Though Gov. John Bel Edwards’ administration has applauded the performance of the $1.6 billion Restore Louisiana program—a federally funded initiative to get victims of the August 2016 flood back into their homes, the state is withholding more than $1.3 million in payments to the firm administering the program, IEM, for issues related to the execution of its $308 million, three-year contract.
According to documents provided by the state Office of Community Development, which oversees the program, the problems center on IEM’s failure to meet several deliverables under the terms of its contract, as well as for errors found in the case files of more than 600 flood victims.
Given the size of the Restore Louisiana program and the scope of the hefty contract to administer it—IEM’s contract covers both program management and construction management services—the number of errors and associated penalties represent a tiny fraction of the total.
Still, it’s big money—public money—and bears watching because an increasing amount of federal dollars is going to disaster relief programs, as catastrophic weather events become more common. How OCD and its contractors handle programs like Restore Louisiana will determine the course of future relief efforts which, seemingly, are all but inevitable.
The problems related to IEM’s administration of the Restore Louisiana program were identified in an audit by an independent quality control firm, CohnReznick, and are spelled out in three letters the state sent to the firm in February 2018, August 2018 and April 2019.
According to the letters from 2018, problems started within a few months of the beginning of the program, when IEM failed to produce 2,000 environmental review reports per week, as its contract stipulated it would.
The firm also fell short of completing a contractually-required 4,500 damage assessments per month.
The April 2019 letter indicates problems continued with later phases of the program. According to that letter, IEM didn’t complete repairs to some homes within the required 120 days, and didn’t complete grant award closings to some recipients within the contractually required 14 days.
Additionally, the firm transferred hundreds of files to OCD for processing that contained errors, such as missing documentation, incorrect pricing information or incorrect damage assessment amounts.
OCD Executive Director Pat Forbes says both IEM and its subcontractors share responsibility for the problems that have been identified. But his office says it’s important to consider the overall size of the Restore Louisiana program and number of flood victims it has successfully served over the past 2.5 years.
Some 43,000 applications have been processed and grants totaling $556 million have been awarded to more than 15,000 homeowners.
Given those numbers, is IEM’s performance typical? Is there a rule of thumb for how many errors, on a percentage basis, a program manager getting paid 20% of the total program can make before it’s considered unacceptable?
Forbes can’t say.
“There is no such thing as a typical contract, and this is the first time we have had a contract like this that includes both program management and construction,” he says. “Just as every disaster is unique so is every contract.”
Forbes also declines to say whether OCD is pleased with IEM’s performance. But he says the state is “focused on getting homeowners back into their homes, and while we strive every day to make continued progress, we know that it will never be fast enough.”
IEM declines to comment on the issue, citing a clause in its contract that precludes it from discussing its deal with the state. But the firm is challenging the penalty findings. OCD could not make documents related to IEM’s challenge immediately available.
Though the IEM contract has attracted little attention apart from flood victims and those in the disaster recovery space, it was the source of considerable controversy two years ago, when it was first awarded. IEM’s initial selection from a crowded field of high-profile and well-connected firms was challenged in March 2017, and soon thereafter, was scrapped by OCD amidst a controversy over licensing requirements and cost concerns.
In a second round of procurement weeks later, IEM was selected again, an award later challenged unsuccessfully by AECOM for no less than a dozen reasons that included questions about IEM’s pricing structure.
Forbes continues to defend the selection of IEM, saying OCD followed “a standard RFP process to select the firm that demonstrated the best qualifications for delivering a high-quality program timely and efficiently.”
But OCD recently issued a RFP for a program manager to oversee the next phase of the Restore Louisiana program, which will continue beyond April 2020, when IEM’s contract expires. IEM didn’t bid on the new contract and cannot say why. Forbes also declines to say much about it, except that his office hopes to maintain as smooth a transition as possible.
Like the initial Restore Louisiana procurement process, the recent one has been mired in controversy and put out for bid a second time. The first award was scrapped in May, after state officials determined that a subcontractor of the firm initially selected had a conflict of interest.