FEMA Mismanaged The Commodity Distribution Process In .
FEMA Mismanaged theCommodity DistributionProcess in Response toHurricanes Irma and MariaSeptember 25, 2020OIG-20-76
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DHS OIG HIGHLIGHTSFEMA Mismanaged the Commodity DistributionProcess in Response to Hurricanes Irma and MariaSeptember 25,2020Why We DidThis AuditWe conducted this auditto determine the extentto which FEMA managedand distributedcommodities in responseto Hurricanes Irma andMaria.What WeRecommendWe made fiverecommendations that,when implemented,should improve FEMA’smanagement andoversight of its disasterresponse activities.For Further Information:Contact our Office of Public Affairs at(202)981-6000, or email us hs.govWhat We FoundThe Federal Emergency Management Agency (FEMA)mismanaged the distribution of commodities in responseto Hurricanes Irma and Maria in Puerto Rico. FEMA lostvisibility of about 38 percent of its commodity shipmentsto Puerto Rico, worth an estimated 257 million.Commodities successfully delivered to Puerto Rico took anaverage of 69 days to reach their final destinations.Inadequate FEMA contractor oversight contributed to thelost visibility and delayed commodity shipments. FEMAdid not use its Global Positioning System transponders totrack commodity shipments, allowed the contractor tobreak inventory seals, and did not ensure documentedproof of commodity deliveries. Given the lost visibility anddelayed shipments, FEMA cannot ensure it providedcommodities to Puerto Rico disaster survivors as neededto sustain life and alleviate suffering as part of itsresponse and recovery mission.In addition, FEMA’s mismanagement of transportationcontracts included multiple contracting violations andpolicy contraventions. These violations occurred becauseof poor acquisition planning that did not addressrequirements for transoceanic shipments. While weunderstand FEMA’s priority on expediting commodityshipments to disaster survivors, it overrode theimportance of following sound inventory managementpractices, significantly increasing the potential for fraud,waste, and abuse. Contract costs grew without FEMAhaving proof that services were performed as required andultimately led to contract overruns of about 179 millionand at least 50 million in questioned costs.FEMA ResponseFEMA concurred with four of the five recommendations.Appendix B contains FEMA’s management comments intheir entirety.OIG-20-76
OFFICE OF INSPECTOR GENERALDepartment of Homeland SecurityTable of ContentsBackground . 1Results of Audit . 5FEMA Mismanaged the Commodity Distribution Process in Response toHurricanes Irma and Maria . . .5FEMA’s Mismanagement of the Transportation Contract Led to MultipleFederal Acquisition Regulation Violations . . .15Conclusion. 20Recommendations . D:Objective, Scope, and Methodology . 24FEMA Comments to the Draft Report . 27Survey Results of Puerto Rico Municipalities . 38Report Distribution . IGPODPREMARSASOPU.S.C.www.oig.dhs.govContracting OfficerContinental United StatesContracting Officer’s RepresentativeFederal Acquisition RegulationFederal Emergency Management AgencyFederal Staging AreaGovernment Accountability OfficeGlobal Positioning SystemLogistics Supply Chain Management SystemMeals Ready-to-EatOffice of Inspector GeneralPoint of DistributionPuerto Rico Emergency Management AgencyRegional Staging AreaStandard Operating ProcedureUnited States CodeOIG-20-76
OFFICE OF INSPECTOR GENERALDepartment of Homeland SecurityBackgroundOn September 6, 2017, the eye of Hurricane Irma passed the northern coast ofthe U.S. Virgin Islands and Puerto Rico. On September 20, 2017, HurricaneMaria made landfall in Puerto Rico as a Category 4 hurricane. The stormseverely damaged Puerto Rico’s transportation, electrical, and communicationinfrastructures. Damage to these critical infrastructures left Puerto Rico’sentire population of 3.7 million without electricity and 95 percent of cell towersout of service. All of the island’s residents were disaster survivors who had torely on FEMA’s response efforts for basic commodities, such as food and water,for extended time periods. As of December, 2018, FEMA reported it had spentapproximately 2.5 billion in response to Hurricane Maria.The Robert T. Stafford Disaster Relief and Emergency Assistant Act (StaffordAct), permits the President to declare a major disaster when requested by thestate governor or tribal government chief executive.1 The Department ofHomeland Security has the primary responsibility for coordinating disasterresponse for the Federal Government and the Federal Emergency ManagementAgency (FEMA) leads the Department’s response efforts.2 The NationalResponse Framework describes how the Federal Government, states andlocalities, and public and private sectors should respond to disasters.3 Stateand local authorities usually serve as first responders to disasters. Federalagencies