The senators appeared even angrier when FEMA simply blew off the second round of testimony, the one that featured local officials. A stunned Coburn stopped that portion of the hearing after a few minutes and asked whether any representative from FEMA had stayed to listen or take notes. For a moment no one spoke, and then Strock raised his hand.Other parts of the problem revealed in the subcommittee hearing:
"No, general, you're with the corps, not FEMA," Coburn said. "No one from FEMA stayed around to listen to this and hear what's going on? That's part of the problem right there."
The testimony illuminated accounts of poor or nonexistent planning by federal agencies, of curiously lax contract oversight and of inflexibility that hampered local authorities.Also, does the federal government do anything by itself anymore, or does it just contract everything out to the private sector?
There were a number of ways, testimony showed, in which costs ballooned. For example, it showed that large companies, already familiar players with federal bureaucracies, who landed gigantic federal contracts in the storm's immediate aftermath, subcontracted from 70 percent to 99 percent of their work. That led to a curious and costly arrangement: overhead and profit margins for the big companies of up to 47 percent, and multiple tiers of subcontractors that sometimes stretched five or six companies deep.The private sector is motivated by profit and will only do just enough to obtain that profit, even when the objectives set are not enough to achieve the desired result.
"Bechtel, CH2M Hill -- why do you need them?" Coburn asked, citing two of the multinational companies that landed prime contracts. "They go out and subcontract 99 percent of this stuff anyway. Why can't you do that?"
When the people of southeastern Louisiana stand up and say, “We want Cat 5 protection no matter what the cost,” I don’t see the private sector respond saying, “We will give you Cat 5 protection no matter what the cost.” Why? Because they are all about the cost.
The federal government should be all about the people. Obviously, the two need to work together. But what we are seeing after Katrina is the federal government relying too much on the private sector, and the people are losing out:
The second theme is that tens of millions of dollars were frittered away in layers of subcontractors. What Washington and the nation need to realize, the Louisiana contingent argued, is the totals bandied about as earmarked for relief are, in fact, grotesquely inflated by misspending.The over-inflated “more than $100 billion” number looks a lot smaller when you factor in money misspent as well as the money that shouldn’t be included (like flood claim payments).
There is another reason why tipping the scales to the private sector is bad for the recovery. The government must make up for the money that was misspent by the private corporations. Every dollar misspent still comes out of the US Treasury and every job left undone or done inadequately by a private corporation has to be finished by the federal government. However, we will never see the private corporations give back any of their profits or see any CEOs give back any of their salary for a job poorly done.
We will just see more House and Senate committee investigations.