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58–458 PDF 2010

FIVE YEARS AFTER KATRINA: 

WHERE WE ARE AND WHAT WE HAVE 

LEARNED FOR FUTURE DISASTERS 

(111–137) 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS, AND 

EMERGENCY MANAGEMENT 

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

September 22, 2010 

Printed for the use of the 

Committee on Transportation and Infrastructure 

( 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

JAMES L. OBERSTAR, Minnesota, Chairman 

NICK J. RAHALL, II, West Virginia, Vice 

Chair 

PETER A. DEFAZIO, Oregon 

JERRY F. COSTELLO, Illinois 

ELEANOR HOLMES NORTON, District of 

Columbia 

JERROLD NADLER, New York 

CORRINE BROWN, Florida 

BOB FILNER, California 

EDDIE BERNICE JOHNSON, Texas 

GENE TAYLOR, Mississippi 

ELIJAH E. CUMMINGS, Maryland 

LEONARD L. BOSWELL, Iowa 

TIM HOLDEN, Pennsylvania 

BRIAN BAIRD, Washington 

RICK LARSEN, Washington 

MICHAEL E. CAPUANO, Massachusetts 

TIMOTHY H. BISHOP, New York 

MICHAEL H. MICHAUD, Maine 

RUSS CARNAHAN, Missouri 

GRACE F. NAPOLITANO, California 

DANIEL LIPINSKI, Illinois 

MAZIE K. HIRONO, Hawaii 

JASON ALTMIRE, Pennsylvania 

TIMOTHY J. WALZ, Minnesota 

HEATH SHULER, North Carolina 

MICHAEL A. ARCURI, New York 

HARRY E. MITCHELL, Arizona 

CHRISTOPHER P. CARNEY, Pennsylvania 

JOHN J. HALL, New York 

STEVE KAGEN, Wisconsin 

STEVE COHEN, Tennessee 

LAURA A. RICHARDSON, California 

ALBIO SIRES, New Jersey 

DONNA F. EDWARDS, Maryland 

SOLOMON P. ORTIZ, Texas 

PHIL HARE, Illinois 

JOHN A. BOCCIERI, Ohio 

MARK H. SCHAUER, Michigan 

BETSY MARKEY, Colorado 

MICHAEL E. MCMAHON, New York 

THOMAS S. P. PERRIELLO, Virginia 

DINA TITUS, Nevada 

HARRY TEAGUE, New Mexico 

JOHN GARAMENDI, California 

HANK JOHNSON, Gerogia 

JOHN L. MICA, Florida 

DON YOUNG, Alaska 

THOMAS E. PETRI, Wisconsin 

HOWARD COBLE, North Carolina 

JOHN J. DUNCAN, JR., Tennessee 

VERNON J. EHLERS, Michigan 

FRANK A. LOBIONDO, New Jersey 

JERRY MORAN, Kansas 

GARY G. MILLER, California 

HENRY E. BROWN, JR., South Carolina 

TIMOTHY V. JOHNSON, Illinois 

TODD RUSSELL PLATTS, Pennsylvania 

SAM GRAVES, Missouri 

BILL SHUSTER, Pennsylvania 

JOHN BOOZMAN, Arkansas 

SHELLEY MOORE CAPITO, West Virginia 

JIM GERLACH, Pennsylvania 

MARIO DIAZ-BALART, Florida 

CHARLES W. DENT, Pennsylvania 

CONNIE MACK, Florida 

LYNN A WESTMORELAND, Georgia 

JEAN SCHMIDT, Ohio 

CANDICE S. MILLER, Michigan 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

BRETT GUTHRIE, Kentucky 

ANH ‘‘JOSEPH’’ CAO, Louisiana 

AARON SCHOCK, Illinois 

PETE OLSON, Texas 

TOM GRAVES, Georiga 

(II) 

SUBCOMMITTEE ON ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS, AND EMERGENCY

MANAGEMENT

ELEANOR HOLMES NORTON, District of Columbia, Chair 

BETSY MARKEY, Colorado 

MICHAEL H. MICHAUD, Maine 

HEATH SHULER, North Carolina 

RUSS CARNAHAN, Missouri 

TIMOTHY J. WALZ, Minnesota 

MICHAEL A. ARCURI, New York 

CHRISTOPHER P. CARNEY, Pennsylvania, 

Vice Chair 

DONNA F. EDWARDS, Maryland 

THOMAS S. P. PERRIELLO, Virginia 

HANK JOHNSON, Georgia 

JAMES L. OBERSTAR, Minnesota 

(Ex Officio) 

MARIO DIAZ-BALART, Florida 

TIMOTHY V. JOHNSON, Illinois 

SAM GRAVES, Missouri 

SHELLEY MOORE CAPITO, West Virginia 

MARY FALLIN, Oklahoma 

BRETT GUTHRIE, Kentucky 

ANH ‘‘JOSEPH’’ CAO, Louisiana 

PETE OLSON, Texas 

(III) 

(V) 

CONTENTS Page 

Summary of Subject Matter .................................................................................... vi 

TESTIMONY 

Bingham, Lisa Blomgren, Professor, School of Public and Environmental Affairs, Indiana University and Visiting Professor of Law, William S. Boyd 

School Of Law, University Of Nevada, Las Vegas ............................................ 7 

Daniels, Stephen, Chairman, Civilian Board of Contract Appeals ...................... 28 

Jadacki, Matt, Assistant Inspector General for Emergency Management Oversight, Department of Homeland Security .......................................................... 7 

McCarthy, Francis, Federalism, Federal Elections and Emergency Management Section, Congressional Research Service .................................................. 7 

Riley, Mark, Chief of Staff, Governor’s Office of Homeland Security and 

Emergency Preparedness, State of Louisiana ................................................... 28 

Russell, Tony, Region VI Administrator, Federal Emergency Management 

Agency ................................................................................................................... 28 

Womack, Mike, Executive Director, Mississippi Emergency Management 

Agency, State of Mississippi ................................................................................ 28 

PREPARED STATEMENT SUBMITTED BY MEMBERS OF CONGRESS 

Taylor, Hon. Gene, of Missouri ............................................................................... 53 

PREPARED STATEMENTS SUBMITTED BY WITNESSES 

Bingham, Lisa Blomgren ........................................................................................ 58 

Daniels, Stephen ...................................................................................................... 66 

Jadacki, Matt ........................................................................................................... 70 

McCarthy, Francis ................................................................................................... 80 

Riley, Mark ............................................................................................................... 93 

Russell, Tony ............................................................................................................ 106 

Womack, Mike .......................................................................................................... 115 

ADDITION TO THE RECORD 

Amnesty International, statement for the record ................................................. 124 

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(1) 

HEARING ON FIVE YEARS AFTER KATRINA: 

WHERE WE ARE AND WHAT WE HAVE 

LEARNED FOR FUTURE DISASTERS 

Wednesday, September 22, 2010 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON ECONOMIC DEVELOPMENT, PUBLIC

BUILDINGS AND EMERGENCY MANAGEMENT, 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:11 p.m. in room 

2167, Rayburn House Office Building, the Honorable Eleanor 

Holmes Norton [Chairman of the Subcommittee] presiding. 

Ms. NORTON. Good afternoon. 

We are pleased to welcome our witnesses to another of our important series of Subcommittee hearings to make certain that there 

is real progress in the recovery from Hurricanes Katrina and Rita 

on the Gulf Coast. 

Today we will evaluate the efforts of the Federal Emergency 

Management Agency, as well as the affected State and local governments, in their efforts to proceed more rapidly with their work 

on the long five-year recovery from these storms. 

This hearing is part of the vigorous oversight agenda that this 

Subcommittee has pursued on a bipartisan basis since the storms 

struck our Nation in 2005. 

Today we will hear about the arbitration program mandated in 

the American Recovery and Reinvestment Act, as well as about 

other steps that the leadership at FEMA is taking to improve the 

pace and the quality of recovery efforts on the Gulf Coast. Nearly 

a year ago, before our arbitration mandate was instituted to break 

the logjam on billions of dollars of projects, the Subcommittee received testimony about how the arbitration program would be 

structured. Today we are not merely looking at what has been done 

and what currently is being done, we also are looking forward to 

seeing what lessons we can learn from these experiences for future 

disasters. We do not intend to allow logjams to develop when there 

is Federal money on the table again. 

We will hear from those who are engaged in these efforts to improve the recovery from Hurricanes Katrina and Rita and also from 

experts in the Federal Government and academia who will provide 

analysis on these efforts. 

Prior to last year, FEMA resisted efforts from the Subcommittee 

and other stakeholders to try to break the logjam on public assistance projects that were seriously impeding the recovery from the 

2 

storms. Yet at that time, in testimony before the Subcommittee, 

FEMA officials denied that there was even a problem with the Public Assistance Program. 

Some of the key recommendations of the Subcommittee to improve the recovery from these storms were reflected in H.R. 3247, 

the Hurricanes Katrina and Rita Recovery Facilitation Act of 2007. 

This is 2010. This Subcommittee reported H.R. 3247 and the House 

passed it in October of 2007. As a matter of fact, we passed this 

bill not once, but twice, as a similar bill was passed in October, 

2008. 

Unfortunately, the Senate never passed this legislation. Many of 

the recommendations in today’s testimony were included in that 

legislation three years ago. These include such common sense steps 

as encouraging the use of third parties to review and expedite public assistance appeals, simplified procedures under which small 

projects would be permitted to proceed on estimates for projects up 

to $100,000, and raising the Federal contribution for certain 

projects from 75 percent to 90 percent. 

We are encouraged that recent hearings and the written statement submitted for today’s hearing indicate progress. Like an individual who is in personal recovery, the first step to improvement 

is acknowledgment that there is a problem. FEMA Administrator 

Craig Fugate did acknowledge that there were problems with recovery from these storms at our Subcommittee hearing earlier this 

year. 

FEMA is taking steps short of arbitration to resolve disputes, including appointing special joint expediting teams of FEMA and 

State officials to resolve lingering disputes. 

In some cases, common sense solutions also are being applied in 

other areas. For example, moving FEMA officials so that they are 

in the same city as their state counterparts. Another costly and exasperating example is eliminating dual consultants, where both 

sides would hire licensed professionals to provide expert opinions. 

And this elimination of dual consultants was a strong recommendation of this Subcommittee. 

Astonishingly, both State and Federal consultants were paid 

with Federal disaster funds to essentially set up an adversarial 

process to determine costs. This was a prodigious waste of money. 

At a Subcommittee hearing earlier this year, Administrator 

Fugate announced that FEMA would move to a system, when appropriate, allowing both parties to rely on the advice of a single licensed professional. 

It is important to emphasize that many of the items that are recommended to improve the Public Assistance Program in testimony 

today are already authorized and within FEMA’s discretion to 

carry out. For example, FEMA currently has authority to engage 

in alternative dispute resolution as a result of the Administrative 

Dispute Resolution Act of 1996, and has been encouraged to do so 

by this Subcommittee. 

A number of witnesses today note that one significant improvement in FEMA’s Public Assistance Program would be to move to 

a system that pays State and local governments for repair and construction projects on the basis of the cost estimates as is done in 

the insurance industry. FEMA is not only encouraged to do so, but 

3 

has been mandated to do so by the Disaster Litigation Act of 2000, 

a bill that was passed by this Committee, enacted by Congress and 

signed by President Clinton nearly 10 years ago. 

That Act mandated that FEMA move to a cost-estimating system 

once FEMA implemented a rule to do so. So it is unconscionable 

that nearly 10 years later, the required rulemaking has not occurred. 

As this Subcommittee previously noted, had FEMA implemented 

this provision as it was authorized to do in 2000, many of the 

delays in the recovery from Hurricanes Katrina and Rita would 

have been avoided. 

In order to remedy this delay, legislation recently passed by the 

Committee would require FEMA to implement this provision within 180 days of enactment. I hope that this new statutory mandate 

will prove unnecessary, however, because legislation should not be 

necessary and FEMA is fully empowered to make this step on its 

own. 

We are looking forward to hearing from today’s witnesses and we 

very much appreciate their being here on how arbitrations are proceeding, how FEMA and the States are moving forward on the recovery from the devastating storms, and the lessons that their experiences teach us for further actions. 

Let me welcome again the witnesses and once again offer the 

gratitude of the Subcommittee for their willingness to come forward. 

It is my great pleasure to introduce the Ranking Member, Mr. 

Diaz-Balart, who is from a State which has extensive experiences 

of just the kind we are discussing today. 

Mr. DIAZ-BALART. Thank you, Madam Chairwoman. 

Let me just first thank you for this very important hearing, for 

calling this very important hearing. Five years after Katrina, it is 

hard to believe. Right? 

But those of us in Florida understand that you have to learn 

from these disasters in order to mitigate for future disasters. Andrew was our wake-up call in Florida, Hurricane Andrew, and a lot 

of good lessons were implemented after that. And obviously 

Katrina was the wake-up call for the rest of the Country and it was 

a big wake-up call. 

So it has now been five years since it hit Louisiana, Mississippi, 

Texas, and Alabama, and also Florida. Florida was actually hit relatively hard by Hurricane Katrina. We had a lot of interesting 

issues in those days trying to remind people that Florida had also 

been hit by Katrina. It made landfall in the District that I am privileged to represent, and also just part of the Gulf Coast. 

So obviously we all know that Katrina left a tremendous amount 

of devastation in its wake. But since Hurricanes Katrina and Rita, 

Congress has taken a number of I think really important steps, 

frankly, to strengthen FEMA and our emergency management capabilities, including passing the Post-Katrina Reform Act. 

Now, while that legislation took I think some very important 

steps to improve preparedness and response, there is a lot more 

that obviously needs to be done. For example, all too often recovery 

following a major disaster has been painfully slowed by bureaucratic red tape and just inflexible policies. And the impact of this 

4 

red tape is especially greatly magnified following a large scale disaster when that assistance is really critical, really critical to the rebuilding of those local communities that have been devastated. 

So finding ways to cut through that red tape and to expedite 

funding really ultimately I think also saves money in the long 

term. And it helps those communities recover more quickly. In 

hearing after hearing, and the Chairwoman has mentioned that, 

we have received testimony about the frankly very slow process 

which communities have to navigate. And this process, it really 

taxes Federal, State and local resources. 

So I need to mention Congressman Cao from this Subcommittee 

who has worked tirelessly, and frankly very effectively, to cut 

through the bureaucracy, the red tape, to free up funding for the 

recovery of Louisiana. And he is, as always, here today. But last 

year, Ranking Member Mica hosted two roundtables at Congressman Cao’s request to bring together FEMA, the State and the local 

representatives, to work through that funding backlog to try to 

break through those barriers and figure out if we could work 

through that. And since then, FEMA put into place decision teams 

to tackle the growing funding backlog. 

Last year, a new arbitration process was established to expedite 

recovery funding which has freed out more funds for the rebuilding 

of Louisiana, and I think that is a really positive step. And I am 

pleased that today we will hear more on how well that process is 

moving along. 

So while it will be important to determine whether or how even 

an arbitration process should be used in the future, frankly it 

shouldn’t take Congressional action and an arbitration panel to cut 

through the bureaucratic red tape. It is something that should just 

happen naturally. 

So responsible changes to the Stafford Act and to FEMA policies 

can go a long way to really speed up the recovery of communities 

after they have been hit by one of these disasters. And we know 

that others will be coming, unfortunately. 

For example, reviewing and streamlining FEMA policies and procedures or implementing the cost estimate provisions that the 

Chairwoman just mentioned, and as usual the Chairwoman and I 

really see eye to eye and there is very little light between us on 

most of these issues. Doing that could go a long way in speeding 

up the recovery process and again helping to rebuild the communities. 

This Congress, I am glad to have worked with my Chairwoman, 

Chairwoman Norton, along with Chairman Oberstar and Ranking 

Member Mica, on H.R. 3377, the Stafford Act bill. The bill, if 

passed, would improve preparedness and mitigation, including incentives for building codes, improving the Nation’s public alert and 

warning system. Those are two things that I have been working on 

now for a number of years, along with the Chairwoman. And providing for the transfer of excess goods and housing units to local 

communities, which we keep hearing about. Unfortunately, this 

Congress has decided to not move that bill forward, maybe because 

they felt that naming post offices was more important. 

I hope that today we will be able to examine the progress made 

in the recovery efforts of the Gulf Coast and what lessons can we 

5 

learn, have we learned, to better prepare for the future disasters 

that we know unfortunately will hit us. 

So I once again want to also thank the witnesses for joining us 

today. We really look forward to your testimony. 

And thank you, Madam Chairwoman, for calling this very important hearing. 

Ms. NORTON. Thank you very much, Mr. Diaz-Balart. 

I ask unanimous consent that Representative Gene Taylor of 

Mississippi, a Member of the Committee on Transportation and Infrastructure, be permitted to participate in today’s Subcommittee 

hearing. 

Without objection, so ordered. 

Mr. Taylor, have you any opening statement? 

Mr. TAYLOR. Madam Chairman, just only to thank you and the 

Ranking Member for letting me participate. I have a fairly lengthy 

statement for the record that I would like to submit. 

Ms. NORTON. So ordered. Thank you, Mr. Taylor and welcome. 

Mr. Cao, have you an opening statement? 

Mr. CAO. Yes, I do, Madam Chair. 

And first of all, I just want to thank you and the Ranking Member for your leadership in this important Subcommittee and for 

working with me on some of my District’s greatest challenges in 

our ongoing recovery. Both of you have been steady and compassionate partners, and together we have held government accountable for their responsibilities in the recovery of Orleans and Jefferson Parishes. 

