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Friday, October 21, 2005
Are Govt. Rebuilding Contracts Too High?
Spending in the wake of Hurricane Katrina has elicited a lot of yelling and screaming from all sides, with worries ranging from how much we are spending, to how we will offset that spending, to whether or not tax and budget cuts are necessary or wise in the wake of the disaster. A new round of legitimate worries has gained more momentum recently, specifically over which giant corporations are getting government contracts, why they are getting those contracts, what their ultimate development goals are, and whether or not they are receiving too much money for the services they are providing (and thus wasting taxpayer dollars).
Halliburton has been the focus of much of this attention for receiving tens of millions of dollars from the Republican administration to work on rebuilding the Gulf Coast. Now, many are questioning the deal struck between the government and Carnival Cruise Lines, which is housing displaced hurricane victims on three of their cruise ships. The company is receiving $236 million for this six-month contract, to cover the costs of using the ships, and also to compensate for lost revenue Carnival would have received if the ships were stocked with paying vacationers.
The disconnect here, however, is that Carnival Cruise Lines is possibly making significantly more money than they should be, and thus wasting disaster-relief funds which are badly needed in many areas. The cruise line earned $150 million in revenue over a 6 month period (the data came from 2002), which is significantly lower than the $236 million being allocated to the company. (A spokeswoman for Carnival noted that revenue was down because it was the year following the September 11 attacks, but did not provide data to back up this statement). On top of this, many of the cruise line's entertainment services and staff -- a big chunk of their expenditures, no doubt -- will not be needed or used by the company over the next six months, thus arguably bringing costs even lower than $150 million.
Rep. Henry Waxman (D-CA) is a key lawmaker investigating this issue, and he sent a letter to Dept. of Homeland Security Secretary Chertoff yesterday demanding more accountability and transparency in federal contracting. The letter asks DHS to provide the following information:
All documentation regarding calculations of lost revenue provided by Carnival Corporation to justify the cost of the contract;
All documentation regarding the calculations of expenses incurred under normal operations and under the charter contract that were provided by Carnival Corporation to justify the cost of the contract;
All documentation regarding the decision to reimburse Carnival for federal taxes owed while under the charter contract; and
Any documentation regarding the development of the provision calling for return of excessive profits by Carnival.
In a time when lawmakers are calling for harsh budget cuts to offset the costs of Katrina-related spending, it is imperative that funds are not wasted through excessive government handouts to these major corporations. Lawmakers, who are responsible for these contracts, should know what the cost estimates for certain contracts should be and not be duped into paying more than what is necessary.
Posted by Becky Lewis
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