FEMA’s Issuance of Task Orders under MD Contracts Resulted in as Much as $16 Million in Waste

FEMA wasted as much as $16 million because it did not allocate task  orders under the MD contracts to the companies with the lowest prices. Breakdowns in FEMA’s Invoice Review Process Led to about $16 Million in Improper or Potentially Fraudulent Payments

From June 2006 through January 2007, we estimate that FEMA made  approximately $16 million in improper or potentially fraudulent payments  to the MD contractors based on invoices that should not have been  approved, according to its own payment process. This amount includes  about $15 million in payments made for preventative maintenance—which  includes a required monthly inspection—and over $600,000 in payments  for emergency after-hours repairs. After the contract awards, FEMA provided the contractors  with a temporary housing unit inspection sheet (see app. Case Studies Illustrate Excessive Costs at Group and Commercial Sites

Our four case studies show that FEMA’s placement of travel trailers at  group and commercial sites can lead to excessive costs. We estimate that, on average, FEMA will spend  approximately $30,000 for the life cycle of a trailer placed at one of these  private sites. As shown in figure 3, FEMA paid about $14,000 to purchase  each 280 square foot trailer and $12,000 to haul the trailer to the site and  install it, and will spend an additional $4,000 to maintain a private site  trailer through the March 2009 temporary housing occupancy extension. Part of the reason for these extreme expenses is that  FEMA failed to efficiently allocate work at the sites. For example, FEMA  wasted about $800,000 by inefficiently allocating trailers and pads and also  could not explain why it spent over $204,000 per year to lease one group  site when most of the other parks only cost about $30,000 per year to  lease. In this case,  FEMA spends over $576,000 per year—$72,000 per trailer—for site  maintenance. Evidence of Improper Activity Related to Contract Award Process

During the course of our work on the MD and GSM contracts, we found  that FEMA awarded GSM contracts to two companies that did not appear  to have submitted independent bids and also made false statements on  proposals submitted to FEMA. We also found that a FEMA contracting  officer may have improperly awarded the UFAS contract to make the  housing units accessible to individuals with disabilities, resulting in   $3 million in unnecessary expenses. We also found that key personnel at both companies  admitted to misrepresenting their job titles and functions in final offers  submitted to FEMA, a potential violation of the False Statements Act,   18 U.S.C. For  example, both companies had the same president, executive vice  president, and accountant. In response to our recommendation to issue task  orders to companies at the lowest cost, FEMA stated that has reallocated  work under the GSM contracts on a “low price basis per site” and under  the MD contracts on a “best value basis.” In response to our  recommendation to inventory mobile homes and trailers, create a  database, and link work assigned to the contractors with specific unit  barcodes, FEMA states that it began an invoice-matching project in March  2007 and is in the process of completing an inventory count to ensure that  all the temporary housing units at the sites are recorded in the agency’s  existing management system. Appendix I: Objectives, Scope, and Methodology

The objective of our investigation was to determine whether there were  indications of fraud, waste, and abuse related to Federal Emergency  Management Agency (FEMA) oversight of the 10 MD and 5 GSM contracts  in Mississippi. We also prepared case studies to determine the costs  associated with the placement of travel trailers at group sites and  investigated allegations of criminal and improper activity related to the  contracts.
Why GAO Did This Study

Hurricane Katrina destroyed or damaged 134,000 homes and 10,000 rental units in Mississippi alone. The Federal Emergency Management Agency (FEMA) in part responded by providing displaced individuals with temporary housing in the form of mobile homes and travel trailers, placed on both private property and at FEMA-constructed group sites. In 2006, FEMA awarded 10 contracts in Mississippi to maintain and deactivate (MD) the housing units and 5 for group site maintenance (GSM). GAO was asked to investigate whether there were indications of fraud, waste, and abuse related to FEMA's oversight of these 15 contracts. GAO analyzed FEMA's issuance of task orders, tested a representative sample of monthly maintenance inspections payments, prepared case studies detailing the costs related to trailers placed at group sites, and investigated improper activity related to the contracts.

What GAO Found

FEMA's ineffective oversight resulted in an estimated $30 million in wasteful and improper or potentially fraudulent payments to the MD contractors from June 2006 through January 2007 and likely led to millions more in unnecessary spending beyond this period. For example, FEMA wasted as much as $16 million because it did not issue task orders to the contractors with the lowest prices. In addition, GAO estimates that FEMA paid the contractors almost $16 million because it approved improper or potentially fraudulent invoices. This amount includes about $15 million spent on maintenance inspections even though there was no evidence that inspections occurred and about $600,000 for emergency repairs on housing units that do not exist in FEMA's inventory. Furthermore, FEMA's placement of trailers at group sites is leading to excessive costs. FEMA will spend on average about $30,000 on each 280 square foot trailer at a private site through March 2009, the date when FEMA plans to end temporary housing occupancy. In contrast, expenses for just one trailer at the Port of Bienville Park case study site could escalate to about $229,000---the same as the cost of a five bedroom, 2,000 square foot home in Jackson, Mississippi. Part of the reason for this expense is that FEMA placed only eight trailers at the Bienville site. FEMA wastes money when it operates sites with such a small number of trailers because GSM costs are fixed whether a site contains 1 or 50 trailer pads. At Bienville, FEMA spends over $576,000 per year--$72,000 per trailer--just for grounds maintenance and road and fence repair. GAO also found evidence of improper activity related to the contract award process. For example, FEMA awarded GSM contracts to two companies that did not appear to have submitted independent bids, as required. These companies shared pricing information prior to submitting proposals to FEMA and also shared the same president and accountant. Personnel at both companies also misrepresented their job titles and functions, a potential violation of the False Statements Act. In another case, FEMA's contracting officer awarded a $4 million contract to make the temporary housing units disabled-accessible; the contracting officer allegedly had a previous relationship with the awardee's subcontractor. GAO licensed engineers estimated that the work should have only cost about $800,000, or one-fifth of what FEMA ultimately paid.