We have made a good team both in oversight initiatives and on 

the legislation we have successfully passed during this Congress. 

So on behalf of my constituents, I would like to offer to both of you 

our thanks. 

August 29 of this year marked five years since Hurricane 

Katrina landfall along the Gulf Coast. The tragic loss of life alone 

made this one of the greatest disasters this Nation has ever seen. 

And more than 1.2 million people were under some type of evacuation order; 3 million were left without electricity for weeks; and 

hundreds of thousands were left jobless. 

So make no mistake, Hurricane Katrina destroyed Orleans and 

Jefferson Parishes and these effects are still felt today. Many of the 

critical institutions like Charity Hospital, and basically the entire 

health care infrastructure in the hardest-hit New Orleans east 

have never reopened. Many basic services like hospitals, police, fire 

and rescue, libraries and schools were wiped away by the floodwaters and today remain empty and padlocked. In the immediate 

area around New Orleans, 80 percent of the buildings and 40 percent of the housing stock were damaged in some way. 

But hurricane recovery continues even in the face of the new environmental, economic and health challenges caused by the massive BP oil spill. We have had tremendous successes in the past 

two years, and this is because of the hard work of the people I see 

before me today, including Tony Russell and Mark Riley. So I 

thank both of you for everything, for your compassion, as well as 

for your partnership in this recovery process. 

For the past two years, I have been focused on both institutional 

change and the release of recovery money already approved by the 

6 

Congress to the devastated region. Since January of 2009, through 

sustained oversight by this Subcommittee, FEMA has obligated 

$2.55 billion in recovery dollars to Louisiana. These are critical dollars for the State and include education, $1.62 billion; public works, 

$235 million; public safety and protection, $177 million; health 

care, $7.9 million; public infrastructure, $428 million; and debris 

removal emergency protective measures, $83 million. 

From this, I fought for a resolution to the Charity Hospital dispute, which eventually came with the $475 million settlement to 

reopen that critical health facility. This is in addition to hundreds 

of millions for local universities, school districts, and public services 

which came only after I brought all the parties to the table to resolve their differences. 

I also launched an investigation into allegations of mismanagement, inordinate delays and unnecessary additional levels of bureaucracy at the FEMA office in New Orleans, which directly led 

to the closure of the office and its reorganization. It also led to the 

streamlining by Mr. Russell and his staff of hundreds of projects 

that had been stalled. 

In addition, we have worked hard on institutional reform within 

FEMA to ensure that policies are relevant and responsive to actual 

disasters and catastrophes. In talking with constituents, with 

State, local and Federal officials, with FEMA Administrator 

Fugate, and with one of our witnesses today, Mr. McCarthy, I 

drafted H.R. 3635, the Disaster Relief and Recovery Development 

Act of 2009. This would streamline operations and increase accountability and transparency at FEMA; return focus on FEMA’s 

role as the recovery and coordinating agency; formally direct FEMA 

to consider lump sum settlements for projects similar in nature; 

and ensure critical emergency information is reaching citizens. 

I am pleased to report that the majority of these provisions were 

included in H.R. 3377, which passed out of Committee. 

My constituents know Stafford Act as something that was evil 

and prohibited us from progress and recovery. But because of our 

working together on this in this Subcommittee, we will make it 

work for those who have been affected by the disaster. 

We still have a long way to go. I look forward to working with 

my colleagues to continue our important reforms. I look forward to 

the testimony from our witnesses and discussing the critical areas 

remaining for reform. 

So again, I would like to thank the Chairwoman and the Ranking Member for their hard work on this Subcommittee and I yield 

back. 

Ms. NORTON. Thank you very much, Mr. Cao. 

We will proceed to panel one. We will begin with Matt Jadacki, 

Assistant Inspector General for Emergency Management Oversight 

at the Department of Homeland Security. 

Mr. Jadacki? 

7 

TESTIMONY OF MATT JADACKI, ASSISTANT INSPECTOR GENERAL FOR EMERGENCY MANAGEMENT OVERSIGHT, DEPARTMENT OF HOMELAND SECURITY; FRANCIS MCCARTHY, 

FEDERALISM, FEDERAL ELECTIONS AND EMERGENCY MANAGEMENT SECTION, CONGRESSIONAL RESEARCH SERVICE; 

LISA BLOMGREN BINGHAM, PROFESSOR, SCHOOL OF PUBLIC AND ENVIRONMENTAL AFFAIRS, INDIANA UNIVERSITY 

AND VISITING PROFESSOR OF LAW, WILLIAM S. BOYD 

SCHOOL OF LAW, UNIVERSITY OF NEVADA, LAS VEGAS 

Mr. JADACKI. Good afternoon, Madam Chairwoman and Members 

of the Subcommittee. 

Thank you for the opportunity to discuss where we are and what 

we have learned in the five years since Hurricane Katrina. In brief, 

we have learned a lot since Katrina, and FEMA is better prepared 

to handle large disasters. 

There is, however, still room for improvement to ensure that preparedness, response, recovery and mitigation efforts are carried out 

effectively and efficiently, and in a manner that minimizes waste, 

fraud and abuse. 

My office has conducted a significant amount of work in the past 

five years assessing FEMA’s programs and policies, as well as conducting audits of disaster grantees and sub-grantees. Our program 

let us cover a wide range of areas, including acquisition management, logistics, individual assistance, public assistance, and mitigation. 

Today, I will discuss our recent report on public assistance policies and procedures, as well as the arbitration process that has 

been established for some public assistance projects. 

In response to concerns raised by this Committee, my office conducted an in-depth assessment of design and implementation of 

FEMA’s Public Assistance Program policies and procedures. Our 

review focused on the efficacy of FEMA’s policies and procedures 

with respect to the individuals and organizations that have to navigate them, the grantees and the sub-grantees. 

Our assessment revealed multiple challenges that significantly 

hinder FEMA from consistently administering the PA Program in 

an effective and efficient manner. These challenges include untimely funding determinations, deficiencies in program management, and poorly designed performance measures. Although we determined many of these obstacles derive from personnel-based 

issues, there are other noteworthy causes that contribute to the obstacles that FEMA must overcome. 

Consequently, we presented FEMA with 16 recommendations to 

improve not only FEMA’s process for reviewing and approving the 

public assistance projects, but the overall administration and delivery of the program. 

FEMA has taken some actions in response to our recommendations. As I said, we found challenges in the areas of program management and performance measures. FEMA needs to improve the 

timeliness of PA to avoid project delays and improve program efficiency. Such improvements should center on the appeal determination process, the environmental and historic preservation process, 

and the reconciliation of insurance settlements. 

8 

In its response to our report, FEMA acknowledged the untimeliness issue, but insisted the problem is being addressed through the 

application of additional resources and improvements in the process of appeals. We remain concerned that FEMA does not plan to 

take action to establish time frames in the appeal process beyond 

what is currently in regulation. 

For example, current regulations do not include a time frame for 

applicants who have submitted additional information to support 

their appeal or a time frame for independent technical experts to 

provide information to FEMA on the appeal. 

Another area that could benefit from improvement is FEMA’s 

management of the PA Program. Keys to successful program management include the use of the cost estimating format, as required 

by the Disaster Mitigation Act of 2000; more accurate cost estimation and scopes of work; procedures to minimize repetitive documentation requests; and identifying eligible PA hazard mitigation 

work early on in the process. 

Contributing to many of the challenges we identified in our report are turnover, inexperience and limited training within FEMA’s 

disaster workforce. FEMA has identified several areas of planned 

improvement in its personnel system and is taking a number of actions in this area, but full implementation is lacking. 

We identified various alternatives that could be employed to 

streamline the PA process. All those alternatives represent opportunities to improve the program. Each alternative also presents 

drawbacks. Those alternatives that we explored include negotiated 

settlements, increasing the large projects threshold, replacing some 

grants with mission assignments, transferring Federal disaster programs from other agencies to FEMA or vice versa, and providing 

interval payments based on project estimates. 

Despite the challenges here, we have learned that many of 

FEMA’s customers consider the current PA Program design inherently sound. They believe the flaws are primarily in execution. 

Consequently, we are in agreement that most of the challenges 

could be significantly diminished by focusing on the fundamentals 

upon which the PA Program rests. 

There are times, however, when FEMA and its grantees and subgrantees reach an impasse in the application and appeals process. 

Hurricane Katrina occurred five years ago, yet there are still critical public assistance projects that have not been funded. In an effort to break the impasse that sometimes leaves PA applications in 

limbo for years, Congress enacted legislation that established an 

arbitration process for PA projects related to Hurricanes Katrina 

and Rita. As of September 9, 2010, there were 25 arbitration requests, 20 of which have been undecided. The most well known of 

these arbitration cases is Charity Hospital, in which the arbitration 

panel awarded the applicant $474 million for replacing the hospital. 

We suggested in our report on public assistance policies and procedures that FEMA should consider establishing a mediation and 

arbitration process for appeals that reach an impasse. We are currently monitoring the arbitration cases and plan to conduct work 

in this area to determine whether the current arbitration frameVerDate Aug 31 2005 14:31 Dec 22, 2010 Jkt 000000 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 P:\DOCS\58458.0 KAYLA
9 

work provides a means for speeding assistance to communities, 

while protecting the interests of American taxpayers. 

Madam Chair, this concludes my prepared remarks. I welcome 

any questions that you or the Members may have. 

Thank you. 

Ms. NORTON. Thank you very much, Mr. Jadacki. 

Next, Francis McCarthy, Federal Elections and Emergency Management Section of the Congressional Research Service. 

Mr. McCarthy? 

Mr. MCCARTHY. Thank you, Madam Chair. 

Good afternoon. It is an honor to appear before you today to talk 

a bit about public assistance, or the PA Program, and ways that 

we might be able to improve it. 

The appeals process for PA generates a lot of interest based upon 

the huge number of dollars involved, but also because the projects 

are important to a community’s recovery from a disaster. Two of 

the criticisms that stand out on PA appeals are usually the timeconsuming nature of the appeal and how long it can drag out, but 

also a feeling that the appeals process is internal to FEMA without 

enough outside review. 

Many have noted that due to its experience in disaster situations, it is important for FEMA both to provide leadership and to 

offer flexibility in the administration of disaster programs. In essence, FEMA works on disasters every day, while States and localities become involved due to an extraordinary event that may never 

recur in their area. So it is difficult for States and local governments to match FEMA’s mastery of the details of the appeals process. 

That is also why it is important that FEMA explain its process 

fully to applicants in order to provide a level playing field for the 

exploration of eligible damage and the costs to address that damage. 

There are a couple of options that could be utilized to lessen the 

need for appeals. As has been mentioned by everyone, the cost-estimating process was approved in DMA2K in 2000. And what that 

provides for is the ability for FEMA to pay for large projects based 

upon an agreed upon estimate. Finally implementing that authority would go a long way towards shortening any appeals. 

A second option is to use the alternate projects option to turn 

multiple projects into a single project that captures the recovery vision of a community. I think the recent experience with the New 

Orleans Recovery School District might suggest a promising approach in this area. 

There are two existing options to lessen appeals, and maybe improve the process itself. A project decision team, similar to one 

used on the Gulf Coast, is a concept that is of interest not due to 

only its recent success, but also in the fact that conceptually it 

brings in experts from within the agency that have not previously 

been associated with the case in dispute and they can provide an 

objective review. 

A second existing option is for increased use of the alternative 

dispute resolution process. FEMA has an office that can do this, 

and it could be used more extensively to really improve the relationship between FEMA and applicants. 

10 

Regarding the arbitration system, it is not new to Federal disputes, but it is very new to the recovery process. And while the arbitration system may arguably lead to a more equitable result, it 

may also stretch out the time of the recovery process and thus the 

time of restoration. 

A vital consideration is whether the arbitration process should 

move toward a common agreement, or whether it approximates litigation, rather than mediation. If so, an adversarial arbitration 

process could undercut the existing Federal-State relationship and 

reduce the overall level of cooperation for all disaster response and 

recovery programs. 

In approaching the establishment of permanent arbitration authority, Congress ought to consider a number of criteria; if the authority should be triggered by the projected cost of a project, or by 

the definition of the project itself. One of the things I thought of 

in looking at arbitration is that in some ways we could suggest that 

maybe the threshold for dollars should be higher so that the there 

will be fewer requests. 

On the other hand, maybe we should think of arbitration as 

something to have in the quiver that is going to encourage more 

settlements, but also that could be used for any problem, no matter 

how small, whether it involves not just large public assistance 

projects, but also the kind of disputes that arise within individual 

assistance where people are disputing the types of housing that is 

being used or the way that services are being provided. 

I think if we are going to use arbitration, it might be something 

that gives the President the discretion to use it regardless of the 

size of the project, but as a way to overcome an impasse. 

Finally, I want to mention that a block granting approach has a 

number of different angles to it. I think a number of approaches 

have come forward. We have heard lump sums referred to, and I 

would particularly speak to the special procedures for widespread 

damage that are in H.R. 3377, that really suggest a means of getting to a cost-estimating proposal that could end with a block grant 

for disaster areas. 

There are many approaches that can make a positive contribution to the discussion. Congress may also wish to conduct a study 

of the current arbitration pilot process to determine the efficacy of 

the panel findings. Similarly, Congress may also wish to examine 

the New Orleans Recovery School Project that I mentioned, and the 

arbitration process that has just completed to see which ones merit 

replication. 

In addition, other suggestions such as the special procedures in 

H.R. 3377 could at least initially be used as a pilot program to see 

how it works. The pilot programs in both I.A. and PA I think really 

did succeed in showing some effective processes that can be used 

for the benefit of disaster victims and their communities. 

I hope my testimony was focused on those themes and proposals 

that can improve PA and I would be happy to answer any questions you might have. 

Ms. NORTON. Thank you, Mr. McCarthy. 

Finally, Lisa Bingham, Professor Bingham, School of Public and 

Environmental Affairs, University of Indiana, also the University 

of Nevada, Las Vegas. 

11 

Professor Bingham? 

Ms. BINGHAM. Thank you, Madam Chairwoman and Members of 

the Committee. It is a tremendous honor and privilege to be here 

today to discuss the use of dispute resolution in public assistance 

programs under the Stafford Act. 

My areas of expertise include dispute resolution in the Federal 

Government. I have done research with the United States Postal 

Service on mediation of discrimination cases; with the Department 

of Justice on its use of dispute resolution in Federal litigation involving the Assistant U.S. Attorneys; with the Occupational Safety 

and Health Review Commission on its use of settlement procedures. 

In addition, I have served as a consultant with the Departments 

of the Air Force, Agriculture and the National Institutes of Health. 

I have, however, never served as a consultant in any capacity with 

FEMA and this is my first experience doing research on their 

project. 

The arbitration program to date has entailed approximately 26 

cases. A number of those involve cases in which the parties have 

asked for the case to be withdrawn by agreement or dismissed by 

agreement. It appears that there are settlements. In addition, there 

are a number of awards. But the arbitration, the total number of 

cases is too small to do any empirical research on the program. 

What we can say about the program is that there do not appear 

to be any administrative problems. I believe it was anticipated 

when this program was created that there would be many more 

cases than have in fact been filed. And the Civilian Board of Contract Appeals, which has substantial expertise in the substantive 

area of these disputes, has been able to absorb this caseload and 

establish an orderly system that does not present any concerns 

about due process or fairness, unlike arbitration programs, for example, for consumers and employees that are mandated by corporations or employers. 

This is an entirely voluntary program and therefore it doesn’t 

present issues about unequal bargaining power or fairness of process. 

However, the program has resulted in substantial awards 

against FEMA and there are a number of alternatives that would 

provide perhaps faster, less expensive and better ways of handling 

conflicts involving the Public Assistance Program. FEMA has an 

Office of Dispute Resolution. That Office of Dispute Resolution has 

authority under the Administrative Dispute Resolution Act to help 

the agency design systems for handling conflict. To date, it has designed a system for employment disputes. 

FEMA does have some experience using mediation and voluntary 

processes for hurricane-related damage. It did so in 1998 in a dispute involving Hurricane George and the island of Puerto Rico, and 

mediated very successfully a dispute there. 

Mediation is very different from arbitration. Arbitration is an adjudicatory process that is adversarial, involves the imposition of a 

final and binding award as it is designed in this program. Mediation is assisted negotiation and a voluntary process in which the 

parties use a third party to help them reach a voluntary settlement. 

12 

FEMA could, and I would recommend, that FEMA undertake a 

comprehensive dispute system design process. It could develop a 

system that involves negotiation, mediation, potentially non-binding fact finding, that could get at disputes much earlier in the life 

of the conflict. It could involve stakeholders, including grantees, 

sub-grantees, nonprofits, local governments, as well as the public 

in its design process, and its own staff. It should develop interestbased negotiation training for its staff, and a comprehensive design 

would include an evaluation system that would entail feedback 

from stakeholders, including grantees. 

This system should also address the question of the scope of negotiation under the Stafford Act, which I believe has been the 

source of some conflict as reflected in the Inspector General’s report. 

This concludes my prepared remarks. I am happy to answer any 

questions of the Committee. 

Ms. NORTON. Thank you very much, Ms. Bingham. 

I want to thank all three of you for really quite informative and 

interesting testimony. 

Let me say a word as a predicate for my questions about the arbitration process. This Subcommittee was faced with more than $3 

billion lying on the table in the middle of the Great Recession. It 

hadn’t moved. A Member from Louisiana in the Senate was so disturbed, I can’t blame her, at the misery of seeing nothing happen 

that she actually put into legislation in an appropriations bill that 

the President would appoint arbitrators for the Gulf Coast. It just 

got that bad. 

