Katrina contract overpaid by 20%, audit says

The company suddenly raised its price one day after presenting an estimate.
WASHINGTON (AP) -- The government overpaid by 20 percent on a $39.5 million, no-bid Hurricane Katrina contract for portable classrooms because the Army Corps of Engineers passed up chances to negotiate a lower price, a federal audit says.
The draft Government Accountability Office report on the contract with Akima Site Operations LLC, a subsidiary of an Alaska native-owned firm, said the government wasted at least $7.8 million on the classrooms in Mississippi. It's the latest in a series of audits detailing waste of hundreds of millions of taxpayer dollars in the hurricane recovery effort.
Hearings planned
It comes as several congressional panels plan hearings to examine fraud and waste in federal contracting, including the Katrina effort. Today, the Senate Homeland Security Committee is to examine FEMA housing waste in Hope, Ark.
"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. "We believe the Corps could have, but failed to, negotiate a lower price."
The report found that in its rush to get classrooms after the Aug. 29 storm, the Army Corps wasted at least $7.8 million by failing to seek a lower price after Akima suddenly raised its price one day after submitting a lower initial estimate.
Some lawmakers were immediately critical.
"The administration has some explaining to do," said Sen. John Kerry of Massachusetts, the top Democrat on the Senate Committee on Small Business and Entrepreneurship. "We can't allow this to become an excuse for not awarding small firms their fair share of contracts."
Army Corps response
A spokesman for the Army Corps, Doug Garman, said Thursday the agency was reviewing the draft and would submit a response to the GAO for the final report. John Wood, CEO of Akima Management Services, defended the deal as fair given the extraordinary circumstances after the hurricane.
"We did everything the Army Corps asked us to," Wood said. "It was a very successful contract. Mississippi kids got back in school and we saved their school year. There were a lot of risks in the contract terms."
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