White House Initiatives Aim to Streamline Recovery, Rebuilding in Stricken Gulf Coast

By Paula Cruickshank and David Hansen, CCH Washington Staff Writers

The Bush administration is undertaking a number of initiatives and reforms to help those affected and to eliminate bureacratic red tape from the recovery and rebuilding of the disaster-struck Gulf Coast region of the United States.

Two weeks after landfall of Hurricane Katrina, President George W. Bush on September 15, 2005, outlined several measures to help rebuild the lives and communities of those displaced by the storm.

Gulf Opportunity Zone

In a nationally broadcast address from New Orleans, Louisiana, Bush proposed the creation of a Gulf Opportunity Zone (GO Zone) encompassing those areas of Louisiana, Mississippi and Alabama devastated by the hurricane. Businesses in the GO Zone would be eligible for benefits through 2007, according to a White House release.

The GO Zone would double small business expensing from $100,000 to $200,000 for investments in new equipment, provide a 50 percent bonus depreciation for all businesses and extend tax relief to new building construction. To help small businesses start up again, the proposed GO Zone would provide loans and loan guarantees to small businesses, including minority-owned enterprises.

"It is entrepreneurship that creates jobs and opportunity. . .it is entrepreneurship that helps break the cycle of poverty. . .and we will take the side of entrepreneurs as they lead the economic revival of the Gulf region," Bush asserted.

Worker Recovery Accounts

The president also proposed Worker Recovery Accounts to provide targeted assistance to hurricane victims who have lost their jobs and need additional assistance beyond what is provided by state unemployment benefits or Disaster Unemployment Assistance.

Under the plan, Bush noted, job seekers could withdraw up to $5000 for job training and education and for child care expenses during their job search. If workers find a job within 13 weeks of starting unemployment insurance benefits or disaster unemployment assistance, they may keep the money remaining in their account as an employment bonus, according to details released by the White House.

Urban Homesteading

The president also outlined plans to provide free federal land, via a lottery, to poor urban victims of the disaster. Those receiving the land must agree to build a home through a low-interest mortgage program or through a charitable organization that specializes in providing such housing assistance (e.g., Habitat for Humanity, etc.).

Bush stressed in his speech that home ownership, much like entrepreneurship, especially among poor minorities, is pivotal to any revitalization of the region and to the lifting up of disadvantaged populations.

Government Contracting Reforms

The president described the work that lies ahead as "one of the largest reconstruction efforts the world has ever seen." Bush said that the federal government would cover the bulk of the rebuilding expenses, but did not offer any cost estimate, which has been widely reported to exceed $200 billion. To ensure that federal funds are spent wisely, the president said "a team of inspectors general" from all affected agencies will review expenditures.

The federal government's current $51.8 billion aid package for Hurricane Katrina victims increases the maximum amount of purchases that can be made without competitive bidding if the leader of an executive agency determines the price is reasonable.

The law, the Second Emergency Supplemental Appropriations Act to Meet Immediate Needs Arising From the Consequences of Hurricane Katrina, 2005, was passed by Congress and signed into law by President Bush on September 8. It raised the "micro purchase" amount that can be made without competitive bidding from $2,500 to $250,000.

"By cutting the red tape on contracts less than $250,000, we can help get food, water and housing to victims as soon as possible," explained Office of Federal Procurement Policy Administrator David H. Safavian. "After the immediate crisis has subsided, we will reevaluate the need for this provision."

The Office of Management and Budget (OMB) issued guidance on September 13 for federal agencies to follow the streamlined procedure. It requires agency leaders to establish policies for determining whether a transaction supports hurricane relief and rescue operations and identify who is authorized to use the expanded amount. Agencies must also conduct follow-up reviews of transactions and increase management controls to avoid improper spending.

Moreover, the White House on September 8 suspended the prevailing wage requirements under provisions of the Davis-Bacon Act. Also, due to the special circumstances arising from the hurricane, the Department of Labor on September 9 determined that it was in the national interest to waive federal contractors from the requirement under Office of Federal Contract Compliance Programs (OFCCP) to develop written affirmative action programs. Federal contractors temporarily exempted from some of the laws administered by the OFCCP are still subject to nondiscrimination requirements under those laws, noted Charles E. James, Sr., deputy assistant to the secretary of labor (Employment Standards Administration).

The president, in a September 8 message to Congress, exercised his authority under section 6 of the Davis-Bacon Act to suspend the provisions in the event of a national emergency. Bush suspended the prevailing wage provisions in designated areas of Alabama, Florida, Louisiana and Mississippi.

Under the OFCCP waiver, federal contractors will not be obligated to develop an affirmative action program, prepare the reports or provide notices usually required under certain OFFCP regulations. In addition, federal contractors will not be required to list job openings under regulations implementing the Vietnam Era Veterans' Readjustment Assistance Act. The 90-day waiver from developing written affirmative action plans does not apply to other anti-discrimination rules, such as posting the "Equal Opportunity is the Law" notice at the workplace, record keeping and record retention and employment listings with appropriate local employment service offices.

A White House official, at a press briefing on September 16, said that the Davis-Bacon suspension and waiver of certain OFCCP regulations is designed to remove federal red tape that could slow down recovery efforts. Claude Allen, assistant to the president for domestic policy, said that waiving these contracting requirements also would open the door to small and medium-sized businesses, including women- and minority-owned enterprises, which do not historically contract with the federal government.

"Many of these businesses that heretofore (did) not contract with the federal government may choose to do so . . . because they don't have the additional paperwork and red tape to go through," Allen explained. Suspending these requirements is not unprecedented, he added, citing instances in 1992 when President George H.W. Bush waived the Davis-Bacon Act for reconstruction after both Hurricanes Andrew and Iniki.

Ross Eisenbrey, vice president and director of policy at the Economic Policy Institute, a labor union-funded think tank, disputed the need to suspend Davis-Bacon provisions and OFCCP regulations for the purpose of speeding up recovery efforts. Eisenbrey contended that the paperwork requirement involved in complying with Davis-Bacon provisions is not burdensome and depicted the argument about cutting red tape as a smokescreen for permitting federal contractors to underpay workers. The EPI official noted that federal contractors need only submit their weekly payroll sheets to the contracting agency to determining if they are meeting prevailing wage requirements. On the OFCCP waiver, Eisenbrey maintained that the requirement for a written affirmative action plan allows federal contractors 120 days to develop a program and would not interfere with the hiring process.

A spokesman for the U.S. Chamber of Commerce contended that complying with Davis-Bacon provisions involves more than making payroll submissions. "It's not just a matter of prevailing wages," said Marc Freedman, director of labor law policy at the business chamber. He noted that federal contractors under the law also must follow specific hiring practices that small employers often find too complicated to understand or follow. Suspending Davis-Bacon during a national emergency "opens up competition and attracts more contractors," including those smaller businesses that otherwise might not seek federal contract work. He also maintained that competition among businesses in the disaster area would keep federal contractors from paying less than the prevailing wages in the area.

Related items:

Small Business Resources for Katrina Recovery

Disaster Planning for Your Finances

House Passes Tax Exemption for FEMA Disaster Relief Grants

Victims of Natural Disasters Can Get Federal Tax Relief, Gov't Aid

Posted September 23, 2005.