So the first thing you should bear in mind is that the Subcommittee is very aware that arbitration is rarely used except in 

circumstances where agreement has broken down. 

We then worked with the Senate to say that is going to be even 

more cumbersome to go through the Administration. And the result 

was the arbitration process that you have. And you do note that 

we looked to the existing procedures and found that there were 

people of some independence that could all along have been used 

and are used in this process. 

Now, we would be very interested and do note that we believe 

the fact that the arbitration process has had an effect on both the 

agency and on the States. That is what it is supposed to do. 

This is my concern, and I think particularly, I don’t know if it 

is you, Professor Bingham, or you, Mr. McCarthy, talked about 

what we are very aware of and very exasperated was not used, and 

that is an ADR system within FEMA. One of the reasons we figured out that the process didn’t move, whether you were talking 

about the appeals process, it still doesn’t move, or the negotiation 

process, is quite simply FEMA is a party. FEMA’s job is to preserve 

the taxpayer funds of the people of the United States of America. 

The job of Mississippi, the job of Louisiana is to extract as much 

as these States and these localities can. 

As Chair of the Equal Employment Opportunities Commission, I 

set up a system that got rid of the backlog, an early resolution system. So I am not only familiar, but a great proponent of early resolution systems. But the EOC was an independent agency. So when 

you suggest that FEMA as a party, for example, within FEMA, if 

13 

I am Mr. Cao’s District or I am Mr. Taylor’s District, and FEMA 

invites me into its processes, and says just come right here. And 

here you have an agency, a part of FEMA, which will decide this 

dispute. 

I want to know whether you believe that the localities and the 

States involved are to have full confidence that out of such a process located within FEMA, there could be a just resolution, and particularly whether you believe it would go any faster than the 

present appeals process or the present arbitration process. 

I give that to any of you who care to answer. It is a question of 

independence. Who gets to decide when one of the parties is holding the money and the other side wants the money? And there is 

by definition an adversarial relationship unless FEMA isn’t doing 

its job, or Mississippi and Alabama aren’t doing their jobs. 

Ms. BINGHAM. I understand the question and I would be happy 

to address it, Madam Chairwoman. 

A comprehensive system would be one that started at the point 

that the parties are developing the project worksheet. The parties 

are already negotiating and working collaboratively in many instances in developing the estimates of costs. But we don’t have a 

system that provides interest-based negotiation training skills. 

Ms. NORTON. Which would mean they would develop the costs 

collaboratively, the cost sheets collaboratively as well? 

Ms. BINGHAM. I confess I am not an expert on FEMA’s internal 

procedures. 

Ms. NORTON. No, but go right ahead. Don’t assume that those 

procedures can’t be changed. OK? 

Ms. BINGHAM. My understanding of the nature of the disputes 

are that they involve facts, the facts of estimates of costs, the estimates of construction, how those relate to total costs. That is analogous to any kind of an insurance program where we are trying to 

estimate what the policy should pay. Negotiation in that circumstance is common. It is a daily fact, but it is improved greatly 

with skills training. And that skills training would encompass how 

to negotiate constructively using principles and interests, as opposed to adversarial bargaining like haggling over the price of a 

car. 

It would also encompass discussions of the scope of bargaining. 

I believe that one of the areas of disagreement is the question of 

FEMA’s obligations under the law, as distinguished from the facts 

of a particular project. And so a comprehensive system would start 

with negotiation. You could then move to mediation. Mediation 

could either be provided by inside neutrals, but there are also outside neutrals. There is a shared neutrals program in the Federal 

Government that would provide employees from other Federal 

agencies who are substantially neutral. And that could be a next 

step. 

There are other alternative processes that are designed to encompass, including fact finding which can be either non-binding or 

binding arbitration just on the facts, not the law. And then there 

is also a process called partnering that the Army Corps of Engineers uses where when there is a big construction project, they set 

up a team. That sounds to me that it may have some similarity to 

the expedited teams that FEMA is now using, where all the players 

14 

involved in that project have a retreat. They have shared negotiation training. They set up an agreed procedure for handling conflict. And then there are backup processes. Binding arbitration of 

rights is a last resort under these kinds of designs. 

Ms. NORTON. That is very helpful, your suggestions, and that is 

from within the Federal Government. Your last suggestion comes 

from within the Federal Government itself. 

Mr. McCarthy, you speak about cost estimating procedures, I 

take it, from the insurance industry, in your testimony? 

Mr. MCCARTHY. Actually, insurance and other industry experts. 

That was FEMA’s charge, was to streamline. 

Ms. NORTON. Now, those are profit-making enterprises. How 

come they rely on, how are they able to rely on estimates and still 

stay in business and the Federal Government hasn’t been able to 

figure it out? 

Mr. MCCARTHY. Madam Chair, I have to confess I worked at 

FEMA and I worked on DMA2K and I didn’t expect it was going 

to be questioned 10 years later on why it hasn’t been implemented. 

Essentially, FEMA put together the panel it was supposed to immediately after the bill passed. It did bring in industry experts, insurance experts and other experts to set up a system that would 

work, to develop estimates that would be of assistance to local governments both on the high end and the low end. 

Ms. NORTON. But it is the part of my question, I would be particularly interested in. Somebody bumped into my car coming to 

the Congress. I called the insurance agency. They said go to the insurer and find out what is the estimate, and they paid it. And the 

people who did the car reported to them, and they didn’t come and 

negotiate with me. They told how much it would be. 

I am trying to understand why they are able, and I recognize 

that they have people there who look at it, who come over. They 

are not just a pass-through. 

I am asking how very profitable industries like the insurance industry can say give me your cost estimate, take it, and my car was 

fixed in a few days. Now, that is small compared to what my colleagues have gone through on the Gulf Coast, but I do not understand the process and would like to understand it. And maybe I 

would understand why it took some time for FEMA to implement 

it. 

Mr. MCCARTHY. I can’t answer on why that happens. I think in 

some ways the culture that grew up in the PA Program was we are 

going to be certain of every cost before a dollar is spent; before the 

audit comes and gets us; that we are going to be certain so that 

we are not going to be caught on anything, so we will wait until 

the end of the process to pay. 

Ms. NORTON. I see. You may be right in the government. 

Mr. Jadacki, and then I am going to go on to my colleagues before I come back. I am interested in the shortest way to get an answer. That is why the arbitration process ought to be a last resort. 

It hasn’t always been a last resort. After all, the State, I understand we have been using both. And the State can opt for arbitration, I guess it is. But once they do, they are into arbitration, which 

is the way it ought to be. 

15 

But I understand from your report that the appeals process still 

can go on for as much as eight or nine months, and that the arbitrator gets done in 60 days. Now, I am trying to find out what the 

reasons for the much longer process, because I don’t even think 

they accept, do they, the findings such as they are of the appeals 

process? They do their own independent findings. 

How in the world could you do that in 60 days with judges? That 

is who they are. And the appeals process takes many times that. 

Mr. JADACKI. In some cases, it takes years to get the appeals 

done. There are several rounds of appeals and there are timelines. 

I think there are 90 days, and I think in reviewing your bill, the 

proposed legislation, you reduce that to 60 days, which I think is 

a good idea. 

The problem is with the arbitration process, my understanding 

is everything has to be in, the witnesses have to be, everything has 

to be prepared so they make a decision. In the appeals process, 

what we found was that documentation submitted, may be deficient. They go back and ask the applicant for additional documentation. The clock stops. It starts again when the additional information comes in. And the process just takes an inordinate 

amount of time to get done because there is a lot of negotiating 

back and forth. 

Ms. NORTON. Mr. Jadacki, that doesn’t sound like an appeals 

process. That sounds like an ordinary negotiation. 

Mr. JADACKI. That is a negotiation. That is exactly what it is. In 

a lot of cases, some of the ones I have been reviewing, and you used 

the example before about the accident. I think a lot of the cases it’s 

the extent of damage. How much damage did it cause? I have seen 

some cases where FEMA comes in and says, well, we are going for 

repairs because it is less than 50 percent, versus replacement. The 

same thing with the insurance company with your car. If your car 

was totaled, you get the entire replacement cost for that and a lot 

of the disputes result from exactly how much damage was caused. 

Now, the use of an independent, I don’t know whether it resides 

in FEMA. I think that would be very difficult to have an arbitrator 

or mediation in FEMA, but if you can agree on an independent assessor like you do in insurance companies, that both parties agree 

with, saying yes, it is 150 percent damage; we are going to pay replacement costs. Or no, it is somewhat less than that; we are just 

going to pay for the repairs. 

I think that is the basis for a lot of these problems. 

Ms. NORTON. Do you think this notion that I spoke about in my 

opening statement about dual consultants. You tell me, Mississippi, 

what the damage is. FEMA will tell you what the damage is. That 

sounds like a real setup there. 

Mr. JADACKI. Yes. It is kind of similar to what the arbitration, 

you know, there is maybe one arbitrator if you use an independent 

engineer. But it is the same basis the arbitration is, where you 

present your evidence and they present their evidence, and somebody decides. 

So if it is a damaged building, you have one entity instead of 

paying for both on the State side and the Federal side, and they 

decide, yes, this is substantially damaged and you both live by 

that. 

16 

Ms. NORTON. So just getting rid of dual consultants and having 

one agreement well ahead of time, that might not even get you to 

the appeals process. Maybe you could decide it so you wouldn’t 

even have to appeal. 

Mr. JADACKI. I think if they can agree on somebody that is truly 

independent and doesn’t have any of either side’s interest at stake, 

just like an insurance assessor, an independent insurance assessor, 

as long as you are not affiliated with the insurance company, same 

thing. They will go out and do an honest assessment and the parties live by that. There could be some negotiations back and forth 

still, but right now the process is we want this, we want this, and 

it just seems a long time to get these things settled. 

Ms. NORTON. Thank you very much, Mr. Jadacki. 

Mr. Cao, please. 

Mr. CAO. Thank you, Madam Chair. 

My first question to the panel, or anyone who might have expert 

knowledge on community disaster loans. I would like for you to 

compare for me the rules promulgated by FEMA for disasters before Katrina, and the rules promulgated by FEMA in relation communities as to loans for Katrina. 

Mr. MCCARTHY. Mr. Cao, the biggest difference would be how the 

first sets of loan were made for Katrina. I think rules were written 

differently at that point because there was an idea that there 

would be no forgiveness of any loans and that they all had to be 

paid back. And that when the second set of loans were done, that 

was after Congress had permitted the idea of forgiveness for loans. 

So I think it was somewhat different between the two sets of 

loans for CDLs, but I don’t know the exact details of how they 

changed it. 

Mr. CAO. But for disasters prior to FEMA, it was routinely done 

that CDLs were forgiven. Is that correct? 

Mr. MCCARTHY. Yes, absolutely. I think you could count on one 

hand the number of loans that were actually paid back, and those 

were very small loans to smaller communities. I think the amount 

of loans that were forgiven was well over 90 percent. In fact, dollars forgiven was well over 90 or 95 percent. 

Mr. JADACKI. Right. I actually worked in the FEMA CFO’s office 

and they had a default rate of 96 percent prior to Katrina, which 

means 96 percent of the money that was lent wasn’t expected to 

come back. And it was based on three years’ average revenues, 

post-disaster revenues. I don’t know all the formulas on that, but 

there were a couple that paid it back, but for the most part, most 

of them were canceled. 

Mr. MCCARTHY. Those were loans from Hurricane Andrew. 

Mr. JADACKI. There were floods. 

Mr. MCCARTHY. Yes. 

Mr. CAO. Now, based on the data that you have collected, can 

you provide me with a percentage of CDL loans forgiven by FEMA 

in connection with Katrina? 

Mr. MCCARTHY. I can get that information. 

Mr. CAO. I can ask Mr. Tony Russell when he comes up here 

later. That would be a lot easier. 

Mr. MCCARTHY. OK. Yes. 

17 

Mr. CAO. I know that one of the biggest issues in regards to the 

community disaster loans forgiveness for Katrina-related projects, 

or municipalities, is the issue of income, three years’ income. That 

is one of the requirements for St. Tammany, for instance, for Jefferson Parish, and some other municipalities like the Jefferson Parish Sheriff’s Department. Right after Katrina, they received a spike 

in income because of the tremendous number of people moving over 

there to temporarily reside while waiting for their homes to be rebuilt in New Orleans. 

Based on your understanding of rules promulgated by FEMA for 

previous disasters, were the income criteria, were they the same? 

Or are they different from what was drafted for Katrina? Do you 

know? 

Mr. MCCARTHY. I don’t know if they are different. I just don’t 

know if there was a similar circumstance with the jurisdiction absorbing that kind of population. I can’t think of one in Florida that 

was similar, but I am sorry, but I could look into that and see if 

there was at least something similar. 

Mr. CAO. OK. In regards to the arbitration process, I guess I am 

somewhat in a similar circumstance as you, Mr. McCarthy, in the 

sense that I am somewhat skeptical of the arbitration process because I do feel that if the process is available to them, they might 

just kick everything to arbitration, and thus slow down the recovery after a disaster. 

What we have seen in Louisiana after Katrina was the need to 

move at a very quick pace. And that was not available there. I 

guess when we are looking at ways to resolve disputes, what would 

be some of your recommendations to possibly allow for an expedient resolution to the many disputes that we have? 

Mr. MCCARTHY. I guess one of the things I would point to really 

is some of the things that you have experienced. The idea of a 

project decision team of people admittedly within FEMA, but still 

without a stake in the ongoing argument, bringing in those people 

really does open a new page. 

And it also starts dialogue within FEMA where people have to 

start looking at regulations. And if you are bringing in people from 

different regions who worked on different disasters at different periods, I think it really does broaden the kind of conversation and 

maybe make things a bit more flexible and move you toward settlement. 

On the other hand, having an arbitration process probably also 

encourages many settlements that never go to arbitration. It may 

be the threat of arbitration that helps to move some of it that way. 

But I do think that the kind of action team that was put together 

with Mr. Russell previously is good example of what can be used 

for future disasters as well. 

Mr. CAO. That is all the questions I have of this panel. Thank 

you very much. I yield back. 

Ms. NORTON. Thank you very much, Mr. Cao. 

Mr. Taylor of Mississippi? 

Mr. TAYLOR. Again, I want to thank the panel for being here. 

Early on when it came to debris removal, something that stuck 

out in my mind was the Corps of Engineers came to my home county which lost the county courthouse and city hall. And basically 

18 

gave them the option of saying we estimate the debris removal 

should cost this much per cubic yard; we will let you put it out for 

bid; you do all the paperwork, and we will reimburse you up to 

this. Or given the fact that you guys don’t even have a pocket calculator to your names, which was accurate, we will do it, and let 

the Board of Supervisors make that decision. 

What I have really noticed in some of these adjustments that 

have been dragging on for five years is the total lack of initiative 

on the part of HUD for housing or the Department of Education 

when it came to schools, to find an expert who could look at a 

school or a building and say this is our estimate of what it would 

cost to not only make it look like it did the day before the event, 

but bring it up to compliance with the laws that have been passed 

since that building was built, whether it is for asbestos; whether 

it is for the Americans With Disabilities Act, and say: This is what 

we have estimated it will cost to fix; this is what we will make 

available to you, or we will do it, and absolve you of all responsibility. We will do it and we think we can bring it in at that price. 

Given the enormous amount of money that has been spent and 

is still being requested, I am still to this day appalled at what I 

sense is a total lack of expertise within our Nation as far as estimating what something should cost. And we ought to be the experts, not communities of 4,000 or 5,000 people. They can’t afford 

an expert. We certainly have to afford an expert. 

What, if anything, has happened in the past five years to address 

those things? 

Mr. MCCARTHY. I can’t point to a specific instance where that 

has happened. I guess that is why I have kind of belabored the 

point about FEMA using the cost-estimating formula that Congress 

gave it. And that goes back to when Director Witt was at FEMA 

when that was granted. Since that hasn’t been implemented, everything FEMA worked on as far as developing expertise to be able 

to do cost estimating right at the start of a disaster to try to reach 

an agreement, use industry experts to develop all that, has just 

lain dormant for those 10 years. 

I think FEMA can have people that are expert at estimating. 

They do a lot of disasters every year. They can have some staff that 

is good at estimating. And I think they have also tried to at least 

encourage a bit more that the local governments themselves can 

begin to establish those kind of contracts for debris removal and 

give them a greater cost share if they have those kind of things in 

place. 

But the overall expertise you are discussing I think, at least as 

far as FEMA PA projects, wouldn’t really develop because I think 

we are staying with the system we have and not with the authority 

Congress had given to maybe increase that expertise. 

Mr. TAYLOR. Going back to Congressman Cao’s observation, 

which we saw the same thing in many of the Mississippi Gulf 

Coast communities that rely on sales tax for their revenue. When 

all the stores are gone, obviously the sales tax revenue is gone. But 

then when the big box stores come back, you will have a spike 

since everyone is replacing every refrigerator, every air conditioner, 

every microwave oven. So for a short period of time, there will be 

19 

a huge spike in sales tax, but then it gets back to a desperate situation. 

To what extent are the Federal agencies empowered to just on 

their own turn to their bosses in Washington and say, look, I have 

looked at this. These guys cannot repay the loans. I am asking you, 

FEMA, to forgive them. 

Why do even, in many instances when it is just blatantly obvious 

in some of these communities, why do you even have to wait for 

a town of 1,500 or 2,000 or 3,000 to hire an attorney and a staff 

to put together that, when in so many instances it is just obvious? 

