Oct. 7 (Bloomberg) -- The U.S. Homeland Security Department awarded two contracts worth $521 million, for trailers to house hurricane victims, to a politically active Indiana firm that has contributed mostly to Republicans.

The founding family and employees of Gulf Stream Coach Inc., which won the contracts, have given at least $81,650 to political candidates and groups during the past 10 years, all but $5,250 to Republicans, according to the Federal Election Commission.

Bigger competitors of Nappanee, Indiana-based Gulf Stream said they didn't have a fair chance to bid on the government business. ``We were not approached on that bid,'' said Wade Thompson, chief executive of Jackson Center, Ohio-based Thor Industries Inc., the biggest U.S. recreational-vehicle maker by sales.

Lawmakers such as Senator Joseph Lieberman of Connecticut, the senior Democrat on the Homeland Security Committee, have criticized the Homeland Security Department and the Federal Emergency Management Agency for rushing to award contracts without adequate safeguards against abuse of the system.

``It sounds to me like a congressional investigation,'' said Paul Light, a professor of organizational studies at New York University. ``The goal may be noble to get these trailers, but we may have ended up with the wrong contractor at the wrong price for the wrong reason.''

Seeking New Bids

Acting FEMA Director David Paulison told congressional committees yesterday that the agency would seek new bids on contracts that had no competition. ``We will not tolerate discriminatory contracting practices,'' he told the Senate Homeland Security and Governmental Affairs Committee.

The contracts Gulf Stream won were offered under ``limited competition,'' in which the government speeds up the process by allowing only up to five bidders to submit estimates, said Larry Orluskie, a Homeland Security Department spokesman. Orluskie said he didn't know how many companies Gulf Stream competed against on each of the bids.

Hurricane Katrina, the worst natural disaster in U.S. history, struck the Gulf Coast on August 29. Hurricane Rita hit September 24, and together the two storms affected between 400,000 and 600,000 households, Paulison said. Gulf Stream received a $250 million contract on Sept. 2, four days after Katrina came ashore. On Sept. 9, it won an additional $271 million contract.

`As Fair as Possible'

``FEMA strives to be as fair as possible when awarding contracts in any situation,'' said Nicol Andrews, a Homeland Security Department spokeswoman. ``In order to meet the urgent need for housing hundreds of thousands of people following the largest natural disaster in our nation's history, the competition of some contracts was limited.''

Gulf Stream competed for the orders in a fair process, said Kyle Martin, a company spokesman. Gulf Stream also is working with other dealers and manufacturers to fill the orders.

Thompson of Thor said he would have considered bidding on the contract, the biggest trailer contracts awarded by the government, if he had known about it. ``It's a half-billion dollar contract,'' Thompson said. ``I would be irresponsible as a chief executive if we didn't consider it.''

Thompson has also been politically active. He gave $20,000 to help New York Democrat Charles Schumer defeat incumbent Republican Alfonse D'Amato in 1998. He has made smaller contributions over the last decade, totaling about $8,000, to Republicans including President George W. Bush and New York Governor George Pataki.

Lyle Larkin, vice president of Fleetwood Enterprises Inc., said news of the contract award to Gulf Stream ``was on the street before Fleetwood was contacted by FEMA.''

Cavaliers

The order for 50,000 of Gulf Stream's white Cavalier trailers is many times more than the 5,900 vehicles and mobile homes Gulf Stream and parent company Fairmont Homes shipped from January through July, according to Statistical Surveys Inc., which tracks the recreational-vehicle and mobile housing industry. Thor shipped 50,000 units during the same period, according to Statistical Surveys.

During the first half of the year, Gulf Stream also shipped fewer vehicles than several other competitors, including Coachmen Industries Inc., Monaco Coach Corp., Winnebago Industries Inc. and Fleetwood.

``I just can't believe they awarded it to Gulf Stream,'' said Tom Walworth, Statistical Surveys' president. ``They're a pretty minor player.''

Hurricane Andrew

Gulf Stream began providing trailers to the federal government after Hurricane Andrew in 1992 and has been manufacturing trailers for storm victims almost every year since, according to a Sept. 29 company press release.

``The fact that Gulf Stream's trailers are of such high quality that they can withstand delivery by rail is one reason FEMA selected the company,'' the press release said.

Walworth questioned whether that set Gulf Stream apart from the competition. ``Anybody out there can ship them by rail,'' he said. ``This industry adapts to opportunities pretty well.''

Thor's dealer network has won about $210 million in Katrina- related contracts, which included purchases by FEMA, insurers and other companies, Thompson said. He said a FEMA employee asked him about the possibility of an order for 300 to 400 trailers for Mississippi families.

Contracts

FEMA awarded $170 million in contracts to Fleetwood to provide 7,500 travel trailers and 3,000 manufactured homes.

Monaco Coach is manufacturing as many as 3,000 travel trailers for the government, according to a company statement.

While the trailers will serve an important purpose, a more deliberate contract process might have saved money and reduced speculation about those who won the business, said Scott Amey, general counsel for the Project on Government Oversight. Amey's group, based in Washington, tracks waste in government spending.

``Obviously it wasn't something that needed to be done on the first day when Katrina blew through,'' Amey said.

To contact the reporter on this story: Jeff Bliss in Washington jbliss@bloomberg.net .