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Audit faults FEMA's Katrina contracts

By ASSOCIATED PRESS
Published April 23, 2007


WASHINGTON - FEMA exposed taxpayers to significant waste - and possibly violated federal law - by awarding $3.6-billion worth of Hurricane Katrina contracts to companies with poor credit histories and bad paperwork, investigators say.

The new report by the Homeland Security Department's office of inspector general, to be released this week, examines the propriety of 36 trailer contracts designated for small and local businesses in the stricken Gulf Coast region following the 2005 storm.

"Based on our analysis, we concluded that FEMA contracting officials exposed the agency to an unacceptable level of risk," according to the report by the office of inspector general Richard Skinner.

It also found a haphazard competitive bidding process in which the winning contract prices were both unreasonably low and high. For example, the Federal Emergency Management Agency accepted bids as low as $74 and as high as $4,720 to completely refurbish used travel trailers. FEMA estimated it should cost $295 per trailer.

Moreover, FEMA did not take adequate legal steps to ensure that companies were small and locally operated, resulting in a questionable contract award to a large firm with ties to the Republican Party.

FEMA disagreed that the wide price variations put taxpayers at risk. The agency contended that it was comfortable with bidders' financial viability based in part on past performance. In cases where contract prices appeared unreasonably high, those would be offset with lower payments later on subsequent work orders, FEMA officials said.

The audit is the latest to detail mismanagement in a multibillion-dollar hurricane recovery effort that investigators say has already wasted more than $1-billion.

FEMA recently said it would not have a federal emergency response plan ready before the approaching hurricane season, which begins June 1.