Cover Story — November/December 2005

Troubled Times — Mixed Messages

AGC Gulf contractors are not getting as much of the Katrina cleanup and rebuilding work as they'd like to have, or as much as they've been promised

By Mary Buckner Powers

A submerged equipment yard in New Orleans. Many construction companies face the issue that their equipment was damaged or destroyed by flood waters. Photo by FEMA/Jocelyn Augustino

In the aftermath of hurricane Katrina, which slammed into the Gulf Coast on Aug. 29, construction companies in New Orleans face myriad issues as they scramble to get back on their feet.

Their troubles range from replacing flooded equipment to locating their dispersed work force and finding housing for those who have returned to the area.

As contractors struggle to raise a work force, they must also battle competing employers. "Our job is to make sure Louisiana is not sucked dry by the poaching going on," says Courtney Fenet, president of R.E. Heidt Construction, Westlake, La., and president of the Louisiana Associated General Contractors.

Unprecedented wages are being offered to secure workers for the most menial of jobs. "Local fast food restaurants are offering $6,000 signing bonuses," says one local contractor trying to hold on to his work force.

Small Businesses Hurting

Smaller contractors face troubling short-term futures. Many have had pre-Katrina contracts cancelled, while those who still have work worry that owners will hold them to contracts bid before the hurricane-and before materials prices skyrocketed, says Derrell Cohoon, CEO of Louisiana AGC, based in Baton Rouge.

With the city badly ruined and the financial future and reconstruction plans of many owners dependent on insurance companies, small contractors hope to receive a windfall from the Federal Emergency Management Agency's bankroll. But Fenet says many wonder why prime contractors hired by the federal government tell them they are number 6,000 on a list of contractors signed up for work when there are only 3,500 licensed contractors in the state.

A flooded post office is typical of the damage to New Orleans buildings and infrastructure. photo by FEMA/Jocelyn Augustino

Both Louisiana Gov. Kathleen Blanco (D) and U.S. Rep. Bobby Jindal (R-La.) have taken up the local contractors' cause. On Oct. 6 Jindal introduced legislation into the U.S. House of Representatives that would give small business contractors a preferred status for federal reconstruction contracts. It would require that 30% of all federal contracts be awarded to local small businesses.

"A lot of money has been spent on the recovery and unfortunately too little has gone to local Louisiana companies," says Jindal's spokesman. "These companies are looking to get back on their feet. They need these contracts."

Blanco has deployed state resources to connect local businesses with FEMA's prime contractors and used her political muscle to force the issue at the federal level.

In an Oct. 14 letter, Blanco asked FEMA Acting Director David Paulson to refer to the Stafford Act in contracts released for public bid. The act, passed by Congress in 2000, requires that local firms be given contractual preference for debris removal, distribution of supplies, reconstruction and other disaster activities.

"It would be most effective if prime contractors were required to seek out and use local subcontractors wherever possible," Blanco says in her letter. They should be required to demonstrate that they have exhausted available local and in-state resources before using out-of-state subcontractors, Blanco adds.

She also wants federal agencies to use local firms as prime contractors because of their ties to local subcontractors. Blanco adds that the federal agencies should use federal and state procurement resources to help link primes to local subcontractors.

While Louisiana politicians are doing their best to help the situation, and local contractors are searching for solutions, "Ultimately it will take the AGC guys go-ing to D.C. and throwing a conniption," says Fenet.

Battered But Not Broken

The recovery of Mississippi is fundamentally different from that of Louisiana. A wall of water smashed Mississippi's coast, but it quickly receded, leaving the coast broken but inhabitable. Regional contractors must now juggle obligations to existing contracts, long-standing clients and their own personal and business needs.

A broken levee floods New Orleans' 9th Ward. Most of the area is expected to be a complete loss because of the prolonged flooding. Locally based electric utility Entergy Corp. does not know when it will begin to restore the power infrastructure. photo by FEMA/Jocelyn Augustino

Construction work in Mississippi also contrasts with the debacle of Louisiana, thanks to the forceful leadership of Gov. Haley Barbour (R), says Perry Nations, executive director of the Mississippi AGC, based in Pascagoula.

"My hat is off to our governor," Nations says. "He has been very firm about making sure Mississippi contractors get the work."

He says local contractors have all of the work they can handle. The Mississippi Dept. of Transportation has relied primarily on Mississippi contractors as the state tries to repair the tattered roads and bridges in coastal counties. The state awarded TL Wallace, Columbia, Miss., an emergency contract to repair damaged bridges on Interstates 10 and 110, and the company will likely be a frontrunner for the $300-million-plus contract to build two new U.S. Highway 90 bridges across Biloxi Bay and the Bay of St. Louis, Nations says.

Barbour took the initiative to create the Governor's Commission on Recovery, Rebuilding and Renewal. Its mission is to facilitate thoughtful planning for bettering cities and towns along the Gulf.

The Mississippi Renewal Forum, held Oct. 12-17 in Biloxi, brought hundreds of architects and planners together to decide how to rebuild the coast. The forum issued a report on potentially smart building and zoning codes, and on city plans for the 11 coastal cities, a spokesman says. The decision to execute any plans ultimately will be left to municipalities and communities.

While the approach to the rebuilding remains to be determined, the massive windfall to the local contracting community is certain. "I expect my contractors to be busy for years to come," says state Rep. Danny Guice (R), and the Gulf Coast manager for AGC.

The demand for contractors and subs is so high it's affecting the market throughout the state, says Don Roberts, vice president of Roy Anderson Corp., in Gulfport, Miss. "Most major contractors were already busy," he says. "We were actively seeking project managers and superintendents before the storm."

FEMA has hired a number of subcontractors throughout the state, which has impacted the availability of subs. "We've seen a smaller number of them bidding than we would typically see," Roberts says.

This CSX-owned railroad line was heavily damaged despite being more than a half-mile inland from Mississippi's coast. Planners want to remove the railroad and put a new scenic highway over the right of way. Ultimately, local officials will decide how to rebuild. photo by michael powers

FEMA's bureaucracy frustrates prime contractors in both Louisiana and Mississippi, but some have done their best to include local subcontractors. "Bechtel has been very cooperative," Nations says of the engineering giant that won a contract to provide emergency housing. Bechtel has contacted the state AGC and tried to use its contractors whenever possible, he adds.

"It has been a great relationship and has helped us award 60% of all of our subcontracts to Mississippi firms," says Howard Menaker, public affairs manager for Bechtel Infrastructure Corp., Washington, D.C.

In Louisiana, Fluor Corp., headquartered in Aliso Viejo, Calif., says 90% of its subcontractors are from the state. "Fluor does not bring in craft employees from other places," says Lee Tashjian, vice president for corporate communications.

But in Mississippi as in Louisiana, the massive debris removal effort has not been as locally focused. AshBritt Inc., Pompano Beach, Fla., which has a $500-million clean-up contract with the Army Corps of Engineers, has not used many of the local AGC contractors and has not tried to communicate with the AGC, say Nations and Cohoon. AshBritt officials declined to comment. Cities and counties that have opted against Corps of Engineers assistance with clean-up are the sole source for debris removal contracts awarded to local AGC members, Nations says.