The Marketplace Report: Katrina Rebuilding Contracts

Alex Chadwick talks to John Dimsdale of Marketplace about the first large-scale contracts awarded for the rebuilding of New Orleans and surrounding areas. Many of these firms, such as Bechtel and Fluor, received the contracts without having to go through a competitive bidding process.

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ALEX CHADWICK, host:

Back now with DAY TO DAY. I'm Alex Chadwick.

With more than 62 billion federal dollars approved for rescue and recovery efforts along the Gulf Coast, government officials are beginning to sign contracts with private companies for jobs from building houses to pumping floodwaters. But a lot of these contracts are being awarded without competitive bidding, and that means criticism. Joining us is John Dimsdale in "Marketplace's" Washington bureau.

John, how about these complaints?

JOHN DIMSDALE ("Marketplace"): Well, you know, these are huge multimillion-dollar contracts that have been signed without soliciting other bids, as you mentioned. They're also what are called cost plus contracts, and these cover the companies' costs, whatever they are, plus a guaranteed profit. And the awards are going to politically connected companies, like Halliburton and Bechtel. None of this is a surprise to Sam Gdanski, who's a former Defense Department assistant counsel and now a government contracting lawyer.

Mr. SAM GDANSKI (Government Contracting Lawyer): The reality of it is how much ever we want to criticize it, you need the expediency of moving that quickly. And the only way you can do that is with no-bid contracts, but to proven contractors.

CHADWICK: John, there have been auditors reports that no-bid contracts in Iraq resulted in hundreds of millions of dollars in wasteful spending, double billing and inflated prices and the like. And that was in the Persian Gulf. Now they're repeating that in the Gulf of Mexico.

DIMSDALE: Yeah, that's been the rap, and you're right. Special auditors in the Defense Department and the Government Accountability Office have documented lots of accounting problems in the Iraqi contracts. But the Katrina relief officials say that they don't have time for competitive bids. And they say you can't entrust these huge housing reconstruction clean-up jobs to small businesses, which is why you see the same big companies getting the new contracts. But what you can do, Gdanski says, is get auditors on the ground a lot quicker.

Mr. GDANSKI: The General Accountability Office in the Iraq construction effort did not have field people in country until months, maybe even a year, after contracting was going forward. While that's understandable perhaps in retrospect because of the war conditions, there's no such limitation here. The area has stabilized to the point outside auditors should get in on the ground quickly.

CHADWICK: So, John, what is Congress saying on the awarding of these contracts?

DIMSDALE: Well, given the size of the rebuilding effort, which is going to be more than a hundred billion dollars ultimately, there are calls from both Republicans and Democrats for a new government agency to manage the reconstruction, including the awarding of these contracts. And they suggest a new bureaucracy be headed by a prominent personality such as Colin Powell or Rudy Giuliani, the former mayor of New York, and that this agency have a separate anti-fraud board to oversee the contracts.

Coming up later today on "Marketplace," a report on how a simmering struggle between the courts and Congress over the Constitution's Commerce Clause is likely to boil over during this week's Supreme Court confirmation hearings for John Roberts.

CHADWICK: Thank you, John.

John Dimsdale of public radio's daily business show "Marketplace" produced by American Public Media.

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