Big And Easy
Iraqi-Style Contracts Flood New Orleans
By Pratap Chatterjee
23 September, 2005
CommonDreams.org
The
day Hurricane Katrina struck Louisiana, Robert Boh watched the dramatic
pictures of the unfolding disaster on television at his in-law's house
in Jonesboro, Arkansas, where his family had taken shelter. As president
of the biggest construction company in New Orleans, he was confident
that the hundreds of miles of levees that he and his rivals have built
over the decades would hold. "It never occurred to me," he
said, that the 17th street canal would gave way. "I was shocked."
The next day the
phones started ringing off the hook. One of the calls was offering work
to repair the levees and drain the city from the Army Corps of Engineers,
a federal agency run by the US military. Unable to access his New Orleans
offices, which had six feet of water on the first floor, Boh drove down
to work in nearby Baton Rouge, to help save the city where his grandfather
had founded a construction business 96 years before.
Military Blackhawk
and Chinook helicopters dropped sandbags into the breached levees in
New Orleans, as Boh Brothers crews worked around the clock for a week.
The work was a financial boost for the civil engineering company that
had been $2 million in debt just over a year prior, because the Army
Corps of Engineers had no money to pay them for installing floodgates
for New Orleans' Harvey Canal.
Before Katrina struck,
Boh was starting to question if he really wanted to apply for more work
from the Corps, which oversees the levees. "In 2004 and 2005, funding
for our work has been cut," he told CorpWatch. Indeed, earlier
this year, New Orleans district projected that it would get just $82
million in flood and hurricane protection projects, a 44.2 percent drop
from the $147 million spent in 2001.
Today state and
federal money and contracts are flowing into the stricken area and Boh
Brothers is one of the key local beneficiaries. Right after completing
the emergency repairs, Boh was subcontracted to help pumping water from
the flooded city by the Shaw Group, a politically well-connected contractor
that had worked on reconstruction in Iraq. Then the state of Louisiana
awarded the company a new $30.9 million contract to fix the hurricane-damaged
twin-span bridge that carries Interstate 10 traffic over Lake Pontchartrain.
Boh's contract is
tiny compared to the billions that will flow to the giants of the industry:
Halliburton, Bechtel and Flour. "The construction industry has
stood up and is saying we are standing ready for your call," Lieutenant
General Carl Strock told a September 2 Defense Department briefing.
The Federal Emergency Management Agency and the Army have budgeted at
least $62.5 billion in emergency aid for Alabama, Louisiana, and Mississippi,
(not including rebuilding the levees), creating a boom for construction
companies.
"They are throwing
money out, they are shoveling it out the door," said James Albertine,
a Washington lobbyist and past president of the American League of Lobbyists,
told the New York Times. "I'm sure every lobbyist's phone in Washington
is ringing off the hook from his clients. Sixty-two billion dollars
is a lot of money -- and it's only a down payment."
"You are likely
to see the equivalent of war profiteering -- disaster profiteering,"
said Danielle Brian, director of the Project on Government Oversight,
a nonprofit government spending watchdog group. She notes that Joe Allbaugh,
President Bush's former campaign manager and a former head of FEMA is
now a lobbyist and consultant to both the Shaw Group and Halliburton.
(Melissa Norcross, a Halliburton spokeswoman, said Allbaugh has not,
since he was hired, "consulted on any specific contracts that the
company is considering pursuing, nor has he been tasked by the company
with any lobbying responsibilities.")
Many, including
Senator Richard Durbin, "are worried because we hear about no-bid
contracts in the Katrina areas going to the same companies that they
went to in Iraq without the kind of accountability that we have to demand,"
the Illinois Democrat told National Public Radio, a public radio network
in the US. "
Building Bonanza
Boh Brothers, a
$250 million company in New Orleans, was probably the first company
to get a post-Katrina federal contract from the Army Corps of Engineers
to patch the broken levees. Robert Boh says that he still has no idea
how many people worked on the job and how much it cost, because all
work was tracked on paper rather than by computer. "Last week we
managed to get our computers out of our offices with the help of a crane
on a nearby overpass," he told CorpWatch.