become involved in disaster response when response and recoveryrequirements exceed state and local government capabilities.In accordance with the FEMA Region II Hurricane Annex for Puerto Rico & VirginIslands, the commodities distribution process should start with Puerto Ricomunicipalities submitting commodity requests to FEMA. Then, FEMAcoordinates the movement of these commodities from its distribution center inAtlanta, GA (or other suppliers as needed) through the closest port (i.e.,Jacksonville, FL) via maritime transportation services. FEMA relied on CrowleyMaritime Corporation (Crowley) to ship the commodities to Puerto Rico and todistribute them throughout the island.Once commodities arrive at the Port of San Juan in Puerto Rico, FEMALogistics4 (located at the Joint Field Office) coordinates the movement of these42 United States Code (U.S.C.) § 5170.6 U.S.C. § 313(c)(4).3 The National Response Framework is the part of the National Preparedness Systemestablished in Presidential Policy Directive 8 that is to be used to manage any type of disasteror emergency response, regardless of scale, scope, and complexity.4 The Joint Field Office is a temporary Federal facility where FEMA coordinates disasterresponse in the area.12www.oig.dhs.gov1OIG-20-76
OFFICE OF INSPECTOR GENERALDepartment of Homeland Securitycommodities based on commodity requests. FEMA Logistics directs themovement of the commodities from two Federal staging areas5 (FSA) to thePuerto Rico government’s regional staging areas6 (RSA) or points ofdistribution7 (POD) across the island (see Figure 1).Figure 1. Commodity Distribution Process to Puerto RicoSource: DHS Office of Inspector General (OIG) analysis of the commodity distribution process toPuerto RicoFEMA uses the Logistics Supply Chain Management System (LSCMS) to trackcommodities and property shipments from initial order to final distribution.The state, or in the case of Puerto Rico, the Commonwealth, generally serves as5 A Federal staging area is a federally-managed area or facility where commodities andequipment are positioned by FEMA, generally in anticipation of or in response to an incident.6 A regional staging area (also called State staging area) is a state-managed area or facility setup and operated solely by the state.7 A point of distribution is a state-operated area where disaster relief supplies are distributeddirectly to survivors.www.oig.dhs.gov2OIG-20-76
OFFICE OF INSPECTOR GENERALDepartment of Homeland Securitythe final distribution point during a disaster response. Once FEMA transfersownership of the commodities to the state for distribution to disaster survivors,FEMA’s responsibility ends. In the case of the Commonwealth of Puerto Rico,the RSAs and PODs represent the final distribution points where FEMAtransferred ownership. FEMA can also use LSCMS to track shipments to itsown warehouses. In these instances, FEMA maintains ownership of thecommodities and stores them for later distribution or future disasters.LSCMS capabilities provide real-time visibility of commodity shipments,including location, quantity, movement, and status. According to the LSCMSStandard Operating Procedures (SOP), the commodity distribution process isinitiated in the system with the placement of a customer order8 forcommodities necessary to meet the anticipated needs of the affectedpopulation. The Logistics Management Center9 approves the customer orderand forwards it to the Supply Chain Integration Branch.10 This branch,located at FEMA headquarters, sources the requested commodities, providesorder approval, and forwards the customer order to the TransportationManagement Branch11 for shipping. The Transportation Management Branchmakes all transportation arrangements and moves the commodities betweenlocations. The FSA receives the commodities from the sources and stages themfor shipping to the state upon request (see Figure 2).As the initial orders for commodities in the supply chain, customer orders are placed inLSCMS to request movement of commodities from one location to another.9 The Logistics Management Center is responsible for managing, collecting, and processing alllogistics requirements and requests.10 The Supply Chain Integration Branch oversees the commodity inventory at FEMAdistribution centers and determines how to source the requested items. Items can be sourcedfrom FEMA’s supply chain or from other partners and vendors.11 This branch is responsible for contracting the transportation of FEMA commodities throughthe use of transportation companies.8www.oig.dhs.gov3OIG-20-76
