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the same as the cost of a five bedroom, 2,000 square foot home in Jackson, Mississippi. Part of the reason for this extreme expense is that FEMA did not allocate work at these sites in a cost-effective manner and did not reevaluate this allocation after the sites were established. For example, FEMA placed only eight trailer pads at the Bienville site. FEMA wastes money when it operates sites with such a small number of trailer pads because GSM costs are fixed whether a site contains 1 or 50 pads.7 In this case, FEMA spends over $576,000 per year—or $72,000 per trailer—just for grounds facilities maintenance, lawn care, and road and fence repair. At another case study site, we found that FEMA’s mismanagement led to wasteful spending for septic cleanings. The MD contractor at this commercial site charged FEMA $245 per service to provide septic cleanings to the approximately 61 trailers at the park. In total, FEMA paid the contractor about $1.8 million for this service because the cleanings were provided 3 times per week per trailer over the course of a year. However, this contractor made a profit of almost $1.5 million because it paid a subcontractor just $45 per service to actually perform the work. According to the terms of the contract, FEMA could have saved this $1.5 million by reassigning the septic cleaning services to a cheaper company, but it did not exercise this option.

Finally, we found evidence of potentially improper activity related to the contract award process, as described in the two cases below. We have referred both of these matters to the Department of Justice and the Department of Homeland Security (DHS) Inspector General (IG) for further investigation and we have notified the Katrina Fraud Task Force about our findings.

FEMA awarded GSM contracts to two companies that did not appear to have submitted independent bids and that also made false statements on proposals submitted to FEMA. As previously indicated, FEMA awarded the Mississippi GSM contracts to five businesses. In actuality, FEMA awarded one of these businesses two contracts: one contract as a “single entity” and one as part of a “joint venture” with another firm. Although making this type of award is not prohibited, both the single entity and the joint venture were required to sign a certification affirming that they had each arrived at their price proposal independently and had not disclosed their bid to competitors. Even though both companies signed this certification, we found that they

7Group site maintenance costs are dependent on the size of the site—small sites contain 50 trailer pads or less, medium sites have 51 to 100, and large sites have 101 to 300.

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GAO-08-106 Hurricane Katrina

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