Charlie Cray is the director of The Center for Corporate Policy in Washington, D.C., and co-author of The People's Buisness: Controlling Corporations and Restoring Democracy (Berrett-Koehler, 2004).
Some of the same crony contractors who cleaned up in Iraq are beginning to sign big contracts with FEMA. Moreover, the same inexperience and bureaucratic ineptitude that handicapped the agency’s initial response threatens to convert the agency into “an oversized entitlement program,” as former FEMA head-turned Halliburton lobbyist Joe Allbaugh put it in his 2001 confirmation hearings.
The money allocated to rebuild has to be spent. But the current emergency has created a rush to skimp on competitive bidding processes designed to increase potential savings and enhance work quality. A handful of no-bid, “cost-plus” contracts similar to the ones handed out in Iraq have already been signed—with some of the same companies. This time the administration has begun to use the current emergency as an excuse to circumvent routine competitive-bidding processes, while virtually deflecting the hundreds of businesses that have been calling the Army Corps and FEMA to learn how they can get in on the action. We can expect new tales of wasted money and shoddy work.
Bechtel, the giant construction and engineering firm hired through a no-bid contract to rebuild Iraq’s electricity and water infrastructure, is reportedly in negotiation with FEMA for a contract to provide temporary housing, as is Fluor, another politically connected company that also worked in Iraq.
Although Halliburton/KBR doesn’t yet have any contracts with FEMA, it began damage reassessment and debris removal for the Navy over a week ago, under a $500 million contract that it won in 2001 and renewed in 2004. That contract is strikingly similar to the Army logistics contract that provided the “foot in the door” for much of the rest of its work in Iraq. So there may well be more to come. The Army Corps of Engineers, which has given Halliburton the vast majority of its business in Iraq, will also surely be looking for help. The Corps recently demoted Bunnatine Greenhouse—a top-level civilian employee who was responsible for ensuring the Corps follows competitive bidding requirements—after she accused the Corps of giving KBR improper influence over the contracting process.
Since 1989, KBR's Government and Infrastructure Division has made $3 billion cleaning up damage caused by natural and man-made disasters, including tens of millions after last year’s hurricanes in Florida. So there you go: If you’re in the right business, there’s bound to be a lot of money in global warming, and Halliburton seems to be making money on both ends of that one.
One of the key people sitting in the eye of the current windfall is Allbaugh, who signed on as a Halliburton lobbyist in March. According to the company, “Since that time, Mr. Allbaugh has not consulted on any specific contracts that the company is considering pursuing, nor has he been tasked by the company with any lobbying responsibilities.”
Although he professes to not work to obtain federal contracts, Allbaugh is “consulting” for other companies that FEMA has turned to in a pinch. On Saturday, Reuters reported that another Allbaugh client, Shaw Group Inc. also snagged a $100 million FEMA emergency contract for housing management and construction.
Both Fluor and CH2M Hill—which reportedly received a fourth $100 million FEMA housing contract, were given contracts in Iraq to oversee the work of other contractors, an arrangement that Congressmen Henry Waxman, D-Calif., and John Dingell, D-Mich., charged was “rife with potential conflicts of interest and opens the door to significant additional waste of taxpayer dollars.”
The coziness of the various contractors with those handing out the contracts is compounded by the immense brain drain of professional staff at FEMA under President George W. Bush, many of whom are making much more money as consultants to the same agency. As Allbaugh, who is keeping a low profile and not talking to reporters, told the National Journal in 2004: "I don't buy the 'revolving door' argument. This is America. We all have a right to make a living.”
Few deny the need to rebuild; the debate is how. But the nexus between the revolving door and the push for privatizing the process means that many decisions will be in the hands of corporate consultants and contractors—hands whose grip on the government is now so tight that they are close to being able to—as Grover Norquist so aptly put it —"shrink government down to the point where it can be strangled in a bathtub." The problem for the rest of us, of course, is that this kind of strangulation of government services won't make things any cheaper.
With the ongoing rush to contract and make it appear as if he’s getting the job done, it doesn’t seem as if President Bush believes his former close adviser’s words apply to local businesses or employees. (Allbaugh managed the 2000 campaign and before that was the governor’s chief of staff in Austin). The “right to make a living” didn’t prevent Bush from signing an executive order that exempts contractors from having to abide by federal wage standards, a move that is certain to disadvantage many unionized contractors.
Meanwhile, FEMA is talking about using the Department of Homeland Security’s inspector general to prevent the kind of massive waste, fraud and abuse witnessed in the Iraq reconstruction contracts. But the problems are so deeply embedded in the process that a token watchdog will hardly make a difference. The contracts will probably include “cost-plus” clauses, which KBR whistleblowers have testified create a culture of waste and fraud.
Already, there are signs that similar problems could occur in the Gulf. A provision in the relief bill which raises the spending limit on government credit cards used for Katrina-related purchases to $250,000 from $15,000 per transaction is intended to allow officials to buy needed supplies more quickly than if they went through normal procurement channels, but it will also likely lead to much waste and abuse. Moreover, this time, U.S. taxpayers will foot the bill: the Federal Reserve won’t be able to fly in pallet-loads of $100 bills allocated out of the “Iraqi peoples” oil revenues, for which there has still been little accountability.
Even Republicans are raising concerns about the potential for a contractor feeding frenzy. "I think there are some laws that have to be changed, especially [when contracting] in emergency situations and the like," Rep. Tom Davis, R-Va., chairman of the House Committee on Government Reform, told The Hill last week .
But if Davis and his colleagues don’t act fast, it may soon be too late as a handful of companies lock up a few big contracts and get the inside track on follow-on work. Hence, the power of well-connected consultants like Allbaugh who can help their clients get in while the getting is good. Because once the big contracts are let, it’ll be like scrambling for scraps.
In October 2003, Davis' Virginia colleague Democrat Rep. Jim Moran suggested that smaller companies (U.S. and Iraqi) trying to bid for reconstruction work in Iraq were having trouble making their case to get business from the lead contracting agents at the Pentagon. "The indication they're getting is if they want the money they really have to go though Halliburton," Moran told The Washington Post. Worse is the fact that no one seems to want to involve the people whose lives have been ruined in all these decisions. Although House Minority Leader Nacy Pelosi, D-Calif., has called for an "anti-fraud commission" to oversee the contracts, across the aisle Baton Rouge Republican Congressman Richard Baker blurted out that God had "finally cleaned up public housing in New Orleans." If the devastated communities do not control the reconstruction process, they face a long-term struggle against ubergentrification.
The survivors of the hurricane deserve a speedy and effective clean-up and reconstruction effort. America’s taxpayers who are underwriting that effort expect the bidding process to be fair and transparent. In their unbridled greed, the corporate “disaster lobby” is pushing a wave of earmarks and deficit expenditures that threaten to further bankrupt the nation’s treasury at the same time that it fails the people of the Gulf. It's still too early to sniff any corruption in the doling out of post-disaster contracts by FEMA, but given the Bush administration’s track record in Iraq, we—and our representatives in Congress—should all be paying close attention.