Normally contracts
are supposed to be openly advertised for 30 days, but in an emergency
government officials can cut this process to just two to three days
through a limited bidding system to a few selected companies.
For example, the
Boh Brothers contract for the repairing the I-10 "Twin Span"
bridge over Lake Pontchartrain was bid, reviewed, and signed in record
time. On Sept. 9, bids were opened at 1 p.m., reviewed and approved
by 3:30 p.m. and the contract was signed by 5:15 p.m.
Boh is now working
on a subcontract with the Shaw Group of Baton Rouge, a $3 billion engineering
company, which has a $100 million contract with the Corps to pump floodwaters
out of New Orleans. Shaw also has a $100 million contract named "Operation
Blue Roof" (after the blue-colored plastic tarpaulins used for
temporary shelters) that was awarded by the Federal Emergency Management
Agency (FEMA) to provide housing and support services for displaced
residents. (The Shaw Group has won at least $135.7 million in work in
Iraq)
A similar fast-track
system gave contracts for work in New Orleans to Kellogg, Brown and
Root (KBR), a subsidiary of Halliburton, a $20 billion company based
in Houston, to "assess pumps and infrastructure in the city and
construct a facility to support recovery efforts." In addition
KBR has been asked to repair three Navy facilities in Mississippi including
the Stennis Space Center. The work so far has included damage assessments,
repairing roofs, and restoring power. The KBR contract, worth approximately
$30 million, is part of a larger $500 million naval contract that was
bid well in advance of the disaster. Signed in July 2004, this contract,
called CONCAP (construction capabilities), is issued by the Naval Facilities
Engineering Command. This is KBR second CONCAP contract; the first included
constructing prisons in Guantanamo Bay. CONCAP is very similar to the
better known Army contract called Logistics Civilian Augmentation Program
(LOGCAP) under which Halliburton has done the bulk of its work in Afghanistan
and Iraq.
Although CONCAP
is a Navy contract, the Corps has taken advantage of it in the last
two weeks to hire Halliburton to build a temporary morgue and to pump
water from Plaquemines Parish (south of New Orleans).
Asked why the Corps
was using Halliburton for this work without competitive bidding, Carol
Sanders, a Corps spokeswoman, said: "Due to the magnitude of Hurricane
Katrina and the urgent requirements for emergency response, the Corps
was authorized to tap into the existing contracts of sister services."
Likewise a system
of pre-bidding followed by limited bidding allowed AshBritt and Philips
& Jordan to be dispatched right after the hurricane to clean up
debris in the Gulf States: AshBritt of Pompano Beach, Florida, was hired
to clean up Louisiana and Mississippi under a $150 million contract
issued by the Corps in 2003. Phillips & Jordan of Nashville, Tennessee,
holds a similar 2003 Corps contract for debris removal in Alabama and
Florida. (Phillips & Jordan was also hired to remove debris from
the World Trade Center, under a Corps program called "Advanced
Contracting Initiatives")
These preexisting
contracts were replaced on Sept. 15 by the winners of a new limited
bid competition the Corps conducted for debris removal. Each of these
new contracts is worth up to $500 million, with an option to increase
the ceiling another $500 million.
Not surprisingly,
out of a pool of 22 candidates, the very same companies won the contracts.
Ashbritt has been hired to clean up Mississippi, and Phillips &
Jordan to remove debris in Louisiana. California-based Environmental
Chemical Corporation and Ceres Environmental Services of Minnesota also
won contracts in Louisiana.
Bechtel, a $17.4
billion San Francisco-based privately owned company, has also been selected
by FEMA to provide short-term housing for people displaced by the hurricane.
The company also worked on removing World Trade Center debris in New
York and was the beneficiary of $2.8 billion in reconstruction contracts
in Iraq.
