10,830 

St. John the 

Baptist 

4 161,448 40,362

St. Landry 2 40,121 20,060 

St. Martin 1 30,285 30,285 

St. Mary 4 96,974 24,244 

St. Tammany 7 107,703 15,386 

Tangipahoa 8 80,701 10,088 

Vermilion 1 6,964 6,964 

Washington 10 47,076 4,707 

 99 $1,934,585 

Williams, Adley & Company, LLP 

FLUOR REJECTED SITES SUMMARY BY PARISH 

SHAW REJECTED SITES SUMMARY BY PARISH 

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Figure 3: Rejected Sites by Parish 

Source: WA&Co analysis based on data provided by FEMA. 

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REJECTE

NO SITE IA-TAC REASON FOR REJECTION-COMMENTS 

D SITES SELECTED FOR REVIEW 

ESTIMATED 

COST 

1 Canseco Lot 

CH2M 

Hill Owner withdrew the offer $ 45,000 

2 

Balliviero 

Property 

CH2M 

Hill Site was not feasible due to lack of water 

supply and sewage system $ 25,000 

3 

Brandt Dufrene 

Private 

Property 

CH2M 

Hill 

Parish was not interested in site and new 

ordinances required many permits, making the 

site unfeasible 

$ 25,000 

1 

Annunciation 

Playground 

Shaw 

Group 

No permits – 

Rejected by Mayor and City Council $500,000 

2 

Buckhorn Bend 

- Whitehall 

Shaw 

Group 

Environmental concerns and inability to obtain 

water and sewage permits. $370,902 

3 New Roads 

Shaw 

Group Owner withdrew $434,405 

4 Old JC Penney 

Shaw 

Group 

Restricted covenants at the site prohibited 

Mobile Homes $645,058 

5 

Progressive 

Baptist Church 

Shaw 

Group Cost prohibitive and irresolvable lease issues $317,866 

6 

Public School 

Admin Bldg 

Shaw 

Group 

School board rejected due to irresolvable lease 

issues $332,898 

7 Robinson Road 

Shaw 

Group High environmental concerns $436,452 

TOTAL $3,132,581 

Source: WA&CO analysis of data obtained from FEMA as of February 2006 (Hill) and September 2006 (Shaw). 

*Actual figures were not available at time of our review. 

Additional details regarding each rejected site are provided below. 

•	 Canseco Lot: This site is located at the southeast corner of Patterson and Thayer streets in 

New Orleans, Louisiana. The initial site assessment identified the site to be a flat and 

grassy site with small trees on the east side. There were no environmental concerns 

identified on the strike team site assessment. Nonetheless, the right of entry agreement 

prohibited FEMA from occupying the property until an agreement was reached between 

FEMA and the property owner on rent, indemnities, insurance, and other terms. The site 

was rejected on December 6, 2005 because the owner withdrew the offer. At the time of 

this review, the site had a total estimated cancellation cost of $45,000. 

•	 Balliviero Property: This site is located at 35954 Highway 11 in South Buras, Louisiana, 

and had a total of 10.5 acres to be used for a travel trailer group site. The site assessment 

identified two houses that needed to be removed and the need for utility restoration in the 

entire community. Furthermore, on a utility update memo it was documented that no water 

supply would be available in Buras for at least 2 months and the sewage treatment plant 

was awaiting services. There was no estimate as to when there would be any sewer system 

available. The site was rejected on December 22, 2005, due to site feasibility and cost. At 

the time of our review the total estimated cancellation cost was $25,000. 

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•	 Brandt Dufrene: This site is located at 837 Highway 306, Paradise, Louisiana, and had a 

total of 40 acres to be used for a travel trailer group site. The site assessment did not 

identify any environmental issues, but noted that the site was in a flood zone. Also, it was 

identified on the initial site assessment that the St. Charles Parish was not interested in a 

FEMA group site and that new parish ordinances specifying many conditions to obtain 

permits could affect the placement of the site. The site was rejected on December 22, 

2005, due to high leasing costs. At the time of our review, this site had a total estimated 

cancellation cost of $25,000. 

•	 Annunciation Playground: This site is located at Annunciation and Orange Streets in 

New Orleans, Louisiana. The site was designed for 40 travel trailers in a community-like 

setting. At the time the strike team performed the preliminary site assessment, the 

anticipated ready for occupancy date was November 25, 2005. The land’s previous use 

was a playground. The site was rejected by the City Council. At the time of this review, 

the site had a total estimated cancellation cost of $500,000. 

