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Contractor tiers swell Katrina costs

Normalcy eludes city as bodies are still being found

NEW ORLEANS -- How many contractors does it take to haul a pile of tree branches? If it's government work, at least four: a contractor, his subcontractor, the subcontractor's subcontractor, and finally, the local man with a truck and chainsaw.

If the job is patching a roof, the answer may be five contractors, or even six. At the bottom tier is a Spanish-speaking crew making less than 10 cents for every square foot of tarpaulin installed. At the top, the prime contractor bills the government 15 times as much for the same job.

For the thousands of contractors in the Katrina recovery business, this is the way the system works -- a system that federal officials say is the same after every major disaster but that local government officials, watchdog groups, and the contractors themselves say is one reason why costs for the cleanup continue to swell.

''If this is 'normal,' we have a serious problem in this country," said Benny Rousselle, president of Plaquemines Parish, a hurricane-ravaged district near New Orleans.

''The federal government ought to be embarrassed about what is happening," Rousselle said. ''If local governments tried to run things this way, we'd be run out of town."

Federal agencies in charge of the Katrina cleanup have been criticized repeatedly for lapses in managing the legions of contractors who perform tasks ranging from delivering ice to rebuilding schools.

Last Thursday, Congress's independent auditor, the Government Accountability Office, said inadequate oversight had cost taxpayers tens of millions of dollars, by allowing contractors to build shelters in the wrong places or to purchase supplies that were not needed.

But each week, many more millions are paid to contractors who get a cut of the profits from a job performed by someone else. In instances reviewed by The Washington Post, the difference between the job's actual price and the fee charged to taxpayers ranged from 40 percent to as high as 1700 percent.

Defenders of the multitiered system say it is a necessary part of doing business in the aftermath of a major disaster. The prime contracts are usually awarded by FEMA or other government agencies well in advance, so relief services can be brought in quickly after the crisis eases. These companies often must expand rapidly to meet the need, and they do so by subcontracting work out.

The two federal agencies that administer most disaster-related contracts, FEMA and the Army Corps of Engineers, say the system benefits small and local companies that do not have the resources to bid for large federal contracts. At the top end, prime contractors must be large enough to carry the heavy insurance burdens and administrative requirements of overseeing thousands of workers, agency officials say. They also note that contractors have a legal right to hire subcontractors as they need them.

But watchdog groups that monitor federal contracting say Katrina has taken the contract tiering system to a new extreme, wasting tax dollars while often cheating smaller companies. In some cases, the groups say, companies in the top and middle rungs contribute little more than shuffling paperwork from one tier to the next.

''It's trickle-down contracting: You're paying a cut at every level, and it makes the final cost exponentially more expensive than it needs to be," said Keith Ashdown of the watchdog group Taxpayers for Common Sense.

As rebuilding efforts go on, New Orleans officials are continuing to find bodies. An estimated 400 people are still missing since Hurricane Katrina flooded the city more six months ago.

Two more victims were found yesterday buried in the ruins of houses on the 2400 block of Tupelo Street.

The two victims were discovered by two students who had been working to clear debris, officials said.

Walking by wreckage of a bulldozed house, the students noticed a limb and called police. The victims have not yet been identified.

Coroner's investigator Orrin Duncan said more bodies are being found each week as the pace of home demolition picks up in the Lower Ninth Ward, a mainly African-American community that was hit by a torrent of water when a levee breached during the Aug. 29 storm.

Henry Irvin, 69, who lived in the neighborhood for five decades, said he was angry rescue crews did not find the bodies earlier when they moved the debris off the street. ''They did a lot of pushing homes around here. I'm just glad they're going through it the right way now," he said.

A citizens' commission created by Mayor Ray Nagin will report today on how to bring back the city after the hurricane.

Some of the recommendations of the Bring New Orleans Back Commission have been public for weeks. The group has been criticized by many people of the region for one subcommittee's proposal that large tracts of the city be returned to wetlands and open space.

Material from Reuters was included in this report.

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