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Results in Brief

To conduct our investigation, we analyzed FEMA’s issuance of task orders under the contracts and the costs associated with the most expensive contract line items from June 2006 through January 2007. In addition, we selected and tested a representative sample of payments made to the MD contractors for monthly preventative maintenance inspections from June 2006 to January 2007. To prepare our case studies, we reviewed specific costs associated with a nonrepresentative selection of 3 group sites and 1 commercial site in Mississippi. We did not conduct a comprehensive evaluation of whether FEMA adhered to its own solicitation requirements and other laws or regulations when awarding the 10 MD and 5 GSM contracts. However, our interviews with FEMA officials, contractor personnel, and confidential informants led us to identify potentially improper activity associated with the award process. To further investigate this activity, we reviewed and compared the contract proposals, total bid prices, line item bids, and government estimates for work. We conducted our work from October 2006 to September 2007. We conducted our investigative work in accordance with the standards prescribed by the Presidents Council on Integrity and Efficiency and conducted our audit work in accordance with generally accepted government auditing standards. For more information on our scope and methodology, see appendix I.

Overall, we estimate that FEMA’s ineffective management resulted in about $30 million4 in wasteful and improper or potentially fraudulent payments to the contractors from June 2006 through January 2007 and likely led to millions more in unnecessary spending beyond this period. We found that (1) FEMA’s failure to issue task orders under the MD contracts in a cost-effective manner led to as much as $16 million in waste and (2) breakdowns in FEMA’s invoice review process led to an estimated $16 million in improper or potentially fraudulent payments. Furthermore, our case studies demonstrate how FEMA’s placement of travel trailers at group and commercial sites can lead to excessive costs, when compared

4The estimated $30 million in wasteful and improper or potentially fraudulent payments is the sum of the $16 million FEMA wasted by not allocating task orders to the MD contractors with the lowest estimated costs and an additional $16 million in improper or potentially fraudulent payments made to the contractors for work for which that have no evidence that they performed. If FEMA had allocated the work to the MD contractors based on cost, the magnitude of improper and potentially fraudulent payments likely would have been reduced.

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GAO-08-106 Hurricane Katrina

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