Profiteering Wins, Rebuilding Loses on Gulf Coast

A report by the nonprofit group CorpWatch says disaster profiteers make millions of dollars while local companies and laborers in New Orleans and the rest of the Katrina-devastated Gulf Coast region are systematically losing out.

An analysis of Federal Emergency Management Agency (FEMA) records shows that 90 percent of the first wave of post-Katrina reconstruction contracts awarded went to companies from outside the three worst-affected states—many of them politically well-connected. As of July 2006, companies from Louisiana, Mississippi and Alabama still had no more than 16.6 percent of the total contracts.

Many of the same companies and government agencies that mishandled the reconstruction of Afghanistan and Iraq are responsible for the failure of "reconstruction" of the Gulf Coast region. The Army Corps, Bechtel and Halliburton are using the very same "contract vehicles" in the Gulf Coast as they did in Afghanistan and Iraq. So-called “indefinite delivery, indefinite quantity” and open-ended “contingency” contracts that are being abused by the contractors on the Gulf Coast to squeeze out local companies. “Cost-plus” contracts allow contractors to collect a profit on everything they spend, which is an incentive to overspend.

Abusive “contracting pyramids” leave the actual subcontractors doing the work with only a tiny and often insufficient fraction of the taxpayer money awarded for projects. Local companies sometimes even go unpaid or are frozen out of the process altogether. Laborers—particularly immigrant workers—are often not getting paid. The overly complex subcontracting layers are a major part of the problem, where each can't pay the next until it gets paid, meaning the laborers on the bottom rung get paid last, if at all.