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Created: September 10, 2005
Latest Update: September 10, 2005
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September 10, 2005
In Storm's Ruins, a Rush to Rebuild and Reopen for Business
By JOHN M. BRODER
BATON ROUGE, La., Sept. 9 - Private contractors, guided by two former directors of the Federal Emergency Management Agency and other well-connected lobbyists and consultants, are rushing to cash in on the unprecedented sums to be spent on Hurricane Katrina relief and reconstruction.
From global engineering and construction firms like the Fluor Corporation and Halliburton to local trash removal and road-building concerns, the private sector is poised to reap a windfall of business in the largest domestic rebuilding effort ever undertaken.
Normal federal contracting rules are largely suspended in the rush to help people displaced by the storm and reopen New Orleans and the Gulf Coast. Hundreds of millions of dollars in no-bid contracts have already been let and billions more are to flow to the private sector in the weeks and months to come. Congress has already appropriated more than $62 billion for an effort that is projected to cost well over $100 billion.
Some experts warn that the crisis atmosphere and the open federal purse are a bonanza for lobbyists and private companies and are likely to lead to the contract abuses, cronyism and waste that numerous investigations have uncovered in post-war Iraq.
"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. "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."
Joe M. Allbaugh, a close friend of President Bush, the president's 2000 campaign manager and the FEMA director from 2001 to 2003, and James Lee Witt, an Arkansan close to former President Bill Clinton and a former FEMA director, are now high-priced consultants, and they have been offering their services to companies seeking or holding federal contracts in the post-hurricane gold rush.
Mr. Allbaugh said that he was helping private companies, including his clients, cut through federal red tape to speed provision of services and supplies to the storm-wracked region. Two of his major clients, Kellogg Brown & Root, a subsidiary of Halliburton, and The Shaw Group, already are at work on disaster response efforts.
Mr. Allbaugh said that he had played no role in helping Shaw or Kellogg get the work, insisting that help with federal contracts is not a service he offers to clients.
"A lot of people want to connect the dots, but the dots don't exist," he said in a telephone interview from Texas. "I don't do federal contracts, end of story."
However, one of the first things Shaw did after the storm was to invite Mr. Allbaugh to Louisiana, where he helped the company assemble its disaster team, giving advice on how to match the company's efforts to those of the government agencies it serves. He later helped other companies provide assistance.
Mr. Allbaugh said that he was not paid for these efforts and that he did not sign up any new clients in Louisiana. He did acknowledge that he suggested to UltraStrip Systems Inc., a client that markets water filtration products through a subsidiary, that it send representatives to Louisiana.
"Given the situation in the hospitals and nursing homes, I called them up," he said. "I said, 'You've got to get your unit down there, I'm sure they can put it to use.' "
Clients of Mr. Witt, who is advising Gov. Kathleen Babineaux Blanco of Louisiana on managing the crisis, are also in position to profit. Among the clients are Nextel Communications, Whelen Engineering, a manufacturer of warning systems, and the Harris Corporation, a telecommunications equipment company.
Mr. Witt said in a brief interview here on Thursday that it is critical to move quickly after a disaster to restore basic services and that rather than speed such efforts, government often gets in the way.
"Time is of the essence here and we have to make sure it's fast and smooth and works well," he said at the Louisiana emergency operations center here. He said that FEMA had been bureaucratically and financially hobbled since it was absorbed by the new Department of Homeland Security.
Mr. Witt's company, James Lee Witt Associates, also employs Wesley Clark, the former NATO commander and Democratic presidential candidate, and Rodney Slater, a secretary of transportation in the Clinton administration. The firm's Web site says it provides "advice, counsel and assistance with strategic introductions primarily in the area of homeland security."
Mr. Witt did not respond to a request to comment specifically on the role of his clients in reconstruction.
One of the most immediate tasks after Hurricane Katrina hit was repair of the breaches in the New Orleans levees. Three companies - the Shaw Group, Kellogg Brown & Root and Boh Brothers Construction of New Orleans - have been awarded no-bid contracts by the Army Corps of Engineers to perform the restoration.
"After a disaster, we have certain authorities to execute contracts faster than we ordinarily would," Gene Pawlik, a Corps of Engineers spokesman in Baton Rouge, said on Friday. "There is a pot of money that Congress gives us that lets us respond quickly to an emergency."
The Shaw Group, based in Baton Rouge, is a $3 billion-a-year construction and engineering firm. It announced this week that it had received two contracts of up to $100 million each, one from FEMA, the other from the Corps of Engineers, to work on levees, pump water out of New Orleans and provide assistance with housing.
Halliburton, Kellogg Brown & Root's parent company, has a $500 million, five-year contract with the Navy to provide emergency repairs at military installations damaged in the hurricane. Under terms of the contract, Halliburton draws down on the money as it performs services for the military.
Halliburton is doing repair work at three Mississippi naval facilities, as well as at the Stennis Space Center. The company will also assess pump and infrastructure damage in New Orleans and construct a facility to support recovery efforts, it said.
To provide immediate housing in the region, FEMA says it suspended normal bidding rules in awarding contracts to the Shaw group and CH2MHill, based in Denver. Fluor, of Aliso Viejo, Calif.; Bechtel National Inc., of San Francisco; and Dewberry Technologies, of Fairfax, Va.; are doing similar work under longstanding FEMA contracts that allow the agency to turn to them during disasters.
John Corsi, a spokesman for CH2MHill, said that the contract could be the first of several and that it was awarded on a no-bid basis "because of unusual and compelling situation."
The sheer volume of the contracts and the speed in which they are being issued troubles some. The government is drawing down on Hurricane Katrina relief money at a rate of more than $500 million a day.
Danielle Brian, director of the Project on Government Oversight, a nonprofit government spending watchdog group, said Katrina, like Iraq before it, would bring the greedy and the self-interested out of the woodwork.
"This is very painful," Ms. Brian said. "You are likely to see the equivalent of war profiteering - disaster profiteering."
Fluor already has identified some sites, including in Slidell, La., where the first 400 new homes will be installed, each of which can handle about five people, Mr. Tashjan said.
Bechtel, with $17.4 billion in annual revenues globally, is working under an informal agreement with no set payment terms, scope of work or designated total value. The company's zone is Mississippi, where it has started to install the first homes.
The company has 100 employees assigned to the task and it does not know how many will ultimately be working on it, said Howard Menaker, a Bechtel spokesman. It is also looking for subcontractors that can deliver portable water treatment, sewage and power plants, as well as mess halls, showers, even helicopters to move supplies.
Bechtel has a long pedigree in emergency response work, including helping to remove the remains of the twin towers in New York, building refugee camps in Kosovo in 1999 and doing safety assessment after the 1989 Loma Prieta earthquake in San Francisco. It is performing reconstruction work in Iraq under a large federal contract.
"Political contributions are not a factor," Mr. Menaker said. "It is the fact that we could get the job done."
Eric Lipton contributed reporting from Baton Rouge, La., for this article, Raymond Hernandez and Glen Justice from Washington, andLeslie Wayne and Ron Nixon from New York.
Copyright 2005 The New York Times Company