Hurricane Katrina: Planning for and Management of Federal Disaster Recovery Contracts
Published: 2006-04-10T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The devastation experienced throughout the Gulf Coast region in the wake of Hurricanes Katrina and Rita has called into question the government's ability to effectively respond to such disasters. The government needs to understand what went right and what went wrong, and to apply these lessons to strengthen its disaster response and recovery operations. The federal government relies on partnerships across the public and private sectors to achieve critical results in preparing for and responding to natural disasters, with an increasing reliance on contractors to carry out specific aspects of its missions. At the same time, the acquisition functions at several agencies are on GAO's high-risk list, indicating a vulnerability to fraud, waste, and abuse. This testimony discusses how three agencies--the General Services Administration, the Federal Emergency Management Agency (FEMA), and the U.S. Army Corps of Engineers (the Corps)--conducted oversight of key contracts used in response to the hurricanes. Efforts are ongoing by these agencies to address issues GAO and others have identified.
section_title: What GAO Found
paragraphs: Agency acquisition and contractor personnel have been recognized for their hard work in providing the goods and services required to be responsive. The response efforts nonetheless suffered from three primary deficiencies: First, there was inadequate planning and preparation in anticipating requirements for needed goods and services. Some key agencies did not always have adequate plans for contracting in a major contingency situation. For example, while contracts for some items were in place prior to the storm, the Federal Emergency Management Agency did not adequately anticipate needs for such services as providing temporary housing and public buildings. There were also competing tensions between the selection of national contractors and the Stafford Act requirement that there be a preference for contractors from the affected area. Better planning could have alleviated those tensions. Second, there was a lack of clearly communicated responsibilities across agencies and jurisdictions to ensure effective outcomes. In a disaster situation, sometimes local or state officials determine the requirements and communicate them to FEMA, which then may write and award the contract or communicate the requirements to another agency that writes and awards the contract; and then FEMA or another agency will oversee contract performance. To ensure effective execution of the contract, this approach puts a premium on clear alignment of responsibilities and good communications, but our fieldwork identified examples where unclear responsibilities and poor communications resulted in poor acquisition outcomes. For example, the process for ordering and delivering ice heavily depends on effective communications between FEMA and the Corps. However, according to Corps officials, FEMA did not fully understand the contracting approach used by the Corps and ordered at least double the amount of ice required, resulting in an oversupply of ice and a lack of distribution sites to handle the volume ordered. And third, there were insufficient numbers and inadequate deployment of personnel to provide for effective contractor oversight. The purpose of monitoring is to ensure that contracted goods and services are delivered in accordance with the agreed upon schedule, cost, quality, and quantity provisions stated in the contract. Without sufficient numbers of trained people properly deployed, however, monitoring will not be effective, agencies may not be able to quickly identify and correct poor contractor performance, and agencies will be at risk of overpaying contractors. Our work indicated that while monitoring was occurring on the contracts we reviewed, the number of staff available was not always sufficient and staff were not effectively deployed. For example: FEMA's contracts for installing temporary housing in four states had only 17 of the 27 technical monitors that had been determined necessary to oversee contractor performance.

section_title: Letter
paragraphs: Thank you for inviting me here today to discuss the management and  oversight of federal disaster recovery contracts related to Hurricanes  Katrina and Rita. The size and strength of Hurricane Katrina resulted in  one of the largest natural disasters in our nation’s history, and in its  aftermath major questions have been raised about our nation’s readiness  and ability to respond to catastrophic disasters. Hurricane Rita increased  demands on an already stressed response and recovery effort by all levels  of government.
GAO has a large body of ongoing work on a range of issues relating to all  phases of the preparation, response, recovery, and rebuilding efforts  related to Hurricanes Katrina and Rita. GAO’s work has been coordinated  with the rest of the accountability community at the federal, state, and  local levels to ensure that all significant issues associated with relief and  recovery, including contracting, are addressed while avoiding unnecessary  duplication of efforts.
