Report: Katrina Contractors Bilk Taxpayers

The Guardian

While removing enough debris to cover Britain, contractors working on hurricane recovery have overbilled the government in a $63 billion operation that only will get more expensive, according to a House report Thursday.
Mileage claims were overstated to get extra fees, debris was mixed improperly to inflate prices and companies sent bills twice for removing the same loads, Democrats on the GOP-controlled House Government Reform Committee found.

Rep. Henry Waxman, D-Calif., who compiled the report for the hearing on Katrina contracting, also complained about layers of subcontractors that drove up costs. A major contractor would take a large cut and pay smaller amounts to the subcontractors, down to the company with the truck hauling debris to the dump. ``It seems you get more than half,'' Waxman told Randall Perkins, president of AshBritt Inc. in Pompano Beach, Fla., after Perkins said his company received $23 a cubic yard in a debris removal contract but paid a subcontractor $10 to haul the material.

``We outsource to companies like yours and they go out and subcontract,'' Waxman said. ``It's a higher
overhead.'' Perkins said some cleanup contractors did hire many subcontractors, but he only hired a few. He said the prices he charged were determined partially by U.S. Army Corps of Engineers rules he had to follow. In a story last October, The Associated Press reported of instances in which the Katrina debris cleanup involved five layers of subcontractors. Some haulers reported they were being paid just $6 a cubic yard.

Many of those interviewed at the time said they believed the prime contractors were being paid $26 to $28 a yard. The corps refused to provide the cost figures specified in the master contracts and last month denied the AP's request for those figures, made under the Freedom of Information Act.

The committee chairman, Rep. Tom Davis, R-Va., said Congress approved more than $63 billion for disaster relief and that recovery expenses may top $200 billion. Davis said many contracts were awarded without competition. Government officials at the hearing said these contracts are being replaced with competitive awards. Davis said the sole-source contracts allowed an ``unprecedented opportunity for fraud and mismanagement.''

The corps said hurricanes Katrina and Rita left 87,000 square miles of debris in parts of Louisiana, Alabama, Arkansas, Texas, Mississippi and Florida, roughly the size of Britain. Waxman said the corps was lax in allowing fraud, waste and abuse in removing that debris. A corps official disputed that.