Does anyone wish to address that? 

Mr. JADACKI. I have worked on CDLs for a number of years, 

going back to Hurricane Hugo and Hurricane Marilyn, and I tend 

to agree with you. There is a big spike. I mean, the whole purpose 

of the CDL program is there is going to be a drop in the tax base 

because homes are destroyed; people are moving out. But eventually in some cases after disasters, you have a real big spike on that. 

I think the idea of the CDLs is a sound idea, that communities 

do need the working capital. They do need to pay the police force 

and the firemen and those types of things because of that base. But 

they are eventually going to recover, they are going to get back to 

where they were before, so they are going to be living at this same 

level, but yet trying to pay a big Federal loan back, too, at the 

same time. 

So I think that needs to be taken into account also, even though 

they did return to their tax base, now they have the additional liability of paying back this Federal loan. And I think, again I mentioned before, historically there is about a 95 percent, 96 percent 

default rate because communities have just demonstrated through 

their financials that they just can’t recover. And I think that has 

to be taken into consideration when the loans are up for cancellation. 

Mr. MCCARTHY. And I would mention, too, check on this, but I 

think another thing historically is that when CDLs first began, 

very briefly, it was a grant program and not a loan program. And 

I think when I was at FEMA years back, and I think when we 

would look at straight up costs of looking at the finances of many 

communities and sending auditors down and trying to guesstimate 

things, and the cost involved in hiring accounting firms to go to 

various counties and look, certainly what we came back to is maybe 

another approach would be, maybe loans not of that size, but 

maybe a smaller size that just become grants to smaller communities, rather than trying to put both the Feds and the communities through that kind of process. In some cases, you can end up 

spending as much on the administration of the loan as on the interest on the loan itself. 

So one of the suggestions that was made, at least back in 2000, 

was to consider making it a partial grant program. But given all 

the other costs on the Federal Government, it is not the kind of 

thing that gets a lot of traction. 

Mr. TAYLOR. Mr. McCarthy, and again I very much appreciate 

the Chairwoman. I am not even a Member of this Subcommittee, 

so she is very kind of let me participate. But what, if anything, if 

it happened again tomorrow, only this time it was coastal North 

20 

Carolina or coastal Georgia or Charleston for the second time in 20 

something years, if it happened again tomorrow, what assurances 

can you give me that it would be done better than it has been done 

since 2005? And if you can’t give me any assurances that it would 

be done better, what specific recommendations would you or anyone on that panel make for changes in the law so that we don’t 

keep making the same mistakes? 

Mr. MCCARTHY. Mr. Taylor, I want to say that I think there have 

been improvements. And when people ask me about the Act, it 

wasn’t retroactive to what Mississippi and Alabama and Louisiana 

went through, but I think the pilot programs from that project 

were useful. FEMA experimented in Iowa and Texas and found out 

they could do something about helping to restore the rental inventory, rather than just thinking about trailers, of thinking of fixing 

up apartment buildings in areas so that there is more available 

housing. 

And another thing I always point to is I think when we had all 

the people dispersed around the Country in 38 States after 

Katrina, trying to meet up with family members, FEMA at that 

point didn’t have a case management authority where you could actually have them talk to people and make them aware of what 

services they were entitled to and how they could be linked back 

with their family. 

I think there have been small improvements. And I think that 

Mr. Fugate at FEMA really has reinvigorated the agency to be 

looking forward. And I think you put your finger on it, initiative. 

You can’t just have a law that sits there or regulations that sit 

there. You have to have administrative initiative to make it work 

because you can’t legislate the spirit of an organization. You can 

only give them the tools. 

I think Congress has given the Administration a number of tools 

to make disaster recovery work better, but it is partly how it is administered that really counts. 

Ms. NORTON. Yes, Mr. Taylor, certainly. 

Mr. Johnson of Georgia? 

Mr. JOHNSON. Thank you, Madam Chair, for holding this hearing, a very important hearing, five years after Hurricanes Katrina 

and Rita, which struck the Gulf Coast. All of us will never forget 

that area just literally being drowned, an enormous stretch of land 

and an enormous number of people who were adversely impacted. 

And to go back there now and look at the lay of the land, it doesn’t 

really look like a lot has been done. 

And as I understand it, I am pretty much interested in this arbitration process that has been put into place to resolve disputes. 

And I wanted to know who are the arbitrators? And do the decisions come from arbitrators or arbitration panels? 

Does anyone really know? I know we don’t have anybody from 

GSA. 

Ms. BINGHAM. The arbitrators are experienced administrative 

law judges with the Civilian Board of Contract Appeals. They sit 

in panels of three. And each arbitrator has a vote and they decide 

cases by majority vote, analogous to an appellate court, for example, but they conduct the hearings using de novo review. They take 

in evidence and argument from witnesses. 

21 

Mr. JOHNSON. Are there any rules of procedure, rules of evidence? 

Ms. BINGHAM. Arbitration is by design an informal process. Arbitrators generally are not bound by the rules of evidence. 

On the other hand, the rule of thumb is they let almost everything in because that is the safer practice. So to my knowledge, 

there haven’t been disputes about arbitrators excluding evidence in 

this program, and the rules of evidence, when you have an expert 

decision maker, and these are expert decision makers with substantial background in contracting and construction disputes, for 

example, the rules of evidence aren’t as necessary. They are designed primarily to keep evidence away from lay people on juries. 

Mr. JOHNSON. Yes, how are these experts selected for a particular case? Is there a wheel system or somebody pulls their name 

out of a hat? Or do they volunteer, I want to hear this one, I want 

to hear that one? 

Ms. BINGHAM. I believe Chief Judge Daniels can respond to that 

question. He is on a subsequent panel. I don’t have detailed information about that. 

Mr. JOHNSON. Yes, I would be concerned about even with trained 

witnesses or trained arbitrators without a set rule of law, if you 

will, you know, on what basis can a decision be made? And then 

how can one rely upon that decision as precedent for any future decisions to be made? And without rules of evidence, how can you determine whether or not something is material or relevant or whether or not any evidence may be tainted in some way? I wonder about 

those things. 

Is there an ability to appeal from the arbitration panel’s decision? 

Ms. BINGHAM. The process of arbitration is different. 

Mr. JOHNSON. It is a binding arbitration? 

Ms. BINGHAM. It is a binding arbitration. And it is different from 

an administrative adjudication in that it does not set precedent of 

any kind. It is substantially final under the Federal Arbitration 

Act. Arbitration awards can only be appealed on certain limited 

grounds, and these include fraud, evident partiality, collusion, corruption of the arbitrators, the failure to execute an award that is 

within the scope of the submission, the refusal of arbitrators to 

admit evidence or to postpone a hearing on good cause shown. 

These are very limited grounds for appeal. 

Mr. JOHNSON. Yes. So now on the front end of the process, do the 

litigants or contestants, or whatever you want to call them, are 

they given a choice as to whether or not to proceed in binding arbitration? Are there any alternatives for them at the beginning of the 

dispute? 

Ms. BINGHAM. This is a voluntary program, so the claimants, 

who are grantees and sub-grantees in the Public Assistance Program, can opt into it by filing a request for arbitration. Their other 

alternative is the two-stage administrative appeal within FEMA, 

which results in a final agency decision that is also not appealable, 

but largely committed to agency discretion. 

There is not in place right now a formal, more comprehensive 

dispute system design for these kinds of cases that start with a negotiation step or providing the mediation alternative. And such a 

22 

design, especially if it provides for a prompt and early intervention 

at the outset of a dispute, might resolve. Evidence shows in other 

programs that the earlier that there is some sort of a dispute resolution intervention in the life of that case, the more quickly it terminates and the shorter time it spends on the docket. 

Mr. JOHNSON. Yes, is mediation an alternative dispute resolution 

process that is available? 

Ms. BINGHAM. Yes. Mediation is voluntary assisted negotiation. 

FEMA has a mediation program for employment disputes in place. 

It has an ADR office with substantial expertise in mediation, and 

there are mediators available across the Federal Government in 

the Shared Neutrals Program who are in agencies outside FEMA 

who could also provide assistance. In addition, under the Administrative Dispute Resolution Act, Federal agencies have the authority 

to hire outside neutral mediators, as well as outside neutral arbitrators. 

Mr. JOHNSON. Are these mediators, by the way, paid hourly? Are 

they hourly workers or salaried workers? Or do they work for private dispute resolution companies, arbitration associations and 

what not? 

Ms. BINGHAM. Under the Shared Neutrals Program, the mediators who participate in that program I believe are given special 

duty assignments across agency lines in order to mediate. So that 

there is no additional cost to the agency. 

Mr. JOHNSON. And when you say mediators, are you referring to 

the arbitrators as well? I am really wanting to know about the arbitrators with that question. 

Ms. BINGHAM. My understanding of the arbitrators that are currently used, Civilian Board of Contract Appeals, is that these folks 

are already salaried employees of the Federal Government in the 

General Services Administration, and therefore there are no additional fees paid to arbitrators as there would be in the case of resort to outside neutrals. There are panels of arbitrators available 

from nonprofit organizations like the American Arbitration Association or JAMS. And they charge varying fees, depending on the individual practitioner. It is a private business, so it is as variable as 

what lawyers charge. 

Mr. JOHNSON. If I might ask one more question. What determines whether or not to use the salaried arbitrators, as opposed to 

an outside arbitration group? 

Ms. BINGHAM. My understanding is that the previous legislation 

in the stimulus bill delegated to the President the authority to set 

up the program. The President, in turn, delegated that to the Secretary of Homeland Security, who designated the Civilian Board of 

Contract Appeals. It is within the authority of FEMA to establish 

a different kind of arbitration program provided it complies with 

guidance from the Department of Justice and publishes a policy 

and establishes a written agreement to arbitrate in each case. 

FEMA could, with the voluntary agreement of the grantees and 

sub-grantees, the other side of the dispute, could voluntarily agree 

to arbitrate using outside neutrals. 

Mr. JOHNSON. Thank you. 

Ms. BINGHAM. You are welcome. 

Ms. NORTON. Thank you very much, Mr. Johnson. 

23 

I am going to quickly ask a few more questions to clarify the 

record, and then move on to the next panel. 

Mr. Jadacki, do you have any concerns about the arbitration procedures now being used? You have looked at what they have been 

doing. Or about any of the arbitration decisions that have been 

made? 

Mr. JADACKI. There haven’t been that many decisions and I 

haven’t been privy to the proceedings. But I did review a lot of the 

decisions that were made. Without knowing, having intimate 

knowledge and being there and seeing what was presented by both 

the oral testimony and some of the documentation that was provided, it is really difficult for me to say that. 

I still believe that I think a lot of the cases that are being presented could have been resolved a while ago. 

Ms. NORTON. Through what procedures, Mr. Jadacki? 

Mr. JADACKI. I am sorry? 

Ms. NORTON. You have testified, though, that it takes nine 

months through the appeals procedure. You mean through procedures at the negotiating stage, the cost setting stage? 

Mr. JADACKI. Right. I think some of the ideas that we discussed 

earlier where we got the independent assessments, some of those 

folks. I think if you could get buy-in from both parties, you can 

probably avoid or prevent a lot of these cases going to arbitration. 

Again, it is just sort of one party says this, one party says this, and 

they can’t agree. But if you get somebody to come in before that 

and says this is what we are going to do, this is the decision we 

are going to make, and we both have to agree to do that. Because 

it is a very expensive process. There is a lot of time that is consumed presenting documentation and evidence and those types of 

things. It is a very time consuming process. 

Ms. NORTON. This is very important because, as I said, people 

are suffering when we are talking about this program. Legal procedure is exasperating and therefore what you have to say here is 

going to be the basis for our calling in FEMA after this hearing to 

see whether or not we can go below the present processes and get 

to where you can begin to get some kind of agreement. We ourselves, just hearing FEMA talk back and forth, got the dual consultants. That was pretty easy. 

But you are suggesting that, and so did Professor Bingham, that 

way down in the process, you could begin to get early agreement 

on numbers so that you might even avoid other processes, including the appeals process. 

In fact, arbitration does seem has had the effect of increasing settlements. Arbitration does seem to do that, an independent somebody who is not beholden to either side does get the attention. We 

see that eight have been settled. Several more have been resolved 

before arbitration. It is as if you look arbitration in the eye, it looks 

like the State can, once you get into one system, you are into it. 

But then the State can always look at what has happened before 

and make a decision as to whether it is going to try arbitration the 

next time. 

Do you think that arbitration should therefore be the bogey man 

that is always there for disasters of a certain kind or only for certain disasters? 

24 

Mr. JADACKI. What the arbitration does, it forces the agency to 

do something it should be doing anyway. They should be working 

with the States and the locals. They should be coming up with the 

amount of the projects. And because they promulgate the regulations based on the law, and that should be it. 

When you get to an arbitration point where you have to use an 

arbitrator, there is something entirely wrong with the system. OK? 

The system is not working if you have that much of a disagreement 

on such a large scale. 

I think in the case of Katrina, and I think you mentioned it in 

some of the legislation that you have about the special provisions, 

you know, using project worksheets for small disasters may work 

very well. City hall gets damaged. You rebuild city hall where it 

is. Where you have widespread people being displaced, you don’t 

know what the demographics are going to be, I think that the 

States and locals need more flexibility. Instead of possibly funding 

by P.W., why not fund by category? Like, I think the RSD is a good 

example of that where let them make the decision. If it doesn’t 

make sense to build a school here, build it here, but don’t get penalized because there is an alternative project. 

So larger scale disasters, I think when there is uncertainty about 

people moving back, what is going to happen, I think you need to 

get more flexible. I am not familiar with what the special provisions would be, but I certainly think in a catastrophic type event, 

that the P.W. process may not work as well as it did in the smaller 

types of disasters. 

Ms. NORTON. Ms. Bingham, I was interested in your suggestions. 

I became Chair of the EOC as a litigating lawyer, and quickly understood that my job was to help people, not to help lawyers. I am 

a tenured professor of law, still, at Georgetown, and I am always 

looking for ways to break through legal processes because America 

has learned to hate lawyers, I have to say, for good reasons. And 

we shouldn’t let that go on by looking as if there is no other way 

to get things done and that we can’t facilitate agreement. 

You mentioned something called non-binding fact finding. 

Ms. BINGHAM. Yes. 

Ms. NORTON. If it is non-binding fact finding, why should the 

parties participate in it? What is the credibility to the parties to 

make them have confidence that the fact finding is something that 

they should rely upon? How would it work? Who would do it? 

Ms. BINGHAM. There are a couple of different models. First, let 

me comment on non-binding arbitration. Fact finding is a sub-category of arbitration. 

Ms. NORTON. Yes, or even of an appeals process, not just arbitration. 

Ms. BINGHAM. Right. 

Ms. NORTON. Could it be used even in an appeals? 

Ms. BINGHAM. Absolutely. 

Ms. NORTON. All right. 

Ms. BINGHAM. But in non-binding processes in general that result in an award, the parties comply with the award over 90 percent of the time. And the reason for that is that it is a public statement of what the appropriate and fair outcome is, and there is a 

25 

certain amount of moral suasion associated with that public statement. 

You can use fact finding in two different ways. You can use it 

as a way to essentially adjudicate fact and determine a set of facts 

retroactively that then are the basis for further negotiation. Or the 

term is also used in labor relations as a step toward creating a contract. So in labor relations if there is a dispute between labor and 

management over what the new contract should be, then a fact 

finder will come in, hear evidence about the economics and comparable contracts in the industry, and then recommend what that 

contract should be. 

So it is actually a very broad use of fact finding, but it can also 

be, again, non-binding and the parties then can sit down and negotiate the parameters of their final deal. 

So what that does is there is a conflict here. FEMA’s obligation 

is to enforce the law and act within the scope of its delegated authority. And the disputes that are arising are largely disputes of 

fact. The arbitration panel is not subject to review on grounds of 

error of law. I think that under the Federal Arbitration Act, an 

error of law is not a basis for overturning an arbitration award, unlike an administrative adjudication. When these same decision 

makers sit as administrative law judges, then they are subject to 

a broader scope of review. 

Ms. NORTON. Because both sides have agreed this will be the fact 

finder, if the arbitrator is the agreed-upon fact finder. 

Ms. BINGHAM. The parties could agree. 

Ms. NORTON. Often, the arbitrator is. Now, if I understand it, in 

this case the State can say we want arbitration and FEMA, I think, 

has to agree. 

Ms. BINGHAM. Correct. That is my understanding. 

Ms. NORTON. One more question for you. Just let me say for the 

record, I agree. I think it is you, Mr. Jadacki, who indicated that 

by the time you get to arbitration, you have a failed process. That 

is the only way this Committee got to arbitration, with almost $4 

billion on the table, a disgrace. 

So I couldn’t agree more that nobody would want to think of arbitration as a way to proceed and we see that this was a highly unusual act. 

Let me say another, the reason we looked at arbitration at all, 

given the size of the dispute, is that it was brought to our attention 

that there were disputes between a number of States, a large number of States, in fact, and the Federal Government some years 

back. And somebody got smart and figured out to try to take something like Medicaid and disentangle it enough State by State just 

wasn’t going to work. They used arbitration and we figured that 

that was the failed dispute of the size and scope that we were faced 

with. Impact means failure and therefore the fact that this process 

is unable to do in 60 days what the entire process hasn’t done in 

months, and sometimes years, does speak to the efficacy of arbitration, at least in such large disputes. 

I am wondering if any of you are aware of, perhaps you, since 

you are a student of these procedures, of the Federal Arbitration 

Act, and whether the Federal Arbitration Act informs or could inform what FEMA has done with arbitration until now. 

