Road Home subcontractors make hundreds of millions

While ICF International's expanding Road Home contract has led to high-profile inquiries and lots of hand-wringing, there are also three dozen subcontractors that have made hundreds of millions of dollars off the program.


Sixty-two percent of the $592.7 million the state paid ICF as of March 10 was spread among 38 other companies or nonprofits, 22 of them identified as having a base of operations in Louisiana. They do most of the legwork in the state's $10.3 billion Road Home effort and, according to ICF's latest projections, could end up collecting $569 million. That equates to 6 percent of the money Congress sent to Louisiana for homeowner relief.

"We haven't been looking at payments to and performance of the subcontractors," said David Greer, director of performance auditing under Legislative Auditor Steve Theriot. "Now, we'll be looking globally at the Road Home contract to see how services are delivered, and that will get us, partially at least, to the subs issue."

The state Office of Community Development provides monthly updates of subcontractor pay to the Joint Legislative Budget Committee, but the documents were released to The Times-Picayune for the first time last week.

They show that, as of March 10, three of the 33 for-profit subcontractors had made 56 percent of the money, while two of five nonprofits or educational institutions had yet to see a dime for services they provided homeowners.

Shaw top moneymaker

The recipient of the most money is the Shaw Group, whose founder and chairman Jim Bernhard once led the state Democratic Party and who was a leading contributor to former Gov. Kathleen Blanco, architect of the Road Home program. Shaw has collected $84.9 million of a contract projected in February to total $127.6 million, by far the largest of the bunch.

The Baton Rouge company is in charge of equipment and facilities, supporting the Road Home headquarters and 12 housing assistance centers, including one in Texas. The company also runs a call center in Baton Rouge that Shaw bought out when another subcontractor, West Telecommunications, threatened to move it out of state.

Sean Clancy, a spokesman for Shaw, declined to comment about Bernhard's ties to Blanco. He said Shaw is in the third and final phase of its work, has been paid on time and is in the process of closing facilities and scaling back its Road Home work force of 200.

"Shaw is proud of the work it did in the program and believes it helped a considerable number of Louisiana residents through its efforts," Clancy said.

The second-highest paid firm is First American, a financial services company based in Powtay, Calif., that has a Louisiana subsidiary title company. ICF hired it to do $109.3 million worth of title searches, Road Home closings and appraisals, according to a February projection of the contract's value. It has been paid $62.3 million so far but has seen its pay slow during the past year as it has been replaced as the appraisal coordination firm and its allocation of title work has declined.

First American has been largely supplanted by HGI Catastrophe Services, a tiny LaPlace company ICF originally hired for a minor contract but turned into the third-highest earner with no-bid change orders. HGI, a subsidiary of Hammerman & Gainer, was brought on to do about $8 million worth of home damage inspections but has already been paid seven times that much because lucrative appraisal and title work was tacked on to its existing contract last spring. The assignment of additional work came even though the firm has just three years of experience in title work and struggled to pay appraisers in a timely manner.

Hammerman & Gainer's owner, Larry Oney, also contributed to Blanco. A spokesman for Oney declined to comment this week, referring all questions to ICF spokeswoman Gentry Brann.

Subcontractors get bulk

Brann has said decisions about how to distribute closing work between First American, a giant of the industry, and HGI, a relatively unknown firm, change based on the flow of files. A third title company, Bayou Title of Gretna, also was added to the mix, getting a contract estimated in February to be worth $1 million but collecting nearly three times that by March 10.

First American, which early on promoted its ability to handle hundreds of files a day but later had to lay off employees because of a downturn in workload, declined to comment, citing a section of its contract forbidding it to do so.

ICF chose which subcontractors to hire, generally using open bidding processes, although at times -- as with HGI -- the state ordered ICF to sign emergency, no-bid contracts to increase program capacity. Some subcontractors, including Shaw and First American, were part of ICF's original bid package to the state when it sought the full Road Home contract.