Comptroller General Walker recently testified on GAO’s preliminary  observations on the challenges encountered in the response to Hurricane  Katrina, and he identified four themes that are similar to lessons learned  from past catastrophic disasters. These include the central importance of  (1) clearly defining and communicating leadership roles, responsibilities,  and lines of authority for response in advance of a catastrophic disaster;  (2) clarifying the procedures for activating the National Response Plan and  applying them to emerging catastrophic disasters; (3) conducting strong  advance planning and robust training and exercise programs; and   (4) strengthening response and recovery capabilities for a catastrophic  disaster.
These themes directly relate to what I will discuss today, namely how  three agencies planned for and conducted oversight of several key  contracts in support of Katrina and Rita response and recovery efforts: the  General Services Administration (GSA), the Federal Emergency  Management Agency (FEMA), and the U.S. Army Corps of Engineers (the  Corps). In doing our review we selected 13 mission-critical contracts each  with a dollar value in excess of $5 million that were awarded to   12 contractors performing work for the three agencies. We analyzed in  detail how monitoring policies and processes were put into practice.  We  conducted our work from October 2005 through February 2006 in  accordance with generally accepted government auditing standards.
subsections: section_title: Contractors Role in Responding to Emergencies is Increasing
paragraphs: The private sector is an important partner with the government in  responding to and recovering from natural disasters such as Hurricanes  Katrina and Rita. As we recently noted, such partnerships increasingly  underlie critical government operations. With hundreds of billions of tax  dollars spent each year on goods and services, it is essential that all federal  agency acquisitions be handled in an efficient, effective, and accountable  manner.
Over $87 billion of federal funding has been appropriated in response to  the recent hurricanes. In responding to Hurricanes Katrina and Rita, the  government depended heavily on contractors to deliver ice, water, and  food supplies; patch rooftops; and provide housing to displaced residents  and temporary facilities to local government agencies. Overall, the  circumstances caused by the hurricanes created a difficult environment in  which agencies had to balance the need to deliver goods and services  quickly with the need for appropriate controls. Although achieving that  balance is sometimes hard to accomplish, that fact must not be allowed to  serve as an excuse for poor contracting practices.
section_title: There Was Inadequate Planning and Preparation in Anticipating Requirements for Needed Goods and Services
paragraphs: The need for strong planning is one of the themes identified by the  Comptroller General in regard to the government’s overall response to the  hurricanes. Planning also must explicitly address the need for and  management of the contractor community. In this regard, we found that  some key agencies did not always have adequate plans for contracting in a  major contingency situation. We also noted the competing tensions  between the selection of national contractors and the requirement under  the Stafford Act for a preference for contractors from the affected area.  Better planning could have alleviated those tensions.
While contracts for some items were in place prior to the storm, the  Federal Emergency Management Agency did not adequately anticipate  needs for such services as providing temporary housing and public  buildings.
The practice of the U.S. Army Corps of Engineers is to establish  Planning and Response Teams for various missions assigned to it by  FEMA prior to an event, with specific responsibilities assigned to team  members. However, the Corps indicated it did not know prior to the  hurricane that it would be tasked by FEMA with some of the mission  assignments it received. In one case, faced with a compressed time  frame for acquiring portable classrooms and with no prior knowledge  about the classroom mission they were assigned, Corps contracting  officials placed an order, under an existing agreement, with a  subsidiary of an Alaska Native Corporation under the Small Business  Administration’s section 8(a) Business Development Program. The  Corps accepted the contractor’s proposed price of $39.5 million even  though the Corps had information that the cost for the classrooms was  significantly less than that.  Based on our analysis of a quote obtained  by the contractor from a local Mississippi business, the price the  contractor actually paid for the classrooms, and prices for similar units  from General Services Administration (GSA) schedule contracts, our  preliminary conclusion is that the Corps could have, but failed to,  negotiate a lower price.
Similarly, better management of requirements development could have  avoided costs to house workers and victims. Based on information  provided by local officials, FEMA spent $3 million for 4,000 base camp  beds that were never used.
