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>From The Times-Picayune
Pickings slim for debris haulers
Layers of contractors siphon off earnings
Monday, February 27, 2006
By James Varney
and Gordon Russell%%par%%Staff writers
On a recent morning on Nursery Avenue in Metairie, a crew of 10 workers
from Iowa, freshly arrived from a stint picking up trash in Gulfport,
Miss., was cleaning up the last few morsels of what had been a small pile
Thanks to the logistical legwork of getting orders and stationing flagmen,
it took about an hour to sweep the street clean of a mess that didn't go
far toward the crew's goal of filling up three trucks that hold about 30
cubic yards apiece.
Leigh Bock, a Connecticut contractor who until recently was in the debris
business, asked the foreman how long it took his men to load the pile.
"Too long," the man said.
And how many trips would his crew make to the landfill that day?
"Not enough," the man said.
The episode illustrated in miniature what Bock says are the untenable
economics of the debris-removal business six months after Katrina. With
much of the large, easy-to-pick-up trash gone, crews like the group from
Iowa are being assigned to small piles that are time-consuming to pick up
but financially unrewarding because the crews are paid by the load.
Bock sketched out the realities: Ten men on the job, plus equipment worth
several hundred thousand dollars. At $6.50 per yard, the crew's daily haul
might be $1,200. The workers might bring in $1,800 if they were able to
make three trips, or less if they got a flat tire. Not much when the
salaries of 10 men and the costs of running three massive trucks are taken
Bock himself said he was fired several weeks ago after he refused to pay
his crews to rake yards and pick up small scraps.
"We're not down here to pick up cigarette butts," he said. "That
absolutely kills you. I brought half a million dollars of equipment down
here. I told them, 'If you want us to do that, you have to pay us by the
The irony, as Bock and other contractors describe it, is that there's
plenty of money being pumped into the debris-removal effort -- about $1.5
billion so far, according to the federal government, which is supervising
the effort and paying for most of it. But most of that cash ends up not in
the pockets of the crews on the street, but in the accounts of the three
prime contractors handling the debris mission in Louisiana and an army of
middlemen who serve no particular function, Bock and others say. Indeed,
the contracting layers have such a draining effect on relief funds that
top federal officials are searching for a way to eliminate them.
While plenty of eager workers have descended on the region, lured by
promises of big money, Bock said that once they get here and do the
arithmetic they're going home -- some of them with debts they can't afford
to pay. No matter that a big bonanza is promised by the primes once
housing demolition kicks in with receipt at long last of federal housing
money. The result, he said, is that much of the smaller debris that still
lines the streets of southeast Louisiana might wind up being the problem
of cash-strapped local governments and residents.
The issue of subcontractor pay remains a knotty one, possibly involving
malfeasance or worse. The Louisiana attorney general's office said it has
forwarded 10 to 15 investigative leads to the Federal Emergency Management
Agency, where they are under legal review.
"It is a problem," said Isabelle Wingerter, who heads the attorney
general's public protection division. "It might be time for us to revisit
this, and maybe we need to look at trying to pass some stronger
legislation against this in March."
Indeed, some litigation has surfaced. Jed Cain, an attorney with Herman,
Herman, Katz & Cotlar, has filed two lawsuits on behalf of laborers who
allege they were cheated by primes or subcontractors on debris removal
work in Louisiana. For its part, however, the Army Corps of Engineers said
internal probes uncovered nothing untoward in the payment plans and
schedules of the sprawling debris-removal effort.
"To have an operation as long and as huge as we have going here, it's not
atypical for a sub-sub-subcontractor to complain," said Jean Todd, the
corps' lead contracting officer in Louisiana. "Our prime contractors are
doing yeoman's work making sure no one is getting stiffed."
Todd and several other corps officials said the matter is complicated by
the sometimes ad-hoc nature of the arrangements far down the hauling
chain. In some cases the invoices are never submitted by subcontractors,
the corps said, while in others no formal contract is signed, making it
more difficult for the sub to substantiate his claim.
Those are thin shields for investigators to hide behind, said Wingerter,
who characterized the no-written-contract defense as "a bit of a cop-out."
Nevertheless, she said the relationships are often forged in such haste as
to make a resolution impossible.
Lengthy list of firms
Such misty alliances create an environment in which payments become
irregular, according to one corps contracting officer who discussed the
matter on background. He corroborated the complaints of several
subcontractors that the multiple layers of crews surrounding debris
removal projects mean less cash reaches the street.
"They're doing this one thing with no oversight, and that's when they're
probably getting screwed," the official said of the low-level haulers.
"The lesson learned here should be that the next time we do something like
this, we limit it to a three-tiered deal, no more than that."
At times, some subcontractors said, debris removal arrangements stretch
five or six companies deep. The major players -- those that landed one of
the four $500 million deals the corps let in September, in some cases
without fully competitive bidding -- usually have one or two companies
handling their logistics, delineating collection zones and staging areas
in various parishes and dishing out the work orders. Under those two or
three layers is a company that receives the work orders and either does
the job itself or, more commonly, doles it out to street crews that
perform the manual labor. At each stage, of course, someone expects
Just how much, particularly at the top, is hard to determine. The corps
will not say how much it pays the prime contractors per cubic yard, citing
federal court rulings that agreed with corporate interests who argued
making such information public would erode their competitive edge.
Regardless of how much the primes are paid, Washington bureaucrats appear
to be losing patience with the layering effect. Earlier this month,
Homeland Security Secretary Michael Chertoff testified to Congress about
relief pies being cut into ever thinner slices by stacks of contractors, a
process he labeled "needless bureaucratic churning."
