Katrina profiteering

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KAI RYSSDAL: We're 12 days shy of the first anniversary of Hurricane Katrina. The Gulf Coast is still cleaning up. Billions of federal dollars have been spent there. And a new report out today shows a lot of that money's going to companies with other government contracts, too. In a completely different place. The non-profit CorpWatch points out big industrial firms like Halliburton and Bechtel have gotten no-bid contracts on the Gulf Coast. And Iraq. Pratap Chatterjee is the group's director.

PRATAP CHATTERJEE: A lot of these companies, this is their business. The engineering companies. They do construction, whether it's in Iraq or Britain or in the Gulf Coast. So, it is to be expected that they would apply for the contracts. It would also to be expected that they would win the contracts. I think the problem lies in the fact that if these companies have notoriously botched jobs or overcharged, that they are not being warned and their contracts are not being cancelled for not doing a good job. For example, Halliburton has lost three contracts, major contracts, in Iraq in the last three years. Same thing with Bechtel, where they really did a bad job of fixing schools in Iraq in 2003. They just lost a contract in Basra. So you'd think by now the Army Corps of Engineers would have learned their lesson and realized that they needed to pay more attention to how these contracts are done.

RYSSDAL: In the fog of war, in the moment of that first couple of days after Katrina, we had to do something. And we didn't have time for rules and regulations and worrying that all the i's were dotted and the t's were crossed. We had to get people food, you had to get soldiers their meals, and their shelters.

CHATTERJEE: It's very true that in a hurry you need to get things done quickly and it's why the US government has set up things called contingency contracts. This is what we've used in Darfur in Sudan. We have used this in Iraq. And now we're using it in Katrina. Where you set up a contract in advance so that in case of emergency government bureaucracy can be short-circuited and jobs be done immediately on the ground.

Now, here's the problem, though. Let's say you have a company in Biloxi, Mississippi, that can do a job. They can't get those large contingency contracts, but they are the most effective people to do the job because they're right there. They know the by-ways. In the case of a flood, you have to know the geography. You can't look it up on MapQuest. And so, even though contingency contracts are supposed to be the quickest way to deploy people, they're not necessarily the best. The local people often will know much more than a company that is in Virginia and can win a contract because they have worked in many places around the world.

RYSSDAL: Not to be overly cynical, but there is this wheeling and dealing that happens all the time between government contractors and the government — where the deals get done because they're the biggest or because they're the fastest. Not necessarily because they're the best. And it happens in Iraq and we sort of shake our heads. Why are we surprised, I guess, that it's happening on the ground in the states?

CHATTERJEE: Well, you'd think that by now we'd have learned our lesson. The problem with federal contracting is not something that's three years old. It goes back to the days of Vietnam, and it goes back to the Second World War. You'd think by now the government would have learned its lessons. But it's clear that we haven't learned that. And it's also interesting to note, as you pointed out, that the people that are in charge of this are often the people who go to work for the contractors when they retire. And sometimes they retire early. So you start to wonder if there isn't a cozy system, a relationship, between these people. What's often called a revolving door. By the phenomenon of contracting out, we are encouraging people to leave government and set themselves up in business, or go and advise big companies on how they can get contracts and make a lot of money. But it is really the same people that once worked in government that are now working for the private contractors.

RYSSDAL: The report out today from CorpWatch is called "Big, Easy Money: Disaster Profiteering on the American Gulf Coast." Pratap Chatterjee is that group's director. Pratap, thanks for your time.

CHATTERJEE: Thanks for having me, Kai.

About the author

Kai Ryssdal is the host and senior editor of Marketplace, public radio’s program on business and the economy.

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