JEFFREY KAYE: In the weeks since Hurricane Katrina laid waste to much of New Orleans, armies of private contractors have arrived in the city to pick up the pieces. The scope of the work is massive and contractors seem to be everywhere repairing ruptured levees, clearing debris, running ambulance services, testing soils for contamination, unclogging storm drains, fixing utility lines. With $62 billion in emergency funding appropriated by Congress-- and that amount will increase-- the aid effort is likely to result in the largest transfer of government funds into private hands in American history.
JEFFREY KAYE: Could you do this without the private contractors?
DENNIS NEILL: It would be very, very difficult.
JEFFREY KAYE: The extent of the government's reliance on private contractors can be seen in microcosm at this support center near the French Quarter. Although managed by the U.S. Forest Service, businesses from around the country keep the place running. They wash clothes, run the phone and Internet services, and provide beds. They also cook for 7,000 hungry people-- all cops, aid workers, manual laborers and government officials trying to put the city back together. This operation has cost taxpayers $6 million over the past three weeks. Dennis Neill says his agency, the U.S. Forest Service, regularly relies on the same contractors to provide support services.
DENNIS NEILL: I won't say we can't do it. I will say it would be a lot more expensive and it would be very difficult and it would take us some time to get geared up to do it. So they are a lifeline for us. It is a partnership. You know, they make a living, there is no question about it. They are well paid for what they do; they deserve every penny of it.
JEFFREY KAYE: Washington state-based Incident Catering Service provides 12,000 meals a day. Owner Ray Keener says he expects his firm could earn up to $2 million from its New Orleans work, work which he says the federal government doesn't have the know-how or equipment to do.
RAY KEENER, Incident Catering Services: There isn't anybody in the government who has the size or the capabilities of the type of equipment that we are talking about. This equipment is basically ready to feed 2,000 people per meal anywhere in the country once it gets to the site. It comes with potable water, refrig trailers, the manpower and the food ready to go once we are dispatched.
JEFFREY KAYE: Some of the most lucrative federal contracts have gone to engineering and construction giants, many of them politically well-connected. Joseph Allbaugh, former head of FEMA, the Federal Emergency Management Agency, and a former campaign manager for President Bush, has advised two major contractors, Kellogg, Brown and Root, a Halliburton subsidiary, and the Shaw Group, a global construction firm based in Louisiana. But Allbaugh has said he didn't help them secure contracts. FEMA is paying Bechtel, Fluor, CH2M Hill and Shaw hundreds of millions of dollars to provide temporary housing for thousands of evacuees. One such instant city is in Baker, outside Baton Rouge. Six hundred furnished trailers are just about ready for occupants on the site of what just two weeks ago was a cow pasture. This project, complete with roads as well as electrical, sewage and water systems, was put up by a subcontractor working for Shaw. Shaw, along with Kellogg, Brown and Root, also has major contracts with the U.S. Army Corps of Engineers for pumping water and for levee repair. Contracts to fix levees are among those that went out with little or no competition. And a list provided to the NewsHour by the Department of Homeland Security shows that out of $1.6 billion in FEMA contracts, mostly for housing, at least 79 percent were signed without bidding or with limited competition. The contracting process is troubling for government watchdog groups.
JIM BRANDT: I think Louisiana will be overrun with people seeking business.
JEFFREY KAYE: Jim Brandt is president of the Public Affairs Research Council of Louisiana, which monitors the intersection of money and politics.
JIM BRANDT: Obviously, with this much money on the table, there are a lot of contractors, businesses out there that will be seeking part of this work. And in order to, again, adequately evaluate those contractors, select the ones that are capable of doing the job, monitor their work, we need to have very well defined systems in place that are accessible to everyone in terms of what the rules are, how the contracts will be bid, full transparency or we will be the losers.
JEFFREY KAYE: One firm involved in levee repair work is Boh Brothers, New Orleans' largest construction company. In a phone interview, the company president defended the contracting process. He said that the Army Corps of Engineers is approving every expense. The chief auditor for the Department of Homeland Security, which oversees FEMA, says he'll monitor hurricane-related contracts and expenses.
Richard Skinner heads the Office of Inspector General of the Department. He told a House committee last month that he has created an office to oversee the work of inspector general's offices from other federal agencies.
RICHARD SKINNER: The OIG's will be looking at the evidence to support the no-bid decision, the criteria used to select one contractor over another, the reasonableness of the costs associated with the service for the product to be delivered, the qualifications of the contractor selected and support for payments made to the contractor.
JEFFREY KAYE: But Jim Brandt says that's not sufficient. He wants to see the appointment of independent auditors.
JIM BRANDT: This is something that worked very well in New York after 9/11, where they turned to independent private sector inspector generals to assist in the monitoring function. They are outside of the governmental function in terms of being hardwired to the government, more independent and I think have the ability to move where they are most needed.
JEFFREY KAYE: In the wake of the hurricanes, companies with little or no experience are also signing federal contracts. Floodwaters caused widespread damage in St. Bernard Parish to the east of New Orleans. Here, FEMA has arranged for a tent city, a base camp for workers. The contractor in charge is Lighthouse Disaster Relief, a newly-formed company owned by Pastor Gary Heldreth. He hopes profits from the $5.2 million contract will help him build a new church.
JEFFREY KAYE: But your company is a for-profit company?
GARY HELDRETH: It is now.
JEFFREY KAYE: It is now. And you have a contract?
GARY HELDRETH: I have a contract with FEMA. Yes, I do.
JEFFREY KAYE: And what is the contract?
GARY HELDRETH: Well, basically, I am to provide housing for a thousand men or ladies -- also provide three meals a day with showers, laundry service, a 24-hour kitchen, a rec hall for them to rest when they're off duty. It is just basically to try to bring some of the comforts back home to the workers that are going to be out there, you know, taking care of the disaster and get it back on its feet.
JEFFREY KAYE: Have you ever done this before?
GARY HELDRETH: No, sir. About the closest thing I have done to this is just organize a youth camp with my church.
JEFFREY KAYE: The FEMA official overseeing the project acknowledged the risk in hiring an inexperienced contractor, but he believes Heldreth is up to the task.
For the private sector hurricanes have provided opportunity. These men from a Virginia drain cleaning company look forward to overtime pay, but they also realize their work has more than monetary value.
RICHARD HAMMOND, Atlas Industrial Services: I think it is pretty humanitarian, most humanitarian because in order for you to take a shower or go to the bathroom, or anything and flush - not this drain - this is a storm sewer -- but the sanitary has got to be clean.
JEFFREY KAYE: But you need working sewers for the city to come back to life.
RICHARD HAMMOND: Yes, because you can't inhabit it if you can't flush. Nobody wants to live where they can't go to the bathroom and take a shower.
JEFFREY KAYE: Cleaning up and rebuilding from the devastation will be an historic challenge. For years to come, New Orleans and much of the Gulf Coast will be a costly work in progress.