NEW ORLEANS — An engineering firm hired to oversee the reconstruction of city buildings and infrastructure damaged by Hurricane Katrina has been overcharging the city, including billing for theater tickets and a flight to Las Vegas, an internal investigation found.
The report by New Orleans Inspector General E.R. Quatrevaux said the flawed contract with MWH Americas Inc. has hurt the city's recovery, placing blame on both the company and city officials. The city's slow rebuilding process continues to anger residents, and the uneven recovery was a major issue in the campaign leading up to last month's mayoral election.
Quatrevaux advised scrapping the deal with the Broomfield, Colo.-based firm in the report, first made public Thursday by The Times-Picayune. The company's work previously had not garnered much criticism.
"The city has blindly paid MWH's expenses," the report said, including "a markup of approximately 23 percent" without knowing if that was appropriate.
The report also said city employees and elected officials may have violated ethics laws by accepting gifts or meals from MWH.
MWH was hired in December 2007 by Mayor Ray Nagin's administration to manage the massive rebuilding of city infrastructure after the 2005 storm flooded fire and police stations, parks, community centers and roads. As of February, MWH had been paid $29 million for its work and billed the city for $36 million, the report said.
The probe said the city was paying the firm too much considering the amount of progress made, and that the contract, and its escalating costs, "will have profound consequences for the recovery program."
Hours after Quatrevaux's criticism was made public, one neighborhood leader lamented the recovery.
"It's moving at a snail's pace," said Dennis Scott, the vice president of the Lakewood East Homeowners Association in eastern New Orleans.
"We have a temporary trailer as a library. We still have a police facility that is a temporary building, and a fire station that is still in a trailer. And there's definitely no hospital."
MWH said in a statement it had helped the city complete several challenging projects including a performing arts center. It also said about 600 projects are underway.
"We take our work and the work of our subcontractors very seriously," the company said.
It added that its fees, which are paid on top of rebuilding costs, would "not reduce money available to the city to build projects."
The inspector general's report did not specify an overbilling amount. But it noted that under the contract, MWH could reap 8 percent of the total design and construction costs. Because the city and MWH projected costs as high as $600 million, the contract allowed MWH to bill as much as $48 million.
But the inspector general said those numbers were "unrealistically high" because by late 2007 city officials were only expecting to receive about $315 million in rebuilding funds, from sources that included FEMA and bond sales. Eight percent of $315 million would be about $25 million, or about $11 million less than what MWH has billed the city.
Quatrevaux also said MWH has sought reimbursement for a number of questionable expenses, including $93,289 for telecommunications services; gifts for city employees such as flowers, theater tickers and Christmas presents; a flight from Salt Lake City to Las Vegas "with no apparent connection to New Orleans"; rental of a corporate apartment and MWH business cards and membership in professional organizations.
MWH said some expenses had been incorrectly billed and the city was not charged for other expenses, according to the report. The company reimbursed the city $3,646 for gift and meal expenses, the report said.
Quatrevaux's report also criticized the city's process of selecting MWH, saying it didn't give other firms a fair shot and gave the company excessively favorable contract terms.
City officials did not return messages seeking comment. Nagin, who is term-limited, leaves office in May.
Gary Clark, a professor of politics at Dillard University in New Orleans, said the MWH contract was new evidence of profiteering in the wake of Katrina.
"There is a whole area called disaster capitalism: There are entire groups that accrue wealth through natural disasters. It's taking place in Haiti, it's taking place in Chile, and it took place here," he said.