Preparation was also lacking in implementation of the Stafford Act  preference for contractors residing or doing business in the affected  area. The Corps staff expressed uncertainty regarding how to apply  preferences or determine if a company was in an affected area. Several  GSA and FEMA officials indicated they were aware of the Stafford Act,  but stated it is difficult to immediately factor in local businesses in  such a catastrophic event. GSA officials stated they plan to review the  Federal Acquisition Regulation (FAR) to see if additional Stafford Act  guidance is necessary.
In discussing our findings and observations with FEMA officials, they  indicated that in order to better respond to future disasters, they were  taking steps to improve in areas such as staffing and premobilization  capabilities. However, they also stated that such pre-planning and  preparedness has a cost. The Corps commented that contracting staff need  to have defined requirements in order to get the right type of contracts put  in place, and the contracting staff did not always get defined requirements  in a timely manner. Additionally, a Corps official commented that until  funding for a particular mission is secured, preparation for it cannot go  forward and this also delayed contracting efforts. Finally, both GSA and  the Corps noted that they tried to reach out to local and small businesses  through forums and other means to make them aware of opportunities to  contract with the federal government.
section_title: There Was a Lack of Clearly Communicated Responsibilities Across Agencies and Jurisdictions
paragraphs: We also found that processes for executing contracts were hindered by  poor communication. As envisioned under the National Response Plan  (NRP), federal agencies responding to a disaster carry out their acquisition  functions through a network of federal, state, and local agencies. In some  instances, the local or state officials determine the requirements and  communicate them to FEMA; FEMA may write and award the contract or  communicate the requirements to another agency that writes and awards  the contract; and then FEMA or another agency oversees contract  performance. This approach puts a premium on aligning roles and  responsibilities clearly and maintaining good communications to ensure  effective execution of the contract.
Our fieldwork identified examples where unclear responsibilities and poor  communications resulted in poor acquisition outcomes. For example:    FEMA officials stated that a contractor spent approximately   $10 million to renovate 160 rooms and furnish another 80 rooms in  military barracks in Alabama that a FEMA survey team identified for  use as temporary housing. To renovate the facility, FEMA headquarters  awarded a contract without consulting local FEMA officials in  Alabama. According to FEMA officials in Alabama, however, the  facility was not needed and they tried to stop the renovation. These  same FEMA officials stated that few evacuees agreed to live at the  facility, and when officials decided to close the facility, it had only six  occupants.
The process for ordering and delivering ice heavily depends on  effective communications between FEMA and the Corps. However,  according to Corps officials, FEMA did not fully understand the  contracting approach used by the Corps and ordered at least double  the amount of ice required, resulting in an oversupply of ice and a lack  of distribution sites available to handle the volume ordered.  Additionally, the local Corps personnel were not always aware of  where ice might be delivered and did not have the authority to redirect  ice as shipments arrived, resulting in inefficient distribution and receipt  at the state level.
FEMA tasked GSA to write three contracts in Louisiana for base  camps, hotel rooms, and ambulances, with a total value of over   $120 million. GSA contracting officers awarded the contracts, but could  not tell us which FEMA officials would be responsible for overseeing  contractor performance. The FEMA official identified as the main point  of contact by GSA did not have any knowledge of these contracts or  who was responsible for oversight. Only after contacting multiple  FEMA officials over a 3-week period were we able to determine the  agency officials responsible for contract oversight.
In commenting on our findings, GSA officials stated that their role is to  provide resource support in the response phase of a disaster, meaning  they are responsible for executing contracts under the NRP, and FEMA is  responsible for monitoring the contracts. FEMA officials commented that  there needs to be more clarity regarding procurement roles and indicated  one of their goals is to work with GSA to clarify procurement  responsibilities for the future. GSA officials indicated that the current  memorandum of understanding between GSA and FEMA is being updated  to reflect the standards of the new NRP as well.
section_title: There Were Insufficient Numbers and Inadequate Deployment of Personnel to Provide for Effective Contractor Oversight
paragraphs: The purpose of agencies’ monitoring processes is to ensure that  contracted goods and services are delivered in accordance with the  agreed-upon schedule, cost, quality, and quantity provisions stated in the  contract. Without sufficient numbers of trained people properly deployed,  however, effective monitoring is hampered and agencies may not be able  to identify and correct poor contractor performance in a timely manner.  Furthermore, agencies can be at risk of paying contractors more than the  value of the services performed.
