Report: Law limiting subcontracts could inhibit disaster response

Federal Emergency Management Agency officials should work with chief procurement regulators to avoid limits to subcontracting that could strain efforts to respond quickly to disasters such as Hurricane Katrina, according to a new report.

Richard Skinner, the Homeland Security Department's inspector general, wrote in a report released Aug. 4 that legislation passed by Congress in 2006 that restricts subcontracting by prime contractors could inhibit disaster responses and recovery work by FEMA or other DHS agencies.

Congress said DHS contractors could not send more than 65 percent of their work to subcontractors. The lawmakers wanted “to minimize the excessive use by contractors of subcontractors or tiers of subcontractors to perform the principal work of the contract,” according to the fiscal 2007 DHS Appropriations Act (H.R. 5441). The measure became law in October 2006.

However, Skinner wrote, subcontracting to small and local businesses is the prime contractors’ principal means of matching surges in demand during disasters.

Hurricane Katrina was the most destructive and costly natural disaster in U.S. history. It caused more than $81 billion in estimated property damage and resulted in more than 1,500 deaths. Three weeks later, Hurricane Rita also struck the Gulf Coast.

If the restriction had been in place when FEMA reacted to the hurricanes, it could have decreased the amount of dollars available to subcontractors and possibly could have hindered the ability of prime contractors to fulfill their disaster response work, Skinner wrote. He estimated the law would have halted approximately $300 million worth of subcontracts.

Skinner recommended that DHS and FEMA officials work with the Office of Federal Procurement Policy to create a less restrictive governmentwide standard. He also urged FEMA to talk to Defense Department officials about their subcontracting regulations.

The same year Congress handed DHS its restriction, Congress gave DOD more options to govern its subcontracting. Legislation allowed DOD officials to order their own appropriate restrictions, according to the fiscal 2007 National Defense Authorization Act (H.R. 5122). DOD proposed that prime contractors would report to the department if they plan to subcontract more than 70 percent of the work.

FEMA officials agreed with Skinner’s recommendations but saw a major obstacle.

“It must be recognized that [the restriction] is the law, and FEMA is bound to follow it,” Marko Bourne, director of policy and program analysis at the agency, wrote in response to Skinner’s report.