•	 Buckhorn Bend – Whitehall: This site is located at 200 Farmerville Highway in Ruston, 

Louisiana. Buckhorn Bend-Whitehall was designed to house 320 travel trailers in a 

community-like setting. The business case summary estimated the construction costs to be 

$6,400,000. Review Board meeting minutes reported that Shaw suspected that pesticides 

were used on the land and an independent firm was hired to research environmental issues. 

The local government withheld issuing a building permit until the utility services were 

provided. Also, the contractor experienced difficulties in obtaining the water and sewer 

permits. The owners rejected the site, and decided to proceed with commercial pads 

instead of a group site. At the time of this review, the site had a total estimated 

cancellation cost of $370,902. 

•	 New Roads-Curet: This site is located at 2340 Myrtle Avenue in Baton Rouge, Louisiana. 

The site had 116 acres included in the offer, but only 86 were usable. The land was to be 

transformed to house 680 travel trailers in a community-like setting. The business case 

summary estimated construction costs at $13,600,000 and the cost per unit at $20,000, 

based on a Shaw standard layout. The initial site assessment identified the site as having 

flood issues that needed to be addressed in the site preparation cost, and identified previous 

use as a pasture with a small pecan grove. The owner, due to liability issues with the site’s 

lease agreement, rejected the site. At the time of this review, the site had a total estimated 

cancellation cost of $434,405. 

•	 Old JC Penney Building: This site is located at Lapalco Boulevard and Barateria 

Boulevard in Marrero, Louisiana within the Bell Promenade Mall of Jefferson Parish. The 

3.5-acre parking lot of the Old JC Penney Building was designed to house 35 travel trailers 

in a community-like setting. The business case summary estimated the design cost to be 

$87,500 and construction costs at $875,000. At the time of the initial site assessment, the 

site had already received the Parish President’s approval. The anticipated ready for 

occupancy date was December 9, 2005. The site was rejected because it had restrictive 

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covenants that prohibited mobile home parks from being built. At the time of this review, 

the site had a total estimated cancellation cost of $645,058. 

•	 Progressive Baptist Church: This site is located at the end of Cohen Avenue off of 

Westbank Expressway in Marrero, Louisiana. Approximately 150 travel trailers were to be 

placed on 17.5 acres of land in an exclusive group site. At the time the strike team 

performed the preliminary site assessment, the estimated design cost was projected to be 

$450,000 and construction costs were estimated at $4,500,000. Within the project scope of 

work, it was reported that a 5-acre parcel of the land contained small amounts of asbestos. 

The site was rejected due to irresolvable lease issues. At the time of this review, the site 

had a total estimated cancellation cost of $317,866. 

•	 Public School Administration Building: This site is located at 3500 DeGaulle Avenue in 

Algiers, Louisiana. The site, approximately 10 acres, was going to be used to house 200 

travel trailers within a community setting. The business case summary estimated the 

design cost to be $400,000 and construction costs at $5,000,000. If no permits, building 

inspections, or design review approval were required, then it would have taken 

approximately 5 days to design and 9 days to deliver the final product. The estimated 

ready for occupancy date was October 19, 2005. The contractor reported the site as having 

moderate damage. The School Board rejected the site due to irresolvable lease issues. At 

the time of this review, the site had a total estimated cancellation cost of $332,898. 

•	 Robinson Road: This site is located at 3104 Breard Street in Monroe, Louisiana. The 

property has 120 acres with 80 acres reserved for a pecan orchard and 40 acres as 

undeveloped. The 40-acre property formerly used as a pecan orchard was intended to 

house 320 travel trailers in a community-like setting. The business case summary 

estimated construction cost to be $6,400,000. The strike team site assessment reported that 

eight 55-gallon drums of lubricant oil were located on the premises. The environmental 

checklist reported that prior land use might have been for a municipal waste site or 

abandoned hazardous waste site with former underground storage tanks. Public 

transportation was greater than 10 miles away and herbicide and pesticide sprays had been 

used on the property for the pecan orchard. The site was rejected because local officials 

determined there was no requirement for it, and because of environmental suitability 

problems. At the time of this review, the site had a total estimated cancellation cost of 

$436,452. 