Our work indicated that while monitoring was occurring on the contracts  we reviewed, the number of monitoring staff available was not always  sufficient, and staff were not always effectively deployed. For example:    FEMA’s contracts for installing temporary housing in four states had  only 17 of the 27 technical monitors that had been determined  necessary to oversee contractor performance.
Corps officials responsible for overseeing the “blue roof” program’s  field operations told us it was slowed down due to the lack of sufficient  monitors.
Deployment practices did not always provide for appropriate notification  of responsibilities or overlap of rotating contracting officers and oversight  personnel, thus making knowledge transfer and continuity of contract  management operations difficult. For example:    For four of the contracts we reviewed, officials were either unaware or  not notified by FEMA of their oversight responsibilities.
The lack of overlap between oversight personnel for a large temporary  housing contract left the most recent contract administrator with no  knowledge or documentation of who had authorized the contractor to  perform certain activities or why the activities were being performed.
While discussing our findings and observations with FEMA officials, they  emphasized that they lacked adequate staffing, but said they have made  efforts to fill staffing gaps. Additionally, FEMA officials stated they  recognize the need for continuity in contract oversight and indicated they  are implementing a process to ensure workload and knowledge sharing  among rotating personnel. However, they also believe that fewer transition  difficulties exist now as a result of hiring more people and having more  oversight officials staying in the affected areas. GSA officials indicated  there may also be other alternatives for ensuring adequate contract  oversight, such as designating GSA employees to conduct oversight on  some contracts. Corps officials stated their policy is to rotate certain  personnel every 29 days to keep personnel costs to a minimum because of  regulations under the Fair Labor Standards Act.
section_title: Previous Lessons Can Guide Agency Contracting Actions in Emergencies
paragraphs: In reviewing contracts awarded for Iraq—another contingency situation— GAO found that without effective acquisition planning, management  processes, and sufficient numbers of capable people, poor acquisition  outcomes resulted. GAO made recommendations regarding the need for  ensuring that requirements for placing orders are within the scope of  contracts; timely definition of contract terms and conditions, and  sufficient numbers of trained staff who have clear responsibilities and  guidance for overseeing contractor performance. Having these capabilities  requires preparation, such as having prearranged contracts in place in  advance of the disaster or other contingency.
Among the issues that we have identified in previous reports that warrant  consideration by agencies when contracting in an emergency are:  the strategies and flexibilities they will use to plan their procurements  to avoid the risks associated with undefined contracts;  the knowledge they need to have to identify, select, and manage  contractors to achieve successful outcomes; and  the need to have competitively awarded contracts in place prior to the  event against which orders can be placed as needed.
In executing these contracts, agencies should consider such issues as how  to effectively    communicate and coordinate with other agencies and with contractors;    define contract terms and conditions to avoid excessive costs and  ensure desired performance; and    monitor contractors.
Finally, agencies should consider crosscutting issues that affect their  overall ability to manage contractors, such as the    capability of their information systems to provide visibility into  financial and contracting operations;    skills and training of the acquisition workforce;    alignment of responsibilities among the key officials in managing the  award and oversight of contracts; and  the policies, procedures, and guidance for managing contracts.
In closing, in any acquisition, agencies must have in place sound  acquisition plans, processes to make and communicate good business  decisions, and a capable acquisition workforce to monitor contractor  performance so that the government receives good value for the money  spent. These components are critical to successfully managing contracts in  any environment—even in a contingency situation such as that presented  by Hurricanes Katrina and Rita.  -     -     -     -     -  Mr. Chairman this concludes my statement. I would be happy to respond  to any questions you or other members of the Subcommittee may have at  this time.
