HURRICANE KATRINA 
Bechtel, Fluor Will Help
Erect Emergency Facilities;
Bush Suspends Wage Rules
September 9, 2005
By YOCHI J. DREAZEN
Staff Reporter of THE WALL STREET JOURNAL
September 9, 2005; Page A10

WASHINGTON -- Accelerating efforts to rebuild the storm-ravaged Gulf of Mexico region, the Bush administration hired five private contractors -- including some active in rebuilding Iraq -- and took the controversial step of suspending Depression-era wage floors throughout the area.

The Federal Emergency Management Agency announced yesterday that it was awarding contracts to Bechtel National Inc. of San Francisco and Fluor Corp. of Aliso Veijo, Calif., both of which are involved in Iraq. The other companies awarded FEMA work are Shaw Group of Baton Rouge, La., Denver-based CH2M Hill, which is providing housing in Alabama, and Dewberry Technologies of Fairfax, Va., which is providing planning and reporting tools to help guide the efforts.

Later in the day, the White House said it was suspending in the disaster area so-called Davis-Bacon rules requiring prevailing wages be paid to workers on federal contracts. (http://www.whitehouse.gov/news/releases/2005/09/20050908-5.html) Republicans praised the executive order temporarily waiving the rules, which they said would fuel job growth in the hurricane region, but Democrats and their organized-labor allies accused the White House of exploiting the tragedy to accomplish a conservative goal.

The five contracts awarded yesterday are the first in the wake of Hurricane Katrina, in what is expected to be the largest and most lucrative government-funded rebuilding effort ever launched in the U.S.

Halliburton Corp.'s Kellogg, Brown & Root unit is already doing repair work at three Navy facilities in Mississippi as part of an existing contract.

Shaw Group and Kellogg, Brown & Root are clients of former FEMA director Joe Allbaugh, who has a private consulting firm in disaster relief. He resigned from FEMA in March 2003. Shaw's deal to refurbish damaged buildings and provide emergency housing could be worth as much as $100 million, the company said.

The enormous amounts of federal money beginning to pour into hard-hit areas across the Southeastern U.S. are beginning to set off a gold rush reminiscent of corporate America's efforts to profit from the reconstruction of Iraq, and many companies winning Katrina-related contracts also have multibillion-dollar contracts there. White House and congressional officials are working to finalize a new $51.8 billion aid package that would push the total amount of federal money dedicated to relief efforts to more than $62 billion.

Patti Giglio, a spokeswoman for Mr. Allbaugh, said the former FEMA director helps companies like Shaw with strategic planning but doesn't lobby FEMA or other government agencies on their behalf. She said he is traveling the region to marshal private-sector resources to support hurricane victims, not to seek work for clients. "He's down there because he feels he can help," she said. "He doesn't lobby FEMA, and he's never called FEMA."

Shaw Group's Web site encouraged would-be employees to apply for work online. "Hurricane Recovery Projects -- Apply Here!" it said, adding, "Subcontractors and craftsmen, please click here to apply for available positions."

Executives at the companies that won FEMA contracts said they had begun working on new housing for many of the hundreds of thousands of Americans displaced by the hurricane.

Officials at Bechtel and Fluor said their contracts, like Shaw's, were valued at as much as $100 million. The other two companies couldn't be reached for comment, and a FEMA spokesman didn't return calls about the value of those deals.

Fluor spokesman Lee Tashjian said the contract calls for identifying and leasing large plots of land in Louisiana that could house settlements of temporary housing, transporting trailers and prefab homes to the sites, and connecting the homes to electricity, water and sewage systems. Fluor began transporting the first 20 homes of an initial consignment of 400 units from Baton Rouge to hard-hit Slidell, La., yesterday afternoon, he said.

The government also hired Fluor to handle operations for the new Housing Area Command that is charged with overseeing public- and private-sector emergency housing issues. The organization includes FEMA, the Department of Housing and Urban Development, the Army Corps of Engineers, the American Red Cross and the private contractors. Its primary goal is to quickly find temporary housing for Katrina refugees, but FEMA said the Housing Area Command will also develop plans for longer-term housing initiatives.

The White House wage order, meanwhile, added fuel to the partisan tensions already raging since the storm hit. At issue are prevailing-wage requirements put into law as part of the Davis-Bacon Act of 1931, one of organized labor's biggest legislative victories.

Republicans have long hated the bill, which they say impedes the free flow of labor and adds unnecessary expense to federal projects. Shortly before leaving office in 1992, President Bush's father issued an executive order exempting hurricane-damaged parts of Florida, Louisiana and Hawaii from the Davis-Bacon regulations, a move rescinded by President Clinton. President Bush's move yesterday marked the first time his administration has suspended the rules, and was hailed by many Republican lawmakers. In a statement, Rep. Marilyn Musgrave (R., Colo.) said it would save "vital time and money in reconstruction efforts."

Democrats and union leaders attacked the move, with AFL-CIO President John J. Sweeney saying it was "unbelievable and outrageous that the White House would lift the time-tested standard for ensuring quality work and decent living standards for taxpayer-financed reconstruction."

Write to Yochi J. Dreazen at yochi.dreazen@wsj.com1

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