26 

Ms. BINGHAM. The Federal Arbitration Act was adopted to provide safe haven for arbitration from the courts. 

Ms. NORTON. What from the courts? 

Ms. BINGHAM. To provide a safe haven for arbitration in the 

early parts of the 20th century. Courts were interfering in arbitration awards and commercial parties at arms length were trying to 

use arbitration to resolve their conflicts and stay out of court. So 

what the Federal Arbitration Act does is it creates a space that is 

protected from judicial review for parties to use a private justice 

system or private adjudicatory process. And it does not speak to 

the design details of arbitration. 

Ms. NORTON. Thank you. 

Just a couple more questions. Mr. Jadacki, I was interested, especially in light of all you know about the issues and problems that 

FEMA has had with Katrina and Rita public assistance programs 

that you recommended transferring other disaster programs to 

FEMA. I wonder what you had in mind and whether you think 

that would improve those particular programs? 

Mr. JADACKI. Yes, and I think it goes both ways. There might be 

some FEMA programs. And I will use the case of the highways, 

roads, you know, clearing debris. FEMA is responsible for the local 

roads and in some cases the State roads, and the Federal Highway 

Administration is in charge of the Interstates and the Federal 

highways and those type of things. You have two separate processes going on that essentially do the same thing, remove debris. 

So it might make sense for economies and efficiencies to combine 

those efforts where you would have one entity, whether it is FEMA 

or the Federal Highway Administration would be responsible for 

that, versus having two separate things. In some cases it could be 

the States and locals going through a project worksheet to work debris. In some cases, the Corps of Engineers would come in. So there 

is a lot of jurisdictional issues there. 

So looking at some of the places where there is duplication and 

jurisdiction issues might be good. 

Ms. NORTON. But is there real duplication? The States are supposed to do their part. 

Mr. JADACKI. Right. 

Ms. NORTON. The roads intersect. 

Mr. JADACKI. You are having in some cases Feds contract out to 

debris removal people at the same time the States or locals are 

doing the same thing. You could achieve economies by doing it once 

and then sorting it out later on under the auspices of one organization. 

Ms. NORTON. Just like your cost estimating procedures. 

Mr. JADACKI. Just like that, yes. 

Ms. NORTON. Finally, Mr. McCarthy, I was intrigued and could 

understand almost instantly when you said that the Recovery 

School District, consolidating the schools and doing it together, 

economies of scale, I guess, or even decisions of scale might work. 

I wonder if it did work. If putting all the schools together, in your 

judgment, as neat as it sounds, given all of the issues that were 

raised in the process we have just gone through whether you think 

it really worked, or if it should work, because you would think 

theoretically schools would have much in common and that would 

27 

do it. So did that work because people acted rationally when they 

had schools together and said, hey, we are just building schools. 

So all schools should cost no more than, and this is the maximum amount, and we are going to make them out of the same material. Did it have that effect? And do you think that there are 

other examples other than school consolidations where the desired 

effect, theoretical effect could come about? 

Mr. MCCARTHY. I believe so. And I am basing it, I think we are 

all students of Katrina at this point after five years. And there 

were a lot of discussions at the beginning on the number of schools 

affected and what the future would be, and the reason I have expressed some enthusiasm regarding the Recovery School District is 

that it was locally generated and it was their decision as to how 

to approach it, about how many campuses they wanted to have 

eventually. 

And I think what Matt and others have pointed out is that if you 

are going by a project worksheet for each school building and suddenly you say, well, we are not planning on having that campus 

anymore, and we want to move that money over here. If there are 

questions about that throughout that process and if you are doing 

it school by school by school, that is how things stretch out into 

years. 

But in this case, it really appeared to be the local initiative and 

the local decision making that drove it. And the good part is that 

Congress, first of all, gave the authority that provided additional 

money. Because usually if you make that choice to do something 

different than just repairing or replacing that school, that means 

you will get 90 percent of the Federal money, not 100 percent. 

So in this case, Congress made sure that it was a full Federal 

payment. They provided for 100 percent. So that is something else 

that could be looked at in the future is whether those kind of in 

lieu payments perhaps, I think the idea always was that you don’t 

want FEMA’s money to be just repairing overall infrastructure in 

an area. You just want to go to the areas that were affected by the 

disaster. 

And that was I think part of the reason to only pay 90 percent, 

to make sure that people are making a decision, a wise decision on 

that. But I think the Recovery School District maybe presents the 

argument that perhaps it ought to be treated like every other PA 

project and that if people make a choice to redesign parts of their 

public infrastructure that that ought to be their decision, and that 

there shouldn’t be a 10 percent penalty for making that choice. 

Ms. NORTON. We think about Charity Hospital, which was one 

of the projects which drove us to suggest arbitration, one wonders 

if it would work with clinics and with smaller health services, and 

where the economies of scale could come about that way. So that 

you shouldn’t really be preferring one jurisdiction over another 

when it comes to health centers and clinics and that you might, indeed, get some economies that you would not otherwise get, jurisdiction by jurisdiction, after the initial planning had been done and 

approved from the local jurisdiction. 

Could I thank all three of you for coming? We asked you to come 

first because we don’t like the experts from the agencies, who are 

going to come next, to simply engage in show and tell. They don’t. 

28 

They are often very analytical, but I have never understood the 

witnesses who have looked at them come afterwards, and then they 

come and testify and they leave. So they don’t even get to hear the 

independent critiques. 

So we thought, while we have our own questions for the officials 

from the States and from the Federal Government, we thought it 

might be good to hear the critics first and that would even inform 

our own questioning, and it certainly has. 

Thanks to all three of you for very informative and invaluable 

testimony. Thank you very much. 

Now, could I ask the second panel to approach now: FEMA from 

the State of Mississippi, from the State of Louisiana, and of course 

from the Civilian Board of Appeals. We are going to begin with 

Stephan Daniels, Chairman Daniels of the Civilian Board of Appeals. 

Mr. Daniels? 

TESTIMONY OF STEPHEN DANIELS, CHAIRMAN, CIVILIAN 

BOARD OF CONTRACT APPEALS; TONY RUSSELL, REGION VI 

ADMINISTRATOR, FEDERAL EMERGENCY MANAGEMENT 

AGENCY; MIKE WOMACK, EXECUTIVE DIRECTOR, MISSISSIPPI EMERGENCY MANAGEMENT AGENCY, STATE OF 

MISSISSIPPI; MARK RILEY, CHIEF OF STAFF, GOVERNOR’S 

OFFICE OF HOMELAND SECURITY AND EMERGENCY PREPAREDNESS, STATE OF LOUISIANA 

Mr. DANIELS. Thank you very much, Madam Chairwoman and 

Members of the Subcommittee. 

A year ago when I testified before this Subcommittee, I assured 

you that the Civilian Board of Contract Appeals would do its utmost to fulfill a mission we have been assigned by the Congress 

and the Secretary of Homeland Security. As the arbitration panel 

established under the American Recovery and Reinvestment Act of 

2009, we would resolve as quickly and as fairly as possible disputes 

between the Federal Emergency Management Agency and State 

and local jurisdictions in the Gulf Coast region concerning public 

assistance grants resulting from damage caused by Hurricanes 

Katrina and Rita. 

I am pleased to be able to report to you today that the Civilian 

Board has over the past year been doing exactly that. State and 

local governments have filed 26 cases with us seeking arbitration 

of their disputes with FEMA regarding these grants. The cases involve all sorts of facilities: schools, hospitals, arenas, roadways, 

parks, port areas, canals, water and wastewater treatment plants, 

solid waste disposal areas, and fire hydrants. 

Most of the cases have come from jurisdictions in Louisiana and 

Mississippi, with 14 from Louisiana and 10 from Mississippi. We 

have had one case from a jurisdiction in Texas and one from a jurisdiction in Alabama. 

Eight of the cases have been settled by the parties. Six cases are 

still pending. Of the cases that have ended other than by settlement, we resolved each one of them within the time limit prescribed by regulation, which is 60 days after the parties have completed their presentations. 

29 

Three of the applications have been granted in full. Six have 

been granted in part. Two have been denied, meaning that FEMA’s 

position was upheld. And one was dismissed for lack of jurisdiction. 

Some of the cases, as was noted by the previous panel, have involved large sums of money. The most publicized of them, Charity 

Hospital in New Orleans, resulted in a determination that FEMA 

should pay to the State of Louisiana nearly $475 million as the replacement value of the damaged facility. Other cases have involved 

far less funds, and in some the project value has been only slightly 

greater than the minimum of $500,000 necessary to place a case 

before us. 

However large the case, our proceedings have taken far less time 

and required the expenditure of far less resources by the parties 

than would have been involved in a court or even in a contract case 

before the Board. Nevertheless, I feel confident that we have understood the essence of every one of the cases, and in each of them, 

we have reached a result which has been fair and appropriate. 

FEMA issued regulations on August 31, 2009, opening the possibility for resolution of these disputes by arbitration. And during the 

fall of 2009, the Board experienced an initial rush of case filings. 

Indeed, 15 of our 26 cases were filed in October, 2009. The numbers of filings has slowed since then, and increasingly cases have 

been settling, rather than going to decision. 

My own personal sense is that this trend has occurred because 

the ability of State and local governments to opt for arbitration has 

had a positive impact on the process of resolving the disputes. The 

parties have been addressing issues earlier and more cooperatively 

in an effort to come to positions which are mutually acceptable. 

I thank you again for the opportunity to testify this afternoon, 

and I am happy to respond to any questions the Subcommittee may 

have. 

Ms. NORTON. Thank you very much, Chairman Daniels. 

Tony Russell, Region VI Administrator, FEMA. 

Mr. RUSSELL. Yes, good afternoon, Madam Chairwoman, and the 

distinguished Members of the Subcommittee. 

My name is Tony Russell. I am the Region Administrator for 

FEMA Region VI, which includes States of Texas, Louisiana, New 

Mexico, Oklahoma, and Arkansas. 

Before coming to Region VI, I served as the Acting Director of 

the Louisiana Transitional Recovery Office. It is my honor to appear before you today to discuss what we have done in the aftermath of Hurricanes Katrina and Rita, and to help facilitate a faster, smarter and better recovery for the Gulf Coast. 

Now, when I say what we have done, I mean we in the broadest 

sense of the word, from individuals in the community, the State, 

the parents, the local leaders, FEMA field and regional staff, our 

Congressional partners, Administrator Fugate, Secretary 

Napolitano, and President Obama. Together, what we have done is 

to fundamentally adjust our attitude so that we can create solutions to common problems. 

We use the trust that we have built in order to speed up the recovery process in the Gulf Coast. 

When I began a year and a half ago as the Acting Director for 

the LATRO, I noticed many obstacles to recovery. One was a culVerDate Aug 31 2005 14:31 Dec 22, 2010 Jkt 000000 PO 00000 Frm 00051 Fmt 6633 Sfmt 6633 P:\DOCS\58458.0 KAYLA
30 

ture of formality where process prevailed over a focus on outcomes. 

Another was that we lacked a system for regular communication 

with our partners and the pace and the scale of recovery suffered 

as a result. 

My life experience has shown me that when working with others, 

you can only go as fast as the speed of trust. So we worked hard 

to establish a level of trust between the communities, the States 

and FEMA. We also opened up the lines of communication. Instead 

of writing letters back and forth, we began sitting down across the 

table from each other and working together. 

As a result, we were able to use the law, the regulation and the 

policies as tools to serve the communities. But with time and with 

an established level of communications and trust, we were able to 

shift the focus from the process to the outcomes and break many 

of the logjams to recovery. 

As an example, we completely changed the way we approached 

disputed recovery projects. When I arrived in Louisiana, we had 

hundreds of projects that were simply not moving forward. In order 

to resolve these projects that were in dispute and speed up the 

process of making a decision, Secretary Napolitano established two 

joint public assistance decision teams in March of 2009. To date, 

these review panels have resolved 173 previously disputed cases, 

helping those stalled projects move forward. 

Our ability to resolve these disputes was a direct result of the 

relationships we have built in the community and our willingness 

to sit in the same room together and arrive at common sense solutions. 

We try hard to communicate and resolve disputes with the State 

before adjudication becomes required. However, there will always 

be disagreements. Last year, you gave us another important tool, 

an arbitration process to resolve those disagreements. Most importantly, the use of arbitration allows us to continue to remove barriers to communication and work with our partners in an informal 

setting in order to speed up the recovery process. While the law 

specifies that the arbitration process be used for certain projects relating to Hurricanes Katrina and Rita, we will evaluate whether 

the use of arbitration could be useful in other contexts as well. 

But there is no doubt that the trust we have built in the community and the close collaboration with our partners has been key to 

our ability to settle disputes and get stalled projects moving again. 

The good news is that our approach is getting real tangible results. In Louisiana, FEMA has obligated $9 billion in public assistance funds, including $2.5 billion in just the past year and a half 

alone. In Mississippi, FEMA has obligated over $3 billion in public 

assistance funds, including more than $240 million in the past year 

and a half. We are seeing the results of our work, which we measure not in terms of the dollars spent, but in terms of communities 

rebuilt, parents getting back to work, and children learning and 

growing in new and improved schools. 

As we at FEMA help our States and communities recover from 

the devastation of Hurricanes Katrina and Rita, we have learned 

and continue to learn valuable lessons about how to deliver the 

best possible service to our communities. We view the work of recovering from Hurricanes Katrina and Rita with a simple apVerDate Aug 31 2005 14:31 Dec 22, 2010 Jkt 000000 PO 00000 Frm 00052 Fmt 6633 Sfmt 6633 P:\DOCS\58458.0 KAYLA
31 

proach. First, we are here as partners. Second, we work closely 

with the affected communities to resolve common sense outcomes. 

And third, we will be flexible and pragmatic as we work to help 

the Gulf Coast rebuild. 

Thank you again for the opportunity to testify before you and I 

am happy to take your questions at this time. 

Ms. NORTON. Thank you very much, Mr. Russell. 

Mike Womack, Executive Director of the Mississippi Emergency 

Management Agency for the State of Mississippi. 

Mr. Womack? 

Mr. WOMACK. Thank you, Madam Chairwoman and Members of 

the Committee. 

I have been the State Coordinating Officer for Katrina since the 

disaster happened on the 29th of August, and I have been on the 

Mississippi Gulf Coast at least half the time since then. I have 

been directly involved in the Public Assistance Program, as well as 

housing programs and the mitigation programs. Mississippi has approximately $3.1 billion obligated for public as- sistance projects. We have dispersed $2.1 billion of that, meaning 

the projects are complete and we have paid the applicants their 

money to pay their contractors. 

We feel like the State of Mississippi, in partnership with FEMA, 

has done a very good job in trying to resolve disputes. Therefore, 

the fact that we only have 10 disputes that have gone to arbitration, which represents about $40 million, which is less than 2 percent, really a little bit more than 1 percent of the total amount obligated, is a pretty good showing of how well we have done with this. 

It has been a partnership. It was a partnership from the very beginning. We decided that we would try to build a team of FEMA, 

MEMA and the local governments to make sure that we would 

minimize the number of appeals and arbitrations, and certainly 

minimize the amount of money that was ultimately not paid to 

local governments or to the State. 

Now, we did this primarily using the FEMA management cost 

funds that were provided to the State. Now, I will say that if under 

current rules and regulations, they are limited to 3.34 percent for 

all disasters after Katrina, roughly. There is no way that we could 

have done what we have done in partnership with FEMA with 3.34 

percent. It just cannot be done. 

Now, I will say that everything I am going to talk about today 

I have discussed with Administrator Fugate, Associate Administrator Bill Carwile, and Deputy Associate Administrator Beth Zimmerman. They are very cooperative. They are working with not 

only Mississippi, but all the States in trying to work through these 

very difficult issues. 

But getting back to how we tried to minimize the number of disputes, we had integrated project management where we would 

work with the State agency that was administrating the CDBG 

funding, and with our State Department of Archives and History 

and with the Department of Education and other State agencies 

and Federal agencies, because we know that the rebuilding was not 

just public assistance money. It was all sorts of Federal grants. In 

fact, in total, about $24 billion worth of Federal money has been 

provided to the State of Mississippi. 

32 

We developed a whole series of management tools to go well beyond what the MEMA’s program does as far as being able to track 

the funding all the way from the date of obligation through disbursement, through the final inspection process. We also worked 

with FEMA on trying to make sure that the applicant did in fact 

get the estimated amounts that they deserved before they went and 

requested the improved and alternate projects. So of the $40 million that is in dispute, I would say that the arbitration process has been very favorable for our applicants. Every 

one of the cases that has been settled, the applicant received at 

least partial funding. The smallest amount was about one-third of 

what they requested. All the others were over half or a full amount 

that they requested. 

I would say that while we have made great progress, we have 

dozens of new facilities across the coast that are already completed; 

dozens of others that are under completion right now, to include 

numerous fire stations, police stations, city halls that were built 

with mitigation money to harden them so that they will be much 

safer for the next storm that comes to the Mississippi Gulf Coast. 

We do have some challenges. The biggest challenge we have is 

that of FEMA individuals coming, changing decisions throughout 

the process. Again, Administrator Fugate is going to try his best 

to try to fix these problems, but just the fact that many of the arbitration cases that we see are the result of the fact that one FEMA 

employee or contractor would make a decision, and then a year or 

two or three years later that would change. 

Now, the other thing that I want to mention is that the role of 

the IG is absolutely critical, but the IG sometimes drives those decisions that FEMA makes changes on. So it should be a matter of 

making sure the IG is there at the very beginning so when the decisions are made they agree with it and there doesn’t have to be 

a change. 