Brann said that when ICF's Road Home contract ends in June 2009, the company expects to pay subcontractors about two-thirds of the money ICF gets from the state. The other third of Road Home revenue should stay with ICF, although Brann has said the company expects only 3 to 5 percent will be profit. The rest must pay for ICF's 850 employees, computer systems, office equipment, utilities and insurance, Brann said.

The company's most recent projection that the subcontracts will be worth $569 million indicates that ICF would max out its own $912 million contract.

ICF has said the $912 million is a cap and that it may not have to bill for that much, and Brann said Friday that some subcontractors are not expected to bill for as much as the original projections. State auditors and legislators say they are scouring the contract for ways to reduce costs.

K.C. King, a Road Home applicant who sits on the Louisiana Recovery Authority's housing task force and has 16 years' experience designing computer systems for Boeing, has often criticized ICF for not following best practices, particularly with disclosure to stakeholders. He said the subcontractor pay reports are a step in the right direction, but still do not tell the whole story.

"This ability to outsource tasks reflects well on ICF's overall ability to define and organize its work," King said. "What I don't see, of course, are the outsourcing rationales that show that it saves money."

Greer says that is precisely why he and his auditing team will be looking at subcontractor pay, to see if billing is justifiable and if it properly reflects the performance of each company.

Greer said he could not comment about the performance of any subcontractor until he has had more time to review their billing and work.

Some remain unpaid

On the flip side of the large subcontracts are nonprofits and educational institutions. The Loyola University Law Clinic was hired to provide mediation services for applicants having problems with their construction contractors. ACORN Housing Services got a $600,000 contract to help low-income homeowners work through the grant process. Neither has been paid, according to the March 10 report.

"Many of these relationships are relatively new," Brann said, adding that ICF is current in paying all invoices.

Loyola Law Clinic director Majeeda Snead declined to comment about the lack of payment.

ACORN's contract began six months ago and the nonprofit has worked with applicants and mortgage lenders to stop 86 foreclosures, helping modify the homeowners' loans so they can fix their homes and keep them, said Bruce Dorpalen, ACORN Housing Services' director of housing counseling in Philadelphia. He said ACORN has one outstanding invoice, but he attributes that to confusion about some of the contract terms.

"I'm OK with it because we had some contract issues to sort out," Dorpalen said. "I'm not ready to say it isn't working."

A third nonprofit, Easter Seals of Louisiana, was hired to help disabled hurricane victims get their grants. It collected a fraction of its $1.1 million contract before being dismissed in February.

Richard Phelps, a blind homeowner from Lafayette, said Easter Seals was helping him by reading documents to him and processing his application, but when the contract ended he was back to square one, dealing with call center employees who did not understand his limitations and often asked him to do things he had already done.

"Had they not broken that chain, I'm sure I would have gotten my issues resolved about the estimate on the roof repair. Easter Seals is very well known and highly regarded when it comes to disability issues, and I don't understand why they'd cut off the contract," he said.

Dan Underwood, chief executive officer of Easter Seals, said ICF gave no explanation for terminating the contract. But he said the work was marred from the beginning by the changing nature of the program and a lack of clarity from ICF about what services it wanted.

"They kept making everything a moving target," Underwood said. "These were very difficult people to contract with and difficult people to get money from for work performed and on a timely basis. It was common that they would short us on the bill, and the decisions would be arbitrary because one month a service was approved and next month it was denied."

Brann said Easter Seals has been paid in full for its work. ICF personnel and another subcontractor, EAD & Associates of Brooklyn, N.Y., are handling special needs services, she said.

Nearly 40,000 Katrina families still in mobile homes

ORLANDO, Florida (Reuters) - Almost three years after Hurricane Katrina, nearly 40,000 families still are living in vulnerable mobile homes and trailers across the U.S. Gulf Coast with another hurricane season just two months away, the top U.S. disaster official said on Wednesday.

The number is down from about 100,000 families, or some 300,000 people, in April 2006. At one point following the devastating 2005 hurricane season, the U.S. Federal Emergency Management Agency was housing 143,000 families in mobile homes and trailers.

FEMA Administrator David Paulison said the agency, which was heavily criticized for its hapless response when Katrina swamped New Orleans, is moving about 800 families a week into hotels, motels or apartments.