Other well-connected
companies include Fluor, of Aliso Viejo, California. Its work to set
up a new Housing Area Command was approved under long-standing FEMA
contracts that allow the agency to turn to Flour during disasters.
Fluor's team in
the Gulf states is run by the same manager who was in charge of the
company's $1.5 billion in contracts in Iraq. "Our rebuilding work
in Iraq is slowing down and this has made some people available to respond
to our work in Louisiana," Fluor chief Alan Boeckmann told Reuters.
The Los Angeles Times reports that the Fluor board member Suzanne Woolsey,
wife of a former CIA director, is a trustee of Institute for Defense
Analyses, a nonprofit corporation paid by the government to do research
for the Pentagon.
Another engineering
company working in the Gulf States under a preexisting arrangement with
FEMA is CH2MHill. The Denver, Colorado company also had a $28.5 million
reconstruction contract in Iraq in 2004 and joint contract on a $12.7
million electrical power generation deal IN IRAQ?.
While the contractors
rake in the money, it is likely that the cash bonanza might not trickle
down to their workers. On September 8, 2005, in the aftermath of Hurricane
Katrina, President Bush issued an executive order suspending 1931 Davis-Bacon
law that requires federal contractors to pay prevailing wage.
Prioritizing
the Budget
In Iraq, limited
accountability, corruption, massive cost overruns, and devastating failures
fed the chaotic mess that has followed the 2003 fall of Baghdad. Nonetheless,
the largest Katrina contracts have been won by many of the same politically
connected companies that oversaw that failed reconstruction. And it
is perhaps no coincidence, since many of the same people in the Army
Corps of Engineers are awarding them€and in much the same
manner: as open-ended, no- or hastily bid contracts with guaranteed
profit margins.
But before we look
at the flawed contracting process that followed the destruction in the
Gulf states, let's go back the decisions that made the flooding not
only possible but inevitable. Let's start with who decided what to spend
on levees and waterworks around the country and what moneys to cut from
projects in Louisiana since 2001. The ultimate responsibility lies with
the president who signed the national budget and with the members of
Congress who debated and rewrote the plan that the White House draws
up for them every February.
But three high-ranking
men in Washington, DC, play a key role in presenting options to the
White House and Congress. Until about a year ago, they were Marcus Peacock,
associate director of the Office of Management and Budget (OMB) for
natural resource programs, John Woodley, assistant secretary of the
Army for civil works and Lieutenant General Robert Flowers, then commander
of the Army Corps of Engineers.
On April 28, 2004,
the two senators from Louisiana met with Woodley and Peacock and asked
them for more money for the state's environmental restoration and water
projects.
There are two major
pools of money from which the Army Corps of Engineers draws for flood
prevention in Louisiana. The first is the Southeast Louisiana Urban
Flood Control Project, or SELA, which was approved following a massive
rainstorm in May 1995 that killed six people. The second is the Louisiana
Coastal Area Comprehensive Coastwide Ecosystem Restoration Study (LCA).
SELA has spent $430
million on shoring up levees and building pumping stations, with $50
million in local aid. Another $250 million in crucial projects remains
unspent.
LCA, on the other
hand, is only just getting started. It will ultimately take $1.9 billion
over ten years to reverse the 30 percent loss in coastal lands that
is making the southern Louisiana increasingly more vulnerable to floods.
(This plan is significantly scaled back from the original proposal to
spend $14 billion over 30 years.)
"The senators
emphasized a need for support from the administration, not just passive
inaction," said Sidney Coffee, who heads the Governor's Office
of Coastal Activities in Louisiana. "They emphasized the need for
financial support, and none came during this meeting."
Woodley himself
acknowledged the necessity to cut costs-- and why--when he presented
the budget earlier in the year. "This is a frugal budget that reflects
the priorities of a nation at war," he stated.
The lack of support
for these crucial waterworks was predictable. Woodley and Peacock are
both political appointees tasked with implementing the White House priorities
of cutting budgets and regulations rather than supporting environmentalists
or engineers.
In a prior job at
the Army, Woodley opposed environmental regulations on military bases.