As I have run out of time, I will simply say the one program that 

we need to reinstitute or find out a way to do administratively is 

the PA pilot program. It is a great program and needs to be reinstituted. 

Thank you. 

Ms. NORTON. Thank you very much, Mr. Womack. 

Mark Riley, Chief of Staff of the Governor’s Office of Homeland 

Security and Emergency Preparedness, the State of Louisiana. 

Mr. Riley? 

Mr. RILEY. Madam Chairwoman, Committee Members, Louisiana 

is in the midst of the recovery of several compounding disasters 

that have occurred since 2005. Although I have not always been 

able to say this, I believe that FEMA and the State are now on the 

same path with common objectives in the recovery. We now have 

a true and transparent partnership with FEMA thanks to the leadership of people like Administrator Fugate and Regional Administrator Russell. 

With this change of leadership at FEMA, we are looking at recovery as a holistic approach to restoring a community, not just the 

repair of an individual piece of damaged infrastructure. 

The testimony that I will present today will review the effects of 

several pieces of legislation which have assisted the recovery, to inVerDate Aug 31 2005 14:31 Dec 22, 2010 Jkt 000000 PO 00000 Frm 00054 Fmt 6633 Sfmt 6633 P:\DOCS\58458.0 KAYLA
33 

clude provisions authorizing arbitration. I will also discuss additional actions that we may want to consider, especially in the circumstances of a catastrophic disaster. In 2007, FEMA had obligated $5 billion for the recovery from Katrina and Rita. Today, we have a little more than $9 billion or 

a $4 billion difference. At the fifth anniversary of Katrina and Rita, 

we have 2,789 cases that we designate as unresolved, and we believe that when we have resolved all these projects, final dollar 

amounts will be between $13 billion and $14 billion. 

Our short-term goal with FEMA is to complete the funding determinations in the Public Assistance Program and we think this will 

take another 18 to 24 months at the current pace. 

Arbitration has been a very effective tool and has instilled a 

sense of independent evaluation and fairness in the Stafford Act. 

We have filed 14 arbitration cases with the Civilian Board of Contract Appeals, for an approximate value of $952 million. The value 

of claims settled are determined by the CBCA in favor of applicants 

total approximately $613 million. Several new requests for arbitration are currently being prepared and the need for this process will 

continue until we have completely resolved the remaining 2,789 

project worksheets that have funding issues. 

Based upon the State’s experience with the arbitration process, 

we recommend that Congress consider making the arbitration option available or some other option that includes independent third 

parties to all applicants in all future disasters. 

We would recommend three changes to the current process. 

Allow applicants to be reimbursed for the costs that they incur in 

the arbitration effort if the case is not frivolous. Increase the time 

to file an arbitration filing from 30 days to 60 days from the FEMA 

decision. And lower the jurisdictional threshold from $500,000 to 

$100,000. 

I would like to take this opportunity to comment on the service 

and professionalism of the CBCA, its Chairman, Judge Stephen 

Daniels, and the judges serving on the assigned panels. The Stafford Act Assistance Program is a very complex and nuanced program and the CBCA has given each case detailed attention and responded to the process in a fair and even-handed manner. 

There is a completely different toolkit that is needed to respond 

to a catastrophic event as an ordinary disaster. The Stafford Act 

needs a catastrophic annex to deal with such a catastrophic event. 

The average disaster over the last 10 years, measured in terms of 

public assistance dollars, was approximately $40 million. Hurricanes Katrina and Rita in Louisiana will top $12 billion or 300 

times the size of the average disaster. 

In order to effectively recover from a catastrophic event like 

Katrina-Rita, communities need the following. They need assistance in developing master recovery plans. They need 100 percent 

Federal funding of recovery activities even if that includes a loan 

for the non-Federal cost share. And they need a waiver of the alternate project penalty of 25 percent. 

I would like to take a minute to discuss two other issues affecting Louisiana’s current recovery process. After Hurricanes Katrina 

and Rita, 57 local governmental entities took advantage of the 

Community Disaster Loan Program and borrowed approximately 

34 

$822 million. FEMA is in the process of completing the review of 

these loans to determine the level of payback. 

Initial indications are that 42 local governmental entities will be 

required to pay back all or part of the loans. We suggest this puts 

an unfair burden on these communities still attempting to recover 

and still in need of support, and that FEMA’s analysis of the ability of these local governmental entities to repay CDL loans is 

flawed. 

Finally, we ask for support to implement common sense investment of hazard mitigation funds into shelters. Louisiana and the 

Federal Government spent $50 million in transporting critical 

transportation need individuals outside the State of Louisiana during Hurricane Gustaf. We would like to take money that is already 

appropriated to us and invest it in multi-purpose facilities for sheltering. 

Few jurisdictions in our Nation have experienced the levels of 

disaster brought upon our State in the last five years. Louisiana 

continues to recovery from Hurricanes Katrina and Rita, the largest disasters in U.S. history, which have been compounded by Hurricanes Gustaf and Ike in 2008, another $1 billion disaster. Most 

recently, the State has been contending with the environmental 

and economic impact of the largest oil spill in U.S. history. The 

2010 hurricane season is still upon us and we are keeping our fingers crossed. 

In closing, the State of Louisiana greatly appreciates the attention and interest that this Committee has demonstrated over the 

years in helping the State navigate a very cumbersome, bureaucratic, highly regulatory recovery process. 

Thank you very much. 

Ms. NORTON. Thank you very much, Mr. Riley. 

Let me begin with Chairman Daniels. First of all, let me congratulate you, Chairman Daniels, on apparently meeting the 60- 

day time frame in every single arbitration. We would like to understand why, particularly in light of testimony here and our own investigation that shows that it has taken, what is the charitable 

way to put this?, close to a year, let’s put it, and often longer for 

the ordinary appeals process. 

So I would like to know whether it is you, the personnel, Chairman Daniels, or whether there is something about the process, 

which everybody fears, doesn’t want to go to it. Except when you 

go to it, it looks like you get an answer in what I suppose the average layman would think would be a very complicated process, in a 

whole lot less time than you do in the so-called more simplified 

processes. 

Could you explain that to us? 

Mr. DANIELS. Certainly by the time a case is presented to us, 

each party presents the very best evidence and arguments it has. 

Ms. NORTON. If I could pause there, Chairman Daniels. But you 

reach the facts de novo. 

Mr. DANIELS. Yes, we do, but it is on the basis of what we learn 

from the presentations and the hearings. And I think part of it also 

is that as administrative judges, we are all trained to be dispute 

resolution experts. We come into the process thinking there needs 

35 

to be an answer here, and the parties benefit the faster we can get 

them the answer. 

Ms. NORTON. Do you sometimes find that in the middle of the 

proceedings, as is the case with a District Court Judge, for example, the parties will reach decision while the arbitration is ongoing? 

Mr. DANIELS. That occasionally happens. And obviously, it is the 

process that drives them to think about what really are the 

strengths and weaknesses of each position; where can we reach a 

middle ground? Because my goodness, parties came to believe, we 

would rather have control over the resolution of this case than 

leave it up to those ‘‘crazy’’ judges. Who knows what they are going 

to come up with? 

Ms. NORTON. Do the 60 days include the time for presentation 

of the evidence, as well as your own decision making time? 

Mr. DANIELS. The 60 days is the period after the case is finally 

presented to us. 

Ms. NORTON. About how long does it take the case to be presented? 

Mr. DANIELS. Once an application is filed with us the State has 

15 days to file its comments, then FEMA has 30 days to file its 

comments. 

Ms. NORTON. And you hold them to those time frames? 

Mr. DANIELS. Yes, we do. We will then have a hearing within 60 

days and usually less of the time that we get FEMA’s comments. 

And we will issue a decision within 60 days after the hearing. 

Ms. NORTON. This is notable because apparently not only do you 

stay with your own time frames, you have been successful in keeping the parties within time frames as well. 

Mr. DANIELS. Well, if a party doesn’t choose to file any particular 

comments, then all we have to rely on is what we receive from the 

applicant. And I think that is quite an inducement to having the 

other parties file comments. 

Ms. NORTON. I would like to hear something about Charity Hospital. We were very chagrined when Charity Hospital took so long. 

Charity Hospital was settled through this process. Can you describe how that decision was reached? Why had it taken so long before? And how you were able to do it within the 60-day time frame, 

apparently holding the State and FEMA to the time frames you 

just discussed? 

Mr. DANIELS. I couldn’t tell you why it took so long for the case 

to get to us. I think we might have some other witnesses here who 

could address that. I could just tell you that once the case did come 

to us, each party made a very thorough and professional presentation. We then had a hearing which took four days. We heard 

from all the witnesses that all the parties felt were critical for us 

to hear from. 

The feeling of the panel, the three of us who heard the case, was 

that the witnesses who were presented by the applicant, which was 

the State of Louisiana, were far more qualified, far more experienced and knowledgeable, had spent a lot more time in the facility 

than the FEMA people had, and had given a great deal more 

thought to how to do their cost estimates. 

As a result, we found them a lot more credible than the FEMA 

people. The issue in the Charity Hospital case involved FEMA’s 

36 

rule, that if a facility is damaged during a disaster, you are supposed to do estimates of the cost to repair and the cost of replacement. Then you compare the two. If the cost of repair is more than 

50 percent of the cost of replacement, then FEMA should reimburse 

the applicant for the replacement costs. If the cost to repair is less 

than 50 percent, FEMA reimburses for the repair costs. 

In this case, the uniform evidence presented to us by the applicant and believed by us was that the cost of repair would be considerably more than 50 percent of the cost of replacement. We went 

through the analysis that is required under FEMA’s regulations 

and came to the conclusion that the cost of replacement is what 

should be reimbursed. 

Ms. NORTON. It just sounds like a very rational process. We are 

only sorry that this was not available to FEMA beforehand. But 

Mr. Russell, what was available to FEMA beforehand was its statutory mandate to implement cost estimating procedures. Now, that 

was 10 years ago and you have heard testimony from the prior witnesses. All of them were experts. None of them could tell me, because it is only appropriate to ask you, Mr. Russell, perhaps the 

other witnesses as well from the States if they have any insight. 

But why FEMA has not promulgated the implementing regulations 

which were mandated when President Clinton was President? 

Mr. RUSSELL. Well, yes, Madam Chair. I know that we are working through that process now. 

Ms. NORTON. You are. Yes, Mr. Russell. We would really be disappointed if you weren’t at least working through it. Why has it 

taken 10 years to do anything on the process is our question. We 

don’t think you have been doing nothing, unless that is what you 

going to tell me. 

Mr. RUSSELL. Yes, ma’am. In fact, at this moment now, I can tell 

you, ma’am, that we are working through that process now. 

Ms. NORTON. Mr. Russell, when will FEMA publish the regulations? When is it your present plan to publish the regulations 

under a law enacted 10 years ago? 

Mr. RUSSELL. Yes, ma’am. I know that we are working through 

it now, and I don’t have an exact date for you, ma’am. 

Ms. NORTON. I tell you what, Mr. Russell, I understand. We don’t 

want to shoot the messenger, but we are trying to find somebody 

to shoot. We really think that there is a problem and that the problem was acted out on the ground. And this is what we would like 

you to submit, this is FEMA to submit, within 30 days, a timeline 

for the publishing of the cost estimating procedures required by 

Federal law 10 years ago. 

I am going to act like Chairman Daniels: no extension, charted 

timeline. And we would hope, and there must be a very good reason why, it could be rebuttable, but I doubt it. We would expect to 

have implementing procedures on paper by the end of the year. I 

am giving you 30 days, and by that time, because as you say, you 

have been working on it for 10 years. 

So we are impatient with any more extensions. The question 

should have been called before Katrina. And frankly, hundreds of 

thousands of people paid the price. Thirty days, less if possible, 

timeline, end of the year. That is this year, Mr. Russell. We want 

to see some implementing regulations. 

37 

I am simply reflecting the frustration of the entire Committee. 

And this is two administrations. So we are bipartisan in our concern here. 

Why, Mr. Russell, or let me put it this way. I understand that 

your own Office of Alternative Dispute Resolution is largely confined to employee disputes. Is that correct? And is that the intended purpose? 

Mr. RUSSELL. Yes, Madam Chair. At the moment now, they are 

used mainly for disputes with the employees. But they are a tool 

in the tool box. 

Ms. NORTON. Say that again? 

Mr. RUSSELL. They are a tool in the tool box to be used where 

they are required to be used. Now, my goal and what I push for 

in Louisiana is to solve things on the ground, to do whatever we 

can to put the elements of arbitration into the field. By that I mean 

by making it transparent between the State, between FEMA, and 

between the applicant. We all come together and work on the outcome, and the outcome is whatever they want to build in this case. 

And so put all the minds together towards that. 

And I think that is why you have seen a reduction of the cases 

going before arbitration because we are solving them in the field 

now and that has been our main focus to do exactly that. 

Ms. NORTON. Mr. Russell, yes, we know everyone’s working for 

the same outcome, but that hasn’t in and of itself stopped disputes 

at the very beginning level. I hope you heard the testimony of the 

witnesses who preceded you, for example, the whole notion of I 

asked Professor Bingham how non-binding fact finding was useful. 

And it was very interesting to hear what she said. And I am not 

sure people learn from these hearings that once it is a matter of 

public record what somebody that is not primarily involved, it becomes easier to reach conclusions. 

We are going to ask you to work on the 10 year old statute first, 

but we would be very interested in the agency’s view of what it 

could do outside of arbitration that would have the confidence of 

the public that a fair decision would be reached, and of the States 

involved. 

As you may have heard me say, we regard FEMA as nothing 

short of a party, so we think that if, or at least I think, that if you 

set up a procedure within FEMA, you are already suspect unless 

you can show some degree of independence to give the other side 

confidence so that otherwise you are going to have the same disputes arise because they don’t think you are fair. 

And I have never regarded that as your fault or the fault of 

FEMA, Mr. Russell, because it is true that we are looking at FEMA 

not to squander taxpayers’ funds. 

And Mr. Womack and Mr. Riley are there representing taxpayers 

of Louisiana and Mississippi, and they have had a terrible disaster 

and they are not out here to save you money. 

So it really does take some thinking, hard thinking, and I would 

recommend to each of you that you look to the kind of experts that 

preceded you to consider what FEMA should do for the first time, 

it would appear, since your own internal mechanism is largely for 

employees, to make alternative resolution live in your work and in 

38 

the field. And I am going to go on because I want to ask a question 

of Mr. Womack and Mr. Riley, and then go to my colleagues. 

I want to ask something that I think may have plagued both Mr. 

Womack and Mr. Riley, and that is something that FEMA apparently is trying to come to grips with, which is the turnover in the 

field that results in inconsistency of decisions. 

So that I take it you get a decision and it could actually be 

turned around on you. And I want to know whether you have seen 

any improvement in that, and what do you think should be done 

with respect to that inconsistency beyond what you may already 

know about? FEMA has recently issued standard operating procedure. Do you think that will help it? And whether you think that 

has really been a real issue in the recovery from Rita and Katrina? 

Both of you, it seems to me, would help us by answering that 

question. 

Mr. WOMACK. Yes, ma’am, I would say the turnover has been a 

tremendous factor, and I quite frankly in a catastrophic event am 

not sure how you would fix this, because you have to have tens of 

thousands of very competent people. That may be too large a number, but certainly thousands of competent people. And they have to 

be mobilized and they have to be brought in very quickly, and they 

have to live in very, very difficult conditions. 

So I would like FEMA to consider and the IG and all the rest 

of the regulatory agencies to consider something. If a FEMA representative, either a full-time FEMA employee or a contractor, 

comes in and writes a project worksheet based on an estimate, and 

they do this early on, if in fact there is not fraud or a deliberate 

mission of trying to get somebody to mislead someone, then say 

that FEMA has to stand behind it unless the local government 

wants to change that project worksheet. 

Because these are good-intended people that I have worked with 

over the past five years. They say by regulation, I have to change 

the project worksheet because the initial one was incorrect. And in 

my opinion, we should not delay recovery, because that is exactly 

what it does, by having the local governments have to go back and 

start over and redesign and fight to try to get what they were originally told, and so forth and so on. 

So if we could just simply say that the first FEMA representative 

that writes the estimate, that FEMA is bound by that. And that 

no regulatory agency is going to come back and say, nope, it wasn’t 

done right so we have to change it, unless there was fraud or directly trying to mislead the FEMA representative. 

Ms. NORTON. It really is an outrage to make a State go all 

through that again. I don’t know if Mr. Riley agrees or whether, 

for that matter, Mr. Riley or Mr. Womack believe that this new 

standard operating procedure gets them toward that goal 

Mr. RILEY. We have, in fact, experienced the change of personnel, 

change of decision event on a number of occasions. I think two mistakes were made at the front end of this. One, FEMA headquarters 

took direct control of the people on the ground that were making 

decisions, so you had headquarters personnel involved in this decision making process. What normally happens in a disaster is the 

people that are on the ground responding to the disaster work for 

the region, and the region has a close association with the people 

39 

at the State level and have a good working relationship. Well, that 

relationship was abandoned and we could never, until recently, get 

that good partnership approach with FEMA. 

Secondly, because this was catastrophic and when FEMA showed 

up to the event, they were looking for a hurricane and they didn’t 

find it. They found a catastrophe, a large catastrophe. We have 

23,000 projects. So one of the decisions they made is we are going 

to go out and issue project worksheets as placeholders, just to identify that there is a building or some infrastructure that has been 

damaged. Now, we are going to put just a very bland estimate on 

it and we will come back later and then do the detailed analysis 

of what the damage was. 

