Contractors’ Cost Overruns From Anthrax Cleanup: $50 Million

Private contractors hired to decontaminate postal facilities last fall cleaned up more than just anthrax: They billed the government for at least $50 million in unexplained cost overruns and $40 million for mail irradiation machines that have yet to be used, federal auditors found.

In addition, one company received $600,000 for work it never did, while $1 million more went into preparing decontamination facilities that never were used. That’s because officials in the two Maryland communities where the facilities were located didn’t want anthrax-contaminated mail in their towns.

The findings by the U.S. Postal Service’s inspector general come as postal officials ask Congress for nearly $700 million in emergency funding to help cover costs incurred because of the anthrax attacks. They also offer a glimpse of what is likely to come from a separate review by the General Accounting Office, which has been asked to examine the Postal Service’s anthrax response before Congress releases the emergency funding.

Part of that report by the GAO is due early this month, and sources familiar with it say it will be critical of how the Postal Service awarded some anthrax cleanup contracts, as well as other actions it took.

Critics of the Postal Service, which has long been bedeviled by accusations of financial mismanagement, said the emergency nature of the anthrax response simply made a bad situation worse.

“Purchasing methods are atrocious to begin with, and then you add in the pressure from politicians and the public of dealing with the anthrax crisis,” said Rick Merritt, executive director of PostalWatch, a citizen watchdog group. “Then their answer is to just go to Congress and ask to have more money thrown at them.”

The Postal Service’s inspector general spent five months examining 11 contracts, totaling $104 million, awarded last fall during the height of the anthrax crisis. The inspector general pointed out that the Postal Service was under intense pressure to protect its own workers after two died of inhalation anthrax, and also to assure everyone the mail was safe.

But the reports conclude that the Postal Service cut corners unnecessarily, saying “contracts and delivery orders were awarded using deviated purchasing procedures [that] exposed the Postal Service to increased financial risk.”

“The Postal Service’s response to the initial threat of anthrax and its continuing efforts are commendable,” wrote Assistant Inspector General Ronald K. Stith. “However, our reviews identified four areas that warranted management’s attention. These areas were contracting, transportation, contractor oversight and mail delivery.”

The reports specified that:

* The cost of three contracts increased by nearly $54 million over the original bids, with no documentation to explain why. For example, a contract with Clean Harbors, hired to decontaminate the Morgan Street Distribution Center in New York, went from $5 million to $22.8 million.

* IT Corp. was paid $598,780 to clean the Morgan Street facility--but the cleanup was not performed. The company was replaced after postal officials determined it was moving too slowly, but the money was not refunded.

* The company that decontaminated the Pentagon’s internal post office also was retained to verify the results of the decontamination. The contractor did not complete the work, as it had claimed to have done in its final report. Pentagon officials spent an additional $27,000 to finish the job.

Spokesmen for the companies that rang up the $53.7 million in cost overruns cited in the Postal Service inspector general reports declined to comment, referring questions to the Postal Service.

Postal officials acknowledged that some mistakes were made, but they said the unprecedented nature of the anthrax attacks caught many government agencies off guard.