For further information regarding this testimony, please contact   William T. Woods at (202) 512-4841 or woodsw@gao.gov. Individuals  making key contributions to this testimony included Penny Augustine,  James Kim, John Needham, and Shannon Simpson.
section_title: Appendix I: Recent GAO Products on Hurricanes Katrina and Rita
paragraphs: Hurricane Katrina: Comprehensive Policies and Procedures Are  Needed to Ensure Appropriate Use of and Accountability for  International Assistance. GAO-06-460, Washington, D.C.: April 6,  2006  Hurricane Katrina: Policies and Procedures Are Needed to Ensure  Appropriate Use of and Accountability for International  Assistance. GAO-06-600T, Washington, D.C.: April 6, 2006 Hurricane Katrina: Status of the Health Care System in New  Orleans and Difficult Decisions Related to Efforts to Rebuild It  Approximately 6 Months After Hurricane Katrina. GAO-06-576R,  Washington, D.C.:  March 28, 2006 Agency Management of Contractors Responding to Hurricanes  Katrina and Rita. GAO-06-461R, Washington, D.C.: March 16, 2006  Hurricane Katrina: GAO's Preliminary Observations Regarding  Preparedness, Response, and Recovery. GAO-06-442T, Washington D.C.:   March 8, 2006 Emergency Preparedness and Response: Some Issues and Challenges  Associated with Major Emergency Incidents. GAO-06-467T. Washington:  D.C.: February 23, 2006.
Disaster Preparedness: Preliminary Observations on the Evacuation of  Hospitals and Nursing Homes Due to Hurricanes. GAO-06-443R.  Washington: D.C.: February 16, 2006.
Investigation: Military Meals, Ready-To-Eat Sold on eBay. GAO-06-410R.  Washington: D.C.: February 13, 2006.
Expedited Assistance for Victims of Hurricanes Katrina and Rita:  FEMA’s Control Weaknesses Exposed the Government to Significant  Fraud and Abuse. GAO-06-403T. Washington: D.C.: February 13, 2006.
Statement by Comptroller General David M. Walker on GAO’s  Preliminary Observations Regarding Preparedness and Response to  Hurricanes Katrina and Rita. GAO-06-365R. Washington, D.C.: February  1, 2006.
Federal Emergency Management Agency: Challenges for the National  Flood Insurance Program. GAO-06-335T. Washington, D.C.: January 25,  2006.
Hurricane Protection: Statutory and Regulatory Framework for Levee  Maintenance and Emergency Response for the Lake Pontchartrain  Project. GAO-06-322T. Washington, D.C.: December 15, 2005.
Hurricanes Katrina and Rita: Provision of Charitable Assistance. GAO- 06-297T. Washington, D.C.: December 13, 2005.
Army Corps of Engineers: History of the Lake Pontchartrain and  Vicinity Hurricane Protection Project. GAO-06-244T. Washington, D.C.:  November 9, 2005.
Hurricanes Katrina and Rita: Preliminary Observations on Contracting  for Response and Recovery Efforts. GAO-06-246T. Washington, D.C.:  November 8, 2005.
Hurricanes Katrina and Rita: Contracting for Response and Recovery  Efforts. GAO-06-235T. Washington, D.C.: November 2, 2005.
Federal Emergency Management Agency: Oversight and Management of  the National Flood Insurance Program. GAO-06-183T. Washington, D.C.:  October 20, 2005.
Federal Emergency Management Agency: Challenges Facing the National  Flood Insurance Program. GAO-06-174T. Washington, D.C.: October 18,  2005.
Federal Emergency Management Agency: Improvements Needed to  Enhance Oversight and Management of the National Flood Insurance  Program. GAO-06-119. Washington, D.C.: October 18, 2005.
Army Corps of Engineers: Lake Pontchartrain and Vicinity Hurricane  Projection Project. GAO-05-1050T. Washington, D.C.: September 28, 2005.
Hurricane Katrina: Providing Oversight of the Nation’s Preparedness,  Response, and Recovery Activities. GAO-05-1053T. Washington, D.C.:  September 28, 2005.
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