OFFICE OF INSPECTOR GENERALDepartment of Homeland SecurityFigure 2. LSCMS Orders OverviewSource: DHS OIG analysis of the LSCMS Orders OverviewAs reported by the Government Accountability Office12 (GAO) and in FEMA’sown after-action report,13 FEMA acknowledged it inadequately planned whenstating the agency could have better leveraged open-source information andpreparedness data, such as capability assessments and exercise findings, forPuerto Rico and the U.S. Virgin Islands. For example, a 2011 exercise afteraction report for Puerto Rico indicated the territory would require extensiveGAO Report to Congressional Addressees, 2017 Hurricanes and Wildfires, InitialObservations on the Federal Response and Key Recovery Challenges, September 2018.13 FEMA After-Action Report, 2017 Hurricane Season, July 12, 2018.12www.oig.dhs.gov4OIG-20-76
OFFICE OF INSPECTOR GENERALDepartment of Homeland SecurityFederal support in moving commodities from the mainland to the island andthroughout to distribution points. Accordingly, FEMA listed several correctiveactions in its after-action report to address its longstanding planning issues.Results of AuditFEMA mismanaged the distribution of commodities in response to HurricanesIrma and Maria in Puerto Rico. FEMA lost visibility of about 38 percent of itscommodity shipments to Puerto Rico, worth an estimated 257 million.Commodities successfully delivered to Puerto Rico took an average of 69 daysto reach their final destinations. Inadequate FEMA contractor oversightcontributed to the lost visibility and delayed commodity shipments. FEMA didnot use its Global Positioning System transponders to track commodityshipments, allowed the contractor to break inventory seals,14 and did notensure documented proof of commodity deliveries. Given the lost visibility anddelayed shipments, FEMA cannot ensure it provided commodities to PuertoRico disaster survivors as needed to sustain life and alleviate suffering as partof its response and recovery mission.In addition, FEMA’s mismanagement of transportation contracts includedmultiple contracting violations and policy contraventions. These violationsoccurred because of poor acquisition planning that did not addressrequirements for transoceanic shipments. While we understand FEMA’spriority on expediting commodity shipments to disaster survivors, their priorityoverrode the importance of following sound inventory management practices,significantly increasing the potential for fraud, waste, and abuse. Contractcosts grew without FEMA having proof that services were performed asrequired and ultimately led to contract overruns of about 179 million and atleast 50 million in questioned costs.FEMA Mismanaged the Commodity Distribution Process inResponse to Hurricanes Irma and MariaFEMA lost visibility of approximately 257 million in life-sustainingcommodities.15 The shipments successfully delivered, took an average of 69days to reach their final destinations. This occurred because HurricaneMaria’s catastrophic damage in Puerto Rico and multiple, concurrent disastersOIG makes no finding with respect to Crowley’s responsibility.Statements and conclusions within this report derived from FEMA-provided data are subjectto the limitations and conditions described in Appendix A: Objective, Scope, and Methodology.1415www.oig.dhs.gov5OIG-20-76
OFFICE OF INSPECTOR GENERALDepartment of Homeland Securitynationwide challenged FEMA. In efforts to expedite commodity shipments,FEMA did not follow established policies and procedures. For example, FEMAdid not fully utilize its Global Positioning System (GPS) transponder technologyto track commodity movements. It also allowed the transportation contractorto break container seals and redistribute commodities and did not requirethem to provide proof of commodity deliveries. Although FEMA delivered anestimated 3,743 commodity shipments to the Puerto Rico government’s RSAsand PODs, FEMA cannot provide reasonable assurance that it successfullydelivered sufficient life-sustaining commodities to the disaster survivors in atimely manner as needed.FEMA Lost Visibility of Commodity Shipments to Puerto RicoFEMA’s LSCMS SOPs are designed to ensure that FEMA can track itscommodities through every part of the FEMA Supply Chain, from initial orderto final distribution. LSCMS can provide visibility of commodity movementsthrough the FEMA Supply Chain through the use of GPS transpondersattached to trailers, or in the case of Puerto Rico shipments, containers. Thisallows personnel with LSCMS access to see the location of commodities at anygiven time during their transfer from one facility location to another. Whensuch capabilities are used as designed, FEMA should have real-time visibility ofall commodity orders, order status, such as pending or filled, and theprogressive movement of commodities from initial location to the finaldestination.Based on LSCMS records, FEMA lost visibility of approximately 38 percent(4,462) of life-sustaining commodity shipments16 to Puerto Rico.Approximately 98 percent (4,354) of these commodity shipments consisted ofmeals and water. FEMA personnel at the Jacksonville FSA reported that FEMAheadquarters did not record customer orders in a timely manner, or did