We performed reviews covering the period September 1, 2005 through June 30, 2006, on 

rejected sites. We did not independently test contractor payroll costs or FEMA’s adherence to 

procurement and contracting requirements. We relied upon the payroll audits performed by the 

Defense Contract Audit Agency and IA-TAC procurement audits conducted by the DHS 

Office of Acquisitions and Assistance to separately address these issues. 

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Methodology 

Our methodology included reviewing and analyzing rejected site documentation to determine 

whether FEMA and the contractor had procedures in place to ensure that sites selected were 

feasible and costs to the government were reasonable. We held several meetings and obtained 

pertinent documents from FEMA headquarters in Washington, DC and the COTR at the 

FEMA Joint Field Office in Baton Rouge. Additionally, we held interviews with Shaw 

personnel and obtained pertinent documentation to gather information and conduct our 

examination. During our rejected site review activities, we: 

•	 Interviewed FEMA and Shaw personnel to obtain an understanding of policies and 

procedures followed and to identify potential internal control weaknesses and their 

cause. 

•	 Reviewed each rejected sites’ initial strike team site, work plans, and group site designs 

and determined whether Shaw was in compliance with the PWS specifications in the 

contract and whether FEMA and the United States Army Corps of Engineers were 

provided complete and accurate information to facilitate the early detection of issues or 

concerns that would affect the suitability of the sites. 

•	 Reviewed the general permit requirements for each site and determined whether the 

contractor acquired the necessary permits. 

•	 Reviewed expenditures invoiced by Shaw, and paid by FEMA, and determined whether 

proper controls were in place to ensure that costs incurred by the contractor were 

reasonable and allowable for each rejected site reviewed. 

•	 Reviewed Project Review Board and design meeting minutes, as well as email 

communications, to determine whether adequate information was communicated and 

issues identified promptly during the site development stage to promote the timely 

determination of feasibility. 

•	 Performed a limited comparison between the seven Shaw rejected sites and the three 

Hill sites, which were rejected for similar reasons but had lower estimated cancellation 

costs. 

We performed the audit under the authority of the Inspector General Act of 1978, as amended, in 

January 2007, and according to Generally Accepted Government Auditing Standards. We 

executed tests, conducted interviews, made observations, and performed examinations in the 

following areas: 

•	 Strike Team Preliminary Site Assessment; 

•	 Group Site Design; 

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• Work Plans; 

• Project Review Board meeting minutes; 

• Notice to Proceed; 

• Stop Work Orders; and 

• Limited Invoice Review. 

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Appendix 2 – FEMA Official Comments
 

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Appendix 3 – Site Development Process 

Step 1: The predeployment meetings with FEMA (strategic planning) are not focused 

around any specific location or type of event and are designed to build a strong 

systematic approach for managing, monitoring, and supporting programmatic issues and 

disaster operations. The contractor meets with FEMA representatives to plan and 

coordinate response, deployment, implementation of activities, and become familiar and 

acquainted with FEMA requirements, methods, policies and procedures. At this point, 

FEMA should provide the contractor with information regarding regulations and any 

specific process flows to be used during a disaster recovery mission. 

Step 2: According to the Performance Work Statement attached to the IA-TACs, the 

contractor was responsible for developing a work plan within 7 days of the mission 

identification by FEMA (Exhibit 2 of the PWS). The work plan shall describe in detail 

concepts, procedures, timelines, management and organization, and how planning 

documents will be used to assure satisfactory contract performance. Within this 

document, the contractor was responsible for identifying the following key items, which 

could have assisted in the timely identification of an unfeasible site: 

•	 Point of contact for state and local officials with jurisdiction over use of 

temporary disaster housing in affected areas; 

•	 State and local requirements or restrictions, and the process for obtaining permits 

within the identified counties/parishes; 

•	 Placement (zoning) restrictions for temporary disaster housing; 

•	 Lot boundary restrictions; 

•	 Permit requirements to place or install temporary disaster housing; 

•	 Utility companies’ requirements for inspection, transfer of service, and deposits; 

and 

•	 Any other state or local requirements that may affect the timely, efficient, and 

cost-effective installation and occupancy of temporary disaster housing. 

Once these items were identified, FEMA was responsible for determining, negotiating, 

and obtaining a waiver if required; however, a waiver was not guaranteed. 

