WASHINGTON – Senator John Kerry (D-MA) sent a letter to FEMA Director David Paulison, calling on Paulison to disclose the details of the FEMA contacts awarded to small businesses, as they rebuild the Gulf Coast in the wake of Hurricane Katrina. Kerry also inquired about whether those businesses have been paid in full, amidst allegations that FEMA has consistently failed to fairly compensate contractors for their work. (Text of Kerry letter below.)

“From its initial response to its efforts for long-term recovery, the Bush Administration has failed the victims of Katrina. Now we are hearing that Washington isn’t paying its bills on time to small business owners,” said Kerry, who serves as Ranking Member of the Senate Small Business Committee. “Gulf Coast businesses have rolled up their sleeves to help rebuild their home, as they themselves struggle get back on their feet. Many of those businesses depend on these contracts to keep their doors open - and from what I’m hearing, FEMA isn’t holding up its end of the bargain. We need ensure that FEMA keeps its word on these contracts, because it’s about time Washington started keeping its promises to those that are working to create a future for the Gulf Coast.”

Kerry asked Director Paulison to disclose the number of small business contracts issued by FEMA that were Katrina related; the number of contracts that have been completed and paid for; the average time between the completion of a contract and full payment by the Agency; and the number of completed contracts that went unpaid by the Agency.


Text of Kerry letter to Director Paulison:

The Honorable R. David Paulison Director/Under Secretary

Federal Emergency Management Administration

500 C Street, SW

Washington, DC 20472

Dear Director Paulison:

As you know, more than a year ago the Gulf Coast region was devastated by Hurricane Katrina and then Hurricane Rita. As the result of this national disaster, the nation has made a great commitment of time and resources to rebuild and restore the region to its unique place in our nation. Restoring the Gulf Coast’s business community – especially it’s small business community – is a critical component to bringing the region back to its former glory.

According to the Louisiana Economic Development office between 15,000 and 20,000 small businesses in Louisiana alone were initially affected by Hurricane Katrina. These business represented tens of thousands of employees and hundreds of millions of dollars in payroll. Many of these small businesses also represent the expertise and labor that is rebuilding the region. As a nation we must ensure that we do all we can to support their continued health and growth.

To ensure that the small businesses of the Gulf region survive and thrive, it is important that FEMA fulfill its responsibility to promptly compensate those small businesses that it has contracted with during the recovery. Unfortunately, I have heard from several small business representatives and owners that FEMA is unwilling or unable to pay contractors for completed work in a timely fashion. If this is not the case I would like further clarification so that I can evaluate the situation. Your answers to the following questions would be helpful to that end.

1) How many small businesses have contracted with FEMA for Katrina related goods or services? How many of those contracts are prime and how many are subcontracts?

2) How many of those contracts have in whole or part (such that payment is due) been successfully completed? What is the average time between contract completion and full payment? What is the average time of payment for non-small business contracts that have small business subcontractors?

3) How many successfully completed contracts were not paid within 3 months, 6 months, 9 months or longer?

Businesses in the Gulf Coast region are already struggling to survive. Doing business with the federal government should be a lifeline to those businesses not the final nail in their coffin. I would appreciate your response to the above questions no later than November 1, 2006. Thank you in advance for your cooperation on this important issue. If you have questions about this matter, please feel free to contact me.


John F. Kerry

Ranking Member