The Federal Emergency Management Agency classified a joint venture with headquarters in California and Texas as a local outfit in both Louisiana and Mississippi this year when the agency awarded travel trailer contracts that were supposed to benefit small local firms, records show.
The contractual process, which according to FEMA guidelines was explicitly designed to favor companies from areas directly hit by Hurricanes Katrina and Rita, led to four deals of up to $100 million each for PRI/DJI Inc., a joint venture that the federal contracting register lists as a San Diego company. That is because PRI is a minority-owned firm based in California, while DJI is shorthand for Del-Jen Industries, a wholly owned subsidiary of the Fluor Corp. of Irving, Texas.
FEMA's action is reigniting protests from Mississippi contractor Tim White, who has formally filed protests about the agency's contracting practices.
"It's a baldfaced misrepresentation," White said of PRI/DJI's designation as a local firm.
FEMA and a PRI/DJI spokesman said the firm was licensed in the area and had done business in the state, complying with the agency's definition for local companies.
The revelation that the out-of-state firm landed local status comes as a liberal government watchdog group in California, CorpWatch, issued a report Thursday on what it dubbed "disaster profiteering on the American Gulf Coast." One of the report's key findings was that "local companies are systematically getting the short end of the stick while companies at the top are getting the brunt of the money," said the organization's director, Pratap Chatterjee.
Some local vendors, angry that their own bids on about $3.6 billion in new trailer contracts were rejected, had simmered over FEMA's classification of PRI/DJI as a small business, which the agency's guidelines defined as a company with less than $30 million in annual sales. White, the owner of White Haul Transport in McComb, Miss., formally protested the contract, saying FEMA's small-business definition hardly squared with PRI/DJI's connection to Fluor, which had $14.5 billion in sales in the past 12 months and whose stock price has risen almost 55 percent since Katrina set off a contracting frenzy between federal relief agencies and the private sector.
All told, FEMA awarded 36 separate contracts along the Gulf Coast to handle the maintenance and ultimate disposal of hundreds of thousands of trailers the agency has installed as temporary housing in storm-tossed areas. PRI/DJI was the single biggest winner, landing two $100 million deals in Louisiana and two more in Mississippi, records show.
Rival stunned by local tag
White's protest was rejected because PRI is partnered with Del-Jen as part of a federal mentor program that can last up to nine years, White said. But White said he was equally stunned this month when, in response to a Freedom of Information Act request he made to FEMA in May, he learned the agency had designated PRI/DJI as local, too.
"How did that happen? How can anyone justify this being local in two separate states, neither of which is its headquarters? There's no way," he said.
A PRI/DJI spokesman and FEMA officials said the joint venture met the contracts' stated definition of a local business, which includes possessing a "license to do business" in the state or having a track record of working and paying taxes in it before Katrina. FEMA officials insisted that PRI/DJI had submitted "all the required documentation." But the agency proved unable to furnish copies of said documents or to define them more clearly, despite multiple requests for additional information over more than a week.
"They were doing work for the Army Corps of Engineers until 2002 in Louisiana, and work for the Navy in Mississippi," said Bill Brown, a PRI/DJI spokesman and consultant.
Sparse paper trail
Nevertheless, FEMA's definition struck state officials in Jackson, Miss., and Baton Rouge as odd. Neither Louisiana nor Mississippi offers a statewide business license, and in neither state has PRI/DJI ever filed local incorporation papers or, in Mississippi, made an effort to obtain what the state calls a "certificate of authority," records show. The Louisiana State Licensing Board for Contractors said it had no record of PRI/DJI.
The company's tax history was unavailable, as Mississippi revenue officials said the information was confidential, and their counterparts in Louisiana did not return phone calls.
Meanwhile, the benefits afforded PRI/DJI's bids is of a piece with the overall federal reconstruction effort, according to CorpWatch. In a 36-page "Big, Easy Money" report released Thursday, the organization accused the federal government of bungling Gulf Coast rebuilding projects.
The Oakland, Calif., watchdog group laced its report with references to huge contractors' ties and campaign contributions to Republican officials, particularly President Bush. The report's author, Rita King, criticized the Gulf Coast contracting process in a comment that also is posted on the group's Web site, www.corpwatch.org.
Big companies win out
"The devastation that Hurricane Katrina brought to the Gulf Coast is tragic enough, but the scope of the corporate greed that followed, facilitated by government incompetence and complicity, is downright criminal," she said.
In particular, King's report compared the gigantic contracts that sprawling, multinational service companies have won, often in a noncompetitive environment, with those handed out to smaller, local firms. Of the $6 billion in hurricane-related contracts granted by FEMA to date, only 13 percent, or $780 million, were awarded to local firms, King said.
The problem was acute among small and minority businesses, which appear to have been largely shut out of massive contracting processes, such as the travel trailer deals, that allegedly were designed to favor them, the report said. "Local businesses fared even worse," the document said.
"In the initial aftermath of the storm, a surge of no-bid contracts emanated from FEMA, but only 10 percent (in dollar value) of those contracts went to businesses headquartered in the three worst-hit states," the report said.