Not enough dough
That top-level view meshes with the consensus on the street, according to
hauling crews. Increasingly the story is one of empty pockets and growing
dissatisfaction with the way debris removal -- a job that is, at once, one
of the most important and least sexy on the post-storm agenda -- has been
Penury among debris haulers was nobody's expectation, given the money
lavished on debris removal in Katrina's wake. It seemed unimaginable that
$2 billion would be insufficient to complete the job within a year, the
timetable set by the corps.
"I've lost money," said Tony Lynn, who sold a small construction business
in Arkansas, bought some expensive hauling equipment and came to Jefferson
Parish last October hoping for big money. "It's unbelievable."
State Rep. Troy Hebert, D-New Iberia, who worked as a debris hauler
himself and put other teams in the field in Jefferson Parish, said he has
asked the corps repeatedly how so much money could be earmarked for a job
and yet lead to so many payroll complaints from laborers. He, Lynn and
more than three other contractors from various states all blamed the
layered contracts that sprouted around corps projects. With so many hands
taking a cut, there is nothing left at the end of the day, according to
Hebert and others, including Bock, cited Loupe Construction, a top-tier
sub under Ceres, as an example of a "pass-through" company that added
little or no value to the work but left less money for the man with the
Bobcat actually scooping up debris. Loupe has acknowledged he does not use
his own equipment, but he argues his organizing skill, deep local
knowledge and comprehensive insurance coverage make him an ideal field
marshal for the prime contractors.
Hebert, who worked at times as a subcontractor for Loupe, said many of
those attributes can be found at other links in the chain. He and other
subcontractors said taxpayers would reap huge savings, and the job would
be performed with equal or greater speed, if the number of layers was
"When the little guy works for the middle guy he has no leg to stand on,
and he has no choice if he wants to work," Hebert said. "It's a shame
because a lot of people made a lot of money, and a lot of people worked
really hard and lost."
Others familiar with the contracting labyrinths that accrue to major,
post-hurricane work chalked up some of the problems to an oversaturated
market that has shrunk profits at the fringes, or to the subcontractors'
relative inexperience. Both problems were evident from the outset in the
lines of trucks that would snake around landfills in the first months
after Katrina, queues that forced long waits for haulers and limited the
number of trips they were able to make each day.
Compounding the cash crunch are delays in disbursement. The impact is only
more infuriating, given that the corps' early recourse to giant companies
was justified on the grounds that they had the wherewithal to carry the
operation forward during inevitable interruptions in the flow of federal
"That hits the nail on the head," Hebert said. "I've been asking the corps
from day one why aren't their people floating the money if we gave them
these big contracts? Why can't the corps hold the primes responsible?"
But even timely payment might not be enough to keep the little guys on the
street much longer. Back when the metropolitan area was clotted with
hurricane wreckage, the top contractors "cherry-picked" debris, scooping
up big pile after big pile, making frequent runs to the landfills and
oodles of money in the process, disgruntled subcontractors said.
That's the thrust of a lawsuit filed by Matthew Lopez, who landed a
$9-per-cubic-yard deal as a top tier sub to Ceres in Tangipahoa Parish.
Lopez claims he was given exclusive rights to the debris in four sectors
of the parish but constantly found out-of-state contractors on his turf
picking up the low-hanging fruit. That left Lopez with the time-consuming,
and less profitable, work of scooping up small scraps and chain-sawing
trees too large to fit in his truck.
Now, with debris only dusting some neighborhoods, it isn't profitable for
a crew to spend hours sweeping it up and so it remains in place.
"Right after the storm hit there was stuff everywhere, and everywhere you
went you had a pile so the big contractors went where they wanted," Hebert
said. "It wasn't worth it to go after the smaller piles so they skipped
'em, and now you've got these smaller little piles out there not getting
Lynn, who labored in a zone in which Ceres was the prime contractor,
echoed that analysis.
"Ceres gets all the sugar and we've got go scrounge around for scraps, and
that ain't right," he said.
The corps flatly disputes the argument that the cleanup was haphazardly
supervised or that the prime contractors took the easy work and left
scraps to the subcontractors.
"That sounds like a bunch of crap there," said Charles Briggs, a corps
officer who was active on debris removal contracts in the weeks after the
storm. "The task orders issued don't reflect that."
Briggs declared himself "extremely satisfied" with the cleanup to date.
The most recent corps statistics show debris removal reaching the
three-quarters mark. Of the combined 26-plus million cubic yards of debris
left by Hurricanes Katrina and Rita, the corps said it has cleared 18.7
million, or 72 percent.
It's that last quarter of the job that may prove a challenge. "It's true
there is not as much out there and now you've got to hustle more for it,"
said Robert Anderson, a corps spokesman in Baton Rouge. "And now some
contractors are starting to pull up and leave because there is not enough
work to sustain them."
Herbert, wrapped up in the Legislature's second special session since
Katrina, said he decided to withdraw from the debris-hauling game in the
New Orleans area weeks ago. Lynn and Jackson said they would like to bolt,
saying their experience has left them deeply in the red. Bock has stayed
in town but plans to focus on building houses.
Some of them are hoping that widespread demolition of houses will generate
new heaps of debris and another chance at profitability. But no one knows
when that might happen. Anderson said the corps' deadline for stopping
debris removal is one year after the beginning of home demolitions, then
conceded the deadline is fluid because the starting point is not fixed.
And some subcontractors are so soured by their experience they don't trust
the promise of future work. Lynn, for one, said he has had enough and is
returning to Arkansas.
"They kept holding this demolition carrot in front of you, and as the
weeks went by and no demolitions started I finally realized that carrot
was false," he said.
. . . . . . .
James Varney can be reached at email@example.com or (504)
Debra Lombard, LEED AP
Sustainable Design Specialist
The RETEC Group, Inc.
900 Chapel St., 2nd Fl - Box 9
New Haven, CT 06510
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