Tuesday, September 13, 2005

Katrina: No bid purchases

H.R. 3673, or the 'Further Emergency Supplemental Appropriations, Hurricane Katrina, 2005', singed into law has a provision that has not gotten much attention:


GENERAL PROVISION

SEC. 101. For procurements of property or services determined by the head of an executive agency to be used in support of Hurricane Katrina rescue and relief operations--

(1) the emergency procurement authority in subsection 32A(c) of the Office of Federal Procurement Policy Act (41 U.S.C. 428a(c)) may be used; and

(2) the amount specified in subsections (c), (d), and (f) of section 32 of the Office of Federal Procurement Policy Act (41 U.S.C. 428) shall be $250,000.
Looking up 41 U.S.C. 428 [ed. would be nice if the Congress learned how to hyperlink their documents with referenced law at some point in the future] one finds the following for subsections (c), (d) and (f):

ยง 428. Procedures applicable to purchases below micro-purchase threshold

...

(c) Purchases without competitive quotations A purchase not greater than $2,500 may be made without obtaining competitive quotations if an employee of an executive agency or a member of the Armed Forces of the United States authorized to do so determines that the price for the purchase is reasonable.

(d) Equitable distribution Purchases not greater than $2,500 shall be distributed equitably among qualified suppliers. ...

(f) Micro-purchase threshold defined For purposes of this section, the micro-purchase threshold is the amount of $2,500.

So H.R. 3673 raises the limits for non competitve, equitable distribution and micro purchaes to $250,000 from $2,500; an increase of 100 times!

The Miami Herald's, Turning a disaster into a boondoggle, editorializes on the pitfalls of this policy change:

The urge to loosen the rules so that recovery can quickly get underway is more than a justifiable emotional response to help victims; it is a business imperative. Companies capable of handling the difficult jobs involved in the recovery -- from providing emergency food and housing to rebuilding bridges, roads and infrastructure -- should be well compensated. But some of the procedures put into place invite waste and fraud, and turn the idea of fair compensation on its head.

Congress and the White House thus far have approved $62 billion for aid to Katrina victims and spending is moving along at a clip of $2 billion a day. The final price-tag easily could exceed $100 million [ed: they probably meant billion].

In the past, increases in the spending limit on government-issued credit cards has resulted in misuse and unwarranted expenditures. In 2000, for example, auditors found that the cards were used in $660,000 of questionable purchases, including for personal goods ranging from pizza to jewelry. The rules for contractors are generous to a fault. Contracts already awarded for housing and other big jobs reimburse companies for all expenses and guarantee a certain profit regardless of the expenditures. In other words, there are no incentives to cut costs or save money.

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