The families are either living at group sites or in trailers in the driveways of their homes as they rebuild.

The six-month Atlantic hurricane season begins on June 1. Forecasters are expecting above-average storm activity.

"As far as rebuilding, I did expect it to take this long," Paulison told a small group of reporters at the National Hurricane Conference in Orlando. "But as far as housing people, I did not foresee that they would be there almost three years later."

Katrina killed 1,500 people and caused $80 billion in damage when it swept ashore in late August 2005 near New Orleans, shattering the levees protecting the low-lying city and swamping entire neighborhoods.

The three worst storms of 2005 -- Katrina, Rita and Wilma -- together caused about $110 billion in damages. The record-shattering season produced 28 tropical storms.

The presence of so many people in the flimsy temporary housing complicates preparations for the hurricane season because those families must be evacuated in the event of a threatening storm.

Paulison said the agency was on target to move everyone from the group sites by June 1 but was having "a lot of trouble" getting some of those displaced by Katrina to move again, even from cramped mobile homes that are often reduced to rubble in big storms.

"People simply don't want to move," he said. "It hasn't been as easy a task to get people out as we thought it might be."

Filling holes dug to build levees could cost $2.5 billion

It could cost as much as $2.5 billion to refill all the clay pits that might be dug during construction of levee improvements in southeast Louisiana, according to recent estimates by the Army Corps of Engineers.

Not only would backfilling add a huge expense, some of which would likely be billed to the state and local levee districts, it also could double the number of trucks using regional roadways and local streets to travel between the pits and construction sites, corps representatives said.

If it takes 50,000 dump truck trips, for example, to haul levee-building clay away from one fully excavated 40-acre pit, it would take twice that many round trips total to haul sand or some other material back in to refill the cavity.

Then there's the issue of where to get the material to refill the pits, once they are excavated for the levee-building clay needed to construct a more robust hurricane flood defense system by 2011.

"Some of the (backfill) could come from the river ... but it could result in more pits being dug in the region," said Col. Al Lee, corps' commander in New Orleans.

"Policies are typically set up for normal circumstances," he said. "The situation here is anything but normal. The enormity of this situation is such that we're hoping they'll revisit the policy to see if there is any flexibility for us to respond to this issue," he said, referring to national corps officials.

The effects of backfilling versus leaving behind 20-foot craters are being spelled out in an issue paper Lee's staff is drafting and will soon send to corps headquarters for review.

The document also will discuss the extra cost of backfilling, which could range from a $500 million to $2.5 billion.

"There are a lot of potential problems with trying to backfill ... including the fact that the president's proposed fiscal year '09 budget includes no money to backfill," said corps section chief Brett Herr.

Maj. Gen. Don Riley, the corps' deputy chief of engineers and deputy commanding general, said Wednesday that the issue is getting serious attention.

"We are clearly considering it, but we're looking at more than just the economics of it," Riley said. "We're looking at the ecology of it, the environmental impacts, where all this would come from," referring to the backfill.

The issue of backfilling the so-called "borrow" pits surfaced last year as residents and local governments learned that in keeping with past practice, the corps did not plan to refill the pits.

But the sheer volume of material needed for post-Katrina construction -- estimated to be enough clay to fill more than 20 Superdomes -- means digging an unprecedented number of borrow pits in some of the communities hit hardest by the 2005 hurricane.

If left open, critics say the pits could hold standing water, potentially breed mosquitoes and become liabilities for landowners.

Local governments in at least three jurisdictions, including Jefferson and St. Bernard parishes, have either already passed or are considering ordinances that would require the pits to be refilled once all useable clay is removed.

Although the corps is searching for ways to import as much clay as possible from outside the region, officials said the demand is so great that several regional pits also will be needed.

Ongoing environmental assessments indicate the noise, vibration and dust that will be generated by digging and hauling clay will have a negative impact on immediate neighbors and, to a lesser degree, those living along the routes trucks will travel between pits and construction sites.

Backfilling could easily double truck traffic to and from those pits that can be filled only with hauled materials.

