In awarding two big contracts related to Hurricane Katrina, the Bush administration has violated two very basic rules:

1. Don't give somebody a contract without at getting at least one other competitive bid.
2. Don't agree to cost-plus pricing.

The contracts, for temporary housing, were both awarded to politically connected companies: Fluor Corp. and Bechtel National Inc., a division of Bechtel Group Inc.

One can understand why a novice business owner would make this mistake: You are eager to get the business going and don't want to delay progress by reviewing bids. You trust the company you favor not just to do a good job but also to price it fairly, so you opt for one-stop shopping.

We've all done it and, for most of us, experience taught us why the rules against doing so were created in the first place. A vendor that knows it's getting the contract, however well intentioned, will naturally take less time in studying the project before it bids on it. That lack of early analysis leads to not just sloppier pricing but also less creative approaches to solving problems. Cost-plus pricing means mistakes will be paid for by the customer (in this case, the U.S. government) and not the vendor. Again, that means less attention is paid to the process.

If this were the first time the Bush administration made this mistake, you might be able to forgive them (and that's a stretch). But this is exactly what they did in Iraq, where many billions have been spent with such disappointing results.

Normally I don't make political comments but if you're a small business owner, the above are good examples to bring to your attention. We learn from our mistakes - just you remember not to make the same mistakes in your business dealings.

David Davis
Small Business Resource.