Disaster Contracting Has a Local Preference—and GAO Says Agencies Are Not Applying It Consistently

When a hurricane, wildfire, flood, or other major disaster strikes, federal contracting becomes an important part of the recovery effort. Less widely understood is that federal law is designed not merely to deliver supplies and services to the affected community, but also, where feasible, to direct some of that economic activity back into the community itself.

A September 3, 2026 Government Accountability Office report concludes that agencies are not consistently administering that requirement.

Under the Stafford Act and implementing Federal Acquisition Regulation provisions, federal agencies must provide a preference, to the extent feasible and practicable, to organizations, firms, and individuals residing or doing business primarily in the area affected by a major disaster or emergency. The preference may be implemented through a local-area set-aside or an evaluation preference. When an agency awards a qualifying post-disaster contract to a nonlocal vendor, the contracting officer must document the justification in the contract file.

GAO examined contracting by the Federal Emergency Management Agency and the U.S. Army Corps of Engineers associated with Hurricane Helene, Hurricane Ian, and the Maui wildfires. Together, the two agencies obligated almost $6 billion on response and recovery contracts for the three disasters during fiscal years 2022 through 2024.

GAO found that both agencies encourage local contracting but neither adequately monitors associated data to determine the extent to which local vendors are actually receiving awards.

Even more fundamentally, some contracting officers did not correctly identify the relevant disaster area.

That matters because “local” is not simply synonymous with being located somewhere in the affected state. The applicable area generally follows the official presidential disaster declaration. GAO identified, for example, a FEMA contracting officer who treated the entire State of Tennessee as local rather than limiting the analysis to the declared disaster area. GAO also found that selected Corps contract files lacked required documentation explaining awards to nonlocal firms.

For contractors, these findings have practical implications.

A local business should not assume an agency will automatically recognize its eligibility for a disaster-area preference. Contractors should understand how the relevant geographic area has been defined, maintain documentation demonstrating where they principally conduct business, monitor disaster-related solicitations quickly, and ensure their representations accurately support whatever local status they claim.

The issue is equally important for larger or nonlocal contractors. When agencies increase attention to Stafford Act requirements, teaming with local businesses may become strategically more important. Local firms can provide workforce availability, logistical knowledge, existing supply relationships, geographic presence, and community familiarity while also supporting an agency’s statutory preference objectives.

That does not mean local teaming can be used merely as a label. As with other socioeconomic and set-aside structures, the substance of performance arrangements matters.

GAO made four recommendations, including improved monitoring of local-vendor use, clearer FEMA guidance for identifying the relevant disaster area, and better Corps compliance with documentation requirements for nonlocal awards. Both agencies agreed with the recommendations.

Disaster contracting necessarily moves quickly. GAO’s report nevertheless demonstrates that speed does not suspend the procurement rules designed to help affected communities participate in their own economic recovery.

For local contractors, the opportunity begins with understanding that those rules exist before the disaster occurs.

Recommended FedContractPros Product: SubK Blueprint

The SubK Blueprint can help primes and subcontractors structure clearer roles, responsibilities, flowdowns, performance requirements, and commercial terms when building local teaming arrangements for disaster-response and recovery opportunities.

Disclaimer:
This article is provided for general informational and educational purposes only and does not constitute legal, emergency-management, socioeconomic-program, or government-contracting advice. Contractors should review the applicable Stafford Act provisions, Federal Acquisition Regulation requirements, disaster declaration, solicitation, representations, and agency guidance for each procurement.