Small businesses struggle to win hurricane relief contracts

Shortly after Hurricane Katrina hit the Gulf Coast, Kevin Arvay, a satellite communications consultant based in Leesburg, Va., started calling federal agencies charged with cleanup and reconstruction. He thought he could help build their communications systems.

Arvay is still waiting for a return call. "It's frustrating, because you're sitting here knowing you can do something," he said.

Like hundreds of other small contractors, Arvay wants to be part of the enormous relief effort, but he has had difficulty getting the right people on the phone. As in many emergency situations, contracts are being awarded quickly, outside the normal competitive process, meaning that relationships matter as much as skills. Small companies could have a tough time winning government business in this environment.

Rich Johnson, director of contracting for the Army Corps of Engineers' Mississippi Valley Division, which is responsible for part of the cleanup in the Gulf Coast region, said his agency has tried to reach out to smaller, local businesses. In an effort to move quickly, the agency has used "letter contracts," which are awarded without competition, for those local businesses that were able to respond.

But Johnson said that when cleanup needs exceeded expectations, his team had to rely in some cases on bigger companies. He said he is collecting information on how much of the Army Corps' work is going to small and local businesses, but doesn't yet have the data.

Because big contractors often have the connections and resources to respond quickly in emergency situations, they often win large contracts. Halliburton Co., Bechtel Corp., the Shaw Group Inc., and Fluor Corp. are among the large companies currently working in the Gulf Coast.

In addition to issuing big contracts, agencies involved in the relief effort have relied on additions to previously awarded contracts. For example, a subsidiary of Pitney Bowes, a Stamford, Conn.-based document management company, held a contract with the Postal Service to handle change-of-address services. After Hurricane Katrina, the service asked Pitney Bowes to set up a special program for people who were forced to move because of the hurricane. According to Pitney Bowes, 150,000 people have used the new program.

Mui Erkun, chief of staff in the office of the chief procurement officer at the Homeland Security Department, which oversees emergency disaster relief, said small businesses should contact large prime contractors as well as local agencies charged with cleanup, to seek work. Homeland Security's Web site lists its prime contractors.

"DHS' philosophy is to give opportunities to every company that's capable of providing these services," Erkun said in a conference call hosted by TargetGov, a company that helps contractors win government work.

"One phone call or e-mail here or there just won't do it," TargetGov founder Gloria Berthold told the participants in the conference call. "You need to put together a cohesive strategy that will help you identify the prime contractors and people in agencies that are decision makers."

But some small business advocates, including Rep. Nydia Velasquez, D-N.Y., have argued that small firms should not have to settle for subcontracts. Such agreements give small firms less control over their work, she has said.

For now, contractors like Arvay are continuing to make phone calls. "Unless we work for large companies, it's hard for us to get a break out there," he said.