Well, that group of people rotated out and a new group of people 

came in. The new group of people took the position that those 

project worksheets were good project worksheets, and so if you, applicant, want to change that, the burden of proof is on you, and you 

have to come in and change that. 

Again, it belied this very collaborative relationship that should 

have existed to really determine what the recovery was, what the 

end goal was, as opposed to just what the dollar amount might be. 

But having a consistent relationship with the FEMA personnel 

on the ground is very important. 

Ms. NORTON. I think you indicated there have been improvements with that kind of partnership now. 

Mr. RILEY. Correct. One of the things FEMA did was transfer the 

responsibility for the recovery back to the region. Tony Russell said 

it. One of the things you have to do is establish that trusting relationship between those people. We work closely with Region XI, always have, and the people there know us and we know them. And 

that trust is there because they know how we operate. We know 

how they operate. 

Ms. NORTON. One more question for you both before I ask my colleagues if they have questions. 

It goes to Mr. Daniels’ process. I have indicated I certainly don’t 

think the arbitration process is the way to resolve most disputes; 

that we were driven to it by the problems we were reaching while 

FEMA was getting a new act, shall I say, together. But I think it 

is in Mr. Riley’s testimony that there was some concern about the 

impartiality or the possible perception of impartiality in the first 

and second appeals in FEMA’s traditional appeals process. 

Could you explain, since I take it that doesn’t have the same 

kinds of safeguards that Mr. Daniels’ process has, what your concerns are in these appeals processes which are where we are still 

having problems? And do you still see problems there? 

Mr. RILEY. The problem we were having is as we were trying to 

develop a project worksheet, we would sit down with a FEMA counterpart on the other side of the table and we would work through 

the project worksheet. We would come to some impasse. 

So we would go away and we would file the appeal. Well, the appeal would then be worked by the same guy that was sitting on the 

other side of the table from us to begin with and he would provide 

the Regional Director his input as to the answer to the appeal. 

So we don’t get someone else looking at this thing afresh. We get 

the same people involved. 

40 

Ms. NORTON. And that is an appeal? I appeal to my adversary? 

Mr. RILEY. That is exactly what our complaint was about independent process. Even within FEMA, if they had had an independent team come in and look at it, but their practice was, and 

I don’t have enough experience to know whether it was unique to 

Louisiana TRO or whether this was throughout the system, but the 

practice was when we filed that appeal, it would go back to the 

same individual that made the decision in the first place. 

Ms. NORTON. Mr. Womack, was that your experience as well? 

Mr. WOMACK. It is a little bit more complicated than that. You 

had the people, in our case in Biloxi, that wrote the project worksheets. If it was a difficult decision, they might in fact call the region, or before the region had control of the recovery office, they 

would call headquarters. And they would ask their opinion on these 

things. 

Then once a decision was made, the applicant didn’t like the decision, they appealed it. Before it went to the Regional Administrator, the same office that made the decision had a chance to write 

their comments. Then it went to the Regional Administrator and 

his staff, the public assistance staff that in fact may have consulted 

with the local field office for FEMA, they wrote their recommendation back to the Regional Administrator. 

Now, the Regional Administrator in some cases would go against 

his program staff, but that is very difficult to do in many cases because you hire these people to be the experts. But if they were already consulted on the front end as to what they thought the 

project should be, then it doesn’t seem that there is a lot of value 

in having those same people provide input into the appeal. 

Ms. NORTON. Mr. Russell, I understand if you are sitting outside 

of the system that we are, and trying to get inside a moment. 

When sitting outside, this sounds kafkaesque. If you are inside, you 

are inside a Federal bureaucracy and you are trying to operate according to regular procedure. 

You can understand, though, I am sure, if you extract yourself 

for a moment from your own processes, how circular this process 

necessarily is. 

What if, for example, I heard neither of these State representatives say go hire yourself somebody like Professor Bingham. But 

they seem to imply that there have got to be fresh eyes. What 

about a different regional office, for example, looking at the matter? 

So that you don’t have the frustration of no confidence, even when 

the appeal goes upstairs, because those who had input, who are 

closer to the decision maker, have already influenced the decision 

maker as to the outcome. What about a different regional office? 

I mean, this is off the top of our head. You might be able to think 

of a better person inside of FEMA. I might even ask you to go to 

Mr. Daniels. I am trying to find something within your own processes that would eliminate the appearance of unfairness that our 

two State officials have spoken of 

Mr. RUSSELL. Yes, ma’am. I think that, at least for me, my first 

objective has always been to solve this in the field. And that is with 

a culture shift to where the default answer is yes. OK? That is my 

default answer. So when my employees come to meet with the applicant in the State, the default is yes. 

41 

Ms. NORTON. Mr. Russell, you are not answering my question. 

The default answer is the no. When the default answer is no, and 

as you said yourself in your own testimony, there will be some 

things that have to be appealed. 

Mr. RUSSELL. Yes. 

Ms. NORTON. I am now trying to find, out of this hearing, some 

procedures which FEMA would consider. The default answer is no. 

You tried your best. Now, Mr. Womack and Mr. Riley are appealing. They are now spending months upon months in the same process, essentially. Would it assist the process in having, for example, 

a different Regional Administrator who has not been part of the 

process look at it? Or do you have a suggestion as to how to restore 

the perception of fairness of the State officials who are on the 

ground? 

Mr. RUSSELL. Ma’am, you know, we are looking at a bottom-up 

review as we review our whole PA process, and I will definitely 

take that back as an option for us to take a look at. 

Ms. NORTON. Thank you very much. In 30 days, Mr. Russell, we 

would like an answer to the following question. Will FEMA consider, in order to—let me, the predicate of this question is, we have 

seen huge improvement once we reach impasse and go to the arbitrators. They have stayed within their timelines and they have 

been successful in getting the parties to stay within their timelines. 

We are very, very satisfied with how that process, should that process be used, go. 

According to those who testified before you, the process that we 

now have the most trouble with doesn’t have anything to do with 

this atom bomb process which has done its work apparently in 

keeping wars from breaking out, and of course, once things get to 

arbitration. Our process now is in the ordinary appeals process. 

In 30 days, will FEMA consider the use of a different regional 

office at the first level of appeal so that the appeals process will 

be not only close to a year, but will get closer to what the arbitration process is? And if you find that unsatisfactory, within 30 days, 

let the Subcommittee know what alternatives are under consideration. 

I will turn now to Mr. Cao, who is acting as Ranking Member. 

Mr. CAO. Thank you, Madam Chair. 

I thought that my hari-kari statement was tough. You just want 

to line up people and—anyway. 

[Laughter.] 

Ms. NORTON. So you are right with me. 

Mr. CAO. Well, maybe. Anyway, thank you very much. 

Tony, it seems to me that, based on my conversation with counsel, that the Hazard Mitigation Act of 2000 enables us to prevent 

many of the backlogs that we saw after Katrina. And if the Chairwoman is right that it has taken FEMA 10 years, over 10 years to 

come up with the rules and regulations, I see that as inexcusable. 

And I hope that you can bring the words back to Administrator 

Fugate that this Subcommittee is thoroughly disappointed and I 

hope that a greater urgency would be put on FEMA to come up 

with these rules because based on what I have heard so far, the 

Act itself would provide incentives for the State to actually save 

money, and in essence save FEMA money. 

42 

At the same time, it would create a structure upon which FEMA 

can settle many of the projects through a lump sum settlement 

type of procedure that we have been pushing for. 

So again, once you have come up with a time line to submit to 

the Chairwoman, I would like to get a copy of that time line, if you 

don’t mind. But beyond that, I would have to say that you have 

done a wonderful job as the TRO Director and now as the Regional 

Director of Region VI. 

And I have mentioned it many, many times before. I appreciate 

your cooperation and your hard work and your staff’s hard work in 

the past two years. 

But now we have a new problem and this new problem that we 

have is the Community Disaster Loan Forgiveness Program. It 

seems to me, based on the testimony of the prior panel members, 

that for previous disasters, community disaster loan forgiveness 

has been routinely given, up to 96 percent of the loans. 

The question that I have here is why is FEMA changing its perception or its position on the forgiveness of these loans? I am not 

sure what the rationale is based on the fact that Katrina was and 

still is the most devastating disaster to befall upon our Country. It 

seems to me a no-brainer to forgive these loans so that communities can recover and then to obviously continue with what they 

have to do in order to rebuild and to assist their citizens. 

I know that I have confronted Administrator Fugate many, many 

times in the last two years, pushing for very friendly regulations 

so that loans can be forgiven. And it seems to me that our plea has 

fallen on deaf ears because we are encountering frustration upon 

frustration, before with P.W.s, now with community disaster loan 

forgiveness. 

And it seems to me that, again, rather than to work in cooperation with municipalities to rebuild and then to carry on with their 

lives, obstructions are now being put forward and barriers are 

being built. And again, I would like for you to approach the Administrator and ask him to revisit this problem. 

With that being said, based on what I have heard so far with respect to the appeals process and with respect to the arbitration 

panel that we now have, would it be more efficient for us just to 

simply get rid of the appeals process, to go from first termination 

and allow the members to ask for arbitration? 

Mr. RUSSELL. Well, sir, you know I will go back to my first statement that we tried to do it all in the field, but if we can’t do it in 

the field, then I think that what is going to happen is we are going 

to look at this from the bottom up. And to look at arbitration and 

to look at appeals and to see how those timelines match up. And 

is it more efficient? And in my mind, what is the less amount of 

burden on the applicant? Because there is a burdensome process to 

get your case together, to file your case. There is an expense there 

when it comes to arbitration. 

And so I would like to be able to analyze both of those and figure 

out what is the best way to proceed for the applicant. And we are 

in that process now. 

Mr. CAO. But based on the testimony of the previous panel, the 

average time wait for the appeal process to go through was about 

a year. And if children were waiting for schools to reopen, if ill peoVerDate Aug 31 2005 14:31 Dec 22, 2010 Jkt 000000 PO 00000 Frm 00064 Fmt 6633 Sfmt 6633 P:\DOCS\58458.0 KAYLA
43 

ple were waiting for hospitals to reopen, it seems to me that the 

one-year period is a time that people cannot afford to waste. And 

if you can look at really, really streamline this process and to bring 

as much efficiency, as much as possible, I am pretty sure that future victims of any natural disaster would appreciate that. 

Mr. Riley, first of all, I just want to thank you so much for everything that you have done for Louisiana. I know that you and your 

staff have worked very hard to push forward the recovery. As we 

go forward to look at how we would deal with future disaster, what 

would be the most important area based on your experience that 

we need to focus on right now? 

Mr. RILEY. I think this was mentioned by the earlier panel. You 

get these small communities that have been hit by a disaster and 

if it is an ordinary disaster, in my terms, they might have a building or two that needs to be repaired or replaced, and that is pretty 

simple to do. 

When it is a catastrophic event, they are overwhelmed and they 

don’t have the capabilities necessary to really develop the kind of 

planning that it takes to bring an entire community back, as opposed to just build a building back. 

Now, the experience that we had early on with FEMA was that 

they would come in and they would concentrate on building the 

building back, not reestablishing the community. And it is that sort 

of urban planning master planning expertise that FEMA could 

bring with them to help the community do a good planning process. 

We want to build communities back more resilient, safer, stronger than they were before the storm so that the next storm doesn’t 

hurt them the same way. 

So bring in the right expertise to help them do that sort of planning to become more resilient, safer, stronger and to do the sorts 

of things that you need to do to bring the community back. What 

are the priorities of processes or infrastructure that you need to be 

back? How do you bring it back? Do you bring it back exactly like 

it was? Or do you do something like the Recovery School District 

and develop a master plan and bring schools back online in a different sequence of events that matches the community coming back 

to town. 

So that sort of expertise at the front end of a disaster, to help 

these communities I think would be really helpful. 

Mr. CAO. So, Tony, based on what Mr. Riley has said, what is 

FEMA’s position, FEMA’s perspective going forward? 

Mr. RUSSELL. Yes, sir. I think that we have an emergency support function 14, which is long-term recovery. And during a disaster, we can mobilize them. They can get with the State and begin 

those long-term planning of that matter. So that is something that 

can be done. 

Mr. CAO. Thank you, and I yield back. 

Ms. NORTON. Thank you, Mr. Cao. 

Mr. Taylor of Mississippi? 

Mr. TAYLOR. Thank you, Madam Chairman. 

I want to thank our panelists for being with us this late in the 

day. 

Mr. Russell, let me start by saying that the people of South Mississippi are incredibly grateful for the help this Congress and your 

44 

agency has provided. Mr. Womack says $24 billion. My number if 

$21.8 billion. That is a lot of money to the State of Mississippi and 

we are grateful for every penny of it. 

There have, however—and I want to context everything in that 

we are grateful for the help we have received. But there are still 

some communities where the majority of neighborhoods are driveways that lead to a vacant lot; where the houses have not come 

back. 

As you know, most local communities are a combination of property taxes, and so if the house isn’t there, the property tax revenue 

is way down. And sales taxes, again if people aren’t there, they 

aren’t buying things, and in many instances the stores haven’t 

come back because the people haven’t come back, et cetera. 

Some of the communities that I represent, the loans have been 

forgiven for rebuilding schools. There are other communities that 

in my mind’s eye were actually more devastated, where the loans 

haven’t. One of the things that has happened that I think has 

skewed this is that our Nation, and again I say this with gratitude, 

came up with re-start money knowing that the houses were gone, 

that the stores were gone, therefore there was no property tax or 

sales tax to pay for this. Our Nation stepped forward to get these 

schools going again within about 60 days of the storm with re-start 

money, and we are grateful for it. 

The problem comes in in that that was one-time money from our 

Nation to get these schools going, but it was counted as if it was 

an ongoing source of funds for these communities trying to get 

their loans forgiven, when it was not an ongoing source of funds. 

It was a one-time source of funds. 

I was wondering if this has been brought to your attention by 

Mr. Womack or others? And if it has not, I would certainly ask that 

you take a look at this because I do think some of these communities—no, I know some of these communities have a very legitimate request for help. 

Mr. RUSSELL. Yes, sir. At this time, we are still in the process 

of gaining additional information about the loan process. And if the 

recipient has information to bring forward, we are receptive to receiving that because nothing is final yet. We are still in the process 

and it is still being under review even as I speak. And it is on a 

case-by-case basis also. 

So as more information comes through that is advantageous toward the recipient, then they can be taken into account. 

Mr. TAYLOR. OK. Secondly, and I am going to shift gears, Madam 

Chairman, if you don’t mind. But again, hopefully we have learned 

some lessons from the last storm. 

In my mind’s eye, one of the visions that I both said, gee, I am 

grateful to my Nation, and boy, there has got to be a better way 

to do this, is passing about a week after the events of the storm, 

passing by the Stennis Airport and seeing an L-1011, an absolutely 

enormous cargo plane, the nose of which is now picked up and looking in the cargo plane it is full of ice. 

So on one hand, I am going, gee, we sure need that ice. I am sure 

grateful for this. On the other hand, being a self-professed logistician, I am going, that is the most expensive way on earth to get 

45 

that ice here. We need the stuff. We are grateful for it, but, boy, 

there had to be a cheaper way to get this stuff here. 

Mr. Brown never got it on the importance of ice. You’ve got people who weren’t working outside suddenly working outside. It prevents them from getting a heat stroke. 

Mr. Womack and I recall the very sad situation where we actually commandeered an ice truck to put corpses in because there 

was no electricity and they were rotting in the sun. 

For those people who could find their refrigerators, it gives them 

a few days to take their frozen goods and slowly thaw them out so 

they can feed themselves for a period of weeks until the stores get 

open again. It is a necessity. I can tell you from experience, it is 

a necessity to help people be as self-reliant as possible under these 

terrible circumstances. 

Having said that, Brown and I think his predecessor said in the 

future that there would not be ice. And again, going back to that 

L-1011 full of ice, I am grateful for it, but boy, there has got to be 

a better way to do this. 

One of the advances that I have seen since then, and understanding that the cost of moving that commodity is extremely expensive. Something that has come along since Katrina are these 

portable ice-making machines. It is actually a vending machine, 

that are fairly common throughout South Mississippi now. 

Almost every city in my District has their own water wells. Almost all of them have backup generators to get water to those 

wells. 

I would ask that FEMA strongly consider as a short-term relief 

buying machines, or at least having the ability to lease machines 

like that so that they could be placed at the water wells in a community that has lost its electricity and needs some ice, and cut 

down on those huge logistics costs of taking ice from the Midwest 

and dragging it down to coastal Mississippi or the Midwest that in 

a future storm and taking it to coastal North Carolina. 

Again, I have a responsibility to the taxpayers who aren’t affected, but also to those people who are affected. We want to help 

those people affected and we have to do it in the most cost-effective 

manner. I think this is just a common sense thing that ought to 

be looking at. 

Secondly, hurricanes can hit a coastal community. There is a 

really good chance the bridges will be out, just like they were last 

time. I never really could get it through the previous Administration of the need to have a response from the sea, a rescue from the 

sea. And there are businesses that transport fuel by barge. And I 

would hope that you would seriously consider pre-negotiated contracts with those barge firms to deliver fuel. 

And that does a couple of things. Number one, it gets the fuel 

to the point of greatest impact, which is going to be closest to the 

water. But the second phenomena that we went through is that everyone who went through the hurricane thought they had it the 

worst, when the truth of the matter is the people the farthest from 

the refinery actually had it the worst because they were right there 

on the coast. But every community between that inland refinery 

and the coast tried to grab that fuel truck. 

