Wednesday, May 18, 2011

Predictable: Jefferson County bans debris contractor

Watch the video below, as Channel 13’s John Paepke describes a very common scam used by some unscrupulous debris contractors to defraud taxpayers. Believe me—this is just one of many creative ways that some contractors have come up with to “shortload” their trucks and get paid for more material than they are actually transporting between the disaster area and the local landfill.

When Jefferson County decided to award an “emergency contract” to an out-of-state debris management firm, this blog raised the alarm. Since that decision, a number of municipalities within the county have elected to piggy-back onto Jefferson’s Contract with Ceres Environmental. The City of Birmingham initially awarded an emergency contractor to DRC, a company located in Mobile. However, some reports indicate that the city is reconsidering that contract in the wake of conflicting information on the cost sharing rules.

Ceres Environmental was one of three large debris management contractors hired to remove debris following the devastation of Hurricane Katrina in 2005. While none of the contractors hired to do the work in Louisiana, Mississippi and Alabama after that storm were perfect little angels, the company hired by Jefferson County was cited numerous times for, shall we say, very questionable activities during the recovery effort. The company also agreed to pay up to $1.5 million in back wages to workers it hired during their tour of duty in Bayou Country.

Granted, the company examined in Paepke’s story was a subcontractor of Ceres Environmental. But the prime contractor is responsible for the performance of all subcontractors, regardless of which “tier” they are in with their subcontract. For all we know, this company could have been a sub of a sub of Ceres.

That’s not likely, because the low-ball cost per cubic yard negotiated by Jefferson County and Ceres means that there’s very little room for profit below the first tier of Ceres’ subcontractors. That margin squeeze creates a much stronger incentive to cheat.  Hey, if you’re hauling 20 cubic yards of material and you can get paid for hauling 40, how many different ways could you come up with to game the system?

It is entirely possible that Ceres has learned the lessons of Katrina and won’t tolerate the kind of activities discussed in Paepke’s report last night. After all, the company mentioned in the story had its placards pulled and is no longer working in Jefferson County.

Paepke is expected to have another segment on tonight’s news, in which he covers the various tradeoffs associated with using a private contractor or the US Army Corps of Engineers for debris management after major disasters. It should be interesting, because as I mentioned in the post two weeks ago, I don’t think the local governments have any idea what kind of task they’re up against.

But you know what? If Jefferson County had a team of qualified debris management quality assurance personnel on the job, the truck would never have been loaded in the first place.

UPDATE: In response to emails and Twitter DM’s, here’s the deal with Jefferson County deciding to use a private contractor rather than following Tuscaloosa’s lead and letting the feds handle it.

FEMA has bookshelves of regulations promulgated under the Stafford Act. Many of those regulations describe how a non-federal entity is expected to monitor and verify that only debris eligible for federal assistance is removed from the disaster zone. Per my industry and professional contacts in the area, neither Jefferson County nor any the municipalities piggy-backing on JeffCo’s contract have trained Quality Assurance representatives monitoring the debris removal operations.

They’ve staged a few employees at the management and disposal areas, but they have no one monitoring the crews that are actually picking up and hauling the debris. A contractor goes out. He picks up some stuff. He travels to the landfill. He wants his load ticket.

NO ONE has verified that the contractor has stayed within the Jefferson County jurisdiction. That means the debris hauls being delivered to the management and disposal areas could have come from anywhere.  It could have come from the city of Birmingham. Or, maybe it came from Shelby County. St. Clair County.

FEMA will ask: “How do you know where it came from?”

And if the county or its municipalities can’t answer to the government’s satisfaction, they don’t get paid.

That is a recipe for a financial disaster after the natural disaster. This is a BIG DEAL, folks. Jefferson County already stands on the precipice of bankruptcy, and they are voluntarily cash-flow financing a multi-million dollar operation and hoping that they get reimbursed.

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