A resident just manages to drive under downed utility poles and wires in Charlotte Amalie, St. Thomas, USVI, on Sept. 15, 2017, after Hurricane Irma struck. (FEMA/K.C. Wilsey)

GAO on Disaster Contracting: Agencies Failing to Give Local Companies Preference

The 2017 disaster season was unprecedented, with 15% of the U.S. population affected by three back-to-back hurricanes and catastrophic wildfires.

The law requires, where practical, that federal agencies give preference to local businesses in disaster areas for the contracts used to clean up and rebuild. The idea is to jumpstart the local economy. However, an April 24 report from the Government Accountability Office (GAO) reveals officials didn’t always know how they should give local businesses preference.

Federal contracts play a key role in timely response and recovery efforts following disasters. While federal agencies, such as The U.S. Army Corps of Engineers (USACE) and the Federal Emergency Management Agency (FEMA), may have advance contracts in place for obtaining goods and services following disasters, agencies may also award post-disaster contracts.

In its investigation, GAO analyzed data from the Federal Procurement Data System-Next Generation; selected a non-generalizable sample of 23 post-disaster contracts based on factors such as if the contract was set aside for award to a local contractor; reviewed federal regulations and agency guidance; and interviewed agency officials.

GAO found that following hurricanes Harvey, Irma, and Maria and the 2017 California wildfires, federal agencies obligated at least $5 billion in post-disaster contracts to support disaster response and recovery efforts. USACE and FEMA comprised over three-quarters of reported post-disaster contract obligations as of June 30, 2018.

However, the full extent of post-disaster contracting related to the 2017 disasters is unknown due to the Department of Homeland Security’s (DHS) inconsistent implementation of the criteria for closing a national interest action (NIA) code. This code allows agencies to track data on contract actions related to national emergencies, providing government-wide insight into response and recovery efforts. DHS closed the codes for Harvey and Irma on June 30, 2018, less than a year after those hurricanes hit. In contrast, the codes for prior hurricanes were open for at least five years, with Katrina remaining open for 13 years.

Based on a review of 23 contract files from FEMA, USACE, the Defense Logistics Agency, and the U.S. Coast Guard, GAO identified challenges in the planning of selected contracts. For example, GAO found USACE officials were not consistently aware of the regulation that defines “local area.” GAO also found that contracting officers at FEMA, USACE, and the Coast Guard did not consistently write justifications for awards to non-local vendors outside the disaster area, as required. FEMA developed guidance to address this, but the Coast Guard and USACE have not issued guidance or tools to address this requirement.

GAO says that without addressing planning challenges, agencies may miss opportunities to award contracts to local businesses in the disaster area to the extent feasible and practicable, which could help jump-start the local economy.

It therefore makes 10 recommendations:

  1. The Administrator of the General Services Administration (GSA), in coordination with the Secretaries of Defense and Homeland Security, should jointly revisit and assess the extent to which the criteria in the 2018 NIA code Memorandum of Agreement, including criteria for closing NIA codes, meet long-term visibility needs for high visibility events and account for the needs of users, such as FEMA, other agencies, and the Congress. At a minimum, the agreement should include criteria that take into account the roles of the federal agencies involved in response and recovery and provide a process that ensures consistent consideration and implementation of the criteria.
  2. Until the NIA code Memorandum of Agreement between the GSA and the Departments of Defense and Homeland Security is revised, the Secretary of Homeland Security should, in coordination with the Department of Defense and the General Services Administration, keep the existing NIA code for Hurricane Maria open, reopen the other NIA codes established for 2017 and 2018 hurricanes (Hurricanes Harvey, Irma, Florence, and Michael), and request that agencies retroactively enter NIA codes for contract actions for Hurricanes Harvey and Irma made after June 30, 2018, for Hurricane Florence made after March 15, 2019, and for Hurricane Michael made after April 12, 2019 into the Federal Procurement Data System – Next Generation to adequately capture contract obligations, to the extent practicable.
  3. The Secretary of the Army should direct the Commanding General of the U.S. Army Corps of Engineers to provide guidance or related training to ensure contracting officers are aware of the regulatory definition of “local area”.
  4. The Administrator of the Office of Federal Procurement Policy should provide additional clarification on how contracting officers should determine whether offerors reside or primarily do business in a disaster area for the purposes of a local area set-aside contract.
  5. The Commandant of the Coast Guard should provide guidance and tools for contracting officials to use to ensure requirements concerning contracting with local vendors, including justification requirements for the use of non-local vendors, are consistently met.
  6. The Secretary of the Army should direct the Commanding General of the U.S. Army Corps of Engineers to provide guidance and tools for contracting officials to use to ensure requirements concerning contracting with local vendors, including justification requirements for the use of nonlocal vendors, are consistently met.
  7. The Secretary of the Army should direct the Commanding General of the U.S. Army Corps of Engineers to establish a formal process to solicit input from officials directly involved in the agency’s response and recovery following a disaster and to share that input with the Emergency Support Function Leadership Group.
  8. The Commandant of the Coast Guard should establish a formal process to solicit input from officials directly involved in the agency’s response and recovery following a disaster and to share that input with the Emergency Support Function Leadership Group.
  9. The FEMA Administrator should take the lead to work together with the Coast Guard and the U.S. Army Corps of Engineers to revise the mission assignment policy and related guidance to better incorporate consideration of contracting needs, such as demobilization, and to ensure clear communication of coordination responsibilities related to contracting.
  10. The FEMA Administrator should assess its workforce needs—including staffing levels, mission needs, and skill gaps—for contracting staff, to include regional offices and DART; and develop a plan, including timelines, to address any gaps.

The agencies all concurred with nine of the recommendations. DHS did not concur with the second recommendation regarding NIA codes. In its response, with regards to extending existing NIA codes and reinstating expired NIA codes, DHS stated that it is bound by the memorandum of agreement with GSA and DOD, unless or until all three signatory agencies agree to revise or suspend the agreement. GAO responded that it recognizes that all three agencies are bound by the agreement, and reminded DHS that it recommended that GSA, DOD, and DHS jointly revisit the agreement. GSA and DOD have concurred with this recommendation.

GAO also noted that the memorandum of agreement states that extending expiring or already expired NIA code end date is appropriate, in part, when two or more agencies do not have a reasonable alternative method of identifying and internally tracking those emergency acquisitions. The April 24 report details how once the NIA code is closed, there is no publicly available, government-wide system to track contract obligations for specific events. In addition, the report explains how agencies obligated more than $250 million on contracts for Hurricanes Harvey and Irma during the three months after the NIA codes for these two hurricanes were closed. Given this, GAO continues to believe DHS should consider reopening the codes for Hurricanes Harvey and Irma, in coordination with DOD and GSA.

Read the full report at GAO

Kylie Bielby has 20 years' experience in reporting and editing a wide range of security topics, covering geopolitical and policy analysis to international and country-specific trends and events. She is an editor and contributor for Jane's by IHS Markit, a columnist for security and counter-terror publications, and a former managing editor for Homeland Security Today.

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