A storm-damaged home in western North Carolina. (Photo: North Carolina Department of Commerce HUD CDBG-DR Helene recovery Action Plan)
North Carolina officials have denied a local firm’s request for the state to re-bid a critical hurricane rebuilding contract.
The state held a hearing last month after IEM International, which is based in Morrisville, filed a complaint alleging that it was improperly disqualified from receiving the $81.5 million contract. Horne, another firm based in Mississippi, won the bid. It is tasked with managing a group of contractors and leading the rebuild of western homes after the deadliest and most destructive storm in state history.
IEM’s protest on the decision was denied on June 30, the firm said in a statement. Company officials have 60 days to decide if they want to appeal the ruling through the state’s administrative process.
“IEM was disappointed that the decision letter did not address a significant amount of the substantive evidence we presented to the agency during the protest,” the company said in a statement.
That 20-page decision letter, provided to NC Newsline, outlines the state’s rebuttal to IEM’s complaints. Among those complaints: that the state’s bidding process was biased for Horne, that IEM’s bid was rejected arbitrarily, and that Horne was “not a responsible vendor” and should not have been awarded the contract.
NC Department of Commerce officials rejected IEM’s protest on all counts, providing the most thorough and explicit defense of Horne since the firm was awarded the contract. State lawmakers have separately begun to probe the bid process, questioning Horne’s prior work in and out of state.
“Commerce is focused on delivering results for Helene survivors in western North Carolina who need our help getting back into their homes,” department spokesperson David Rhoades said in a statement. “We’ve received well over 300 applications so far for the Renew NC single-family housing program and we remain hopeful we can start construction work on the first homes later this summer.”
And Horne’s attorneys have issued their own response, accusing IEM of making “desperate attacks” and digging up “misleading” documents about a legal settlement the firm made earlier this year.
“Now that IEM’s meritless bid protest has been rejected by the Department on all grounds, it appears IEM is just continuing to sling mud,” attorney Mitch Armbruster, who represents Horne, wrote in an emailed statement to NC Newsline. “HORNE, however, is already on the ground providing critical services to the areas of western North Carolina impacted by Hurricane Helene.”
How IEM protested the bid — and how the state rejected it
IEM’s bid was disqualified, state officials say, because it did not include enough financial information.
The firm wrote in the bid that its financial statements were not public, but could be provided upon request. But the contract bid “was the request,” state officials responded — so that section was deemed incomplete. IEM’s bid was ruled ineligible and was not graded, according to scoring documents.
IEM has also taken issue with the state’s request, and how it was constructed. The firm argued that North Carolina’s technical specifications “were designed to favor Horne,” according to the state’s decision letter. And it alleged that there was a conflict of interest because a former Horne employee drafted the contract criteria.
Jonathan Krebs, Gov. Josh Stein’s advisor for western North Carolina, was involved in the draft process. He worked for Horne until April 2024. But state officials, in their letter to IEM, said his involvement and role were standard fare.
“It is not unreasonable for the state to utilize someone who has expertise in disaster recovery in the drafting of a [contract request],” they wrote.
“There is no indication that Jonathan Kreb[s] … has a conflict of interest, as defined by law,” they added.
As for IEM’s argument that the contract’s criteria favored Horne, they wrote that the specifications were “more than appropriate and does not demonstrate bias.”
Armbruster, the attorney for Horne, wrote that “IEM proposed the highest cost bid of all bidders, to do less work, and failed to provide basic audited financial reports” as part of their offer.
After IEM attempts to revisit legal settlement and past work, Horne pushes back
IEM’s arguments for a re-bid went beyond disagreements about the state’s process. The company also argued to the state that its competitor should not have been awarded the contract in the first place.
Horne is an “irresponsible vendor,” IEM argued, and should have been ruled ineligible for the contract. IEM cited a previous contract between North Carolina and Horne that ended in 2021; Horne’s involvement in a data breach class action lawsuit; and Horne’s having faced allegations of “incompetence and fraud.”
Attorneys for Horne also sat in on the state hearing and presented counter-arguments.
Horne served as prime contractor during North Carolina’s hurricane recovery efforts in the eastern part of the state, from 2019 to 2022. That homebuilding operation was beset by complaints of poor case management, accounting errors and communications. The contract was not renewed.
State officials wrote that Horne’s Helene recovery bid met all of their qualifications. And they cited the firm’s own rebuttal, in which they said that Horne and the state “jointly agreed to not renew the ReBuild NC contract.”
The state also disputed IEM’s description of both legal matters. A Mississippi court granted Horne’s motion to dismiss the data breach case, officials wrote. The fraud allegations, meanwhile, stem from a case in West Virginia that led to a $1.2 million settlement in April.
State officials wrote that Horne settled “to avoid the time and expense of a legal defense, but that there ‘was no fraud.'”
In that West Virginia case, Horne was tapped to develop the state’s plan to use federal block grant dollars (the same kind that will be used in western North Carolina). West Virginia officials found that a contract originally valued at $900,000 had expanded to $18 million. And a news release from the U.S. Department of Housing & Urban Development’s watchdog described “problematic” invoices from Horne that included property inspections for vacant lots and fictitious applicant information.
Horne says the company, as part of the settlement, did not admit any wrongdoing. IEM, during its protest, referenced a document from a federal watchdog about the case.
That document is an investigation report from the U.S. Department of Housing & Urban Development’s inspector general’s office. A copy of the report, obtained by NC Newsline, states that “Horne … supplied the State of West Virginia with a fraudulent invoice for payment.”
“HUD will not pursue suspension or debarment action against Horne related to this matter,” officials wrote in the report, which was dated April 30 and made available to the public in mid-May.
Both Horne’s attorney and state officials point to language in the report noting that it “contains neither recommendations nor conclusions of the Office of the Inspector General.”
“The State of N.C. awarded the contract to Horne on May 9 prior to the release of this document,” said Rhoades, the department spokesperson. “We also conducted due diligence with HUD’s Office of Inspector General ourselves.”
Armbruster, Horne’s attorney, said that IEM did not include the OIG document in its official protest materials — only displaying “a screenshot of the report in a PowerPoint” during the meeting. And Horne did not know the document existed until after that meeting, he said.
“IEM’s protest raises the West Virginia matter and other complaints in its protest for no other reason than to sling mud,” Armbruster wrote. “It has zero legal bearing on the procurement.”
Separately, Horne has also sought to correct the record on how the West Virginia case has been publicly portrayed. Another attorney for Horne sent a letter to Lisa Johnston, the U.S. Attorney for Southern District of West Virginia, in late May.
In the letter, attorney John W. Huber called the department’s press release about the settlement “misleading and improper.”
“Adding language that simply slanders a defendant to make a press release sound more dramatic is entirely inappropriate, and unfortunately too common,” Huber wrote.
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