For pits near the Mississippi River, Herr said it could be possible to use hydraulically pumped sand at a cost estimated at $5 to $10 a cubic yard.

But for those farther out, from 10 to 20 miles away from the river, he said trucks would have to haul in fill at a cost of $15 to $25 a cubic yard.

Sheila Grissett can be reached at sgrissett@timespicayune.com or (504) 717-7700.

FEMA allows report deadline to pass

WASHINGTON -- FEMA on Tuesday missed a second deadline for producing its plan, in the works since the 2005 hurricanes, for housing displaced victims of the next major American disaster.

The congressionally mandated report was supposed to be finished last June. Criticized for the delay, a top FEMA official promised at a hearing last month that it would be ready by April 1. It is now unclear when it will be done.

The overdue housing report is the latest in a string of busted deadlines that had been imposed by Congress in landmark disaster legislation passed in 2006. The law was designed to remake the nation's disaster response and prevent a repeat of the mistakes exposed by Hurricane Katrina.

This has ramifications much greater than south Louisiana or Mississippi or the Gulf Coast," Sen. Mary Landrieu, D-La., said. "This dragging the feet, incompetence and lack of focus has serious consequences for future disasters where people think they are safe and are not."

'New FEMA'

FEMA officials acknowledge they have fallen behind in complying with some congressional mandates since Katrina -- more than 250 by their estimate -- that sought to rebuild the agency. They estimate 70 percent of the tasks have been completed and 15 percent await regulatory approval.

But they also say that focusing on missed report deadlines obscures real progress the agency has made in improving on-the-ground response capabilities since its much-maligned performance in Katrina.

Drawing on White House, congressional and other governmental reviews, "New FEMA," as they call it, is better prepared to respond to a disaster than at any time in the agency's 29-year history, they say.

"There is a tremendous amount of stuff in place," said Marko Bourne, FEMA's director of policy and program analysis. "By the time we hit summer, the only thing that should be outstanding are the things that need regulatory action."

Frustration mounts

Still, the slow pace has irritated lawmakers, particularly those along the Gulf Coast.

Last April, Rep. Bennie Thompson, D-Miss., chairman of the House Homeland Security Committee, complained to Homeland Security Secretary Michael Chertoff about the department's "failure to meet numerous reporting deadlines" contained in the Post-Katrina Emergency Management Reform Act, which President Bush signed Oct. 4, 2006.

He listed a dozen overdue reports in a letter to Chertoff. At the time, Thompson said the committee had sent "numerous letters" to the Homeland Security Department, which oversees FEMA, but "has yet to get an adequate response."

Chertoff sympathized, saying, "I understand your frustration." He assured Thompson that all of the late reports were "in varying stages of internal review," but seemed to chafe at the number of the congressional assignments -- 393 required by the Department of Homeland Security in 2007.

"The very high volume of congressional reports all must be approved by the Department's appropriate leadership team and must all receive further administration coordination," Chertoff wrote.

FEMA's Bourne said the agency has picked up the pace of complying with congressional mandates since it has hired new people. FEMA had about 1,800 employees in 2006. The workforce is now more than 3,100 and headed toward 4,300.

"As we gain capability, we are getting more of the harder things accomplished," Bourne said.

Landrieu, who is chairwoman of a disaster subcommittee and a member of the Appropriations Committee, said that if the Homeland Security Department or FEMA needs additional resources to comply with congressional mandates, it should ask.

"We would be happy to give it," she said.

'Few simple answers'

Few overdue plans are seen as critical as housing. The federal and state governments were overwhelmed when Hurricanes Katrina and Rita caused major or severe damage to 204,500 homes in Louisiana. Some storm victims were housed in apartments or hotels. Others took up residence in FEMA-provided travel trailers.

Deadlines for hotel and apartment stays were repeatedly extended to contend with the large number of displaced residents. Some trailer residents began complaining about respiratory problems and unusually high levels of formaldehyde, a possible carcinogen, were detected.