notrecord them at all. As such, FSA personnel in Jacksonville often did not knowwhat commodities were shipped until after they had arrived because no LSCMSrecords existed. This negatively impacted the FSA’s ability to plan fortransportation of the commodities to Puerto Rico and created backups at theJacksonville port that exceeded field and vendor storage capacities. Inresponse to the large volume of commodities ordered, FEMA had to open uptwo overflow sites in Jacksonville to store commodities awaiting shipment, aswell as divert a significant amount of commodities to other locations.According to FSA personnel in Jacksonville, some commodity shipmentsA shipment represents the movement of one commodity container between one or morelocations from its point of origin to the final destination.16www.oig.dhs.gov6OIG-20-76
OFFICE OF INSPECTOR GENERALDepartment of Homeland Securityintended for Puerto Rico likely never left the continental United States(CONUS).For supply chain accounting purposes, FEMA made adjustments to LSCMS toaccount for the lost visibility of commodity shipments. According to FEMAofficials, they adjusted LSCMS records for these shipments by changing thelast known locations in LSCMS to “unknown FSAs” or “unknown points ofdistribution.” FEMA officials advised us that they used ‘unknown’ as adestination as they believed the shipments were delivered throughout PuertoRico but could not specifically identify the delivery locations. For example, inJanuary 2018, FEMA adjusted 2,402 LSCMS records by changing the finallocations to unknown FSAs. These records represented about 54 percent of thelost visibility commodity shipments. The estimated costs of the life-sustainingcommodities associated with the lost visibility shipments total approximately 257 million, as shown in Table 1.Table 1. Estimated Costs of Lost Visibility CommoditiesCostCommodityTotal ProductEstimated CostsPer 8,04240,033,77032,02536,97233,52026,738 5.16 0.55 12.95 39.00 40.00 212.40 225,946,297 22,018,574 414,724 1,441,908 1,340,800 5,679,151 256,841,454Source: DHS OIG analysis of estimated commodity costsThe loss of visibility resulted in actual financial loss to the Government.According to FEMA, they conducted a physical re-organization of more than3,000 shipping containers dispersed throughout Puerto Rico. The contents ofthese containers were reconciled with LSCMS records. After final accountingfor all meal and water shipments, FEMA indicated it was unable to locate 19containers and their associated contents valued at 303,000. However, wecannot determine the extent of what was lost due to the internal controlfailures addressed in this report and acknowledged by FEMA.Commodity Shipments Successfully Delivered Were Significantly DelayedIn a post-disaster situation, FEMA must ensure survivors receive lifesustaining commodities as quickly as possible to help with the recoveryprocess. However, FEMA took an average of 69 days to transfer commoditieswww.oig.dhs.gov7OIG-20-76
OFFICE OF INSPECTOR GENERALDepartment of Homeland Securityvalued at approximately 154 million to the Commonwealth’s RSAs and PODs.Specifically, it took FEMA an average of 13 days to ship the commodities fromvarious contractor sites located within CONUS to Puerto Rico. Once on theisland, commodities sat in FEMA’s custody at various locations on the islandapproximately 48 days. The final transfer of the commodities from FEMA’scustody to their end destinations took about 7.5 additional days.Water and food, two of the most important life-sustaining commodities,experienced average shipping delays of 71 and 59 days, respectively. Of theapproximately 97 million liters of water FEMA shipped to Puerto Rico betweenSeptember 2017 and April 2018, 36 million liters (approximately 37 percent)reached the RSAs or PODs for distribution. Likewise, during the same period,of the 53 million meals FEMA shipped to Puerto Rico, 24 million (approximately45 percent) reached the RSAs or PODs for distribution. The remainingcommodity shipments for both water and meals that arrived in theCommonwealth either remained in FEMA’s custody, were in contractorfacilities, or had unknown destinations. Figures 3 and 4 illustrate water andfood quantities arriving in Puerto Rico versus quantities received by themunicipalities for distribution to survivors.Figure 3. Water Shipments Arriving at the Puerto Rico Port versus ThoseDelivered to the Commonwealth’s RSAs and PODsSource: DHS OIG analysis of LSCMS-extracted datawww.oig.dhs.gov8OIG-20-76
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FEMA relied on Crowley Maritime Corporation (Crowley) to ship the commodities to Puerto Rico and to distribute them throughout the island. Once commodities arrive at the Port of San Juan in Puerto Rico, FEMA Logistics. 4 (located at the Joint Field Office) coordinates the movement of these .
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