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, set to be released later 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.
It found a haphazard competitive bidding process in which the winning contract prices were both unreasonably low and high.
FEMA also 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.
In the immediate aftermath of Katrina, FEMA handed out lucrative no-bid contracts for cleanup work to large, politically connected firms.
Following heavy criticism, FEMA director David Paulison pledged to rebid those large contracts. He ultimately reopened only a portion, awarding 36 contracts that the agency said would be prioritized for small and local businesses.
Moreover, FEMA did not have formal criteria to determine whether a contractor should be considered local, did not require corroborating paperwork, and watered down requirements under federal law so that a company with only minimal Gulf Coast ties would be given special consideration, according to the audit.
The Defense Contract Audit Agency determined that at least three bidders presented high financial risks, but FEMA allowed the contracts to go forward.
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