And Peacock was responsible for cutting money to Environmental Protection
Agency (EPA) and instrumental in the Bush administration's decisions
to freeze more than a dozen Clinton-era rules related to environment,
health, and safety, including regulations on arsenic in drinking water,
snowmobiles in national parks, and protections for roadless areas of
national forests.
Diverted to Iraq
White House priorities
were also reflected in the government's failure to pay sufficient attention
to the well-document danger of hurricanes to Louisiana. One possible
reason that Gen. Flowers and his colleagues, were unable to focus on
either SELA or LCA in 2003 and 2004, was because their attention was
diverted to a more urgent White House request: the reconstruction of
Iraq's oil fields, which involved everything from putting out oil fires
during the invasion to trucking gasoline into Baghdad from Kuwait and
Turkey.
When Katrina struck,
resources were stretched. First there was the matter of the money. "It
appears that the money has been moved in the president's budget to handle
homeland security and the war in Iraq, and I suppose that's the price
we pay," Walter Maestri, emergency management chief for Jefferson
Parish, Louisiana, told the Times-Picayune newspaper on June 8, 2004.
"Nobody locally is happy that the levees can't be finished, and
we are doing everything we can to make the case that this is a security
issue for us."
Corps commander
Lieutenant General Carl Strock acknowledged that disaster was inevitable.
In Defense Department briefing on September 2, he said "that if
a Category 4 or 5 hurricane were to strike New Orleans, that this levee
system could not be relied upon." Secondly, there was the matter
of personnel. Two of Flowers' most senior staff were in Iraq: Brigadier-General
Robert Crear and Strock (who went on to head the Corp after Flowers
retired in 2004) spent a good chunk of 2003 working on Project Restore
Iraqi Oil, Halliburton's now-infamous no-bid contract.
As the chair of
the February 26, 2003 Pentagon meeting at which this contract was drawn
up, Strock attracted some notoriety. Less than three weeks after it
was signed, he and Crear posed with Halliburton crews for photo-ops
at the Al Zubair oil fields in southern Iraq. For most of the rest of
the year the two men worked in Baghdad and Basra, rather than Baton
Rouge and Vicksburg.
Strock was one of
the five people who voted at a September 1, 2003 secret meeting in Baghdad
to pay Halliburton $500 million out of Iraq's own funds for the no-bid
RIO project. No Iraqis were present for the vote despite the fact that
the money came from their own coffers.
When whistleblower
Bunnatine Greenhouse revealed the details behind the no-bid contracts
that Halliburton had won in Iraq, Strock arranged to have her demoted,
despite a string of excellent performance reviews in her 23 years of
service. "Ms. Greenhouse's removal from the SES is based on her
performance," Strock said, "and not in retaliation for any
disclosures of alleged improprieties that she may have made."
(All told, Halliburton
has earned more than $12 billion in Iraq. Pentagon audits released by
Democratic party in June showed $1.03 billion in "questioned"
costs and $422 million in "unsupported" costs for Halliburton's
work in Iraq.)
Top experts on water
management from Army Corps were similarly unavailable for domestic programs.
Dr. Eugene Stakhiv, Jerry Webb, and Dr. Edwin Theriot to the Middle
East were dispatched to help the Iraqi Ministry of Water Resources,
as part of the "New Eden" project to restore the Mesopotamian
Marshlands, which Saddam Hussein had drained.
Back in the Bayou
While Strock and
Crear were rebuilding pipelines and restoring marshes in Iraq, the effort
to prevent a disaster in New Orleans was floundering for lack of federal
money and commitment. The time to fix the levees and restore the coastal
marshes was rapidly running out.
Strock had returned
to the US in late 2003 to run the Corps' civil works programs including
flood control and navigation and became commander in 2004. Crear--who
had been in charge of the day-to-day operations of Halliburton's work
in Iraq-- would run the Mississippi Valley Division that includes the
levees in New Orleans.
