Katrina Relief: Balancing Speed and Control Federal money is now flooding the Gulf Coast area devastated by Hurricane Katrina, as the Bush administration and Congress ponder moves to protect against fraud and abuse in the mammoth relief effort. When Congress passed emergency funding for the recovery, it allowed the use of government purchase cards in amounts up to $250,000, compared to the usual limit of $2,500. But the Office of Management and Budget moved quickly to limit the use of the credit cards for such large purchases. “There will be no blanket increase of cardholder authority,” said David Safavian, administrator of federal procurement policy, and Linda Combs, OMB controller, in a Sept. 13 memo to agencies. OMB ordered agency heads to limit the use of the higher threshold to those people “working directly on Hurricane Katrina-related acquisitions.” In addition, OMB said, “All open market transactions (those not placed under existing contracts) that exceed $50,000 must be pre-approved by a warranted contracting officer (other than the buyer or cardholder) or a senior manager at the GS-14 level or above.” Procurements below the micropurchase threshold are not reserved for small businesses. The OMB memo said: “Although there is no absolute requirement to award micropurchases to small businesses, agencies using this authority are expected to provide small businesses maximum practicable opportunity under the circumstances to participate in federal acquisitions as prime contractors and subcontractors. Where possible and consistent with efficient acquisition of needed supplies and services, local small businesses should be given priority.” The $250,000 limit may not last long. Senate Finance Committee Chairman Charles Grassley (R-IA) complained that “the outrageous increase” had “slipped through” Congress and said he will sponsor legislation to reduce the micropurchase ceiling to $50,000. Several Congress members are backing legislation to increase oversight of the recovery spending, either by appointing a special inspector general or giving new powers to current IGs. The Homeland Security Department’s inspector general has set up a new Office for Hurricane Katrina Oversight, with offices in Louisiana, Mississippi and Alabama. Congress has appropriated $62 billion for hurricane relief, with much more likely to come. But some critics say the lead agencies in the relief effort, the Federal Emergency Management Agency and the Army Corps of Engineers, are repeating the mistakes of the Iraq reconstruction by issuing contracts with little or no competitive bidding. The bulk of the early cleanup and reconstruction contracts have gone to large companies that are familiar to FEMA and the Corps: Kellogg, Brown and Root; Bechtel National; Shaw Group; CH2M Hill; and Fluor. Prime contractors are required by law to favor local subcontractors, according to a summary of emergency contracting provisions prepared by the consulting firm Acquisition Solutions Inc. (See www.acqsolinc.com/emergencycontracting/.) House Government Reform Committee Chairman Tom Davis (R-VA) has proposed legislation that would allow agencies to treat all purchases as commercial items during a national emergency or major disaster, bypassing some competition and cost accounting requirements. The bill, H.R. 3766, is cosponsored by Rep. Kenny Marchant (R-TX). The Project on Government Oversight, a watchdog group, protested that the proposal would allow big contractors to “loot the federal treasury.” President Bush has waived the Davis-Bacon Act for recovery-related contracts. The Act requires construction contractors to pay the “prevailing wage.” The Labor Department has waived the requirement that large contractors submit affirmative action plans and other reports under the Equal Employment Opportunity provisions normally used in federal contracts.