State must act ASAP to address facts uncovered in Policy Watch hurricane recovery investigation

In some ways, there’s nothing new or terribly surprising when large bureaucracies – be they government agencies or big corporations – are revealed to be plagued by waste and malfeasance. Humans and their institutions being as they are, flawed and prone to foibles like incompetence, greed, sloth, overpromising, and favoritism; such revelations have been a constant in the American experience since prior to the country’s founding.

All that said, the maddening familiarity of such phenomena cannot serve as an excuse or diminish our commitment to rooting them out and making things right.

And so it is that the state of North Carolina has a new incident of bureaucratic waste and abuse on its hands to which state leaders must give immediate and sustained attention.

As veteran NC Policy Watch investigative reporter Lisa Sorg detailed this week as part of a lengthy and deeply researched special investigation, the North Carolina Office of Recovery and Resiliency (NCORR) – a state government office established by the General Assembly in 2018 to coordinate the disbursement of federal hurricane rescue funds – has made several highly questionable moves in recent years that have helped assure that hundreds of homes damaged or destroyed by Hurricane Matthew in 2016 remain in a state of disrepair and their owners displaced.

And, by all indications, topping the list of questionable moves was the repeated decision to bestow preferential treatment (and thereby award millions of dollars in contracts) to the Raleigh-based contractor Rescue Construction Solutions.

Distilled to its essence, the story is this:

North Carolina received hundreds of millions in federal recovery dollars from the Department of Housing and Urban Development (HUD) to distribute to help lower income families rebuild after Matthew.

Over a period of time, NCORR awarded contracts for a huge chunk of that money, around $80 million, to Rescue even though it almost certainly should have realized that the company was: a) in over its head, and/or b) irresponsibly and misleadingly lowballing contract bids.

What’s more, by all indications, the awards to Rescue were the result of preferential treatment not accorded to other contractors.

As Sorg reported:

• The company was awarded additional contracts, even as it got further behind schedule. Of the 529 homes Rescue won in the bidding process, only 134 are listed as complete, according to state records.
• This year, NCORR retroactively altered 85 of Rescue’s original bids to allocate an additional $3.1 million to the company. Until 2021, NCORR’s own policy forbade retroactively changing bids despite rising construction costs.
• Also in 2021, before NCORR awarded Rescue a $52 million contract to install modular homes, it changed performance requirements in a way that ended up favoring the company. Had NCORR not amended those requirements, Rescue would have been ineligible to bid, according to the office’s own policy.
• Rescue also failed to disclose key information in its pre-qualification application that could have excluded it from the HUD program.

And while all of this would be disturbing enough if Rescue had somehow managed to deliver on the promised work or, at least, had been getting its act together of late, the record shows that it has failed miserably. At the rate it’s been proceeding with a $52 million contract it received to construct 226 modular homes, for instance, the work won’t been completed until 2029.

Of course, there’s no doubt that the pandemic has had a large and adverse impact on the construction business generally. In an interview with Sorg, NCORR chief operating officer Laura Hogshead pointed to spikes in material costs and supply chain issues as a partial explanation for Rescue’s poor performance and her office’s decision to allow Rescue to retroactively revise some of its bids.

But that explanation only goes so far. As Sorg also reported, many other contractors managed to generate significantly better results even as some were denied the opportunity to revise their bids.

Meanwhile, some expressed deep suspicion and frustration with respect to Rescue’s success.

“We didn’t see how Rescue could do the jobs for that price,” one contractor said.

Another stated “We will never step foot in North Carolina again under the current circumstances.”

Hogshead’s explanation also doesn’t explain the strange and eyebrow-raising decision of the official who oversaw day-to-day details of the program, Ivan Duncan, to require contractors to deposit their cellphones in a bucket during weekly meetings so that the meetings could not be recorded.

The bottom line: The process of disbursing hundreds of millions of federal dollars to numerous private firms in dozens of dispersed communities across a large and, in many places, struggling region in order to help hundreds of lower income homeowners would be a tough job under the best of circumstances. During a pandemic, it was sure to be even tougher.

But ultimately, the public has a right to expect that the officials assigned such a task will do an honest and effective job and come forward publicly to ask for help when circumstances make it impossible.

Gov. Roy Cooper should launch an immediate investigation to get to the bottom of this deeply troubling story right away.

[Note: This commentary has been updated as it originally misidentified the Office of Recovery and Resiliency.]