"crony capitalism" at its best?
It looks like Bush has once again found a way for his people to make money. Immediately after the Katrina disaster, Bush suspended federal rules to allow FEMA and the Army Corps of Engineers to give no-bid, "cost-plus" contracts to companies for rebuilding. The companies that were awarded these contracts, such as Shaw Group, Halliburton, Fluor Corporation, and Bechtel, have political ties and stand to make a large profit because of the cost-plus provisions. The Bush Administration is asserting that no-bid contracts hasten the rebuilding process by eliminating the red tape, although, in my opinion, what they eliminate is a competitive bidding process and the opportunity for other businesses to become involved at less cost.
The DOD has already been criticized for giving Iraq reconstruction no-bid contracts to Haliburton and Bechtel. Audits have found hundreds of millions of dollars were misspent in Iraq. Isn't this just a repeat of these same practices aimed at benefitting politically connected companies at the cost of the American public?
13 Comments:
As a fiscal conservative, I am likewise disappointed with the "no bid" policy for contract awards. WIth a looming $200 billion cost estimate for Katrina, a reported $9-$13 billion a month to maintain forces in Iraq, and the inevitable multi billion dollar federal burden for Rita, a little competitive bidding is the least the government could do for us before spending our money. Furthermore, one would think that the administration realizes that most Americans are informed about their relationship with these companies, and thus would distance themselves from these red flagged corporations, if for nothing else than saving political face.
One thing often ignored is how few companies are in the "rebuilding a city" business. What does the competitive playing field look like out there? Who besides Halliburton and Bechtel have the kind of resources, skill and ability to rebuild New Orleans?
What other contracting conglomerates are out there that may have been disadvantaged in this instance?
Looks like we'll never get a chance to find out.
Just because Halliburton and Bechtel are "all-in-one shops" doesn't mean they are the cheapest or best at what they do. Think grocery store vs. co-op/farmers' markets. The grocery store may be able to offer a wide variety of fruits/veggies, but they're expensive, over-ripe, and full of pesticides. The farmers' market pulls together a number of smaller suppliers who can offer a wider variety of fresher/pesticide-free product at a lower cost. I'm sure there are hundreds/thousands of small to mid-size firms across the country who could handle the work of reconstruction (at lower cost, and with higher quality), if only given the chance.
I know from personal experience with government contracting that a government can royally screw up by noble efforts of "spreading the wealth", and here's how it happens:
Great Big Contractor receives notice from Govt that for whatever reason, they are splitting up the work to a wider range of contractors.
Great Big Contractor (GBC) adjusts business to accommodate (selling equipment, laying off employees, reallocating resources into different commitments, etc.)
Itsy-Bitsy Contractor (IBC) does its very best to accomplish the windfall of unanticipated business.
IBC fails from lack of experience, expertise, or any number of reasons, including why they may have been itsy-bitsy in the first place.
Govt calls GBC back in a panic because the work has to be done. The GBC has to pay top dollar to repurchase equipment and recruit employees. The Govt must pay more because the costs are now higher.
The scenario only works if the Govt can reliably predict the abilities of the IBC. But, how long do you think that takes?
In my hometown, it took almost a year for a simple general services contract - and they still got it wrong!
Now extrapolating that to the Federal Govt and an affected area of 90,000 square miles, I feel comfortable in my assertion.
How much time would it take for the Federal Govt to identify, ascertain the financial stability and capabilities of the willing contractors of all segments across the industries involved in rebuilding? And how effective would it be in its evaluation?
It could also spend a tremendous amount of analysis time only to find out that because of economy of scale the GBC costs less anyway.
And all the while, listening to the cries of the affected and the opposition party bitching about the delay? No thank you.
When it absolutely, positively has to be there overnight, - you call FexEx, not a startup charter service over at the county airport.
Calling it cronyism is a partisan jab. There are accountable people making informed decisions about the rebuilding efforts.
I would give the Democrats the same leeway, but lately it seems to me that no matter what is happening, it has to pass through this filter of "Bush is evil". It is very frustrating to me.
On a slightly different note, let's check out how the Repubilcans are offering to pay for this rebuilding of New Orleans: (Yes, you have to watch a brief ad to get access to this link, but it's the best summary of how the Republicans plan on making the sacrafice for the 99% of us that don't get their tax cut.)
href="http://www.salon.com/politics/war_room/index.html?blog=/politics/war_room/2005/09/22/cuts/index.html>link.
This is the link Shanan was attempting to post for everyone.
It appears his link now points to a different "top story", unfortunately.