46 

And in many instances, that fuel truck ended up where it really 

didn’t need to be, and never got to where it needed to be. 

Secondly, you can carry a heck of a lot more fuel on a barge than 

a truck. And it becomes the filling station if properly designed. 

And so again, lessons learned, response from the sea, and keeping in mind that over half of all Americans live in coastal America, 

so something bad happens and it is not the hand of God, but a terrorist, is probably going to happen in a coastal community; and a 

response from the sea for a floating hospitals using large-deck amphibious assault ships that the Marines have; fuel; food. 

Again, I would hope that you would be working with the Military 

Sealift Command and others in the military to come up with this 

response ahead of time, rather than doing it on the fly after one 

of these events. 

Mr. RUSSELL. Yes, sir. In fact we are doing exactly that. We are 

looking at every avenue for health and safety, and I will take this 

back with me to make sure this is one the agenda also. 

Mr. TAYLOR. OK. Again, Madam Chairman, thank you for your 

courtesy of letting me participate in your hearing. 

Ms. NORTON. Of course, Mr. Taylor. 

I don’t have many more questions, but I would like to ask a couple more questions before we dismiss this panel, because these are 

questions I like; when everybody who is engaged in a process are 

before us, so that you can react candidly to one another. 

Now, I note that in the arbitrations, and remember that is a new 

process, so we had a very special obligation to look at it. We note 

that three had resulted in full implementation for the State; six in 

partial implementation for the State; and two were denied. 

So I would like to ask Mr. Russell, Mr. Womack and Mr. Riley, 

are you all satisfied with Mr. Daniels sitting right here? He would 

be glad to hear it, I know. Are you all satisfied with the arbitration 

process? What has been its effects on other parts of the process? 

And why have more arbitrations not been requested? 

Mr. Russell, why don’t you start? 

Mr. RUSSELL. Yes. Madam Chairwoman, my goal is to put Mr. 

Daniels out of business, and that is by solving things at the lowest 

level possible. 

Ms. NORTON. Has this process, arbitration, had the effect, if not 

of putting him out of business, he is very much still in business, 

but had an effect on the speed or ease of the process you are necessarily involved in? And if so, how? Be specific, Mr. Russell. 

Mr. RUSSELL. Well, I think that the trust that we have built has 

had a factor in the field of getting things done. And that we continue to try to solve that, and we know that arbitration is there. 

It is a choice that we can take, but we will try as much as possible 

not to go there if at all possible. 

Ms. NORTON. Mr. Womack? 

Mr. WOMACK. I personally participated on behalf of the State in 

four of the hearings that were held. First of all, I think that the 

panel, the judges, do a tremendous job with it. I was at the very 

first one and we were allocated two days for the oral testimony. 

And now they have shortened it for most cases down to one day. 

And it is a very good process as far as I am concerned. 

47 

I will be quite frank with you. I have very good friends at the 

local level in Mississippi, the Regional Administrator, Deputy Administrator, much of his staff and here at FEMA headquarters. It 

was almost like my support for the arbitration process I was being 

disloyal to my friends in some way because they felt like they had 

been doing the right things. 

And what I tried to emphasize, and I have continued to emphasize to them is look at what the arbitration panel said and say: Do 

we need to change our policies and process? Is there something 

that we missed in all of this? 

And as I looked at it, what I thought was that the judges looked 

at things like what was an applicant told early on; did decision, 

were they changed throughout the process? 

And the other thing is one of the cases where you had one part 

of FEMA, Public Assistance, who said one thing and the National 

Flood Insurance Program, who had a different set of regulations. 

And so the school district got a new school based on the fact of the 

National Flood Insurance Program regulations versus the Public 

Assistance, or at least that was part of the decision making process. 

Has it assisted us in decision making? I think so. I think that, 

yes, we are moving forward quicker on some cases. As to why there 

haven’t been more cases filed, you have to remember if you had already gone through your second appeal process, you could not go 

back and enter into arbitration. So well over $1 billion had already 

been dispersed, maybe $1.5 billion, that was not subject to arbitration. 

Mississippi is further along in the recovery, I believe, than Louisiana, but basically because $12 billion versus $3 billion in PA 

cost. So logically speaking, I think we are at the end of many of 

our processes. 

Ms. NORTON. The reason Mississippi is further along is? 

Mr. WOMACK. Well, they had $12 billion worth of PA projects. We 

had $3 billion. So their disaster is about four times the size of ours, 

if that makes sense. And I also like to say that the water came up 

and went down in 12 hours in Mississippi. It had to be pumped out 

of New Orleans and it took months. 

So it is two different disasters, and in many of their projects they 

are still in that negotiation phase of trying to sort through what 

they are actually entitled to, where we are really under construction on most of ours. So that is why we don’t have as many arbitration cases. 

Ms. NORTON. Mr. Riley? 

Mr. RILEY. First of all, I think that the arbitration services that 

the CBCA provides have been excellent. Whether we win or lose, 

we walk away with a feeling that we have fair and impartial and 

very professional services. What that tool has done for us is it has 

allowed us to bring FEMA to the table in a manner with a larger 

propensity to work the issue out. 

When I first met Tony Russell, he said just give me something 

to hang my hat on and the answer is going to be yes. He didn’t 

wear a hat, so I gave him a hat and then I gave him a nail. And 

it has worked. 

48 

And so we have been able to in a very professional manner with 

the personalities involved currently to sit down and come to reasonable solutions. But I do think one of the reasons that you 

haven’t seen as many arbitrations, when we came here last year, 

we said that there were over 4,000 cases in dispute. And now we 

are saying there are a little over 2,600 and almost 2,000 have been 

resolved. 

One of the reasons more have not ended up in arbitration, however, is because I think the dollar limit for arbitration is too high, 

and when FEMA adopted its regulations it said that the applicant 

will pay for the costs of arbitration. And in order to do this, in the 

cases that have been successful before the CBCA, hired lawyers 

and experts. In order to do that, you need money. And if you are 

a small applicant, you don’t have the money to hire lawyers and 

experts. 

Ms. NORTON. What do you think the ceiling should be? Or should 

they vary based on the size of the community? 

Mr. RILEY. In our disaster, the way I have looked at it, if we were at $100,000 or more, that would be a good arbitration case. 

And so that is just a casual observation from us. 

Ms. NORTON. Do you think the State or local government should 

use the administrative or management funds to help defray the 

costs, if allowed? 

Mr. RILEY. Yes, I do. Many of them are stretched as it is to provide the necessary administrative management just to oversee the 

projects. So it would be helpful if there was a consideration of additional funding. And you can use your arbitrator to kind of balance 

that out. You could give him authority to set fees maybe for attorneys, and also to deny costs if the case is simply a frivolous case. 

So you could manage it so that it is not excessive. But Charity 

Hospital, for example, is a good example. We had a highly professional team of lawyers. We had three experts in architectural construction engineering, cost-estimating world. And that cost money 

to do that. 

Ms. NORTON. Final question. What all of you have had to say has 

been very encouraging. 

And let me say, Mr. Russell and Mr. Womack, Mr. Riley, it has 

been the first time I have heard States speak so favorably, Mr. 

Russell, of FEMA. And so it says a great deal about improvements 

at FEMA that you hear two guys on the ground, if I may call them 

that, who in their respective positions and with their predecessors 

have flooded us with complaints about FEMA, now speak about a 

new partnership. It is very encouraging to the Subcommittee. 

It is very encouraging from all of you to hear both the effects of 

arbitration, shall we say, direct and indirect. And we use these 

hearings to resolve issues. We don’t do ‘‘gotcha’’ hearings. We then 

follow up based on your answers and our questions just as we have 

given Mr. Russell a time frame. We give the agency a time frame 

for responding based on what we have learned here. 

Now, because we have with us Mr. Russell and Mr. Womack and 

Mr. Riley who have an effective partnership, and because we would 

like to see the appeals process, for example, and the negotiating 

process at the ground level do the job so that, as Mr. Russell says, 

Mr. Daniels just fades away like an old soldier. Because we would 

49 

really like to see that. And he looks like he is ready to go, if need 

be. 

I would most appreciate your using this opportunity, Mr. 

Womack and Mr. Riley, to indicate for the public record what other 

steps FEMA should take. You may discuss what steps they have 

taken, if you like, to hasten, cut red tape, speed recovery for public 

assistance projects on the ground where you are. What more would 

you like Mr. Russell to do? 

We can start at the very beginning and especially going through 

appeals. 

Mr. WOMACK. Well, first of all, I think we need to keep the appeals in place. I think we need to have a form of arbitration. 

Whether what we have now is the right one, I don’t know, but 

some sort of independent way of looking at things. 

But what I would like as part of the bottom-up review that Tony 

has talked about, that FEMA is looking at Public Assistance. I 

really think over the last 20 or 30 years that FEMA and the other 

regulatory agencies have kind of lost sight a little bit of what the 

Stafford Act is all about. And it may mean that we need to go back 

and rewrite regulations that say, OK, let’s always give the applicant the benefit of the doubt; rather than let’s try to figure out to 

make sure that they are not getting something they are not entitled to. 

And certainly, local governments and sometimes their contractors will push to try to get more than they are truly entitled to, 

and I fully understand that. But I think now we have a whole set 

of regulations, policies and procedures, and I don’t want to overemphasize this, but I think a lot of them were driven by external 

sources to FEMA. So that now it is such a cumbersome process 

that I think a lot of the regulations need to be rewritten. 

One example is this. Under the PA pilot program, you could get 

straight time for debris removal for your employees, for the local 

employees. OK? It is now in regulation that they cannot do that. 

Ms. NORTON. The statute allows it? The regulations say you cannot do it? 

Mr. WOMACK. As I understand it, the statute doesn’t address 

straight time for emergency work and debris removal. The regulation does. 

Ms. NORTON. And it disallows it? 

Mr. WOMACK. It does. Which means that your incentive is to go 

out and hire a contractor, rather than let your employees do the 

work. You can get overtime and you can get equipment cost, but 

you cannot get their straight time. 

Ms. NORTON. Mr. Russell, excuse me, while we have that on the 

table, could you explain that one to us? 

Mr. RUSSELL. Yes, ma’am. Again, as Mr. Womack said, that is 

part of our bottom-up review to make sure that we are not overly 

taxing our State partners. 

Ms. NORTON. You are not taxing your State partners. They are 

making a rational decision to get as much money from FEMA as 

possible because of a regulation you put in place. 

Mr. RUSSELL. Yes, and then that was, my understanding of it, it 

was to ensure that we didn’t double-pay somebody for doing the 

50 

exact same work. But again, it is going to be under review, ma’am, 

and we are going to take a look at it again. 

Ms. NORTON. You have 30 days to tell us whether you intend to 

change that particular regulation and whether it is under consideration for change and the options you are considering. 

Mr. RUSSELL. Will do. 

Ms. NORTON. The taxpayers, it seems to me, are on the bad end 

of that one, U.S. taxpayers, because the encouragement is to do exactly what Mr. Womack says: maximize your costs, and he is not 

doing it to jack up the government. He is trying to get as much as 

is possible for reimbursement for work done. 

Mr. Womack, you can continue. 

Mr. WOMACK. I would just finish that by saying that I think 

there are a lot of other regulations and policies that need to be 

looked at. And I do know that the senior leadership at FEMA are 

doing this. They are looking at this. 

It is going to take some time. If it took us 20 years or 30 years 

to get here, an overly cumbersome Public Assistance Program, it is 

going to take some time to move back the other direction. I think 

they are moving in the right direction. 

Ms. NORTON. Mr. Riley, do you have any thing you would like to 

say to Mr. Russell about how the process leading up and going 

through appeals could be streamlined, shortened and the rest? 

Mr. RILEY. The Stafford Act, the Act itself is full of the ability 

to make subjective decisions. And I think it was intentionally done 

that way because every disaster is different. So when you get on 

the ground, you have to make different decisions. 

The regulations have removed a lot of that subjective decision 

making. And so, again, you have to default to the ordinary hurricane by regulation. That is what you can do. OK? But it may not 

fit the circumstance you have. 

So I would encourage the regulation to give the Regional Administrator a lot more flexibility on how he responds to a disaster. The 

goal of a disaster is recovery, not the expenditure of funds. And if 

both the State and FEMA have that same goal of recovery, not to 

reduce the amount of funds that are necessary for recovery, but to 

do an adequate job at recovery. 

I think what we do in our program is we design the program so 

that one person that is trying to get over on us won’t get over on 

us. And if we design it so that we have adequate safeguards in 

place, but focus on the necessity to recover and to give the applicant the necessary means to recover. From an applicant’s point of 

view, it is all about the cash flow. I can’t start my project until I 

have identified all the money that I think I am going to need. OK? 

So we have to get there quickly. 

From the State’s perspective, for example, when we bring an architect or an engineer to the table to give a professional opinion, 

he is a licensed architect or engineer. Our experience with FEMA 

is that that is not always the case. He may have an architectural 

or engineering background, or he may be an engineer who has experience on roads and we are talking about a building. 

So we don’t have the same experts talking to each other, and 

sometimes they talk a different language. So having the ability to 

get with FEMA and to agree on a single expert for a project I think 

51 

is a very important thing, someone that both the applicant and 

FEMA can trust to make a professional opinion that he signed off 

on and his license is at risk and every other thing that is at risk 

when you hire an architect or an engineer in the private sector. 

So I do think that we need to work on the culture that Mr. Russell has built about the trust between the State and FEMA, and 

that is a lot of what happened to us in the first part of this disaster 

was that lack of trust, and it was hard to work through. 

So a culture of trust, some more subjective decision making for 

the Regional Administrator who knows what is going on on the 

ground, and putting the right experts in place to make decisions 

that people have confidence in. 

Ms. NORTON. Thank you very much. 

I want to thank all of you. Because this is a hearing on Katrina 

and Rita and because I have learned of some assistance from the 

private sector this Committee or at least this Chair did not know 

of, but you may know of, for the record I would like to get your 

comments. 

Though I am a Member of the Aviation Subcommittee, of the 

Homeland Security Committee as well, I was unaware of the role 

that general aviation played during Katrina and Rita. And I wonder if you had any comments on what I am told was the case that 

general aviation planes played an important role in the early days 

of the disaster. What has been cited to me is delivering of supplies. 

I raise general aviation because of the difficulty of planes at all 

getting in. And of course, even in New Orleans, for example, it was 

difficult for plane travel to occur. So if that was the case, imagine 

these smaller areas in Mississippi and New Orleans. And what we 

are told is that there were missions to deliver supplies to devastated areas in the Gulf Coast. This is general aviation, smaller 

planes which can sometimes maneuver into disaster areas to transport evacuees, to coordinate relief flights, to connect available aircraft to people who needed airlifting to Gulf Coast area hospitals, 

or from those hospitals to other hospitals. That general aviation 

was instrumental in a rescue operation and an example was cited 

to us of patients who were airlifted. This happened with helicopters 

as well. 

I wondered if any of you in your experience for the record have 

anything to say about the role of general aviation in this disaster, 

these smaller planes that can get where larger planes didn’t and 

couldn’t. 

Mr. WOMACK. Congressman Taylor may know more about this 

than I do. I do know that there were a lot of general aviation aircraft that had volunteered their services; that did come in and provide services. It was similar to what we saw with people driving 

up with their pickup loads full of water and food and diapers and 

that sort of thing. It was volunteers, spontaneous volunteers. It 

was extremely helpful, but the flip side of it was it was very difficult to control all that aviation into the area. 

Ms. NORTON. How do you control it? I mean, you have to go 

through some kind of—— 

Mr. WOMACK. Exactly, and there were so many aircraft flying. If 

you think of all the military aircraft that were flying and then you 

52 

bring in all the civilian aircraft, all trying to get to the same areas 

and do the same things. 

But yes, absolutely. They did some life-saving missions early on 

in Katrina. 

Ms. NORTON. Mr. Riley? 

Mr. RILEY. We had the same experience. The volunteerism is a 

very important part of any disaster response. And I think what we 

are trying to do is put together a process where we organize it a 

little better up front so that it is not so haphazard and we have 

a single source to go through for aviation requests and that sort of 

thing. 

Ms. NORTON. Yes, and we do understand these are volunteer efforts. I don’t know if Mr. Taylor knows anything about this. Do you 

know anything about the general aviation? Because you certainly 

had smaller areas. 

Mr. TAYLOR. Madam Chairman, I am certain it happened. I 

would be fibbing if I said I was an eyewitness to it. We saw the 

Mississippi National Guard. We saw C-130’s with Navy SEALs. We 

saw a 13 year old kid hop on a street sweeper to clear a 10,000- 

foot runway the day of the storm, which I mistook as an act of God 

that there wasn’t a twig on this runway, and it was a 13 year old 

kid jumped on his dad’s street sweeper. I know of a 13 year old kid 

who was refueling Blackhawk helicopters, which I am sure violated 

every OSHA rule on earth. 

[Laughter.] 

Mr. TAYLOR. But that crew got the fuel they needed and no one 

got hurt. So there were a lot of remarkable things involving aviation, and I am sure something like that happened. I am just not 

a witness to it. 

Ms. NORTON. Thank you very much. I just thought that in this 

hearing on Katrina after five years, we ought to take note of all 

the unsung heroes. We certainly have before us some of the more 

visible heroes and we thank each of you for being here and for your 

very valuable testimony. 

The hearing is adjourned. 

[Whereupon, at 5:22 p.m., the Subcommittee was adjourned.] 

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