Hearing Of The House Subcommittee On Economic Development, Public Buildings, And Emergency Management Of The House Committee On Transportation And Infrastructure - "Final Breakthrough On The Billion Dollar Katrina Infrastructure Logjam: How Is It Working?

We are pleased to welcome our witnesses to another in a series of hearings our
Subcommittee is holding to oversee and evaluate the efforts of the Federal Emergency
Management Agency (FEMA), as well as the affected state and local governments, to proceed
more rapidly with their work on the long four-year recovery from Hurricanes Katrina and Rita.
Today we will hear specifically about how the new arbitration program, mandated in the
American Recovery and Reinvestment Act (Recovery Act), as well as about other steps that the
new leadership at FEMA and the Department of Homeland Security are taking, is working to
improve the pace and quality of the recovery efforts in the Gulf Coast.
At a hearing early in this year, we were astonished to uncover almost $3.5 billion caught
in a stalemate between FEMA and the state of Louisiana, from which neither could extricate
itself. Based on today's testimony, as well as numerous meetings and discussions that Members
and staff have had with officials at all levels of government in the Gulf Coast, it appears that
progress may have begun since President Obama, Secretary Napolitano and Administrator
Fugate took office. However, it is exasperating to have to note that many of the improvements
now being implemented are not new ideas. Some that have been proposed by this Subcommittee
for two and a half years are just now coming on line. During the last administration, FEMA
resisted efforts to break the logjam, preferring its own traditional devices. Seeing little progress
two years ago, this Committee reported H.R. 3247, which the House passed in October 2007,
encouraging the use of third parties to review and expedite public assistance appeals, as well as
simplified procedures under which small projects would be permitted to proceed on estimates for
projects up to $100,000. We passed this bill, which also raised the Federal contribution for
certain projects from 75% to 90%, not once, but twice, as well as a similar bill in September
2008. It is unfortunate that the Senate was never able to pass this legislation.
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However, even if the H.R. 3247 procedures permitting third-party review had been
enacted, FEMA appeared unwilling to choose an effective third-party process. The past FEMA
leadership never faced the structural impediments that obstructed agreements for the
unprecedented Gulf Coast disasters. Given the huge funding amounts at stake, each side has
built in impulses -- FEMA to resist approving more than it theoretically should and therefore to
parse the analysis to require state responsibility, and the state of Louisiana to insist on more
funds and urge federal responsibility in light of the state's devastation. Neither side has had
much incentive or leadership to negotiate with any efficiency or goals except for its own caged
views. Considering the unprecedented challenge of enormous amounts of money and
complexity, it should have been clear that without deadlines, the state and FEMA would continue
to engage in negotiations for as long as they wanted. Now, all involved have exhausted the
available alternatives and are left with a record of unnecessarily delayed recovery. Louisiana
residents are suffering through the greatest economic crisis most have ever experienced, while
billions of dollars have been left on the proverbial table for years, waiting to be spent on
construction of the new Charity Hospital and other vital infrastructure. The accumulated
hardship on Louisiana residents demands immediate action. Only mandated third-party
intervention or negotiations on a timeline are left as acceptable.
As a result of the new arbitration program authorized by Congress in the Recovery Act,
FEMA has entered into an agreement with the Civilian Board of Contract Appeals (CBCA), a
part of the General Services Administration, which also comes under this subcommittee's
jurisdiction. The CBCA's expertise in resolving disputes in Federal construction contracts should
prove invaluable if fully used, with determined leadership, without delay.
It is unfortunate that new legislative language has been necessary to get action,
particularly since it has been clear to the subcommittee that FEMA had sufficient existing
authority to implement this or similar programs using third-party dispute resolution, even before
this subcommittee put FEMA-specific dispute resolution into law during the last Congress. Even
today, while the arbitration provision in the Recovery Act is mandated for projects exceeding
$500,000, nothing prohibits FEMA from offering arbitration for smaller projects. Nor does
legislation prohibit FEMA from using other types of alternate dispute resolution. If efficient and
timely results are not produced, resistance to using time-limited alternative dispute resolution on
Gulf Coast recovery will not be tolerated. For example, should simplified procedures permitting
small projects from $55,000 to $100,000, or a possibly higher figure, be permitted to proceed
based on estimates? During this "Great Recession" has the usual state match for infrastructure
construction been affected by Congressional failure to pass the provision in HR 3247 that would
have raised the federal match from 75% to 90%?
Again, we thank our FEMA representatives, our witnesses from the Civilian Board of
Contract Appeals and witnesses from Louisiana, for preparing testimony today to help the
subcommittee better understand how to ensure that the recovery efforts in the Gulf Coast
continue to improve.
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