Step 3: The site assessment and feasibility analysis (Preliminary Land or Property 

Identification and Usage Assessment) was to be performed based on criteria furnished by 

FEMA. Through the performance of this assessment, the contractor was to identify any 

local or state code requirements and applicable laws or ordinances pertaining to the 

property sites. Additionally, the contractor should determine multiple factors inclusive of 

site accessibility (including any towing restrictions), flood zone considerations, and 

utility availability to include the sources and accessibility for approved utilities. The site 

assessment also includes detailed information regarding the site characteristics such as 

whether the area is fairly level and has adequate drainage facilities, trees, shrubs, debris, 

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and other items that may affect the site preparation. This information should have been 

incorporated into feasibility analysis provided to FEMA for review and approval prior to 

continuing to the site inspection. 

Step 4: The site inspection process uses a method that was tailored to the disaster 

situation to determine site feasibility. The contractor is responsible for identifying the 

flood zone, whether the site has utilities, and when they will be available. If not, the site 

must have the proper zoning requirement to include any lot boundary zonings, and if the 

contractor identifies this site unfeasible, they should identify what is needed to make the 

system ready. Once this information is gathered, the paperwork should be provided to 

Disaster Housing Operations management to ensure there is enough information for 

FEMA to determine the feasibility of the site. As part of this process, the contractor and 

the FEMA Disaster Housing Operations team are responsible for obtaining the 

landowner’s authorization for the feasible site prior to unit installation. 

Step 5: The group site design is to include infrastructure, site layout, and construction 

strategy (timeline). During the development of group site design, the contractor should 

address and abide by all federal, state, and local requirements including environmental 

and historical preservation requirements. The design should include and incorporate the 

necessary permits; appropriate federal, state and local codes and ordinances; projected 

completion; and other disaster relevant information. Upon approval of the site design, 

the contractor can commence construction, which should be done in the most timely and 

efficient manner possible under the circumstances and priorities established by FEMA. 

Nonetheless, if any environmental issues are identified and the site design is not approved 

by FEMA, the contractor should not incur construction costs. 

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Appendix 4 – Other Observations -- Lease Agreement Process 

We determined that for three rejected sites, FEMA allowed design or construction activities 

to occur although leases had not been properly executed. The sites involved were: 

• Public School Administration Building 

• New Roads - Curet 

• Progressive Baptist Church 

 Public School Administration Building 

On October 10, 2005, FEMA granted Shaw a notice to proceed when the Project Review 

Board (PRB) was notified that the lease for the New Orleans Public School Administration 

Building was executed. A notice to proceed for construction was issued on October 27, 

2005. Two days later, FEMA issued a stop work order after being notified that an 

unauthorized individual had signed the lease. The school board rejected the site on 

November 19, 2005, after exploring other options. The expenses invoiced for this site 

included approximately $135,900 for construction and deactivation costs, $120,600 for 

design costs, and $105,700 for site security and other installation costs. 

 New Roads – Curet 

FEMA authorized Shaw to proceed with 100% site design of the New Roads – Curet site 

prior to ensuring that the property owners were in agreement with the terms of the lease. On 

October 15, 2005, Shaw submitted the 100% site design plan to FEMA and the United States 

Army Corps of Engineers for review and comments. On October 18, 2005, the site owners 

withdrew the site for consideration due to liability concerns with the hold- harmless 

provisions of the GSA lease and declined to sign the agreement. Thereafter, on October 19, 

2005, FEMA issued a stop work order for this site. The estimated cost for this site was 

$434,405. 

 Progressive Baptist Church 

The Progressive Baptist Church site was rejected due to irresolvable lease issues and 

prohibitive costs. At the time of this review, the site had total billed cancellation costs of 

$293,807 for design work performed by Lincoln Builders, a subcontractor to Shaw. The 

original design called for 150 travel trailers to be built on 17.5 acres of land in an exclusive 

group site. Within the project scope of work, it was reported that a 5-acre parcel of the land 

contained small amounts of asbestos. These factors should have led to an early decision that 

the site was not viable. 

FEMA did not implement safeguards to ensure issues encountered during the site assessment 

phase were substantially resolved before the contractor was authorized to proceed with the 

next level of work. While FEMA depended on GSA to negotiate its lease agreements, it did 

not establish proper procedural steps to ensure due diligence in confirming execution of a 

legally binding lease agreement. Also, FEMA did not establish a process whereby lease 

agreement information was shared with site owners during the initial site assessment phase 

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so that lease objections could be identified and resolved or insurmountable obstacles 

recognized early in the process. 