At a hearing March 4 before Landrieu's disaster subcommittee, FEMA's acting deputy administrator, Harvey Johnson, said the delay in developing a housing strategy for future disasters was caused by disagreement within the administration about what to do about the formaldehyde in trailers.

There are few simple answers," Johnson said at the hearing and promised the housing strategy by April 1.

As of Tuesday, FEMA has also failed to report on a congressionally mandated "surge capacity force" of disaster specialists who would be dispatched to the scene of a calamity quickly to assess the damage and map out the initial needs on the ground.

Also past due is a report on FEMA's strategy for helping communities recover after a disaster. The damage caused by Katrina and Rita was so widespread that the region is still struggling to regain a normal semblance of life.

FEMA's Bourne called the "National Recovery Strategy" a "big animal" that must plan for incidents large and small. He said the agency has been working on it, but that the recovery plan can't be completed before the unfinished housing strategy is in place.

"We needed housing strategy done," he said. "We couldn't get cart before the horse."

Big Plans Sputter in New Orleans

NEW ORLEANS — In March 2007, city officials finally unveiled their plan to redevelop New Orleans and begin to move out of the post-Hurricane Katrina morass. It was billed as the plan to end all plans, with Paris-like streetscape renderings and promises of parks, playgrounds and “cranes on the skyline” within months.

But a year after a celebratory City Hall kickoff, there have been no cranes and no Parisian boulevards. A modest paved walking path behind a derelict old market building is held up as a marquee accomplishment of the yet-to-be-realized plan.

There has been nothing to signal a transformation in the sea of blight and abandonment that still defines much of the city. Weary and bewildered residents, forced to bring back the hard-hit city on their own, have searched the plan’s 17 “target recovery zones” for any sign that the city’s promises should not be consigned to the municipal filing cabinet, along with their predecessors. On their one-year anniversary, the designated “zones” have hardly budged.

“To my knowledge, I don’t think they’ve done anything to any of them,” said Cynthia Nolan, standing near a still-padlocked, derelict library in the once-flooded Broadmoor section, which is in the plan.

“I haven’t seen anything they’ve done to even initiate anything,” said Ms. Nolan, a manager in a state motor vehicles office who has painstakingly raised her house here nearly four feet. “It’s too long. A year later, and they still haven’t initiated anything they decided to do?”

The library still bears the cross-hatch markings made by emergency teams in the days immediately after Hurricane Katrina, to indicate whether any bodies were inside (there were none).

The city official in charge of the recovery effort, Edward J. Blakely, said the public’s frustration was understandable, but he suggested that bureaucratic hurdles had made moving faster impossible. Mr. Blakely said crucial federal money had only recently become available, the process of designing reconstruction projects within the 17 zones was time-consuming, and ethics constraints on free spending were acute, given a local history of corruption.

“It took us 11 years to do downtown Oakland,” said Mr. Blakely, an academic from California who specializes in helping cities recover from disasters. “This is a process of urban redevelopment. You cannot do this overnight, no city, anyplace in the world.”

Mr. Blakely has been given broad authority — a staff of more than 200 and jurisdiction over eight agencies — in a municipal hierarchy where the mayor, C. Ray Nagin, has adopted a hands-off role. Criticized last year for frequent trips to Australia, where he holds a university post, Mr. Blakely said he had not been there for some months.

The growing frustration points up what has been a recurring theme in New Orleans’s sketchy, on-again, off-again recovery from Hurricane Katrina: grandiose official promises, apparently made to lift the public’s morale, that soon prove unrealistic.

“They come up with these plans that look great and sound great,” said Sheila White, a Mid-City resident. “They give people hope. Then, they fall into the background. Promises are made, and they are not kept.”

Donna Brown, president of a neighborhood group in the Gentilly section, said she had seen no movement from the Nagin administration.

“I was told there would be groundbreaking Sept. 1, but I haven’t seen anything,” Ms. Brown said. “I’m not sure what’s going on. My neighbors are quite frustrated. I’m sure we’re all pretty much aggravated and frustrated about not seeing results.”

