KATRINA: Army Corps overpaid on Katrina classrooms contract

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The Army Corps of Engineers "could have, but failed to, negotiate a lower price" on a $39.5 million Hurricane Katrina contract for portable classrooms in Mississippi, according to a draft government report.

The tentative finding by the Government Accountability Office, the investigative arm of Congress, raises new questions about the no-bid award to Akima Site Operations, a subsidiary of an Alaskan native-owned firm.

The draft report also confirms a USA TODAY report in September that a Mississippi business that Akima consulted while pricing the classrooms contended it would have supplied the units for roughly half the price.

A government office outside the GAO provided the draft Tuesday on condition that it not be identified.

According to the report, corps officials contacted Akima on Sept. 14, just over two weeks after Katrina devastated the Gulf Coast, and asked if the firm could supply 450 portable classrooms. The corps made the request under a pre-existing blanket contract agreement with Akima.

After a few days of price talks, Akima submitted a formal proposal that became the official contract price.

But the GAO, which reviewed records of the federal award, found that "the corps accepted Akima's proposed price of $39.5 million although they had information that the cost for the classrooms was significantly less than what Akima was charging."

The report said Akima gave the corps an unofficial cost estimate on Sept. 16, then submitted the "significantly higher" final price the next day.

"While we believe the increase in Akima's price should have raised questions among corps contracting officials, we found no evidence they conducted any analysis to determine why the prices had increased," the GAO reported.

Corps contract files examined by GAO investigators attributed the cost increase to expedited delivery requirements in the wake of Katrina.

But a GAO analysis found freight costs were roughly equal in Akima's preliminary and final offers.

Moreover, the GAO report said Akima purchased at least some of the portable classrooms from the same Florida supplier that the Mississippi business would have used.

"Acquiring goods and services in any emergency situation can be difficult," the draft report concluded, "but those difficulties should not provide an excuse for poor pricing outcomes."

Spokesmen for the corps and Akima did not respond to messages seeking comment on the interim findings.

Both the corps and Akima are expected to submit formal responses to the GAO that will be used to shape the conclusions in the final report, which is expected to be made public later this month.

Kent Adams, whose family-owned Mississippi business offered to supply the classrooms, said the GAO findings show the corps "had plenty of information to know they could have gotten the classrooms for less money."

AMP Section Name:War & Disaster Profiteering