48 CFR §37.114(a), Special Acquisition Requirements, requires federal agencies to ensure a 

sufficient number of qualified government employees are assigned to oversee contractor 

activities, especially those that involve support of government policy or decision-making. 

Additionally, during the performance of service contracts, the functions being performed by 

the contractors shall not be changed or expanded to become inherently governmental. 

According to Exhibit 2, Work Plan, §4.1- 5 of the PWS, the contractor is responsible for 

developing a resource list of potential land or property usage and for obtaining a point of 

contact (POC) information. Additionally, according to the FAR, under 48 CFR 37.503(a), it 

is an agency head responsibility to ensure requirements for services are clearly defined and 

appropriate performance standards are developed. 

As a best practice, the contractor and FEMA should perform due diligence to ensure all 

individuals negotiating agreements that may result in costs to the government have the 

authority to do so. 

Without proper oversight and accountability enforcement, there is a greater risk of engaging 

the government in unauthorized commitments that lead to waste of government funding. 

Because negotiations with site owners did not begin early in the site identification process, 

risks associated with obtaining lease agreements were not recognized and costs were incurred 

unnecessarily. Also, because the potential lessor was not at risk financially for withdrawing 

from a lease agreement, there was no incentive to withhold right of entry to the premises to 

limit construction activities. 

In comparison, the site assessment package the Hill strike team submitted for their three 

rejected sites included more detailed information on the strike team assessment and 

documentation than the information Shaw submitted. The type of information Hill provided 

included letters of approval from parish presidents and letters of right of entry authorizing the 

contractor access to the land for the purpose of providing temporary emergency shelter. The 

additional notes and documentation led FEMA and the contractor to determine the suitability 

of sites at an earlier stage, leading to a reduction of cost for the rejected sites. 

As an example, we reviewed the Canseco Lot site that Hill was to develop in New Orleans, 

Louisiana. It was rejected on December 6, 2005, because the owner withdrew the offer. As 

of November 2006, the site had a total estimated cancellation cost of $45,000. There were no 

environmental concerns identified on the strike team site assessment. Nonetheless, the right 

of entry agreement prohibited FEMA from occupying the property until an agreement was 

reached between FEMA and the property owner on rent, indemnities, insurance, and other 

terms. FEMA and Hill correctly avoided incurring substantial development costs pending 

resolution of the lease issues, which subsequently did not get resolved. 

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Appendix 5 – Report Distribution 

Department of Homeland Security 

Secretary 

Deputy Secretary 

Chief of Staff 

Deputy Chief of Staff 

General Counsel 

Executive Secretary 

Under Secretary for Management 

Assistant Secretary for Office of Policy 

Assistant Secretary for Office of Public Affairs 

Assistant Secretary for Office of Legislative Affairs 

Chief Procurement Officer 

Director, DHS GAO/OIG Liaison Office 

Chief Privacy Officer 

FEMA Deputy Administrator 

FEMA GAO/OIG Audit Liaison 

FEMA Director of Management and Chief Acquisition Officer 

FEMA Chief Procurement Officer 

Office of Management and Budget 

Chief, Homeland Security Branch 

DHS OIG Budget Examiner 

Congress 

Congressional Oversight and Appropriations Committees, as 

appropriate 

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Additional Information and Copies 

To obtain additional copies of this report, call the Office of Inspector General 

(OIG) at (202) 254-4199, fax your request to (202) 254-4305, or visit the OIG web 

site at www.dhs.gov/oig. 

OIG Hotline 

To report alleged fraud, waste, abuse or mismanagement, or any other kind of 

criminal or noncriminal misconduct relative to department programs or 

operations: 

• Call our Hotline at 1-800-323-8603; 

• Fax the complaint directly to us at (202) 254-4292; 

• Email us at DHSOIGHOTLINE@dhs.gov; or 

•	 Write to us at: 

DHS Office of Inspector General/MAIL STOP 2600, Attention: 

Office of Investigations - Hotline, 245 Murray Drive, SW, Building 410, 

Washington, DC 20528. 

The OIG seeks to protect the identity of each writer and caller.