Many of the hardest-hit neighborhoods remain stuck where they have been for months, with a few houses on a block occupied and the rest in varying stages of abandonment or repair. In Broadmoor, one block might appear carefully restored by residents, while another will seem derelict. Vacant grassy lots newly pepper the city, ambiguous signs of progress: blighted houses recently sat on them, but construction has often not followed demolition.

The grim housing projects have started to come down, part of a federal replacement plan. But an acute shortage of low-cost housing spurred hundreds to wait hours in line for rental assistance vouchers in mid-March, the biggest crowd officials said they had ever seen. Financing for dozens of developments in New Orleans now appears uncertain, thanks to the national downturn.

Meanwhile, the repopulation of the city after the storm that emptied it has slowed notably. The Census Bureau’s latest estimate, 239,000, represents barely over half the former population — and well under what local officials and New Orleans demographers have been claiming for months. Unemployment is lower than the national average, at 4.1 percent, thanks largely to construction, but high-end jobs are few, more expensive homes sit unsold for months, and the biggest economic development project in sight, a medical complex including a new Department of Veterans Affairs hospital, is years away. The French Quarter, hub of the vital tourism business, is crowded on weekends but empty during the week.

Mayor Nagin remains an elusive figure, occasionally surfacing to take strong issue with local news media portrayals of him, but otherwise delegating much responsibility for the recovery to Mr. Blakely. In one recent venture into the public light, Mr. Nagin complained bitterly when The Times-Picayune published a photograph of him playfully brandishing an M-4 rifle at the police chief during a news conference; the newspaper then published a front-page apology.

Civic leaders are relatively unguarded in their criticism. “The question is, is he relevant anymore?” asked Rob Couhig, a lawyer who ran against Mr. Nagin and then served as an unpaid adviser to him.

“What does he do that the city couldn’t do without him?” asked Mr. Couhig, who is the secretary of the New Orleans Redevelopment Authority, a city agency.

“Obviously, Mayor Nagin continues to serve as mayor of this city, making him the leader of the recovery efforts,” a spokesman responded by e-mail, adding: “Just two weeks ago he led a delegation to Washington, D.C., to lobby Congress regarding our most pressing recovery priorities.”

In the city’s renewal plan, most of the 17 redevelopment areas still bear tentative designations like “preliminary design” or “planning” on a municipal Web site that officials say is up to date. In some areas, no development projects are indicated at all, and on the few that indicate “construction,” actual results seem small-scale — new paving on a basketball court and a new corrugated metal roof over it, in an otherwise forlorn playground, next to an empty, boarded-up school, in a neighborhood, Hoffman Triangle, full of abandoned houses and teenagers hanging out at midday. Another project under “construction” nearby involves replacing “damaged ceiling tiles” at a police station.

Mr. Blakely conceded that progress so far was “still light stuff. I think people were expecting they’d wake up one morning and it would be nirvana. But little things are happening, cleanups, fixups, and so on.” On a driving tour, he pointed to new grass in the median of St. Claude Avenue, and street improvements. Buildings on either side, though, were dilapidated or appeared unused.

Three weeks ago Mr. Blakely announced more projects, including playgrounds, ball fields and swimming pools, as part of the recovery plan.

There have been some uniquely New Orleans hang-ups as well, said the recovery director; “lot of tensions in the staff,” revolving around race. “Black people have a hard time taking instruction from white people,” said Mr. Blakely, who is black. There is resentment “if a white person asks them to do something. It’s really bad. I’ve never encountered anything like this.”

His staff is under pressure from residents — “the people are on them every day, about when are things going to be done” — and the tension was evident in glum faces last week at a staff meeting presided over by Mr. Blakely in a downtown building.

In the neighborhoods, the verdict is still out on Mr. Blakely and his plan.

Leonard Montegut, asked for his assessment of the recovery director, said: “Right now, I can’t think of anything. I think time will tell.”

Mr. Montegut was mowing the grass in front of the apartment building he owns in the Hoffman Triangle, next to the playground that has been one of the few beneficiaries so far.

Stacy Head, a city councilwoman, said: “I’m trying to remain hopeful. I’m ready for some action. Their approaches are smart. But we’re still waiting.”