Editorial: Does Katrina’s Pandora’s Box Have A Bottom?

Almost every day news disseminators bring to us more reports about Katrina-response activities that are alleged to border on terrible mismanagement and, at best, are questionable. Among the latest firestorms is the business of no-bid contracts awarded to replace hurricane-destroyed schools in Mississippi. Would you believe it?

The New York Times reported recently that the Federal Emergency Management Agency (FEMA) and its federal partner, the U.S. Army Corps of Engineers, awarded a $39.6 million no-bid contract to an Alaskan-owned firm to install 450 metal-encased, portable classrooms across Mississippi as part of a $62 billion hurricane relief effort. According to contracting documents, that comes to $87,892 each, the Times report said, “double the wholesale price and nearly 60 percent higher than the price offered by two small Mississippi businesses [that had been] dropped from the deal.”

One of those businesses, Adams Hardware & Home Center, Yazoo City, Miss., proposed a deal for about $24 million, including transportation. When they approached the state, they were referred to the Corps, which referred them to Akima Management Services, the politically connected Alaskan-owned firm. The firm is working on 22 federal contracts and has an agreement to provide modular buildings for the Corps.

Akima met the Corps deadline. (Akima is now based in Charlotte, N.C.) Not so surprisingly these days, we’re told that the installers did not follow state regulations. The structures were placed atop concrete blocks and strapped to anchors drilled into the ground. Plywood walkways were then built, linking the classrooms, the Times reported. (Consider what happens to plywood when it gets wet!)

The Mississippi State Board of Education code does not permit this form of installation. Instead, it requires the modules to be built on foundations consisting of “steel posts secured in place by poured-in-place concrete.” The state’s code enforcement director knew Akima had not followed code but told investigators she considered the Corps’ approach sufficient. A Pennsylvania engineer who had installed modular classrooms for 20 years supported her decision. (Admittedly, being strapped down or perched on steel posts may not make much difference during a hurricane, and that may be why the decision was made as it was.)

Overseers are not thrilled with the way the contract was handled. It has prompted at least one lawsuit and a government investigation. The details continue to raise eyebrows.

Rep. Bennie Thompson (D-Miss.) told the Department of Homeland Security that the Akima deal made “no sense” and that the federal government should have purchased the classrooms directly rather than pay middlemen like Akima or Mississippi companies. He said FEMA ignored a requirement to give preference to local businesses.

According to the Times, the school construction job is one of several Hurricane Katrina deals under scrutiny by auditors and congressional investigators. (Included are deals where the federal government moved quickly to proven contractors, accustomed to large-scale work, and paid what many believed to be highly inflated prices for roof tarps, debris removal and mobile homes.)

Government auditors are not convinced price gouging was not involved, the Times said. A General Accounting Office report to Congress said there is evidence of inflated prices. The auditors are also questioning the installation of the units. Investigators told Congress that they found information in the Corps’ contract files and from other sources that the negotiated prices were inflated.

But then, to stir up the stew even more, it is hinted that Akima might have used political connections to land the contract. Here is how the Times’ writer explained it:

“Akima’s majority owner is the NANA Regional Corporation. It is represented in Washington by Blank Rome Government Relations, a lobbying firm with close ties to the Bush administration and particularly Tom Ridge, the former head of the Department of Homeland Security, FEMA’s parent agency. NANA’s federal contracts have grown rapidly in recent years, according to the Center for Public Integrity.”

Akima is owned jointly by 14,000 Inupiat native-owned businesses eligible for no-bid federal contracts.

Akima president John D. Wood insists that its services were “fair and reasonable” and that neither Akima nor NANA used ties to elected officials to pursue contracts. As for not utilizing the Adams firm, Akima concluded that if it did, it would not have been able to meet contract deadlines.

The presence of smoke doesn’t always indicate fire. But the tinder is smoldering and, before too long, we hope we will learn from investigators if anything shady is going on. We could learn that it is just business as usual and that the government, to keep it in the marine vernacular, is spending like a drunken sailor. Can’t we, for once, just have some straightforward deals that don’t raise eyebrows? Where is fiscal responsibility?

U.S. trade deficits are sky high, critics fear we’re close to breaking the bank, and federal agencies are spending taxpayer dollars like they are going out of style. Is that taking care of “the folks” or not?

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