Auditors Say Agencies Paid Inflated Prices Post Katrina

Wed April 26, 2006 - Southeast Edition

NEW ORLEANS (AP) Government agencies paid inflated prices for goods and services in the aftermath of Hurricane Katrina in a system riddled with waste, three government inspectors general testified at a congressional hearing.

It was the first time the three government auditors — inspectors general with the Department of Homeland Security, Department of Defense and Army — publicly disclosed figures on government waste in the Katrina recovery effort.

The inflated prices were a result of poor planning as well as a lack of proper oversight, the three said April 10.

In the case of debris-removal contracts, awarded to four firms, the Auditor General of the Army found that the four subcontracted their work to multiple tiers of subcontractors, resulting in markups between 17 percent to 47 percent.

Similar price hikes were found in other services, including the placing of blue covers on damaged houses and the installation of temporary housing trailers.

The chief of the Army Corps of Engineers, responding to the reports, said the magnitude of the disaster required the Corps to act outside its normal procedures.

“If we were to follow these usual rules for full and open competition, we would not have been able to award a contract to get the flood waters out of the city of New Orleans,” said Lt. General Carl Strock.

“You probably saw pictures of helicopters dropping these huge sand bags into the various levee breaches. It was an urgent situation which required expedited procurement,” he said.

Several members of Congress pitched in with examples of waste.

Louisiana Rep. Bobby Jindal said the Federal Emergency Management Agency paid $175 per square of blue tarp to place on blighted roofs. But multiple contracting levels later, Louisiana contractors reported they were being paid as little as $2 a square. Each square consists of 100 sq. ft. (9 sq m).

U.S. Sen. Tom Coburn of Oklahoma, who chaired the hearing, cited the cost FEMA paid to install each mobile home: “In Oklahoma, we could build a nice little home for $70,000.”