US: On September 1st, as tens of thousands of desperate Louisianans packed the New Orleans Superdome and convention centre, the Federal Emergency Management Agency pleaded with the US Military Sealift Command: the government needed 10,000 berths on full-service cruise ships, Fema said, and it needed the deal done by noon the next day.
The hasty appeal yielded one of the most controversial contracts of the Hurricane Katrina relief operation, a $236 million agreement with Carnival Cruise Lines for three ships that now bob more than half-empty in the Mississippi River and Mobile Bay. The six-month contract - staunchly defended by Carnival but castigated by politicians from both parties - has come to exemplify the cost of haste that followed Katrina's strike and Fema's lack of preparation.
To critics, the price is exorbitant. If the ships were at capacity, with 7,116 evacuees, for six months, the price per evacuee would total $1,275 a week, according to calculations by aides to Senator Tom Coburn, (Republican, Oklahoma). A seven-day western Caribbean cruise out of Galveston can be had for $599 a person - and that would include entertainment and the cost of actually making the ship move.
"When the federal government would actually save millions of dollars by forgoing the status quo and actually sending evacuees on a luxurious six-month cruise it is time to rethink how we are conducting oversight," said Mr Coburn and Senator Barack Obama (Democrat, Illinois), in a joint statement calling for a chief financial officer to oversee post-Katrina spending.
To Carnival executives, the contract will ensure only that the company breaks even when it pulls three ships from holiday operations. About 100,000 passengers had their vacations cancelled to accommodate the government's needs, said J. Michael Crye, president of the International Council of Cruise Lines, who has been answering questions about the deal for Carnival.
Government contracting officials defended the deal. "They were the market," Capt Joe Manna, director of contracts at the Sealift Command, said of Carnival. "Under the circumstances, I'd say we're getting a pretty good value."
The Carnival deal is only one of several instances in which a lack of Fema preparation may have left US taxpayers with an outsized bill. Despite its experiences with last year's busy hurricane season, Fema found itself without standing contracts for standard relief items such as tarpaulins to cover damaged roofs, according to Thomas Schatz, president of Citizens Against Government Waste.
"It is ridiculous that they can't have the supply on hand for these basics that you know you'll need in every instance," Mr Schatz said.
But the Carnival deal has come under particular scrutiny. Not only are questions being raised over the contract's cost, but congressional investigators are examining the company's tax status. Carnival, which has headquarters in Miami but is incorporated for tax purposes in Panama, paid just $3 million in income tax on $1.9 billion in pre-tax income last year, according to company documents. "That's not even a tip," said Robert McIntyre of Citizens for Tax Justice. US companies in general pay an effective income tax rate of about 25 per cent, analysts say. Carnival's public records boast that "substantially all of our income in fiscal 2004, 2003 and 2002. . . is exempt from US federal income taxes", largely because the company maintains that its operations are not in the US but on the high seas.
Carnival does not want to see that tax status jeopardised just because three major ships are clearly operating in the United States. After it won the Fema bid, Carnival appealed to treasury secretary John Snow for a waiver of US taxes. Treasury spokesman Taylor Griffin said the matter is still under review.
The ships are not holding nearly the number of people displaced by Katrina that Fema had expected. Many evacuees said they saw the ships as a dead end, far away from any job or potential new life. - (LA Times-Washington Post)