The clock was quietly
ticking on January 31, when in a deja vu moment, Crear and Roberts were
reunited for a photo-op in Baton Rouge to sign an agreement with Louisiana
Gov. Kathleen Babineaux Blanco to finalize years of work on the Louisiana
Coastal Area Comprehensive Coastwide Ecosystem Restoration Study.
The Corps inability
to foresee and plan for problems in the wake of Katrina was deja vu
all over again. After returning to the US, Crear testified to Congress
on June 15, 2004 that when working with KBR in Iraq, it was his "mission
in the Department of Defense to secure the oil. ... However, what we
found was not oil well fires but significant damage due to looting.
It was estimated to be about $1.4 billion overall damage and about 85
percent of that due to looting."
Two and a half years
after Strock and Crear posed in the Iraqi oil fields, and seven months
after the men posed for the Baton Rouge photo, the threat of Katrina
again challenged the Army Corps of Engineers. And again it was slow
off the mark. On August 29, as the federal government struggled to respond,
Katrina destroyed New Orleans and devastated a massive area.
But putting aside
the slow response to disaster, the question remains: Could the disaster
have been predicted and prevented?
As for prevention,
experts say that even if Louisiana had gotten full funding in 2003 and
2004, the levees would still have collapsed. The Corps' own engineering
schemes over the last 70 years turned a "serpentine river into
a straight one." The destruction of a natural landscape that could
have checked the devastating floods increased the likelihood and severity
of disaster.
Joe Ballard who
ran the Corps from 1996 to 2000 and grew up in New Orleans does not
blame it for failing to prevent the damage. The Corps, he says, has
been struggling unsuccessfully to get more funding from the Congress
and the White House to pay for corrective work. "It pains me to
see the finger pointed because I know what a juggling act the Corps
has to play," he said.
The failure to predict
the disaster and prepare an effective evacuation plan is another matter.
Despite President Bush's statement that "I don't think anyone anticipated
the breach of the levees," Ballard told CorpWatch that there was
no way that the Corps did not know that a major flood was possible.
"We were walking whistling past the graveyard." he said.
Today, Strock and
Crear are back in the saddle at the Corps overseeing emergency contracts
in the aftermath of Hurricane Katrina, in collaboration with the Federal
Emergency Management Agency (FEMA) and the Navy. Chief among these contractors
are companies such as Halliburton and Bechtel, which have been awarded
pre-bid, limited bid, and sometimes no-bid contracts to assess the damage,
provide emergency shelters and fix the infrastructure.
Marcus Peacock is
no longer at OMB. He is now deputy administrator of the EPA, the very
agency whose budget he helped slash in the early days of the Bush administration.
And Robert Flowers has taken a job as chief executive officer of the
federal contracts subsidiary of HNTB, an engineering company in Kansas
City, Missouri, that builds airport facilities, bridges, and you guessed
it: levees.
Will we see the
same overcharging and failed projects that characterized Corps projects
in Iraq? Only time will tell, but on September 15, an important step
was taken to track the problem if it occurs: the creation of a special
inspector general at the Department of Homeland Security to investigate
corruption and fraud in post-Katrina contracts.
The same day Senators
Joseph Lieberman of Connecticut and Susan Collins of Maine introduced
a bill in Congress that calls for the expansion of the special inspector
general for Iraq reconstruction to include oversight of the spending
in the Gulf Coast recovery. The two senators said using an existing
office was preferable because it would be able to begin work quickly.
In a September 15
speech to the nation, Bush said that Americans "have every right
to expect a more effective response in a time of emergency."
But the track record
of private contractors and federal agencies in Iraq and now in the Gulf
states bodes ill for the likelihood that the public will enjoy that
right. The Corps contracts and those awarded FEMA replicate "the
same flawed contracting strategy that produced disastrous results in
Iraq," Conresssman Steny Hoyer wrote to the Government Accountability
Office.
"Where the
train runs off the tracks is when politics become part of the decision-making
process," says Ballard.
Pratap Chatterjee
is an investigative writer who is currently Director of CorpWatch.