SwampDragon is Shanan? W&M Shanan? Shanan my freshman RA?
If it is you, Shanan: what's up, man? I hope life is good!
-Josh Glover, Yates 3rd South, 1998-99
Yeah, that would be me -- life is good, despite my apparent inability to link articles corrently. I suppose there aren't many Shanan's, although, for the first time in my life, I met another (male) Shanan (spelling: Shanenon) or something ridiculous like that. Check out his work: www.s2photo.com
In response to Randy's last post...
I don't think this is a case of "Bush is evil" so whatever decision he or his administration makes is evil. I think this is a case of pointing out a perceived injustice and laying out an argument for said perception.
For me, the problem is the lack of transparency in the decision-making process. If the Bush administration had laid out its argument for how it was making its decision to hire Halliburton in a way similar to your explanation, perhaps they would not have received so much criticism. However, I would still disagree with their decision. You're right that the rebuilding necessary in the Gulf region is an immense project. But, I still don't think that means we have to go with the biggest company at the expense of the little guy. When planning the reconstruction of Iraq, I remember hearing about "contract fairs" where companies could go and bid on government contracts. Why not take the time to do a careful assessment of everything that's needed, come up with a budget that's responsible and realistic, and then let companies bid on segments of that plan? If the big companies are really the best guys for the job, then they should win the bids. However, to rush ahead and just hire the big guys without even giving the little guys a chance just because it would be too hard to figure it all out is irresponsible and, in the end, will cost us more money than if we take some time now to think things through, do some analysis, and then decide on the proper course of action.
Also in response to Randy's post, the Gulf Coast region has weathered many hurricanes. If I could make a comparison, so has Hampton Roads. There are PLENTY of people in hurricane-prone areas of the country who are very capable of cleaning up after a storm, and re-building. Its what they do. There are entire businesses in Hampton Roads that do nothing else. We get hurricanes often enough to keep these guys in business. No doubt, the Gulf Coast states have the same local resources. Why do we need Halliburton? You do understand that they are currently under investigation for misuse of government funds in Iraq. Now, I have awarded contracts in the business world, and I can tell you for a fact that if you screw the customer, you won't get re-hired. Why are we using them?
And, even though your theory sounds good, do you have any numbers on these companies that you think wouldn't be able to handle the work? If they can't handle the work, don't hire them. But without a competitive bidding process, how will you or anyone else know?
And, if the time required for a fair bidding process is too long, then go ahead with a quicker, easier selection - initally. They're not going to spend the entire $500 million immediately. Give them a small contract to get things started, and do a fair bidding process for the entire job.
And, finally, I'm a little tired of being called "partisan" every time I criticize this administration. Since you generally defend them, I could accuse you of the same partisanship. Let's just keep our comments to the issues at hand without passing judgments on the motivations of the commenters, shall we?
I saw this article on msnbc this morning:
http://www.msnbc.msn.com/id/9489589
The article mentions that some of no-bid deals were made with only a handshake. I guess that brings to light how much effort was put into investigating local companies to do the work, possibly at a lower price. Additionally, Bush suspended the Davis-Bacon law that sets a minimum pay scale for workers on federal contracts, requiring that contractors pay the workers the average pay for that area. The suspension of this law allows the wages of the people who need the money the most to be cut. In my opinion, the people in the Gulf Coast need all the help they can get!
Following up on Carolyn's comment, the protesting of awarding no-bids to Halliburton and other well known campaign contributors and future/past Republican employers is not an instance of knee-jerk, "Bush is evil" partisanship, Randy, it is an instance where you've appeared to have at least sipped, if not deeply imbibed, the Kool-Aid, another frustrating occurrence. Do you REALLY believe the Bushies' excuse that Halliburton and Bechtel are the ONLY companies capable of this work?
I mean, they pulled the same excuse out for the Iraq no-bids for the SAME companies. While it is, at least on its face, plausible that only a few companies would know how to rebuild an entire foreign infrastructure in war-zone conditions half a world away, there are no such extenuating, specialized circumstances here. We have a hurricane. We have flooding. We have mud. As has been mentioned, this is nothing foreign to the American people or American companies.
Hurricanes hit every year from Texas to Virginia. The Midwest floods constantly. While this is a bigger job than most, and may have some new complexities, its nothing crazy to the companies that clean up the Eastern U.S. coast every year.
The Bushies engaged in cronyism, again, and figured "Hey, this excuse worked great in Iraq, let's run it up the flagpole and see who salutes!" Nobody's buying it this time, except those folks with Kool-Aid smiles and dark red-stained tongues.
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