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LAYERS AND LAYERS

by Rita J. KingSpecial to CorpWatch
August 16th, 2006

Also making it difficult to follow the post-Katrina money is the labyrinthian layers of subcontractors on nearly every project. Most major contracts provide for the primary contractor to subcontract work to smaller firms. The layers can be so deep that the person on the ground actually sweeping up storm debris is making pennies on the dollar, if he or she gets paid at all. And because the Bush Administration suspended a number of federal labor and environmental laws in the immediate wake of the storm — ostensibly to speed up relief efforts — those doing the most back-breaking labor and those who live in the worst-hit areas are suffering the most, while out-of-town contractors reap the rich rewards of a profligate procurement system.

“Operation Blue Roof,” is but one example. FEMA paid $6.6 million to All American Poly (29) to make the blue tarps that cover so many storm-damaged roofs in the worst-hit areas. FEMA then gave the tarps — free-of-charge — and the contracts to install them to the Shaw Group and Simon Roofing and Sheetmetal of Ohio. (30) Those companies then subcontracted much of the actual work, and those subcontractors further subcontracted. The final cost for each tarp installation averaged out to almost $2,500 per tarp — almost enough to pay for a new roof in many cases (and the tarps were only designed to last 3 months). The workers who actually tacked the tarp onto the roof (a two-hour job) were probably making closer to minimum wage.

AshBritt’s $500 million contract for debris removal amounted to about $23 for every cubic yard of debris removed, according to an NBC television investigation. AshBritt in turn hired C&B Enterprises, which was paid $9 per cubic yard. That company hired Amlee Transportation, which was paid $8 per cubic yard. Amlee hired Chris Hessler Inc, for $7 per cubic yard. Hessler, in turn, hired Les Nirdlinger, a debris hauler from New Jersey, who was paid $3 per cubic yard.

“It’s a pyramid,” Nirdlinger told NBC. “And everybody is taking a piece of the pie as you work your way up, and we’re at the bottom. We’re doing the work.”

Meanwhile, responsibility for ensuring adherence to labor laws and federal contracting standards is passed down the line as well, and accountability becomes next to impossible to enforce.

The lure of subcontracting was made even more tantalizing on Sept. 7, 2005, when President Bush suspended the Davis- Bacon Act in the region. The act dictates minimum wages for work on federal contracts; without it, primary contractors and their subcontractors could pay laborers lower wages and keep more of the profit.

Bush defended the action as necessary to enable the private sector to move quickly and get more done in a shorter timeframe. Unfortunately, it also meant local laborers — many of whom had lost everything and were working to rebuild their own communities — were getting their wages cut. Bush was forced to reinstate the law two months later after public outcry, but his reversal had a caveat: it wasn’t retroactive. Any contracts signed during the suspension would still be exempt from the law. (31)

And the private contractors are hardly alone in their enthusiasm for having someone else do the dirty work. FEMA, short-staffed and under-funded, has actually contracted out the job of awarding contracts, both on the Gulf Coast and elsewhere. Acquisition Solutions Inc. handles the job, with dozens of former federal procurement officers on its staff to advise potential and existing contractors on technical and bureaucratic issues. It even sent employees to FEMA headquarters to fill in for federal personnel who were sent to the Gulf Coast. (32)

Government records show that FEMA paid the company $1.4 million in fiscal 2004. Records reviewed by CorpWatch found that the company has secured $2.4 million in post-Katrina contracts. (33)

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